REG - Kromek Group PLC - Interim Results
30/01/2024 07:00
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RNS Number : 2834B Kromek Group PLC 30 January 2024
30 January 2024
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 unaudited interim results for the six months ended 31
October 2023.
Financial Highlights
· Revenue increased to £7.1m (H1 2023: £6.8m)
· Gross margin improved to 54.2% (H1 2023: 40.4%)
· Adjusted EBITDA loss reduced to £0.1m (H1 2023: £2.7m loss)*
· Loss before tax reduced to £3.5m (H1 2023: £5.7m loss)
· Cash and cash equivalents at 31 October 2023 were £3.7m (30 April
2023: £1.1m)
· Net cash used in operating activities substantially reduced to £1.6m
(H1 2023: £4.0m)
· Refinancing of its debt facility with new £5.5m secured term loan
in September 2023
· Equity fundraise of £8m (gross) in May 2023
· Remain on track to deliver significant revenue growth and positive
EBITDA for the year to 30 April 2024
*A reconciliation of adjusted EBITDA can be found in the Financial Review.
Operational Highlights
Advanced Imaging
· Commenced significant collaboration agreements with:
o A tier 1 OEM to provide CZT-based detectors for use in the customer's
advanced medical imaging scanners
o Analogic Corporation ("Analogic") to develop CZT-based detectors for
photon counting computed tomography ("CT") applications in medical imaging and
security screening
· New collaboration agreement entered, post period, with a global
blue-chip technology solutions provider to develop CZT-based detectors for
photon counting CT applications in medical imaging
· Received a $1.4m contract from a new Asia-based OEM customer to
develop and supply CZT-based detectors for single-photon emission computed
tomography ("SPECT") applications
· Launch by Spectrum Dynamics Medical ("Spectrum Dynamics"), a key
customer, of the latest addition to its next generation digital SPECT/CT
imaging portfolio, the VERITON-CT 300, using Kromek's detectors
CBRN Detection
· Kromek's nuclear radiation detection solutions continued to be
deployed by global homeland defence and security forces to protect critical
infrastructure, events and urban environments from the threat of 'dirty bombs'
· Received over $1m in new orders for nuclear security products,
including from a new customer that is a substantial global defence corporation
· Awarded a $1.5m contract in Asia for a new product in the civil
nuclear market
· Received a £1.4m contract, post period, for the supply of D3M
detectors for use in the rescEU stockpile being developed by the European
Commission
Biological-Threat Detection
· Received a $5.9m contract from the US Department of Homeland Security
for the development, under a four-year programme, of technologies focusing on
an agent agnostic bio-detection system
· Progressed development of a biological-threat detection system under
previously awarded contract with a UK government department
Manufacturing and IP
· Sustained progress in improving yield and cost efficiency in CZT
crystal growth and detector manufacturing
· One new patent filed and three granted during the period
Dr Arnab Basu, CEO of Kromek, said: "I am pleased to report another period of
growth for Kromek as we continued to deliver on our long-term agreements and
development programmes as well as win new orders. We advanced our strategy by
signing a significant collaboration agreement with a global blue-chip
technology solutions provider in advanced imaging and through expanding our
customer base in CBRN detection, including securing our first order with a
substantial global defence corporation. At the same time, we heavily focused
on managing our cost base and increasing the efficiency within our business,
which remains a key priority.
"Looking ahead, in line with normal seasonality, we will be second half
weighted and remain on track to deliver record revenues for full year 2024 and
positive EBITDA. We continue to operate in substantial markets and are
receiving high demand for our products that are being used every day to save
people's lives - from the detection of nuclear threats in Ukraine, to cancer
in hospitals around the world. As a result, the Board continues to 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
Cavendish Capital Markets Limited (Nominated Adviser and Broker)
Geoff Nash/Giles Balleny/Seamus Fricker - Corporate Finance +44 (0)20 7220 0500
Tim Redfern - ECM
Michael Johnson/Tamar Cranford-Smith - Sales
Gracechurch Group (Financial PR)
Harry Chathli/Claire Norbury/Henry Gamble +44 (0)20 4582 3500
Investor Webinar
Dr Arnab Basu, Chief Executive Officer, and Paul Farquhar, Chief Financial
Officer, will be hosting a presentation for investors at 6.00pm GMT on
Wednesday 31 January 2024 via webinar.
