Kromek Share Discussion Threads

[wigwammer] 07/10/2020 14:40

Growth... "This investment in the UK headquarters follows the relocation of the Group's US operations to a new purpose-built premise near Pittsburgh, Pennsylvania. The site move was completed during the year with the operation moving in its entirety during June 2019, which has enabled a ramp-up in production for CZT-based cameras to serve the SPECT market. Both the UK and US manufacturing sites are certified to ISO9001:2015 through the annual ISO audit cycle."

[wigwammer] 07/10/2020 14:36

Now, why on earth would they do this? ... "In order to meet growing demand for Kromek's products, the Group continued its planned programme to significantly increase its production capacity and optimise the manufacturing process. During the year, Kromek successfully completed a substantial expansion programme at its UK headquarters in Sedgefield by increasing both the number of furnaces for growing CZT and material processing tools. In addition, the Group expanded the product assembly space for new and existing handheld radiation detector products in its existing UK factory."

[susiebe] 07/10/2020 14:34

yes they always seem so desperate.I wonder why?

[babbler] 07/10/2020 14:31

Here they come...

[quepassa] 07/10/2020 14:29

This company has now racked up ACCUMULATED LOSSES of £43million.


QUOTE:
Under this revised base case budget in the period to 30 April 2022, the Group was forecasting:

- to breach its original EBIT:Finance charge covenant on 30 April 2021, which is tested on an annual basis; and

- to breach its original net debt:EBITDA covenant on 31 October 2020, which is tested on a quarterly basis.

In response to these potential breaches the Board has negotiated a waiver in respect of the first covenant, which will means the covenant will not be tested until April 2022, and a waiver in respect of the second covenant for the three periods ending 31 October 2020, 31 January 2021 and 30 April 2021.
UNQUOTE


and

QUOTE
This severe but plausible downside scenario indicates a breach of the net debt: EBITDA covenant from the compliance quarter ending 31 July 2021 as well as breaching its covenant in relation to Group credit balances on 31 October 2021. The effect of which could be that the facilities would become repayable on demand. In addition, in this severe but plausible downside scenario the Directors have identified additional controllable mitigations (notably reducing payroll costs and discretionary expenditure on tangible and intangible assets), the effect of which is that the Group could continue to operate within the existing facilities, should they remain available.
UNQUOTE

[owenski] 07/10/2020 14:27

ST doesn't get them all right, this is a dog and the apd offering is still at testing stage.

[babbler] 07/10/2020 14:24

Miss the boat?

[pugugly] 07/10/2020 14:21

Chairman just invested £8,600 - What a vote of confidence! - not.

[susiebe] 07/10/2020 14:07

This mornings panicers,sorry sellers probably feeling a bit sick now.Good turnaround and expect more with the ST analysis.

[sev22] 07/10/2020 14:06

I'm wondering whether this is another UK technology company that will end up being taken over by a foreign predator.

[dicktrade] 07/10/2020 14:02

PUGUGLY
i would say those that get in quickly do very well.
i certainly have.
those that wait for the hard copy mag probably not so good but still possible.

[wigwammer] 07/10/2020 13:59

Thanks for the article, SEV. Explains a lot. Adding :)

[farnesbarnes] 07/10/2020 13:51

Me too. VLG and TSL. Thanks Mr Thompson.

[edmonda] 07/10/2020 13:30

Covid hurt FY results, as did one-off £13.1m debtor/AROC impairment.
But co says client activity (RFPs) has started to improve and bank covenants renegotiated. KMK is also developing the world’s first ‘biothreat’ detector...

SEE new research note from Paul Hill at Equity Development here:

[babbler] 07/10/2020 13:29

If it wasn't for miton this would be flying

[rivaldo] 07/10/2020 13:20

Just saw the item on the news - no mention of KMK, only the University of Bristol, with whom KMK have worked before:



So KMK are working in an intriguing area, but not sure if this was the same or a different project.

[speny] 07/10/2020 13:19

I do too! Up over 50% on JIM and SLP. Got in here before the ST update at 8.2p as these have been on my radar for a number of months.

[bazzer1000] 07/10/2020 13:10

I do too. SLP best this year.

[rivaldo] 07/10/2020 13:05

I do Pug - regularly! And I suspect a lot of others do too.

Just watched the 1.00 BBC News headlines - looks like KMK are about to be featured re their method of detecting airborne COVID-19 pathogens....a British company, so looks good.

[pugugly] 07/10/2020 12:47

SEV22 - Thanks - ST has a lot of followers but how many make money?

[susiebe] 07/10/2020 12:30

Agree good write up,definitely due a rebound as the CEO said too.Interesting accounting points which todays sellers have failed to grasp.I've bought a few more,will sit tight now.Good value.

[babbler] 07/10/2020 12:19

Couldn't get many via long spread bet... Hey ho.

[gleach23] 07/10/2020 12:17

Compelling write up although I'm rather surprised ST didn't mention that it's an owenski 'bargepole lol' stock - that's often a key buy indicator ;)

[sev22] 07/10/2020 12:05

A Simon Thompson update 'hot off the press' issued at mid-day today.

A Tech winner in fight against Covid-19.

