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Kromek holds significant contracts in huge global market

"What you’re seeing is just the tip of the iceberg," chief executive Arnab Basu told Proactive.
Radiation detector
Its three main markets – medical, security and nuclear detection – are all huge.

Kromek Group PLC (LON:KMK) specialises in radiation detection technology.

Its three main markets – medical, security and nuclear detection – are all huge, and it holds significant contracts in nuclear detection and medical imaging, two of the largest growth opportunities for the company.

The D3S hand-held radiation detectors the company is working on with the US government represented a potential market opportunity of a billion dollars over the next ten years.

"What you’re seeing is just the tip of the iceberg," chief executive Arnab Basu told Proactive.

Product sales accounted for 65% of total revenues in the year to 30 April, up from 46% last year, indicating a change of emphasis from development-led revenues and growing market traction its monitoring devices.

“These numbers are a shift from where we were, but they are just the beginning of what we hope will be years of growth to come,” said Basu.

Unique offering

Basu believes the key to the growth is that all of its devices offer key differentiation and are unique in their offering to the market.

The markets Kromek serves are growing and, importantly, are getting ready to adopt its technology.

2016 saw the strongest product sales year to date with over £22mln of contracts, the largest value the company has ever been awarded.

Sales for the financial year just gone topped £8.3mln, up from £8.1mln reported the previous year, accounting for half of total revenues.

The group was also selected as the sole source supplier by the US Department of Defense agency, DARPA, to supply its D3S radiation detectors as part of the SIGMA programme in an agreement worth US$6mln (£4.55mln).

In the medical imaging sector, Kromek secured a five-year contract worth £9mln with a long-standing customer in the bone mineral densitometry sector.

Kromek also continues to maintain its strong market position as a key supplier of cadmium zinc telluride (CZT) detection systems.

A significant year

“The year was also significant because we were awarded over US$30mln (£22mln) of contracts during the period - the largest value of contracts ever won in a year - and we strengthened our relationships with our current customers,” said Basu.

Despite being the strongest product sales year to date, the group saw pre-tax losses widen to £4.14mln from £3.14mln last year.

Adjusted earnings (EBITDA) came in at a loss of £2.4mln, compared to a loss of £1.6mln last year, due to further investment of £3.2mln in research costs preparation for expected demand.

Basu was nevertheless confident the group's expansion was making good progress in the delivery of its CZT-based product in Asia.

With a strengthened order book and improved revenues, Basu said the group was confident going forward.

He added that the development of the technology meant the group was "making a real difference to the end user by either reducing cost or ease of use, and that’s going to give us growth that’s going to give shareholder value."

Recent news flow

So far in fiscal 2017, Dr Basu's optimism seems to be well founded.

In the middle of October, the company announced it had bagged six new contracts worth, in aggregate, around US$3.1mln.

The contracts are with new and existing customers, including the US Defense Threat Reduction Agency (DTRA) and the UK Ministry of Defence (MOD), and are expected to be delivered over the next six to 24 months.

The important thing about the contracts, Dr Basu told Proactive Investors, is that they underpin the market’s full-year revenue expectations.

In November, the company added further reassurance, announcing repeat orders worth around US$1.15mln for its detector modules from three of its original equipment manufacturer (OEM) customers.

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Kromek Group PLC Timeline

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