The webinar is open to all existing and potential shareholders. Interested
parties can register to attend, and submit questions in advance, using the
following link: https://forms.gle/eRXGNiuCnmH3yGov9
(https://forms.gle/eRXGNiuCnmH3yGov9) .
Participants are requested to submit questions by 12.00pm on 31 January 2024.
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 and
solid-state readout technology, are primarily used to protect critical
infrastructure, events, personnel 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'.
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 2023, Kromek commenced the significant
collaboration agreements that were entered into at the end of the prior year
in advanced imaging with a tier 1 OEM and Analogic, whilst continued customer
engagement resulted in the signing of a further agreement shortly after period
end with a major blue-chip technology solutions provider. These agreements
represent Kromek executing on its advanced imaging strategy and are great
endorsements of the Group's technology, capabilities and solutions.
In CBRN detection, demand for the Group's nuclear security products remained
strong as global insecurity and raised concern over potential nuclear threats
continue to underscore the requirement for such products. Kromek also made
excellent progress on its biological-threat detection development programmes,
with a number of key milestones being achieved under the Group's programme
with the UK government.
Advanced Imaging
In advanced imaging, Kromek primarily operates in the medical imaging market
with some opportunities in the security screening and industrial screening
sectors. Kromek provides OEM customers with detector components, based on its
core cadmium zinc telluride ("CZT") platform, to enhance imaging quality and
enable better detection of diseases such as cancer and Alzheimer's,
contamination in industrial manufacture and explosives in aviation settings.
As the only independent commercial producer of CZT at scale, Kromek is
well-positioned in this segment.
Medical Imaging
During the period, Kromek continued to receive orders in its regular repeat
business, delivered under its supply agreements and progressed its development
programmes. It also secured new customers and expanded its engagement with
leading OEMs, which resulted, shortly after period end, in the Group entering
a collaboration agreement with a new blue-chip technology solutions provider
that has over 100,000 customers globally for a range of applications,
including healthcare. Under the agreement, Kromek will develop CZT-based
detectors for photon counting CT applications in the medical imaging sector
and will ensure production capability is available to support commercial
demand ramp-up.
The Group commenced work under the collaboration agreements that were signed
at the end of the 2023 financial year with a recognised tier 1 OEM and with
Analogic to develop CZT-based detectors for use in their advanced imaging
scanners. The agreement with the tier 1 OEM, which is a leading
health-technology company, comprises a short development phase to integrate
Kromek's CZT-based detectors into the customer's medical imaging scanners,
with the agreement then transitioning to a longer commercial supply phase.
With Analogic, who have been global leaders in CT detector technology for over
50 years, Kromek is developing CZT-based detector solutions for photon
counting CT applications in both the medical imaging and security screening
sectors.
Kromek received an order worth $1.4m from a new OEM customer that is an
established player in the medical imaging sector in Asia. The order is for
CZT-based detector-modules for use in the customer's next generation SPECT
systems. Delivery and revenue recognition are expected in the current
financial year.
Also during the period, Spectrum Dynamics, a key customer, introduced the
latest addition to its next generation digital SPECT/CT imaging portfolio, the
VERITON-CT 300, for higher energy imaging, using Kromek's digital detectors.
This integration enables enhanced image quality and breakthrough clinical
capabilities in digital SPECT/CT.
Security & Industrial Screening
In security and industrial screening, Kromek continued to deliver under its
existing component supply agreements and development programmes. This includes
the detector solutions being developed under its collaboration agreement with
Analogic, noted above, which will be for security applications as well as
medical.
CBRN Detection
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, events 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.
Nuclear Security
Geopolitical insecurity continued to drive demand for Kromek's products that
contribute to ensuring public safety and security, which are selected by
governments and their agencies for their best-of-breed features and the
Group's ability to deploy rapidly. The Group is also benefiting from its
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, which was established in the previous
year.
