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Kromek Group PLC - Interim Results

RNS Number : 4381W
Kromek Group PLC
11 December 2019
 

11 December 2019

Kromek Group plc

("Kromek" or the "Group")

 

Interim Results

 

Kromek (AIM: KMK), a worldwide supplier of detection technology focusing on the medical, security screening and nuclear markets, announces its interim results for the six months ended 31 October 2019.

 

Financial Summary

·      Revenue increased by 43% to £5.3m (H1 2018/19: £3.7m)

·      Product sales accounted for 82% of total revenue (H1 2018/19: 78%)

·      Gross margin was 58% (H1 2018/19: 67%; FY 2018/19: 57%)

·      Adjusted EBITDA* was £0.6m loss (H1 2018/19: £0.6m loss)

·      Loss before tax was £2.7m (H1 2018/19: £2.1m loss)

·      Gross cash and cash equivalents at 31 October 2019 were £13.4m (30 April 2019: £20.6m; 31 October 2018: £6.3m), with the key movement being planned capex of £5.5m primarily to expand production capacity to fulfil customer demand

*Adjusted EBITDA defined as earnings before interest, taxation, depreciation, amortisation and share-based payments as detailed in the Financial Review below

 

Operational Summary

·      Record H1 revenue driven by delivery of high value, multi-year contracts with commercial and large government customers worldwide across nuclear detection, medical imaging and security screening

·      Substantial expansion programme implemented at UK headquarters to increase CZT manufacturing capacity and D3S production

·      Significant commercial traction with D3S family of products:

Expanded sales team and rapid channel development resulting in the D3S platform now having been sold in 22 countries

Received and has successfully delivered orders of £2.1m from a European government-related company, a new customer, for the provision and integration of D3S-related technologies

Further contracts won from US government and European Commission and, post period, a national civil defence agency of a European country

·      Commenced delivery on a significant $58.1m contract to provide an OEM customer with CZT detectors and associated advanced electronics for its state-of-the-art medical imaging systems

·      Substantial increase in capacity in detector manufacturing and introduction of process automation resulting in increased throughput and efficiency in the US facility, which is delivering on substantial medical contracts

·      3 new patents were filed and 8 were granted during the period

 

Outlook

·      Entered H2 2019/20 with increasing commercial momentum: Kromek signed multi-year contracts totalling c. £100m in the three years to 31 October 2019 compared with c. £50m and c. £30m for the three years to 31 October 2018 and 2017 respectively

·      Unchanged outlook for FY 2019/20: on track to achieve revenue and EBITDA profit in line with market expectations

 

 

Dr Arnab Basu, CEO of Kromek, said: "This year has seen a focus on executing on the previously-signed agreements and commencing delivery on the multi-year contracts won in recent years. This has resulted in record first half revenues. We have seen an increase in adoption of our next-generation products in the medical imaging market and an expansion of applications for our D3S platform. Consequently, our product sales have seen a year-on-year increase of 53% and account for 82% of revenues in the first half.

 

"Kromek entered the second half well-positioned to report its highest ever full year revenues as delivery of high value, multi-year contracts continues to ramp up. We are delivering on contracts worth nearly £100m won over the past three fiscal years in our target markets of medical imaging, nuclear detection and security screening as customers commercially deploy their next-generation CZT-based products. Additionally, we continue to experience growing demand for our flagship products, which is expected to convert to further orders. As a result, the Group has visibility of 90% of expected revenue for FY 2019/20 based on delivery of the contracts already won and supported by a strong and increasing pipeline. The Board expects to deliver significant revenue growth and EBITDA profit for full year in line with market expectations."

 

 

For further information, please contact:

 

Kromek Group plc

 

Arnab Basu, CEO

Derek Bulmer, CFO

 

+44 (0)1740 626 060

Cenkos Securities plc (Nominated Adviser and Broker)

 

Max Hartley (NOMAD)

Julian Morse (Sales)

 

+44 (0)20 7397 8900

Luther Pendragon (PR)

 

Harry Chathli

Claire Norbury

Alexis Gore

Joe Quinlan

+44 (0)20 7618 9100

 

 

Analyst Presentation

 

Arnab Basu, CEO, and Derek Bulmer, CFO, will be hosting a presentation for analysts at 9.30am GMT today at the offices of Luther Pendragon, 48 Gracechurch Street, London, EC3V 0EJ.

