Kromek Group PLC (AIM:KMK) shares surged over 40% higher after it said it had signed a non-exclusive deal with Siemens Healthineers that should lead it to become profitable as soon as this year and slash debt.
The radiation and bio-detection detection specialist signed a set of agreements with Siemens Medical Solutions USA, known as Siemens Healthineers, for a total of $37.5 million (£30.2m) in cash, including a first instalment of $25 million to be paid this year.
This is for Kromek to provide its cadmium zinc telluride (CZT) detector tiles for single-photon emission computed tomography (SPECT).
In return, Kromek will transfer 15 of its current total of 174 furnaces for CZT production to Siemens Healthineers and provide know-how and related production services on a non-exclusive basis.
Kromek said it will still be able to produce CZT and supply other customers with its skills and remaining 159 furnaces, making it still the largest independent producer in the market.
Chief executive Dr Arnab Basu said the initial payment from Siemens Healthineers “will be used to support the delivery of various milestones under the agreements, significantly reduce our debt and strengthen our balance sheet, ultimately enhancing our operational capabilities.
“These significant agreements enable us to deliver profitability in FY 2025, significantly ahead of market expectations and lay the groundwork for further growth in revenues and sustainable profitability beyond that period.”
The deal was announced alongside the group’s first-half results, which as flagged late last year, showed revenue of £3.7 million for the six months ended 31 October, compared to £7.1 million a year earlier, though with gross margin widening to 56.9% from 54.2%.
An underlying EBITDA loss of £2.3 million was reported, compared to a £0.1 million loss a year ago, with a reported loss before tax of £5.7 million compared to £3.5 million the previous year.
Cash and cash equivalents at 31 October 2024 were £0.6 million, while total borrowings included in current liabilities were £11.8 million, of which £10.4 million related to principal borrowing facility with Polymer N2 Ltd, an investment vehicle controlled by Graeme Speirs, a significant shareholder and a current finance provider to the company.
Looking beyond the current financial year, CEO Basu said Kromek expects "to deliver growth in revenues for the fifth year in a row in FY 2026 and remain profitable as we continue to deliver on our agreement with Siemens Healthineers and our other OEM customers as well as the CBRN contracts won with governmental agencies in UK and abroad.
"Consequently, the board looks to the future with confidence."
Shares in the company leapt 42.5% higher to 7.55p in early trading on Thursday.
** Update: Adds share price **