During the period, alongside deployments under previously-awarded contracts,
the Group received two new orders in nuclear security, with one being from an
existing customer and the other from a new customer that is a substantial
global defence corporation, which the Group believes represents a significant
opportunity for further sales. Post period, the Group received a £1.4m order
to supply its D3M detectors and associated networkable solutions for use in
the rescEU stockpile, which is being developed by the European Commission to
help safeguard citizens from disasters and manage emerging risks.
Civil Nuclear
In the civil nuclear segment, Kromek secured a contract worth $1.5m, to be
delivered over 15 months, by one of its distribution partners in Asia. The
contract is for a new product, based on the Group's existing technology, with
the development of the product having been funded by the distribution partner.
Biological-Threat Detection
Kromek is developing biosecurity solutions that consist of fully automated and
autonomous systems to detect a wide range of airborne pathogens for the
purposes of national security and protecting public health. In this sector,
the Group may consider forming strategic or financial partnerships to further
accelerate the time to market for this technology.
During the period, the Group progressed the development of a biological-threat
detection system under a contract that had been awarded in the previous
financial year by a UK government department. Under the three-year programme,
which is worth a total of £4.9m, Kromek will develop and supply the system,
with the contract also including an option for extended maintenance services
after the initial term.
The Group was awarded a $5.9m contract from the US Department of Homeland
Security for the development of technologies focusing on an agent agnostic
bio-detection system, under a four-year programme. This is the Group's first
biosecurity contract from the Department of Homeland Security and underscores
management's belief that there are significant market opportunities in this
area as its technologies align well with major governments' biosecurity
strategies. The Group also received during the period an order for the further
development of its biosecurity technology from an existing government
customer.
Manufacturing and IP
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 making significant progress in its cost and productivity in CZT
crystal growth and detector manufacturing. The Group has dedicated teams that
are focussed on targeted improvements for every step in the manufacturing
process, which directly contributes to yield and cost improvement.
In H1 2024, Kromek applied for one new patent and had three patents granted
across three patent families, with the total number of patents held by the
Group being in excess of 230. The new applications cover innovations in both
of the Group's segments.
Financial Review
Revenue for the six-month period ended 31 October 2023 increased by 5% to
£7.1m (H1 2023: £6.8m). In particular, R&D revenue increased
significantly, driven by the Group's biological-threat detection development
contracts, and accounted for 17% of total Group revenue for the period. The
split between product sales and revenue from R&D contracts is as follows:
H1 2024 H1 2023
(Unaudited) (U
na
ud
it
ed
)
£'000 £'000
Product £5,910 83% £6,540 96%
R&D £1,185 17% £245 4%
Total £7,095 100% £6,785 100%
Gross margin improved substantially to 54.2% compared with 40.4% for H1 2023.
The increase is largely due to revenue and product mix in the period -
namely, the increased contributions to revenue from R&D and to product
sales from CBRN detection - and the easing of global supply constraints
resulting in cost savings on component parts compared with the first half of
the prior year. The gross margin is also benefitting from increasing
efficiencies in advanced imaging as the Group continues to implement its
manufacturing productivity programmes. As a result of the improved margin and
higher revenue, gross profit increased to £3.8m (H1 2023: £2.7m).
Administrative expenses and distribution costs reduced to £6.4m (H1 2023:
£8.0m), which reflects the Group's focus on tight cost control. In addition,
the Group generated £0.2m from the change in the fair value of the embedded
derivative liability associated with the convertible loan notes in issue (H1
2023: £nil). Accordingly, total operating costs were reduced to £6.2m (H1
2023: £8.0m).
As a result of the lower operating costs and increased gross profit, operating
loss was significantly reduced to £2.3m (H1 2023: £5.2m loss). After net
finance costs of £0.9m (H1 2023: £0.5m) and exceptional costs of £0.2m
related to the Group's debt refinancing, loss before tax was £3.5m (H1 2023:
£5.7m loss).
