REG - Kromek Group PLC - Interim Results
31/01/2023 07:00
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RNS Number : 3285O Kromek Group PLC 31 January 2023
31 January 2023
Kromek Group plc
("Kromek" or the "Group")
Interim Results
Kromek Group plc (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
2022.
Financial Summary & Outlook
· Revenue increased by 44% to £6.8m (H1 2022: £4.7m)
· Gross margin of 40.4% (H1 2022: 46.8%)
· Adjusted EBITDA* was £2.7m loss (H1 2022: £0.6m loss), primarily
reflecting FX impact and inflation related costs
· Substantial order book and good visibility into H2, with 91% of
forecast FY revenue already awarded, contracted, shipped or provided by
regular repeat business
· Expect to be EBITDA positive and broadly cashflow neutral in H2
· Cash and cash equivalents at 31 October 2022 were £1.0m (30 April
2022: £5.1m)
o Cash position improved post period, with cash and cash equivalents of
£1.3m at 23 January 2023
· Expecting strong revenue growth in H2 with continued contract wins in
both the CBRN detection and advanced imaging segments. Engaged with eight tier
1 and tier 2 OEMs in key target area of medical imaging and Board expects to
announce a number of contracts across the Group in the near term
· On track for record revenue for FY 2023: Kromek expects to report
over 45% year-on-year growth
*A reconciliation of adjusted EBITDA can be found in the Financial Review.
Operational Summary
Advanced Imaging
· Strong revenue growth with delivery under component supply agreements
and increased customer engagement for future projects
· Excellent progress in medical imaging:
o Significant expansion in customer engagement for development programmes in
key target areas of single photon emission computed tomography ("SPECT") and
photon-counting computed tomography ("CT")
o Launch by Spectrum Dynamics Medical ("Spectrum Dynamics") of the world's
first digital SPECT/CT scanner for higher energy imaging, which uses Kromek
detectors
o Won two new orders worth a total of $751k from existing OEM customers
o Post period, received £2.5m in funding from Innovate UK for two
programmes to further develop a low dose molecular breast imaging ("MBI")
technology based on Kromek's CZT-based SPECT detectors
Chemical, Biological, Radiological and Nuclear ("CBRN") Detection
· Significant momentum in nuclear security, with the winning and
delivery of new and repeat orders, participation in a greater number of
tenders and establishing key distribution partnerships:
o Received and delivered two orders from existing US customers totalling $2m
for the Group's D3S-ID and D3M wearable nuclear radiation detectors
o Secured a distribution agreement with Smiths Detection to distribute the
Group's nuclear security solutions to North and South American markets, which
was expanded post period to include the Middle East and certain key markets in
Asia and Australasia
o Post period, the Group was awarded and delivered two contracts, totalling
£1.5m, for the supply of its D3M and D3S-based product lines to European
government end-users; and received a repeat order, for $836k, from a US
government customer for the D3S-ID
· Post period, received a £4.9m contract from a UK government
department for a three-year programme to deliver bio-security solutions
Manufacturing and IP
· Expanded production capabilities and implemented several productivity
improvements leading to further cost efficiency in CZT manufacturing
· 4 new patents filed and 2 granted during the period
Dr Arnab Basu, CEO of Kromek, said: "This has been a record six months for
Kromek. We've generated our highest ever revenue in an interim period while
building our substantial pipeline for the full year and beyond. Our engagement
with customers and potential customers in advanced imaging and CBRN detection
has grown significantly. In our key target market of SPECT/CT, we are now
working with eight tier 1 and tier 2 OEMs to get qualified and designed into
their next-generation medical imaging systems - which reflects our position as
the only large-scale, independent provider of CZT. At the same time, the
geopolitical conflict continues to drive strong demand for our nuclear
security products as governments increase their defence spending.