 

 

 

About Kromek Group plc

 

Kromek Group plc is a technology group (global HQ in County Durham) and a leading developer of high performance radiation detection products based on cadmium zinc telluride ("CZT") and other advanced technologies. Using its core technology platforms, Kromek designs, develops and produces x-ray and gamma ray imaging and radiation detection products for the medical, security screening and nuclear markets.

 

The Group's products provide high resolution information on material composition and structure and are used in multiple applications, ranging from the identification of cancerous tissues to hazardous materials, such as explosives, and the analysis of radioactive materials.

 

The Group's business model provides a vertically integrated technology offering to customers, from radiation detector materials to finished products or detectors, including software, electronics and application specific integrated circuits ("ASICs").

 

The Group has operations in the UK and US (California and Pennsylvania), and is selling internationally through a combination of distributors and direct OEM sales.

 

Currently, the Group has over one hundred full-time employees across its global operations. Further information on Kromek Group is available at www.kromek.com and https://twitter.com/kromekgroup.

 

 

Overview

 

Kromek achieved the highest first half revenue in its history at £5.3m (H1 2018/19: £3.7m), a year-on-year increase of 43%. This progress was based on Kromek continuing to execute on the high value, long-term agreements that it has been awarded across its target markets, which, over the last three fiscal years, amount to nearly £100m in orders. In particular, the Group's growth is being driven by increasing adoption of Kromek's next-generation molecular imaging single photon emission computed tomography ("SPECT") products in medical imaging and the D3S family of products in nuclear detection. It also reflects the increasing commercialisation of Kromek's technology, with product sales accounting for 82% of total revenue (H1 2018/19: 78%), representing 53% growth in value over the same period of the prior year.

 

During the period, the Group implemented a substantial expansion programme at its UK headquarters in Sedgefield to increase its cadmium zinc telluride ("CZT") manufacturing capacity. The expansion programme, which is on track to be completed in H2 2019/20, will increase the Group's CZT manufacturing capacity in the UK by almost seven-fold and will support Kromek in delivering on existing orders as well as expand its pipeline with larger, higher-volume contracts. The Group's management believes that it will provide Kromek with the largest CZT production capacity globally and enable the facility to become a world centre for this core technology. Alongside the major relocation last year of its US operations to a new state-of-the-art facility, Kromek has significantly strengthened its foundations to enable it to deliver on the anticipated future growth of the business. 

 

Medical Imaging

 

Kromek continued to deliver on its contracts and win new orders in the medical imaging markets across its key segments of SPECT, bone mineral densitometry ("BMD") and gamma probes. In particular, Kromek commenced delivery on one of its most significant contracts to date, which had been awarded in H2 2018/19, to provide an OEM customer with CZT detectors and associated advanced electronics to be used in its state-of-the-art medical imaging systems. The contract is expected to be worth a minimum of $58.1m over a seven-year period.

 

Also during the period, the Group advanced towards achieving clinical validation of its CZT-based SPECT detector system under the contract signed in 2014 with an established manufacturer of X-ray diagnostics and analysis equipment. The Group's management believes this system will significantly enhance the identification and management of diseases such as cancer and Parkinson's.

 

Kromek is collaborating with its medical imaging partners to support them in leveraging the advances in SPECT imaging, with a focus on reducing required patient dose, exam time and broadening the application of molecular imaging. This includes the Group's work with the Newcastle-upon-Tyne Hospitals NHS Foundation Trust (the "Newcastle Hospitals Trust") to transition SPECT from a purely diagnostic technique for establishing the presence of disease to a screening solution for detecting potential disease indicators. In particular, under a three-year project that commenced mid-2018, the Group is developing, alongside the Newcastle Hospitals Trust and an OEM partner, an ultra-low dose molecular breast imaging technology based on Kromek's CZT-based SPECT detectors.

 

Nuclear Detection

 

Kromek continued to experience increasing demand for its D3S platform, which is attracting business interest across the globe - and has now been sold in 22 countries. This is supported by the expansion of the D3S sales team and distribution network, with new channels being regularly put in place.

 

In particular, Kromek was awarded a strategically significant contract, worth £1.1m, by a European-government related company, a new customer, for the provision of D3S-related technologies, which was subsequently extended by £1.0m to provide technology integration. The customer works with a European government to detect and protect against potential nuclear threats. Kromek has successfully delivered this contract and the Group's solutions are being actively deployed by the customer for wide-area threat monitoring.

 

The US government awarded Kromek a new and an extension contract worth over $1m in total under two initiatives:

 

·      The US Government's Countering Weapons of Mass Destruction Office, which is a component within the US Department of Homeland Security, has awarded Kromek a $0.7m extension contract to add further technical innovation capability to the D3S family of products.