The adjusted EBITDA loss for the period was reduced to £0.1m (H1 2023: £2.7m
loss). Adjusted EBITDA is calculated as follows:
H1 2024 H1 2023 FY 2023
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Loss before tax (3,492) (5,671) (7,292)
EBITDA adjustments:-
Net interest 913 458 1,243
Depreciation 883 962 1,903
Amortisation 1,357 1,465 2,891
Share-based payments 180 120 354
Change in fair value of derivative (202) - (77)
Exceptional items 246 - -
Adjusted EBITDA* (115) (2,666) (978)
*Adjusted EBITDA is defined as earnings before interest, taxation,
depreciation, amortisation, exceptional items, change in fair value of
derivatives 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. 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. The exceptional item relates to costs associated with the
refinancing of the debt facility.
The Group invested £2.6m in product development in the six-month period (H1
2023: £2.6m) that was capitalised on the balance sheet, which largely
reflects:
· the continuing investment in cost reduction and productivity
improvements in CZT crystal growth and detector manufacturing in advanced
imaging; and
· the development of automated and autonomous biological-threat
detection technology to detect airborne pathogens for the purposes of national
security and protecting public health.
This expenditure was capitalised in accordance with IAS38 to the extent that
it related to projects in the later stage (development phase) of the project
life cycle.
During the period, the Group completed a placing, subscription and open offer
to raise £8m before expenses, of which £7m was raised through the share
placing and subscription, and a further £1m through the open offer.
Cash and cash equivalents at 31 October 2023 were £3.7m (30 April 2023:
£1.1m). The £2.6m increase in cash over the six-month period was
substantially due to the combination of the following cash inflows and
outflows:
· Adjusted EBITDA loss for the period of £0.1m.
· R&D tax receipts of £1.1m.
· Investment of £2.8m in tangible and intangible assets, with
capitalised development costs of £2.6m, IP additions of £0.1m and capital
expenditure of £0.1m.
· Net cash generated from financing activities of £6.9m, representing
new debt and equity funds raised less debt repayments.
· A net cash outflow of £2.3m due to working capital movements.
· An increase in cash of £0.1m arising from the impact of foreign
exchange.
The amount owing by the Group in respect of convertible loan notes reduced
during the period from £2.8m to £2.6m following the partial conversion to
equity of certain of the holdings (see note 13).
During the period, the Group completed a refinancing of its principal
borrowing facility with the signing of a new £5.5m secured term loan. The
new facility was provided by Polymer N2 Limited, an existing and significant
shareholder in the Company. For further details on the Group's borrowings, see
note 12.
Outlook
Kromek remains on track to deliver record revenues for the full year 2024 and
positive EBITDA.
The Group has good visibility of full year revenue forecasts, comprising 72%
contracted or already shipped, 10% awarded and going through contract
negotiation, 2% being provided by the Group's regular repeat order business
and the remaining 16% anticipated to be generated from the known pipeline of
opportunities. In particular, in the second half of the year the Group expects
significant growth in product sales as it delivers under its long-term
contracts and continues to receive new orders.
Kromek remains heavily focussed on controlling costs across the Group and in
increasing efficiency, particularly within the advanced imaging manufacturing
process. In addition, the inflationary pressures on the price of materials and
labour are continuing to reduce.
As a result, the Board expects to report results for full year 2024 in line
with market expectations and, looking further ahead, remains confident of
delivering sustained EBITDA growth.
