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KMK Kromek Group Plc

5.75
0.05 (0.88%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Kromek Group Plc LSE:KMK London Ordinary Share GB00BD7V5D43 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.05 0.88% 5.75 5.50 6.00 5.85 5.75 5.85 916,939 08:00:04
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Miscellaneous Metal Ores,nec 17.31M -6.1M -0.0102 -5.64 34.51M

Kromek Group PLC Interim Results (3285O)

31/01/2023 7:00am

UK Regulatory


Kromek (LSE:KMK)
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TIDMKMK

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 GBP6.8m (H1 2022: GBP4.7m) 
   --    Gross margin of 40.4% (H1 2022: 46.8%) 

-- Adjusted EBITDA* was GBP2.7m loss (H1 2022: GBP0.6m 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 GBP1.0m (30 April 2022: GBP5.1m) 

o Cash position improved post period, with cash and cash equivalents of GBP1.3m 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 GBP2.5m 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 GBP1.5m, 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 GBP4.9m 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 
 Paul Farquhar, CFO                                +44 (0)1740 626 060 
finnCap Ltd (Nominated Adviser and Broker) 
Geoff Nash/Seamus Fricker/George Dollemore/Emily 
 Watts 
 - Corporate Finance 
 Tim Redfern/Charlotte Sutcliffe - ECM             +44 (0)20 7220 0500 
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.

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 GBP2.5m 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 GBP1.5m, 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 GBP4.9m 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 GBP6.8m (H1 2022: GBP4.7m) In particular, product revenue increased significantly and accounted for 96% of the revenue for the half.

 
                H1 2023            H1 2022 
               (Unaudited)       (Unaudited) 
              GBP'000           GBP'000 
           ----------  -----  ---------  ----- 
 Product     GBP6,540    96%   GBP3,786    80% 
           ----------  -----  ---------  ----- 
 R&D           GBP245     4%     GBP921    20% 
           ----------  -----  ---------  ----- 
 Total       GBP6,785   100%   GBP4,707   100% 
           ----------  -----  ---------  ----- 
 

Gross profit increased to GBP2.7m (H1 2022: GBP2.2m) 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 GBP8.0m (H1 2022: GBP6.4m). 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 GBP1.6m increase year-on-year, GBP0.5m 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 GBP1.3m 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 GBP5.2m (H1 2022: GBP2.9m loss). After net finance costs of GBP0.5m (H1 2022: GBP0.3m), loss before tax was GBP5.7m (H1 2022: GBP3.1m loss).

The adjusted EBITDA loss for the period was GBP2.7m (H1 2022: GBP0.6m loss). Adjusted EBITDA is calculated as follows:

 
                               H1 2023        H1 2022       FY 2022 
                           (Unaudited)    (Unaudited)     (Audited) 
                                        ------------- 
                               GBP'000        GBP'000       GBP'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 GBP2.6m for the six-month period ended 31 October 2022 (H1 2022: GBP3.1m). 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 GBP1.2m (H1 2022: GBP1.0m).

Cash and cash equivalents at 31 October 2022 were GBP1.0m (30 April 2022: GBP5.1m). The GBP4.1m decrease in cash over the six-month period is the net result of:

   --    GBP(2.7)m - operating loss for the period 

-- GBP(1.4)m - net working capital movements and income taxes received, including a GBP1.9m reduction in trade payables

   --    GBP(2.8)m - investment in development costs and capital expenditure 
   --    GBP2.0m - net new funds raised less debt and interest payments 
   --    GBP0.8m - 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 GBP1.3m 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 GBP5.7m (30 April 2022: GBP5.7m), of which GBP5.0m related to bank borrowings. The Board is currently working towards the refinancing of the GBP5.0m banking facility and expects to complete this in the short term.