"Whilst we have been significantly impacted during the period by the
inflationary environment and currency pressures, we are seeing this ease in
the second half and, combined with strong revenue growth, expect to be EBITDA
positive for H2 2023. Accordingly, with the excellent revenue momentum and
highest ever levels of customer engagement, we look to the future with
confidence."
For further information, please contact:
Kromek Group plc
Arnab Basu, CEO +44 (0)1740 626 060
Paul Farquhar, CFO
finnCap Ltd (Nominated Adviser and Broker)
Geoff Nash/Seamus Fricker/George Dollemore/Emily Watts +44 (0)20 7220 0500
- Corporate Finance
Tim Redfern/Charlotte Sutcliffe - ECM
Gracechurch Group (Financial PR)
Harry Chathli/Claire Norbury +44 (0)20 4582 3500
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 and liquid-based 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/) .
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014. Upon the publication of this announcement via the
Regulatory Information Service, this inside information is now considered to
be in the public domain.
Operational Review
During the six months to 31 October 2022, Kromek made excellent progress in
both the advanced imaging and CBRN detection segments of the business. The
Group delivered on its existing contracts and development programmes, won new
and repeat orders and experienced significantly increased customer engagement
regarding future projects. Revenue for H1 2023 was 44% higher than the same
period of the prior year, representing significant growth in both the advanced
imaging and CBRN detection segments.
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.
Medical Imaging
During the period, Kromek continued to fulfil its existing supply orders in
medical imaging and progress its development programmes. A key milestone was
the introduction by Spectrum Dynamics of the VERITON-CT 400 Series, the
world's first digital SPECT/CT scanner capable of high energy imaging, which
uses Kromek's CZT detector technology. Kromek believes that this product is
receiving wide-ranging interest and the Group's shipments to Spectrum Dynamics
are ramping up as expected.
In its regular repeat business, Kromek received two new orders worth a total
of $751k from existing OEM customers. One order was for the supply of
detectors for bone mineral densitometry applications and the other was from a
US medical imaging customer that is using Kromek's CZT detectors in their
gamma probes for nuclear medical applications, with this system having
received FDA approval last year.
Under Kromek's development programme for ultra-low dose MBI technology that is
based on the Group's CZT-based SPECT detectors, work progressed with the
Group's OEM partner to prepare the system for clinical trials in the US. This
technology can significantly improve the early detection of breast cancer in
women with dense breast tissues. Post period, as also announced today, the
Group received approximately £2.5m in funding from Innovate UK for two
programmes to further develop an MBI system. The projects are being conducted
in collaboration with the Newcastle-upon-Tyne Hospitals NHS Foundation Trust,
the University of Newcastle-Upon-Tyne and University College London.
Over the last eighteen months, the Group has received a significant increase
in interest from partners for development programmes in the medical imaging
market with the Group now working with eight tier 1 and tier 2 OEMs in its key
target areas of SPECT and CT. As a result, the Board remains confident in the
growth prospects for this market and the Board expects some of these
engagements to transition to formal significant contracts for the supply of
CZT detectors and modules. The Board expects to announce significant contract
wins for the Group in the near term.
Security & Industrial Screening
In security and industrial screening, Kromek continued to deliver under its
existing component supply agreements and development programmes. The Group
also secured a new OEM partner in security screening.
CBRN Detection Segment
In CBRN detection, the Group provides nuclear radiation detection solutions to
the global homeland defence and security market, which 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.
Nuclear Security
The Group received strong demand for its nuclear security platforms - D3S and
D5 - which consist of a family of products designed to cater for the varying
demands of homeland security and defence markets. Kromek was awarded multiple
orders, participated in an increasing number of tenders and established key
distribution partnerships to support continued expansion in this market.
Accordingly, the Group is on track for a record year in detector delivery in
nuclear security.