Consolidated condensed income statement
For the six months ended 31 October 2023
Six months ended 31 October Six months Year
2023 ended 31 October ended
£'000 2022 30 April 2023
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Note
Continuing operations
Revenue 4 7,095 6,785 17,309
Cost of sales (3,246) (4,046) (8,374)
Gross profit 3,849 2,739 8,935
Other operating income 5 - - 121
Distribution costs (216) (319) (612)
Administrative expenses (including operating expenses) (6,168) (7,633) (14,570)
Change in fair value of derivative 202 - 77
Operating loss (2,333) (5,213) (6,049)
Exceptional items 6 (246) - -
Operating results (post exceptional items) (2,579) (5,213) (6,049)
Finance income 32 - 2
Finance costs (945) (458) (1,245)
Loss before tax (3,492) (5,671) (7,292)
Tax 7 425 601 1,192
Loss from continuing operations (3,067) (5,070) (6,100)
Loss per share
9 (0.5) (1.2) (1.4)
-basic (p)
Consolidated condensed statement of comprehensive income
For the six months ended 31 October 2023
Six months ended 31 October Six months Year
2023 ended ended
£'000 31 October 30 April 2023
(Unaudited) 2022 £'000
£'000 (Audited)
(Unaudited)
Loss for the period (3,067) (5,070) (6,100)
Items that may be recycled to the income statement
Exchange gains/(losses) on translation of foreign operations 808 2,017 (166)
Total comprehensive loss for the period (2,259) (3,053) (6,266)
Consolidated condensed statement of financial position
31 October 31 October 30 April
2023 2022 2023
£'000 £'000 £'000
Note (Unaudited) (Unaudited) (Audited)
Non-current assets
Goodwill 1,275 1,275 1,275
Other intangible assets 32,361 30,539 30,554
Property, plant and equipment 10 9,368 10,796 9,831
Right-of-use assets 3,721 4,263 3,758
46,725 46,873 45,418
Current assets
Inventories 11,411 10,866 10,894
Trade and other receivables 6,586 6,692 5,529
Current tax assets 300 349 940
Cash and bank balances 3,723 956 1,097
22,020 18,863 18,460
Total assets 68,745 65,736 63,878
Current liabilities
Trade and other payables (6,750) (5,986) (7,436)
Lease obligation (448) (413) (405)
Borrowings 12 (3,167) (5,693) (8,318)
Derivative financial instruments 13 (309) - (517)
(10,674) (12,092) (16,676)
Net current assets 11,346 6,771 1,792
Non-current liabilities
Deferred income (970) (1,071) (1,021)
Lease obligation (4,051) (4,505) (4,089)
Borrowings 12 (5,737) (3,565) (568)
Total liabilities (21,432) (21,233) (22,354)
Net assets 47,313 44,503 41,524
As at 31 October 2023
Equity
Share capital 14 6,003 4,319 4,319
Share premium account 79,138 72,943 72,943
Merger reserve 21,853 21,853 21,853
Translation reserve 2,705 4,080 1,897
Accumulated losses (62,386) (58,692) (59,488)
Total equity 47,313 44,503 41,524
Consolidated condensed statement of changes in equity
For the six months ended 31 October 2023
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 2023 4,319 72,943 21,853 1,897 (59,488) 41,524
Loss for the period - - - - (3,067) (3,067)
Other comprehensive income for the period
- - - 808 - 808
Total comprehensive gain/(loss) for the period - - - 808 (3,067) (2,259)
Transactions with shareholders recorded in equity
Issue of share capital 1,684 - - - - 1,684
Premium on shares issued less expenses - 6,195 - - - 6,195
Conversion of convertible loan notes - - - - (11) (11)
Credit to equity for equity-settled share-based payments
- - - - 180 180
Balance at 31 October 2023 6,003 79,138 21,853 2,705 (62,386) 47,313
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 gain/(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 2022 4,319 72,943 21,853 2,063 (53,742) 47,436
Loss for the period - - - - (6,100) (4,918)
Other comprehensive loss for the period
- - - (166) - (166)
Total comprehensive loss for the year
- - - (166) (6,100) (6,266)
Transactions with shareholders recorded in equity
Credit to equity for equity-settled share-based payments
- - - - 354 354
Balance at 30 April 2023 4,319 72,943 21,853 1,897 (59,488) 41,524
Consolidated condensed statement of cash flows
For the six months ended 31 October 2023
Note Six months ended 31 October Six months Year ended 30 April
2023 ended 31 October 2023
£'000 2022 £'000
£'000
(Unaudited) (Unaudited) (Audited)
Net cash (used in)/generated from operating activities 11 (1,607) (4,026) 197
Investing activities
Interest received 32 - 2
Purchases of property, plant and equipment (57) (186) (269)
Purchases of patents and trademarks (122) (82) (183)
Capitalisation of research and development costs (2,625) (2,580) (4,821)
Net cash used in investing activities (2,772) (2,848) (5,271)
Financing activities
New borrowings 5,900 3,840 1,100
Interest paid (820) (326) (703)
Payment of loan and borrowings (5,712) (1,047) (1,258)
Finance lease repayments (340) (347) (692)
Proceeds from the issue of convertible loan notes - - 2,840
Net proceeds on issue of shares 7,879 - -
Net cash generated from financing activities 6,907 2,120 1,287
Net increase/(decrease) in cash and cash equivalents 2,528 (4,754) (3,787)
Cash and cash equivalents at beginning of period 1,097 5,081 5,081
Effect of foreign exchange rate changes 98 629 (197)
Cash and cash equivalents at end of period 3,723 956 1,097
Notes to the unaudited interim statements
For the six months ended 31 October 2023
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 2023, 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 2023 have been filed with the Registrar
of Companies and are available on the Group's website: www.kromek.com
(http://www.kromek.com) .