Inventories increased by GBP0.4m in the period from GBP10.5m at 30 April 2022 to GBP10.9m at 31 October 2022, and significantly higher than the GBP7.3m at 31 October 2021. The increase in inventories over the six-month period reflects a GBP0.6m impact of foreign exchange as most of the Group's inventories are USD denominated. Adjusting for the foreign exchange impact, inventories reduced by GBP0.2m 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   Six months       Year 
                                               ended 31     ended 31      ended 
                                                October      October   30 April 
                                                   2022         2021       2022 
                                                GBP'000      GBP'000    GBP'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 on contract               6              -           89        132 
 
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 
 
  -basic (p)                           9          (1.2)        (0.5)      (1.1) 
 
 

Consolidated condensed statement of comprehensive income

For the six months ended 31 October 2022

 
                                                                   Six months 
                                                                        ended               Year 
                                              Six months 
                                                ended 31 
                                                 October           31 October              ended 
                                                                                        30 April 
                                                    2022                 2021               2022 
                                                 GBP'000              GBP'000            GBP'000 
                                             (Unaudited)          (Unaudited)          (Audited) 
 
   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 
                                          GBP'000      GBP'000    GBP'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    Premium              Merger     Translation    Accumulated 
                          Capital    Account             Reserve         Reserve         Losses        Total 
                          GBP'000    GBP'000             GBP'000         GBP'000        GBP'000      GBP'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

 
                                                Six months   Six months       Year 
                                                  ended 31     ended 31   ended 30 
                                                   October      October      April 
                                                      2022         2021       2022 
                                         Note      GBP'000      GBP'000    GBP'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 .

   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 .

   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   Six months       Year 
                     ended 31     ended 31      ended 
                      October      October   30 April 
                         2022         2021       2022 
                      GBP'000      GBP'000    GBP'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 
                                                  GBP'000          GBP'000       Group 
                                                                               GBP'000 
 Revenue from sales 
  Revenue by segment: 
  -Sale of goods and services                       5,621            7,313      12,934 
 -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

 
                                                                             Total for 
                                            UK Operations   USA Operations       Group 
                                                  GBP'000          GBP'000     GBP'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 GBPnil in relation to an item impaired in the full year 2020 financial statements (six months ended 31 October 2021: GBP89k).

   7.         Tax 

The Group has recognised R&D tax credits of GBP601k for the six months ended 31 October 2022 (six months ended 31 October 2021: GBP707k).

   8.         Dividends 

The Directors do not recommend the payment of a dividend (six months ended 31 October 2021: GBPnil).

   9.         Losses per share 

The calculation of the basic and diluted loss per share is based on the following data:

Losses

 
                                              Six months   Six months       Year 
                                                ended 31     ended 31      ended 
                                                 October      October   30 April 
                                                    2022         2021       2022 
                                                 GBP'000      GBP'000    GBP'000 
                                            (Unaudited)   (Unaudited)  (Audited) 
Losses for the purposes of basic loss 
 per share being net loss attributable 
 to owners of the Group                          (5,070)      (2,349)    (4,918) 
 
 
                                              Six months   Six months       Year 
                                                ended 31     ended 31      ended 
                                                 October      October   30 April 
                                                    2022         2021       2022 
                                                    '000         '000       '000 
                                            (Unaudited)   (Unaudited)  (Audited) 
Number of shares 
Weighted average number of ordinary 
 shares for the purposes of basic loss 
 per share                                       431,852      431,852    431,852 
 
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 
 per share                                       432,167      432,470    432,203 
 
 
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 GBP186k (six months ended 31 October 2021: GBP260k).

   11.        Notes to the cash flow statement 
 
                                          Six months   Six months       Year 
                                            ended 31     ended 31      ended 
                                             October      October   30 April 
                                                2022         2021       2022 
                                             GBP'000      GBP'000    GBP'000 
                                         (Unaudited)  (Unaudited)  (Audited) 
 
  Loss for the period                        (5,070)      (2,349)    (4,918) 
 
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) 
 
 
  Increase in inventories                      (363)      (1,134)    (4,301) 
(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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