During the period, the Group received, and delivered, a $1.3m contract from a
US customer for the D3M and a $695k order from a US federal entity for the
D3S-ID, both of which were repeat orders. Since period end, the Group has
received, and delivered, two contracts, totalling £1.5m, for the supply of
its D3M and D3S-based nuclear security products to European government
end-users - with the contracts having been secured with Kromek distribution
and procurement partners. The Group is also in the process of delivering a
$836k order from a US government customer for the D3S-ID, which is a repeat
order secured post period. The large proportion of repeat orders reflects the
increasingly regular nature of the Group's business in this market.
The Group is expanding channels-to-market for its nuclear security products,
as well as supporting the generation of regular, repeat business, through the
establishment of a distribution partnership with Smiths Detection, a global
leader in threat detection and security screening technologies for aviation,
ports and borders, defence and urban security markets. During the period, the
Group signed a distribution agreement for Smiths Detection to distribute
Kromek's nuclear security products - with a focus on the D3 and D5 series - to
North and South American markets and, post period, a further agreement was
signed for distribution to the Middle East and certain key markets in Asia and
Australasia. To date, the Group has delivered over 1,400 detectors under this
partnership.
Civil Nuclear
Business in the civil nuclear market progressed as expected, with regular
sales through the Group's distributor network and customers. During the
period, the Group served 48 customers in this market.
Biological-Threat Detection
Kromek is developing bio-security solutions consisting of fully automated and
autonomous systems to detect a wide range of airborne and liquid-based
pathogens for the purposes of national security and protecting public
health.
During the period, the Group continued to deliver on its development
programmes. This includes a long-running programme with the Defense Advanced
Research Projects Agency, an agency of the US Department of Defense, for a
system that is designed to be networkable and provide wide-area monitoring
capability in near real-time. The Group's work with the UK government resulted
in the award of a contract, post period, by a UK government department for a
three-year programme worth £4.9m to develop and supply biological threat
detection systems. The contract also includes an option for extended
maintenance services after the initial term.
The Group continues to work with the UK government and government agencies
regarding policy concerning biological screening and its implementation. The
Group is also engaging with US authorities as well as with private sector
organisations to develop and finalise a number of use applications for this
technology.
R&D, IP and Manufacturing
Kromek continued to execute on its programmes for the expansion of production
capacity and increased process automation, with particular progress being made
at its CZT manufacturing facility in the US. These programmes are on track and
are resulting in greater manufacturing productivity and cost efficiencies.
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, with
particular progress in medical imaging and biological-threat detection.
In H1 2023, Kromek applied for 4 new patents and had 2 patents granted across
5 patent families, bringing the total number of patents held by the Group to
in excess of 240. The new applications cover innovations in both of the
Group's segments.
Financial Review
Revenue for the six-month period ended 31 October 2022 increased by 44% to
£6.8m (H1 2022: £4.7m) In particular, product revenue increased
significantly and accounted for 96% of the revenue for the half.
H1 2023 H1 2022
(Unaudited) (Unaudited)
£'000 £'000
Product £6,540 96% £3,786 80%
R&D £245 4% £921 20%
Total £6,785 100% £4,707 100%
Gross profit increased to £2.7m (H1 2022: £2.2m) as result of the higher
revenue. Gross margin was 40.4% compared with 46.8% for H1 2022, with the
increase in cost of sales being due to revenue mix and component price
inflation as supply chain pressures persisted.
Administrative expenses and distribution costs, including the adverse impact
of foreign exchange in the period, increased to £8.0m (H1 2022: £6.4m). This
is substantially due to an increase in staff costs reflecting pay rises in
line with the wider economy and modest increased headcount to drive future
revenue growth; an increase in amortisation and depreciation; and higher other
overhead costs due to current inflationary pressures. Of the £1.6m increase
year-on-year, £0.5m represents the foreign exchange impact of translating USD
denominated expenses in the period due to the weaker GBP against the USD in H1
2023 compared to H1 2022.