2. Interim report
This interim financial report will be available from the Group's website at
www.kromek.com (http://www.kromek.com) .
3. 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 2023 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.
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
2023 2022 ended
£'000 £'000 30 April 2023
£'000
(Unaudited) (Unaudited) (Audited)
United Kingdom 1,305 298 3,944
North America 1,745 3,306 6,110
Asia 2,255 424 2,071
Europe 1,698 2,726 5,031
Other 92 31 153
Total revenue 7,095 6,785 17,309
A geographical analysis of the Group's revenue by origin is as follows:
Six months ended 31 October 2023
UK USA Total for Group
Operations Operations £'000
£'000 £'000
Revenue from sales 5,575 5,650 11,225
Revenue by segment:
-Sale of goods and services
-Revenue from grants 263 - 263
-Revenue from contract customers 1,028 - 1,028
Total sales by segment 6,866 5,650 12,516
Removal of inter-segment sales (3,574) (1,847) (5,421)
Total external sales 3,292 3,803 7,095
Segment result - operating loss (989) (1,344) (2,333)
Net interest (788) (125) (913)
Exceptional items (246) - (246)
Loss before tax (2,023) (1,469) (3,492)
Tax credit 425 - 425
Loss for the period (1,598) (1,469) (3,067)
Other information
Property, plant and equipment additions 18 39 57
Depreciation of property, plant and equipment 496 387 883
Intangible asset additions 1,152 1,595 2,747
Amortisation of intangible assets 704 653 1,357
Balance Sheet
Total assets 37,863 30,882 68,745
Total liabilities (15,708) (5,724) (21,432)
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 2022
UK USA Total for Group
Operations Operations £'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)
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
The Group had no other operating income in the periods to 31 October 2023 and
31 October 2022.
6. Exceptional items
The Group has recognised an exceptional item of £246k in relation to
refinancing costs in the six months to 31 October 2023 (six months ended 31
October 2022: £nil).
7. Tax
The Group has recognised R&D tax credits of £425k for the six months
ended 31 October 2023 (six months ended 31 October 2022: £601k). During the
period, the Group also received £1.1m of income taxes relating to UK R&D
tax credits for financial year 2023.
8. Dividends
The Directors do not recommend the payment of a dividend (six months ended 31
October 2022: £nil).
9. Loss 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
2023 ended 31 October ended
£'000 2022 30 April 2023
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Losses for the purposes of basic loss per share being net loss attributable to (5,070) (6,100)
owners of the Group
(3,067)
Six months Year
Six months ended 31 October ended 31 October ended
2023 2022 30 April 2023
'000 '000 '000
(Unaudited) (Unaudited) (Audited)
Number of shares
Weighted average number of ordinary shares for the purposes of basic loss per 573,626 431,852 431,852
share
Effect of dilutive potential ordinary shares:
Share options and warrants 640 315 313
Weighted average number of ordinary shares for the purposes of diluted loss 574,266 432,167 432,165
per share
Basic (p) (0.5) (1.2) (1.4)
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 2023, the Group acquired property,
plant and equipment with a cost of £57k (six months ended 31 October 2022:
£186k).
