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Kromek Group PLC: THE INVESTMENT CASE

Kromek gaining traction with its radiation detection technology

Kromek, formerly Durham Scientific Crystals, was incorporated in April 2003 to commercialise technology that had been developed in the Physics Department of Durham University over a period of some 20 years.
The D3S detector kit
INVESTMENT OVERVIEW: KMK The Big Picture
Kromek has developed significant expertise and capabilities to combine its detector technology and the x-ray imaging technology

Radiation technology company Kromek Group PLC (LON:KMK) is confident of achieving break-even on an underlying earnings (Ebitda) basis this financial year.

The technology company saw a solid increase in revenue in the six months to the end of October, which bodes well for its ambition to break even.

Revenue rose 27% to £4.8mln from £3.8mln the year before, leading to a significant narrowing of underlying losses (Lbitda) to £0.3mln from a loss the year before of £0.6mln.

Loss before tax was unchanged at £1.8mln.

At the end of the reporting period, the group had gross cash and cash equivalents of £15mln, down from £20.3mln at the beginning of the period.

“In the first half, we saw growth in sales through executing on our previously-signed agreements while, at the same time, continuing to win new high-value contracts,” said Arnab Basu, the chief executive officer of Kromek.

Since the end of the reporting period, the company has secured an extension to the contract it has with DARPA – the US Defense Advanced Research Projects Agency – to use Kromek's D3S product to detect 'dirty bombs'.

The radiation monitoring company said the extension, worth US$1.6mln, will be delivered over an 18-month period and will involve additional enhancements to the company’s D3S equipment already deployed at DARPA.

Kromek added that its D3S products will be used to provide greater operational capability and information detail to DARPA’s SIGMA programme, an initiative aimed at preventing attacks involving radiological ‘dirty bombs’ and other nuclear threats in the US and globally.

Since the beginning of its contract in February 2016, Kromek said 10,000 of its D3S units had been delivered successfully.

"We also succeeded in enhancing our reputation in our key target markets. Our D3S product was successfully deployed in high-profile situations for safeguarding against nuclear terrorism, and we achieved a significant milestone in SPECT by finalising the development of a system capable of producing clinical-grade images that will improve early stage diagnosis of diseases such as cancer and dementia,” he added.

“With our increasing traction with existing and potential customers, and with a strengthened order book, the board looks to the future with confidence," Basu said.

High-performance radiation detection

The results indicate that the Durham-headquartered group is reaping the rewards of two years’ worth of hard work during which it has been laying the foundations for future growth The £21mln fund-raising in February 2017, meanwhile, has given it the wherewithal to tap into the huge market opportunities and to invest in research and development, which keeps the company at the cutting edge of radiation technology.

The company is the developer of high-performance radiation detection products based on cadmium zinc telluride (CZT) and other advanced technologies.

Using its core platforms, Kromek designs, develops and produces x-ray and gamma photon imaging and radiation detection products for the medical, security screening and nuclear markets.

The products provide high-resolution information on material composition and structure. This means they can be used in many applications, ranging from the identification of cancerous tissues to hazardous materials, such as explosives, and the analysis of radioactive materials.

Kromek operates a vertically integrated technology. What this means practically is it offers customers core technology components as well finished products such detectors, including software, electronics and application specific integrated circuits.

While based in the north-east, the business, which employs 100, has operations in California and Pennsylvania and sells internationally through distributors and direct to manufacturers.

Companies moving towards CZT technology

As Basu alluded to, the message from Kromek is that more and more companies are looking to move away from traditional detector technology to CZT.

Compared to the likes of silicon and germanium detectors, CZT operates at room temperature and can process more than 10mln photons / second / mm^2 (that’s a good thing).

“The unique combination of spectroscopy and very high count rate capability at room temperature makes CZT an ideal detector solution for Medical, Industrial, Homeland Security and Laboratory applications,” the Kromek website reads.

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Kromek Group PLC Timeline

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