In the first half of the prior year period, the Group benefited from a one-off
forgiveness of £1.3m of Paycheck Protection Loans in the US, which was
reported in other operating income. This was non-recurring income, and the
current period did not benefit from this category of income, which accordingly
impacted loss before tax and adjusted EBITDA on a comparable basis.
As a result of the increased operating costs and lower other operating income,
operating loss was £5.2m (H1 2022: £2.9m loss). After net finance costs of
£0.5m (H1 2022: £0.3m), loss before tax was £5.7m (H1 2022: £3.1m loss).
The adjusted EBITDA loss for the period was £2.7m (H1 2022: £0.6m loss).
Adjusted EBITDA is calculated as follows:
H1 2023 H1 2022 FY 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Loss before tax (5,671) (3,056) (6,129)
EBITDA adjustments:-
Net interest 458 276 548
Depreciation 962 854 1,751
Amortisation 1,465 1,265 2,569
Share-based payments 120 120 236
COVID-19 related items
Exceptional items - (89) (132)
Adjusted EBITDA* (2,666) (630) (1,157)
*Adjusted EBITDA is defined as earnings before interest, taxation,
depreciation, amortisation, exceptional items and share-based payments.
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.
Investment in product development was £2.6m for the six-month period ended 31
October 2022 (H1 2022: £3.1m). The expenditure in H1 2023 was in technology
and product developments, reflecting the continuing investment and commitment
in new and enhanced products, platforms and CZT productivity improvements that
can be commercially marketed. Amortisation of such development activity in the
period was £1.2m (H1 2022: £1.0m).
Cash and cash equivalents at 31 October 2022 were £1.0m (30 April 2022:
£5.1m). The £4.1m decrease in cash over the six-month period is the net
result of:
· £(2.7)m - operating loss for the period
· £(1.4)m - net working capital movements and income taxes received,
including a £1.9m reduction in trade payables
· £(2.8)m - investment in development costs and capital expenditure
· £2.0m - net new funds raised less debt and interest payments
· £0.8m - effect of foreign exchange rate changes
Since period end, the cash position has remained largely stable, with the
Group having cash and cash equivalents of £1.3m at 23 January 2023. This
reduced cash burn reflects an increase in revenue run rate as expected;
inflation beginning to stabilise; the GBP strengthening against the USD; and
that no debt repayments have been required to be made in the second half to
date.
At 31 October 2022, total borrowings included in current liabilities were
£5.7m (30 April 2022: £5.7m), of which £5.0m related to bank
borrowings. The Board is currently working towards the refinancing of the
£5.0m banking facility and expects to complete this in the short term.
Inventories increased by £0.4m in the period from £10.5m at 30 April 2022 to
£10.9m at 31 October 2022, and significantly higher than the £7.3m at 31
October 2021. The increase in inventories over the six-month period reflects a
£0.6m impact of foreign exchange as most of the Group's inventories are USD
denominated. Adjusting for the foreign exchange impact, inventories reduced by
£0.2m in the period. As noted previously, the increase compared with the same
date of the prior year is due to the Group increasing its inventory level to
secure surety of supply, against a backdrop of supply chain disruption, for
delivering its full year revenues.
Outlook
The revenue momentum of the first half of the year has carried through to the
second half with Kromek on track to deliver record revenues for the full year
2023, the highest in the history of the Group.
The Group has excellent visibility over full year revenue forecasts of 91%
comprising 84% contracted or already shipped, 5% awarded and going through
contract negotiation and 2% being provided by its regular repeat order
business, and with the remaining 9% representing a gap to forecast that is
anticipated to be closed by known pipeline of opportunities. As a result, the
Group expects to report year-on-year revenue growth of over 45%, reflecting
substantial growth in both its advanced imaging and CBRN detection segments.
The order book continues to grow giving good visibility well into next year.