·      The US government's Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (JPEO-CBRND) awarded Kromek a $389k contract to provide D3S-related customisation for military operational transition, which will leverage the DARPA SIGMA Program sensor and technology.

 

The D3S platform was used in active deployments and field-tests in multiple locations of strategic importance and high risk across the US, Asia and Europe. This includes deployment under an initiative by the European Commission's Directorate-General for Migration and Home Affairs, working alongside security authorities in Belgium, Luxembourg, The Netherlands and Spain, to allow the law enforcement authorities to validate new and emerging technologies for homeland protection. Over the course of this year, the European Commission will use the D3S-ID and D3S Drone radiation detectors for the protection of public spaces across multiple European locations covering high risk venues such as airports, train stations and other public areas. Kromek was awarded a €180k contract for this programme. 

 

Post period, Kromek won a competitive tender to provide its D3S platform to a national civil defence agency of a European country under a contract worth up to €200k. This is a new customer for the Group and also represents the first sale in this European country for Kromek's D3S platform as its reach continues to expand globally.

 

In the nuclear markets, 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. During the period, this area of business continued to gain traction, receiving orders from both existing and new customers. The Group has also appointed new distributors in key geographical markets, furthering the channel development strategy on a global basis.

 

Security Screening

 

In security screening, Kromek continued to provide its OEM and government customers with components and systems for cabin and hold luggage scanning applications. This includes commencing delivery on the $2.7m expansion order, that was received at the end of the 2018/19 year, under the Group's long-term contract to provide key components for a US-based customer's security screening system for the detection of explosives. The order expansion, which increased the total value of the contract by almost 90%, reflects the growing recognition of the strength of Kromek's detection solution and credentials as a high-quality product supplier. Kromek continues to receive increasing interest in its technologies that are able to meet the high-performance standards demanded by customers to ensure passenger safety while increasing the convenience and efficiency of the security process.

 

The Group also reached a key milestone with another OEM customer in the security screening market, which achieved the highest level of European liquid explosive detection certification for cabin baggage for its scanner that is based on Kromek software and detectors. This certification enables for commercial deployment of the product.

 

Manufacturing Facilities and R&D

 

During the period, Kromek implemented a substantial expansion programme at its UK headquarters in Sedgefield to increase its CZT manufacturing capacity. This included significantly increasing the number of furnaces for growing CZT as well as equipment for other stages of the manufacturing process. In addition, the Group increased the size of the work area for the building of the D3S family of products. Despite this substantial undertaking, the Group was successful in ensuring that its existing facilities remained fully functional throughout the process to enable continued production.

 

The expansion programme, which is on track to be completed in H2 2019/20, will increase the Group's CZT manufacturing capacity in the UK by almost seven-fold and will support Kromek in delivering on existing orders as well as expand its pipeline with larger, higher-volume contracts. The Group's management believes that it will give Kromek the largest CZT production capacity globally and establish the facility as a world centre for this core technology.

 

The implementation of the expansion programme also demonstrates the scalability of the Group's production as Kromek 'industrialises' the CZT manufacturing process. In addition, Kromek invested in significantly increasing process automation at its facilities in both the UK and US, which is already realising results. With greater automation, the Group will expand throughput capacity as well as improve efficiencies. These improvements are intended to be implemented in a phased manner over the course of this current financial year. Alongside the relocation last year of its US operations to a new state-of-the-art facility, Kromek has significantly strengthened its foundations to enable it to deliver on the current and anticipated future growth of the business.

 

Kromek continued to develop its new technology pipeline, with its R&D efforts focused on the development and enhancement of products and platform technologies that form elements of Kromek's product roadmap, particularly for near-term commercial opportunities, and to enable the Group to maintain its leading market position. Kromek worked on both externally and internally funded R&D activities, with the proportion continuing to transition away from externally funded R&D projects as its technologies are increasingly commercialised. In addition, Kromek's R&D efforts were focused on value engineering to increase cost efficiencies to enable the Group to offer competitively priced products whilst maintaining margins.

 

Kromek's externally funded work is primarily in the areas of medical imaging and nuclear detection. In nuclear detection, the focus is on the D3S platform to further reduce the size, weight and power consumption of detectors and increase their immunity to environmental conditions.

 

During the period, three new patents were filed and eight patents were granted.

 

 

Financial Review

 

Revenue for the six-month period ended 31 October 2019 increased by 43% to £5.3m (H1 2018/19: £3.7m), representing the Group's highest ever first half revenue. Product revenue, which increased by 53% to £4.4m (H1 2018/19: £2.9m), accounted for 82% of total revenue (H1 2018/19: 78%). R&D revenue also grew, with an increase of 16% to £1.0m (H1 2018/19: £0.8m).