Kromek (KMK:8p), a Sedgefield-based radiation detection technology company focused on the medical, security screening and nuclear markets, has announced annual results today.
The Covid-19 impact on the business led to Kromek reporting an underlying cash loss of £400,000 on 9 per cent lower revenue of £13.1m. This had already been flagged at the time of the pre-close trading update from the £27.5m market capitalisation company (‘Stock picking value open to future gains’, 4 May 2020).

Of far more interest is Kromek’s subsequent $5.2m (£4m) contract extension by the Defence Advanced Research Projects Agency (DARPA), an agency of the US Department of Defence, for work on developing a mobile bio-security system capable of detecting airborne pathogens. That’s because the project is now expected to be expanded for use in the non-military sector in response to the outbreak of Covid-19.

Kromek has already developed a prototype to sample air and identify the presence of any biological pathogen – including Covid-19 or any mutant version that may emerge over time. The technology can be used to immediately flag the presence of someone with a contagious disease and allow effective mitigation of the risk of transmission. By placing samplers in high footfall areas, such as airports and hospitals, or where people are in close proximity for long periods, threats can be identified without having to individually test people. Knowing a carrier is infected with a disease before they infect further individuals is key to halting the onset of an outbreak and before it causes major global disruption. Non-military applications include use in shopping centres, sports arenas, theme parks, schools, hospitals, offices, airplanes, and cruise ships. Importantly, it’s incredibly accurate, giving a false alarm in just one in 800,000 tests.

Chief executive Arnab Basu revealed during this morning’s results call that Kromek will undertake field trials with the pre-production prototype collecting airborne samples from urban and rural locations starting in January, and has field tests scheduled in London with two UK government agencies: The Defence Science and Technology Laboratory (DSTL), an executive agency of the Ministry of Defence; and Defence Aviation Repair Agency (DARA). Kromek also plans for delivery of units for pilot deployment in the US in the first half of 2021.

It could be a saviour for the UK government given the problems it’s facing with its much maligned Covid-19 test and trace programme. It could also reverse the fortunes for shareholders who have seen the share price decline since hitting a 12-month high of 27p in May, losing two-thirds of its value and taking the price well below the 17.5p level of my repeat buy call in early May.

Share price decline

The major reason for today’s share price fall is that Kromek unexpectedly revealed a £13.1m write-down on a medical imaging contract due to Covid-19 which has disrupted both the shipment to hospitals and access onsite.

Work in progress had been stockpiled for delivery and recognised as revenue over the course of the past 30 months. With shipment originally scheduled for 2020 onwards now delayed, the carrying value of accounts receivable under contract (AROC) is dependent on Kromek being able to prove a shipping date. It is unable to provide this at present, hence the £13.1m write-down to AROC in the accounts. However, all the stock remains on Kromek's balance sheet (and in its UK facilities) ready for shipment and delivery in the future, hence why the directors still expect the position to reverse, at which point Kromek can book a hefty exceptional credit. I am not sure investors have fully grasped this accounting point.

Kromek’s rebound potential

I am not sure they have grasped that a rebound in the 2020/21 financial year is on the cards either.

Firstly, Kromek has now started delivering on a delayed seven-year Original Equipment Manufacturer (OEM) contract worth US$58m (£45m) to provide its cutting edge CZT detectors and advanced electronics in state-of-the-art medical imaging detectors. The contract should deliver revenues worth “millions of dollars” in the current financial year, says Mr Basu. The same is true of another delayed contract from the 2019/20 financial year.

Secondly, the company continues to win new contracts in other parts of the business. Kromek was awarded $1.1m worth of contracts to add technical innovation capability to its D3S ‘dirty bomb detectors’ by US government agencies. They are proving popular in Europe, too, with the European Commission and Irish Civil Defence also using them. Given the heightened terrorism risk across the world, the 22 countries currently deploying the technology is likely to grow.

Thirdly, Mr Basu reassuringly notes that Kromek’s revenue is now back to pre-Covid-19 levels following the disruption of the first quarter to 31 July 2020. That’s important as it means that concerns over the company’s cash position should now ease, another reason for the share price fall since May. Finance director Derek Bulmer says that the company had gross cash of £9.4m at 30 April 2020 and gross debt of £5.6m. Since then it has strengthened its gross cash reserves by over £2m and varied bank covenants on its HSBC facility. Given that revenue has returned to pre-Covid-19 levels, and stocks are now being delivered on delayed contracts, the company should have the funding in place to operate without the need to tap shareholders. This may not have been made clear to investors.

The bottom line is that the 40 per cent share price discount to net asset value of 13p should reverse when investors cotton onto the huge commercial opportunities for Kromek's ground breaking DARPA airborne pathogens technology that is being piloted. Buy.

[33mick] 07/10/2020 11:50

Is the Chinese £££ issue dating back to this original deal in 2014?? Un-named company??

"Kromek Jumps On China Medical Imaging Market Deal"
Fri, 4th Apr 2014 08:09
LONDON (Alliance News) - Radiation detection technology company Kromek Group PLC saw its shares rise strongly Friday after it said it had signed a long-term contract with an established manufacturer of x-ray diagnostics and analysis equipment in China, giving the Chinese firm preferential rights for the supply of Kromek's CZT-based detection modules in the country.