Specifically, the anticipated growth in the advanced imaging segment is based
on delivery under the Group's existing long-term contracts, such as Spectrum
Dynamics, which is ramping up the roll out of its next generation SPECT/CT
scanners; new orders won last year; and the sustained demand being received
for Kromek's CZT products. Since becoming the only independent large-scale
supplier of CZT, Kromek has been approached by an increasing number of
customers that are looking for an independent manufacturer of CZT. As noted,
Kromek is in an active engagement process with eight tier 1 and tier 2 OEMs
and expects to announce a number of contracts across the Group in the near
term.
The current geo-political environment is driving increased interest in the
Group's products in the CBRN detection segment from public authority
suppliers, governments and government agencies. In the past year, Kromek has
sold thousands of detectors that have been deployed to protect events such as
gatherings of heads of states and the football World Cup as well being used in
conflict zones. Kromek expects this growth to continue in the second half and
beyond.
In the first half of the year, the Group experienced cost inflation that,
together with the strengthening of the USD against the GBP, had an adverse
impact on EBITDA. In the second half, the Group has seen inflation stabilising
and the GBP strengthening against the USD. The Group also anticipates
improvement in gross margin based on the reduction in cost pressures and a
normalised revenue mix. This, along with the substantial increase in revenue
in the second half, is expected to see the Group become EBITDA positive and
broadly cashflow neutral for H2. However, this is expected to only partially
offset the H1 2023 EBITDA loss. The Group continues to look at every
opportunity to control its costs, improve collections and manage cash flow.
With the excellent revenue momentum, highest ever levels of customer
engagement and the fundamentals of the business remaining strong, the Board
continues to look to the future with confidence.
Consolidated condensed income statement
For the six months ended 31 October 2022
Six months ended 31 October Six months Year
2022 ended 31 October ended
£'000 2021 30 April 2022
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Note
Continuing operations
Revenue 4 6,785 4,707 12,055
Cost of sales (4,046) (2,503) (6,419)
Gross profit 2,739 2,204 5,636
Other operating income 5 - 1,343 1,410
Distribution costs (319) (273) (551)
Administrative expenses (including operating expenses) (7,633) (6,143) (12,208)
Operating loss (5,213) (2,869) (5,713)
Exceptional impairment reversal on trade receivables and amounts recoverable 6 - 89 132
on contract
Operating results (post exceptional items) (5,213) (2,780) (5,581)
Finance income - 6 34
Finance costs (458) (282) (582)
Loss before tax (5,671) (3,056) (6,129)
Tax 7 601 707 1,211
Loss from continuing operations (5,070) (2,349) (4,918)
Losses per share
9 (1.2) (0.5) (1.1)
-basic (p)
Consolidated condensed statement of comprehensive income
For the six months ended 31 October 2022
Six months ended 31 October Six months Year
2022 ended ended
£'000 31 October 30 April 2022
(Unaudited) 2021 £'000
£'000 (Audited)
(Unaudited)
Loss for the period (5,070) (2,349) (4,918)
Items that may be recycled to the income statement
Exchange gains/(losses) on translation of foreign operations 2,017 1,154 2,063
Total comprehensive loss for the period (3,053) (1,195) (2,855)
Consolidated condensed statement of financial position
31 October 31 October 30 April
2022 2021 2022
£'000 £'000 £'000
Note (Unaudited) (Unaudited) (Audited)
Non-current assets
Goodwill 1,275 1,275 1,275
Other intangible assets 30,539 26,240 28,375
Property, plant and equipment 10 10,796 10,884 10,944
Right-of-use asset 4,263 3,884 3,874
46,873 42,283 44,468
Current assets
Inventories 10,866 7,336 10,503
Trade and other receivables 6,692 7,166 6,429
Current tax assets 349 422 942
Cash and bank balances 956 10,243 5,081
18,863 25,167 22,955
Total assets 65,736 67,450 67,423
Current liabilities
Trade and other payables (5,986) (5,959) (7,855)
Lease obligation (413) (389) (375)
Borrowings (5,693) (4,813) (5,716)
(12,092) (11,161) (13,946)
Net current assets 6,771 14,006 9,009
Non-current liabilities
Deferred income (1,071) (1,221) (1,131)
Lease obligation (4,505) (4,111) (4,161)