 

Revenue Mix

H1 2019/20

H1 2018/19

Full year 2018/19

 

£'000

% share

£'000

% share

£'000

% share

Product

4,382

82%

2,865

78%

12,060

83%

R&D

951

18%

820

22%

2,457

17%

Total

5,333

 

3,685

 

14,517

 

 

Gross margin for the period was 58% compared with 57% for FY 2018/19, reflecting a similar revenue mix. The gross margin in H1 2018/19 of 67% was due to the higher proportion of R&D revenue. As noted at the time, this was disproportionately high due to the US factory relocation throughout that period. Gross profit increased by 25% to £3.1m (H1 2018/19: £2.5m), reflecting the increase in revenue.

 

Operating costs increased by £0.8m to £5.4m (H1 2018/19: £4.6m) due to the planned recruitment of new staff and marketing costs to drive the growth of the D3S platform. The Group was also impacted by the weakness of the GBP£, which created foreign exchange pressures on the conversion of the Group's US cost base. The higher operating costs offset the increase in gross profit, resulting in a greater loss before tax at £2.7m (H1 2018/19: £2.1m). However, there was a neutral impact on the adjusted EBITDA loss for the period, which was £0.6m (H1 2018/19 £0.6m loss). Adjusted EBITDA is calculated as per the following table:

 

 

H1 2019/20

(Unaudited)

H1 2018/19 (Unaudited)

Full Year 2018/19

(Audited)

 

£'000

£'000

£'000

 

 

 

 

Loss before tax

(2,653)

(2,133)

(1,270)

EBITDA adjustments:-

 

 

 

Net interest

311

47

364

Depreciation

544

445

879

Amortisation

1,087

1,040

1,806

Share-based payments

100

48

195

Adjusted EBITDA*

(611)

(553)

1,974

*Adjusted EBITDA is defined as earnings before interest, taxation, depreciation, amortisation, other income and share-based payments. 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 as a result of revenue growth. 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 £1.8m for the six-month period ended 31 October 2019 (H1 2018/19: £1.5m). The increase relates to product development being temporarily suspended in the US operations during the prior period due to the relocation of the US facility. The product development expenditure in H1 2019/20 was in near-term product development, reflecting the continued commitment to invest in the future growth of the business with new and enhanced products that can be commercially marketed. Amortisation of such development activity in the period was £0.7m (H1 2018/19: £0.7m). 

 

Cash and cash equivalents at:

·      31 October 2019 were £13.4m (including £5.0m utilised on the revolving credit facility ("RCF"))

·      30 April 2019 were £20.6m (including £3.0m utilised on the RCF)

·      31 October 2018 were £6.3m (including £3.0m utilised on the RCF)

 

The net decrease in cash and cash equivalents in the six months ended 31 October 2019 was primarily due to the planned capital expenditure of £5.5m, of which £4.8m relates to investment in the expansion of the Group's UK manufacturing facilities to ensure future contract delivery. Other key movements in cash were the result of an EBITDA loss of £0.6m; investment in development costs and other intangibles of £1.9m; net movement in loans and interest net of money market funds of £1.0m; widening of working capital of £1.1m; receipt of R&D tax credit of £0.9m.

 

As noted in the FY 2018/19 results announcement on 27 June 2019, 59% of the balance of trade and other receivables related to the build of amounts recoverable on contract ("AROC"), the majority of which is concentrated with one customer. This reflects the Group's revenue recognition in line with IFRS 15 on long-term contracts and the position was accumulated over the 12-24 months prior to 30 April 2019.

 

With the exception of fluctuations in foreign exchange, the proportion of AROC has remained static, with no further increase in the position and no additional contract related costs incurred at the end of October 2019. Whilst the Group's management did not expect to see a significant unwind of this particular AROC balance in this 6-month period given the delivery plan agreed with the customer for product, there has been a delay in an expected payment. However, the Group's management continues to be in active and regular discussions with the customer regarding firm shipments of completed products and payments, and continues to believe that the recovery of the AROC will be achieved within the 18-month period previously communicated in the FY 2018/19 report.   

 

 

Outlook

 

Kromek entered the second half of 2019/20 well-positioned to report its highest ever full year revenues as the Group continues to ramp up delivery of its high value multi-year contracts.