11. Notes to the cash flow statement
Six months ended 31 October Six months Year
2023 ended 31 October ended
£'000 2022 30 April 2023
£'000 £'000
(Unaudited) (Unaudited) (Audited)
(3,067) (5,070) (6,100)
Loss for the period
Adjustments for:
Finance income (32) - (2)
Finance costs 945 458 1,245
Change in fair value of derivative (202) - (77)
Income tax credit (425) (601) (1,192)
Depreciation of property, plant and equipment 883 962 1,903
Amortisation of intangible assets 1,357 1,465 2,891
Share-based payment expense 180 120 354
Operating cash flows before movements in working capital (361) (2,666) (978)
(517) (363) (391)
Increase in inventories
(Increase) / decrease in receivables (1,057) (263) 900
Decrease in payables and deferred income (737) (1,929) (529)
Cash used in operations (2,672) (5,221) (998)
Income taxes received 1,065 1,195 1,195
Net cash (used in)/generated from operating activities (1,607) (4,026) 197
12. Borrowings
Six months ended 31 October Six months Year
2023 ended 31 October ended
£'000 2022 30 April 2023
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Secured borrowing at amortised cost
Revolving credit facility and capex facility - 5,000 5,000
Term loan facility 5,333 - -
Other borrowings 1,086 1,418 1,357
Convertible loan notes (see note 13) 2,485 2,840 2,529
Total borrowings 8,904 9,258 8,886
Amount due for settlement within 12 months 3,167 5,693 8,318
Amount due for settlement after 12 months 5,737 3,565 568
During the period, the Group completed a refinancing of its £5.0m revolving
credit facility with HSBC with the signing of a new £5.5m secured term
loan. The new term loan facility was provided by Polymer N2 Limited, an
existing and significant shareholder in the Company. The facility has a
repayment date for the principal sum of 27 March 2025, with an option to
extend for a further 12 months. It carries a fixed interest rate of 9.5%,
which is payable quarterly, and Kromek has the option to pay the interest
through the issue of new ordinary shares of 1p each in the Company at the
trailing 10-day volume weighted average price of the Company's ordinary shares
on the date that payment falls due.
Other borrowings comprise:
· A fit-out loan with the landlord in the US in respect of the
facility occupied by eV Products, Inc. This loan is repaid in equal
instalments on a monthly basis and attracts interest at 7.50% per annum. At 31
October 2023, the total loan due to the landlord was £0.1m (30 April 2023:
£0.2m) which is due within 12 months.
· In 2020 and 2021 the Group's US operations were eligible to apply
for Covid-related Economic Injury Disaster Loans. A loan of £0.1m was
approved and secured in June 2020 and a further loan of £0.4m was approved
and secured in August 2021. These loans attracts interest at a rate of 3.75%
per annum and the maturity date is 30 years from the date of the loan note.
· A short-term £0.4m loan in September 2023 to aid with working
capital requirements.
Convertible loan notes of £2.8m were secured in the previous year. This is
discussed further in note 13.
13. Convertible loan notes
During the period, three noteholders converted 15% of their convertible loan
note holding, as well as the interest accrued on that holding during the first
12 months, into equity. This resulted in the issue of 7,830,630 additional
ordinary shares during the period (see note 14 below).
Embedded derivative Convertible loan note Total
£'000 £'000 £'000
Balance at 30 April 2023 517 2,529 3,046
Unwinding of discount - 201 201
Change in fair value (176) - (176)
Extinguish on conversion (32) (245) (277)
Balance at 31 October 2023 309 2,485 2,794
14. Share capital
During the period, 168,395,000 ordinary shares (six months ended 31 October
2022: nil) were issued as part of a placing, subscription and open offer in
May 2023, as well as through the part conversion of loan notes and interest in
September 2023 as highlighted in note 13 above.
Where convertible loan notes, and associated derivatives are settled during
the period, the Group adopts the guidance provided in IAS 32. Any difference
between the carrying amount of the debt host contract plus the carrying amount
(fair value) of the embedded derivative and the fair value of the shares
issued at the conversion date is recognised in profit or loss. During the
period, £26k was recognised in profit or loss. £11k was also recorded
directly in retained earnings as a result of the part settlement of
convertible loan notes.
15. Events after the balance sheet date
There are no significant or disclosable post-balance sheet events.
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