Borrowings (3,565) (1,977) (749)
Total liabilities (21,233) (18,470) (19,987)
Net assets 44,503 48,980 47,436
As at 31 October 2022
Equity
Share capital 12 4,319 4,319 4,319
Share premium account 72,943 72,943 72,943
Merger reserve 21,853 21,853 21,853
Translation reserve 4,080 1,154 2,063
Accumulated losses (58,692) (51,289) (53,742)
Total equity 44,503 48,980 47,436
Consolidated condensed statement of changes in equity
For the six months ended 31 October 2022
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 2022 4,319 72,943 21,853 2,063 (53,742) 47,436
Loss for the period - - - - (5,070) (5,070)
Other comprehensive income for the period
- - - 2,017 - 2,017
Total comprehensive loss for the period - - - 4,080 (5,070) (990)
Transactions with shareholders recorded in equity
Credit to equity for equity-settled share-based payments
- - - - 120 120
Balance at 31 October 2022 4,319 72,943 21,853 4,080 (58,692) 44,503
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
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 2021 4,319 72,943 21,853 - (49,060) 50,055
Loss for the period - - - - (4,918) (4,918)
Other comprehensive income for the period
- - - 2,063 - 2,063
Total comprehensive loss for the year
- - - 2,063 (4,918) (2,855)
Transactions with shareholders recorded in equity
Credit to equity for equity-settled share-based payments
- - - - 236 236
Balance at 30 April 2022 4,319 72,943 21,853 2,063 (53,742) 47,436
Consolidated condensed statement of cash flows
For the six months ended 31 October 2022
Note Six months ended 31 October Six months Year
2022 ended 31 October ended 30 April
£'000 2021 2022
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Net cash used in operating activities 11 (4,026) (2,213) (3,530)
Investing activities
Interest received - 6 34
Purchases of property, plant and equipment (186) (260) (651)
Purchases of patents and trademarks (82) (96) (179)
Capitalisation of research and development costs (2,580) (3,125) (5,619)
Net cash used in investing activities (2,848) (3,475) (6,415)
Financing activities
New borrowings 3,840 560 760
Interest paid (326) (162) (340)
Payment of loan and borrowings (1,047) (704) (1,340)
Finance lease repayments (347) (322) (646)
Net cash generated from / (used in) financing activities 2,120 (628) (1,566)
Net decrease in cash and cash equivalents (4,754) (6,316) (11,511)
Cash and cash equivalents at beginning of period 5,081 15,602 15,602
Effect of foreign exchange rate changes 629 957 990
Cash and cash equivalents at end of period 956 10,243 5,081
Notes to the unaudited interim statements
For the six months ended 31 October 2022
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 2022, 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 2022 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 2022 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.
4. Business and geographical segments (continued)
A geographical analysis of the Group's revenue by destination is as follows:
Six months ended 31 October Six months ended 31 October Year
2022 2021 ended
£'000 £'000 30 April 2022
£'000
(Unaudited) (Unaudited) (Audited)
United Kingdom 298 928 2,033
North America 3,306 1,916 5,807
Asia 424 125 1,556
Europe 2,726 1,695 2,601
South America 5
Middle East 26
Australasia - 43 58
Total revenue 6,785 4,707 12,055
A geographical analysis of the Group's revenue by origin is as follows:
Six months ended 31 October 2022
UK Operations USA Operations Total for Group
£'000 £'000 £'000
Revenue from sales 5,621 7,313 12,934
Revenue by segment:
-Sale of goods and services
-Revenue from grants 38 - 38
-Revenue from contract customers 110 55 165
Total sales by segment 5,769 7,368 13,137
Removal of inter-segment sales (5,126) (1,226) (6,352)
Total external sales 643 6,142 6,785
Segment result - operating loss (2,251) (2,962) (5,213)
Net interest (325) (133) (458)
Loss before tax (2,576) (3,095) (5,671)
Tax credit 601 - 601
Loss for the period (1,975) (3,095) (5,070)
Other information
Property, plant and equipment additions 21 165 186
Depreciation of property, plant and equipment 526 436 962
Intangible asset additions 1,510 1,152 2,662
Amortisation of intangible assets 782 683 1,465
Balance Sheet
Total assets 34,693 31,043 65,736
Total liabilities (15,225) (6,008) (21,233)
4. Business and geographical segments (continued)
Inter-segment sales are charged at prevailing market prices.