 

The Group's products continue to gain traction in all its business segments and Kromek is strengthening its relationships with existing customers as well as enhancing its reputation among potential customers. Kromek is at the early stages of delivering contracts worth approximately £100m won over the past three fiscal years (compared with c. £50m and c. £30m for the three years to 31 October 2018 and 2017 respectively) in its target markets in medical imaging, nuclear detection and security screening, including the seven-year medical imaging contract expected to total $58.1m awarded in January 2019. Over the next few years, these multi-year contracts are expected to provide an ever-increasing order book at the beginning of each year as customers commercially deploy their next-generation CZT-based products. Additionally, Kromek continues to experience growing demand for its flagship products, which is expected to convert to further orders.

 

As a result of this, the Group has visibility of 90% of expected revenue for FY 2019/20 based on delivery of the contracts already won and supported by a strong and increasing pipeline. The Board expects to deliver significant revenue growth and EBITDA profit for full year in line with market expectations.

 

 

 

 

 

 

 

 

Consolidated condensed income statement

For the six months ended 31 October 2019

 

 

 

 

Six months ended 31 October

2019

£'000

 

Six months

ended 31 October

2018

£'000

 

Year

ended

30 April 2019

£'000

 

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

 

 

 

 

 

 

 

 

Note

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

 

Revenue

4

 

5,333

 

3,685

 

14,517

Cost of sales

 

 

(2,240)

 

(1,205)

 

(6,208)

 

 

 

 

 

 

 

 

Gross profit

 

 

3,093

 

2,480

 

8,309

 

 

 

 

 

 

 

 

Distribution costs

 

 

(190)

 

(78)

 

(184)

Administrative expenses (including operating expenses)

 

 

(5,245)

 

(4,488)

 

(9,031)

 

 

 

 

 

 

 

 

Operating loss

 

 

(2,342)

 

(2,086)

 

(906)

 

 

 

 

 

 

 

 

Finance income

 

 

45

 

129

 

155

Finance costs

 

 

(356)

 

(176)

 

(519)

 

 

 

 

 

 

 

 

Loss before tax

 

 

(2,653)

 

(2,133)

 

(1,270)

 

 

 

 

 

 

 

 

Tax

5

 

389

 

480

 

987

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(2,264)

 

(1,653)

 

(283)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses per share

 

 

 

 

 

 

 

 

-basic (p)

7

 

(0.7)

 

(0.6)

 

(0.1)

-diluted (p)

 

 

(0.7)

 

(0.6)

 

(0.1)

 

Consolidated condensed statement of comprehensive income

For the six months ended 31 October 2019

 

 

Six months ended 31 October

2019

£'000

(Unaudited)

 

Six months

ended

31 October

2018

£'000

(Unaudited)

 

Year

ended

30 April 2019

£'000

(Audited)

 

Loss for the period

 

(2,264)

 

 

(1,653)

 

 

(283)

 

Items that may be recycled to the income statement

 

 

 

 

 

Exchange gains/(losses) on translation of foreign operations

(35)

 

1,689

 

1,218

Total comprehensive gain/(loss) for the period

(2,299)

 

36

 

935

 

        

Consolidated condensed statement of financial position

As at 31 October 2019

 

 

Note

 

31 October

2019

£'000

 

31 October

2018

£'000

 

 

30 April 2019

£'000

Non-current assets

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

Goodwill

 

 

1,275

 

1,275

 

1,275

Other intangible assets

 

 

18,986

 

17,760

 

18,165

Investments - Long term cash deposits

 

 

-

 

1,250

 

1,250

Property, plant and equipment

8

 

11,365

 

5,864

 

6,252

Right-of-use asset

 

 

3,809

 

4,488

 

3,975

 

 

 

 

 

 

 

 

 

 

 

35,435

 

30,637

 

30,917

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Inventories

 

 

4,014

 

3,307

 

3,227

Trade and other receivables

 

 

20,823

 

13,115

 

19,997

Current tax assets

 

 

515

 

514

 

987

Cash and bank balances

 

 

13,437

 

6,340

 

20,616

 

 

 

 

 

 

 

 

 

 

 

38,789

 

23,276

 

44,827

 

 

 

 

 

 

 

 

Total assets

 

 

74,224

 

53,913

 

75,744

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(5,369)

 

(3,197)

 

(4,884)

Lease obligation

 

 

(270)

 

(310)

 

(273)

Borrowings

 

 

(3,607)

 

(3,105)

 

(3,133)

Provisions for liabilities

 

 

  -

 

  (281)

 

-

 

 

 

 

 

 

 

 

 

 

 

(9,246)

 

(6,893)

 

(8,290)

 

 

 

 

 

 

 

 

Net current assets

 

 

29,543

 

16,383

 

36,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Finance lease liabilities

 

 

(3,815)

 

(4,289)

 

(3,938)

Borrowings

 

 

(2,156)

 

(2,389)

 

(2,313)

 

 

 

 

 

Total liabilities

 

 

    (15,217)

 

    (13,571)

 

(14,541)

 

 

 

 

 

 

 

 

Net assets

 

 

59,007

 

40,342

 

61,203

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Share capital

10

 

3,447

 

2,605

 

3,446

Share premium account

 

 

61,602

 

42,626

 

61,600

Capital redemption reserve

 

 

21,853

 

21,853

 

21,853

Translation reserve

 

 

914

 

1,420

 

949

Retained earnings

 

 

(28,809)

 

(28,162)

 

(26,645)

 

 

 

 

 

 

 

 

Total equity

 

 

59,007

 

40,342

 

61,203

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated condensed statement of changes in equity

For the six months ended 31 October 2019

 

 

Equity attributable to equity holders of the Group

 

 

 

Share Capital

£'000

 

Share

Premium

Account

£'000

 

 

 

Merger Reserve

£'000

 

 

Translation

Reserve

£'000

 

 

Retained Earnings

£'000

 

 

 

Total

£'000

Balance at 1 May 2019

3,446

 

61,600

 

 

21,853

 

949

 

(26,645)

 

61,203

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the period

-

 

-

 

 

-

 

-

 

(2,264)

 

(2,264)

Other comprehensive income for the period

 

-

 

 

-

 

 

 

-

 

 

(35)

 

 

-

 

 

(35)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive gain for the period

-

 

-

 

 

-

 

(35)

 

(2,264)

 

(2,299)

 

Transactions with shareholders recorded in equity

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital net of expenses

1

 

-

 

 

-

 

-

 

-

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Premium on shares issued less expenses

 

-

 

 

2

 

 

 

-

 

 

-

 

 

-

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit to equity for equity-settled share-based payments

 

-

 

 

-

 

 

 

-

 

 

-

 

 

100

 

 

100

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 October 2019

3,447

 

61,602

 

 

21,853

 

914

 

(28,809)

 

59,007

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 May 2018

 

2,604

 

 

42,625

 

 

 

21,853

 

 

(269)

 

 

(26,557)

 

 

40,256

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the period

-

 

-

 

 

-

 

-

 

(1,653)

 

(1,653)

Other comprehensive income for the period

-

 

-

 

 

-

 

1,689

 

-

 

1,689

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the period

 

-

 

 

-

 

 

 

-

 

 

1,689

 

 

(1,653)

 

 

36

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with shareholders recorded in equity

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital net of expenses

1

 

-

 

 

-

 

-

 

-

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Premium on shares issued less expenses

 

-

 

 

1

 

 

 

-

 

 

-

 

 

-

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit to equity for equity-settled share-based payments

 

-

 

 

-

 

 

 

-

 

 

-

 

 

48

 

 

48

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 October 2018

2,605

 

42,626

 

 

21,853

 

1,420

 

(28,162)

 

40,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 May 2018

 

2,604

 

 

42,625

 

 

 

21,853

 

 

(269)

 

 

(26,557)

 

 

40,256

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

-

 

-

 

 

-

 

-

 

(283)

 

(283)

Other comprehensive income for the period

 

-

 

 

-

 

 

 

-

 

 

1,218

 

 

-

 

 

1,218

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the year

 

-

 

 

-

 

 

 

-

 

 

1,218

 

 

(283)

 

 

935

 

Transactions with shareholders recorded in equity

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital net of expenses

 

842

 

 

18,975

 

 

 

-

 

 

-

 

 

-

 

 

19,817

Credit to equity for equity-settled share-based payments

 

-

 

 

-

 

 

 

-

 

 

-

 

 

195

 

 

195

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 April 2019

3,446

 

61,600

 

 

21,853

 

949

 

(26,645)

 

61,203

 

 

 

 

 

 

 

 

 

 

 

 

 

                           

 

Consolidated condensed statement of cash flows

For the six months ended 31 October 2019

 

 

Note

 

Six months ended 31 October

2019

£'000

 

Six months

ended 31 October

2018

£'000

 

Year

ended

30 April 2019

£'000

 

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

 

 

 

 

 

 

 

Net cash used in operating activities

9

 

(876)

 

(1,940)

 

(4,777)

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in long term cash deposits

 

 

1,250

 

-

 