No impairment losses were recognised in respect of property, plant and
equipment and goodwill.
Six months ended 31 October 2021
UK Operations USA Operations Total for Group
£'000 £'000 £'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 3,487 3,813 7,300
-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)
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 prior 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. There is no other operating for
the period to 31 October 2022.
6. Exceptional Items
The Group has reversed £nil in relation to an item impaired in the full year
2020 financial statements (six months ended 31 October 2021: £89k).
7. Tax
The Group has recognised R&D tax credits of £601k for the six months
ended 31 October 2022 (six months ended 31 October 2021: £707k).
8. Dividends
The Directors do not recommend the payment of a dividend (six months ended 31
October 2021: £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
2022 ended 31 October ended
£'000 2021 30 April 2022
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Losses for the purposes of basic loss per share being net loss attributable to (2,349) (4,918)
owners of the Group
(5,070)
Six months Year
Six months ended 31 October ended 31 October ended
2022 2021 30 April 2022
'000 '000 '000
(Unaudited) (Unaudited) (Audited)
Number of shares
Weighted average number of ordinary shares for the purposes of basic loss per 431,852 431,852 431,852
share
Effect of dilutive potential ordinary shares:
Share options and warrants 315 618 351
Weighted average number of ordinary shares for the purposes of diluted loss 432,167 432,470 432,203
per share
Basic (p) (1.2) (0.5) (1.1)
Basic earnings per share is calculated by dividing the loss attributable to
shareholders by the weighted average number of ordinary shares in issue during
the year. IAS 33 requires presentation of diluted EPS when a company could be
called upon to issue shares that would decrease earnings per share or increase
the loss per share. For a loss-making company with outstanding share options,
net loss per share would be decreased by the exercise of options. Therefore,
the anti-dilutive potential ordinary shares are disregarded in the calculation
of diluted EPS.
10. Property, plant and equipment
During the six months ended 31 October 2022, the Group acquired property,
plant and equipment with a cost of £186k (six months ended 31 October 2021:
£260k).
11. Notes to the cash flow statement
Six months ended 31 October Six months Year
2022 ended 31 October ended
£'000 2021 30 April 2022
£'000 £'000
(Unaudited) (Unaudited) (Audited)
(5,070) (2,349) (4,918)
Loss for the period
Adjustments for:
Finance income - (6) (34)
Finance costs 458 282 582
Income tax credit (601) (707) (1,211)
Depreciation of property, plant and equipment 962 854 1,751
Amortisation of intangible assets 1,465 1,265 2,569
Share-based payment expense 120 120 236
PPP loan forgiveness - (1,253) (1,443)
Impairment of intangible asset - - -
Loss on disposal - - -
Operating cash flows before movements in working capital (2,666) (1,794) (2,468)
(363) (1,134) (4,301)
Increase in inventories
(Increase) / decrease in receivables (263) (524) 215
(Decrease) / increase in payables and deferred income (1,929) (61) 1,741
Cash used in operations (5,221) (3,513) (4,813)
Income taxes received 1,195 1,300 1,283
Net cash used in operating activities (4,026) (2,213) (3,530)
12. Share capital
During the period, no ordinary shares (six months ended 31 October 2021: nil)
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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