-

Interest received

 

 

45

 

129

 

155

Purchases of property, plant and equipment

 

 

(5,459)

 

(2,957)

 

(3,644)

Purchases of patents and trademarks

 

 

(111)

 

(104)

 

(210)

Capitalisation of research and development costs

 

 

(1,738)

 

(1,503)

 

(2,731)

 

 

 

 

 

Net cash used in investing activities

 

 

(6,013)

 

(4,435)

 

(6,430)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans received

 

 

2,000

 

2,495

 

2,557

Proceeds on issue of shares

 

 

2

 

2

 

19,817

Interest paid

 

 

(233)

 

(176)

 

(293)

Payment of loan and borrowings

 

 

(1,683)

 

 

 

(111)

Finance lease repayments

 

 

(265)

 

(58)

 

(486)

 

 

 

 

 

Net cash (used in)/generated from financing activities

 

 

(179)

 

2,263

 

21,484

 

 

 

 

 

Net decrease/(increase) in cash and cash equivalents

 

 

(7,068)

 

(4,112)

 

10,277

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

20,616

 

9,488

 

9,488

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes

 

 

(111)

 

964

 

851

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

 

13,437

 

6,340

 

20,616

 

 

 

 

 

 

 

Notes to the unaudited interim statements

For the six months ended 31 October 2019

 

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 2019; their report was unqualified, did not draw attention to any matters by way of emphasis 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 2019 have been filed with the Registrar of Companies and are available on the Group's website www.kromek.com.

 

2.         Going concern

The directors are satisfied that the Group has sufficient resources and facilities to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the interim financial statements.

 

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; revenues, 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 and consumer markets. Whilst results are not measured by end market, the Group currently categorises its customers as belonging to the Nuclear, Medical or Security sectors.

 

Analysis by geographical area

A geographical analysis of the Group's revenue by destination is as follows:

 

 

Six months ended 31 October

2019

£'000

 

Six months

ended 31 October

2018

£'000

 

Year

ended

30 April 2019

£'000

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

 

 

 

 

 

 

United Kingdom

 

1,916

 

171

 

2,267

North America

 

2,362

 

985

 

4,869

Asia

 

113

 

1,875

 

5,452

Europe

 

940

 

630

 

1,905

Australasia

 

2

 

24

 

24

 

 

 

 

 

 

 

Total revenue

 

5,333

 

3,685

 

14,517

 

 

 

 

 

 

 

 

4.         Business and geographical segments (continued)

 

A geographical analysis of the Group's revenue by origin is as follows:

 

Six months ended 31 October 2019

 

UK Operations

£'000

 

USA Operations

£'000

 

Total for Group

£'000

Revenue from sales

Revenue by segment:

-Sale of goods and services

2,867

 

2,770

 

5,637

-Revenue from grants

508

 

-

 

508

-Revenue from contract customers

310

 

30

 

340

Total sales by segment

3,685

 

2,800

 

6,485

Removal of inter-segment sales

(642)

 

(510)

 

(1,152)

Total external sales

3,043

 

2,290

 

5,333

 

 

 

 

 

 

Segment result - operating loss

(573)

 

(1,769)

 

(2,342)

Net interest

(163)

 

(148)

 

(311)

Loss before tax

(736)

 

(1,917)

 

(2,653)

Tax credit

389

 

-

 

389

Loss for the period

(347)

 

(1,917)

 

(2,264)

Other information

 

 

 

 

 

Property, plant and equipment additions

4,963

 

496

 

5,459

Depreciation of property, plant and equipment

221

 

323

 

544

Intangible asset additions

1,044

 

805

 

1,849

Amortisation of intangible assets

573

 

514

 

1,087

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

Total assets

38,059

 

36,182

 

74,241

Total liabilities

(9,536)

 

(5,698)

 

(15,234)

 

Inter-segment sales are charged at prevailing market prices.

No impairment losses were recognised in respect of property, plant and equipment and goodwill.

 

4.         Business and geographical segments (continued)

 

Six months ended 31 October 2018

 

UK Operations

£'000

 

USA Operations

£'000

 

Total for Group

£'000

Revenue from sales

Revenue by segment:

-Sale of goods and services

1,755

 

1,233

 

2,988

-Revenue from grants

100

 

-

 

100

-Revenue from contract customers

81

 

1,451

 

1,532

Total sales by segment

1,936

 

2,684

 

4,620

Removal of inter-segment sales

(569)

 

(366)

 

(935)

Total external sales

1,367

 

2,318

 

3,685

 

 

 

 

 

 

Segment result - operating loss

(1,156)

 

(930)

 

(2,086)

Net interest

85

 

(132)

 

(47)

Loss before tax

(1,071)

 

(1,062)

 

(2,133)

Tax credit

514

 

(34)

 

480

Loss for the period

(557)

 

(1,096)

 

(1,653)

Other information

 

 

 

 

 

Property, plant and equipment additions

1,246

 

6,368

 

7,614

Depreciation of property, plant and equipment

228

 

217

 

445

Intangible asset additions

825

 

783

 

1,608

Amortisation of intangible assets

614

 

426

 

1,040

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

Total assets

24,384

 

29,389

 

53,913

Total liabilities

(6,162)

 

(7,409)

 

(13,571)

 

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit represents the profit earned by each segment without allocation of the share of profits 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.         Tax

 

The Group has recognised R&D tax credits of £389k for the six months ended 31 October 2019 (six months ended 31 October 2018: £514k, offset by a £34k US tax charge).

 

6.         Dividends

 

The directors do not recommend the payment of a dividend (six months ended 31 October 2018: £nil).

 

7.         Losses per share

 

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

Losses

 

 

Six months ended 31 October

2019

£'000

 

Six months

ended 31 October

2018

£'000

 

Year

ended

30 April 2019

£'000

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

Losses for the purposes of basic earnings per share being net profit attributable to owners of the Group

 

 

(2,264)

 

(1,653)

 

(283)

 

 

 

 

 

 

 

 

 

 

Six months ended 31 October

2019

Thousands

 

Six months

ended 31 October

2018

Thousands

 

Year

ended

30 April 2019

Thousands

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

Number of shares

 

 

 

 

 

 

Weighted average number of ordinary shares for the purposes of basic losses per share

 

344,642

 

260,500

 

275,073

 

 

 

 

 

 

 

Effect of dilutive potential ordinary shares:

 

 

 

 

 

 

   Share options and warrants

 

1,573

 

2,944

 

2,581

 

 

 

 

Weighted average number of ordinary shares for the purposes of diluted earnings per share

 

346,215

 

263,444

 

277,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (p)

 

(0.7)

 

(0.6)

 

(0.1)

Diluted (p)

 

(0.7)

 

(0.6)

 

(0.1)

 

 

 

 

 

 

 

 

Due to the Group having losses in each of the periods, the fully diluted loss per share for disclosure purposes, as shown in the income statement, is the same as for the basic loss per share.

 

8.       Property, plant and equipment

 

During the six months ended 31 October 2019, the Group acquired property, plant and equipment with a cost of £5,459k (six months ended 31 October 2018: £7,614k, of which £4,521k related to ROU accounted for under IFRS 16 and £2,528k related to tenancy improvements financed by a loan with the landlord). Of this £5,459k, £4,834k relates to assets under construction.

 

9.         Notes to the cash flow statement

 

 

 

Six months ended 31 October

2019

£'000

 

Six months

ended 31 October

2018

£'000

 

Year

ended

30 April 2019

£'000

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

Loss for the period

 

(2,264)

 

(1,653)

 

(283)

 

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

 

Finance income

 

(45)

 

(129)

 

(155)

Finance costs

 

356

 

176

 

519

Income tax credit

 

(389)

 

(480)

 

(987)

Depreciation of property, plant and equipment

 

544

 

445

 

879

Amortisation of intangible assets

 

1,087

 

1,040

 

1,806

Share-based payment expense

 

100

 

48

 

195

 

 

 

 

 

 

 

Operating cash flows before movements in working capital

 

(611)

 

(553)

 

1,974

 

 

 

 

 

 

 

 

Increase in inventories

 

(787)

 

(293)

 

(213)

Increase in receivables

 

(826)

 

(1,781)

 

(8,663)

Decrease/(increase) in payables

 

485

 

(303)

 

1,384

Decrease in provisions

 

-

 

(143)

 

(424)

 

 

 

 

 

 

 

Cash used in operations

 

(1,739)

 

(3,073)

 

(5,942)

 

 

 

 

 

 

 

Income taxes received

 

863

 

1,133

 

1,165

 

 

 

 

 

 

 

Net cash used in operating activities

 

(876)

 

(1,940)

 

(4,777)

 

 

 

 

 

 

 

 

10.        Share capital

 

During the period, 12,000 ordinary shares (six months ended 31 October 2018: 115,000) were issued because of the exercise of employee share options.

 

 

11.        Events after the balance sheet date

 

There are no significant or disclosable post-balance sheet events.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
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