Kromek listed on the AIM market in October, 2013 and is a UK company pioneering digital colour imaging for x-rays using cadmium zinc telluride crystals.

NB All statistical data is as at March, 2016


On the road towards mainstream adoption
Published: Dec 11 2019

Occasionally on the FTSE, there can be such a wide disconnect between price & value that it is possible to buy £1 stocks for 50p. Sure these festive bargains are rare, but when they occur, we think canny investors should take note, especially in quality names like Kromek, a leader in next generation radiation detectors.
Its world-beating technology is already disrupting 3 major verticals - Medical Imaging (eg BMD & SPECT), Nuclear Detection (D3S) and Security Screening (Airport baggage/bottles) – each worth >$100m pa. Plus over the past 3 years, the firm has won almost £100m worth of orders, built two state-of-art manufacturing facilities in Durham (UK) & Pittsburgh (US), and is selling its proprietary products to numerous blue chip OEMs globally.
With regards to today’s H1’20 results, turnover jumped 44.7% LFL to £5.33m (vs £3.69m LY), driving a 0.8% increase in gross margin to 58.0% (vs FY19), with adjusted EBITDA (pre SBPs) steady at -£611k (vs -£553k LY). Additionally momentum has accelerated since the period close, with H2’19 EBITDA on track to hit £3.3m (vs £2.5m) on sales of £13.2m (£10.m LY)…and thus achieve our FY20 expectations.
Moreover, irrespective of any future economic slowdown, the business is supported by numerous secular trends – not least, improved patient outcomes, homeland security, regulatory requirements, etc. Meaning that at 17.5p, the stock trades at a material discount to other ‘hi-tech disruptive’ peers – and offers 100% potential upside vs our 35p/share valuation.
Equally, if the firm can secure any new largescale D3S deployments (say covering cities, military sites, border regions, etc), then this would also significantly enhance our projections.
3 more D3S contract wins totalling £1.6m
Published: Jul 01 2019

Hot on the heels of last Thursday’s upbeat FY19 results, Kromek delivered some more positive news this morning. Announcing that it had signed 3 more ‘dirty bomb detector’ (D3S) contracts worth £1.6m in aggregate across the UK, continental Europe and America.
We think these are significant, since they not only de-risk our FY20 estimates and beyond, but also act as further reference sites for securing additional follow-on work, with both existing and new clients.
CEO Arnab Basu, adding "The D3S platform continues to gain traction in the US and the rest of the world. We are working with a number of high value-customers in a number of countries for deployment and implementation of this technology. These new contracts are great examples of the commercial progress in this area as well as the varied security and military applications for our D3S family of products."
Rare ‘hi-growth disrupter’ at modest price
Published: Jun 27 2019

Finding truly world class disruptive companies trading at attractive discounts to their intrinsic worth is the nirvana of most GARP investors. Particularly where these stocks address multi $bn markets, possess patented technology, enjoy wide economic moats and are expanding organically at double digit rates.

Enter radiation detection specialist Kromek, which today reported FY19 turnover up 22.6% LFL to £14.5m (vs £11.8m LY), alongside a 4-fold increase in EBITDA (pre SBPs) to £2.0m (£0.5m). Better still momentum accelerated throughout the period, with H2’19 EBITDA coming in at £2.5m (margin 23.3%) on sales of £10.8m (£7.0m LY).

Sure the blow-out H2 numbers contributed towards a temporary build-up of ‘trade debtors & other receivables’ at yearend – mostly attributable to ‘Amounts Recoverable On Contracts’. Albeit the Board anticipate these AROC products will be shipped, invoiced and converted into cash over the next 6 to 18 months. Producing a rich source of future capital for strategic expansion opportunities, on top of the firm’s £15.2m of net cash as at April’19.

In terms of the numbers, we make no change to our forecasts, and reiterate the 35p/share valuation, underpinned by almost 80% FY20 revenue cover. We believe the stock trades at an unjustified discount to other ‘hi-tech disruptive’ peers across most metrics. Plus, if the company can secure any new major D3S deployments (say covering cities, military sites, border regions, etc), then this would materially enhance our numbers.

CEO Arnab Basu, adding "This was a milestone year as we delivered on all of our objectives, including our key target of growing adjusted EBITDA. Looking ahead, we entered the 2019/20 fiscal year in a stronger position than ever before. The momentum of new contract wins has continued, providing us with greater visibility over revenue. As a result, we are confident of delivering growth for full year 2019/20, in line with market expectations."

Trading in line with expectations
Published: May 10 2019

Despite macro uncertainties (eg Brexit & US/Chinese trade tensions), it is nice to hear positive news about a great British technology success story
On Tuesday (7th) Kromek – an IP/science rich firm which develops cutting edge gamma and x-ray detectors for the multi-$bn medical imaging, homeland security and nuclear screening industries -  said that it “expects to report revenue growth for the full year 2018/19 and EBITDA profit in-line with market expectations.” Implying a strong H2’19, with the Board continuing “to look to the future with confidence”.
Indeed, only 9 days ago the company secured a $2.7m expansion order - to be recognised over the next 24 months - under an existing 5 year security screening contract (now worth a minimum of $5.8m). In turn, further building the orderbook (ED est. $90m+) and improving visibility (ED est. >70% for FY20).
Although our forecasts and 35p/share valuation remain unchanged, we believe there is scope for upgrades in due course, particularly given the group’s modest FY20 EV/sales multiple of 3.6x vs peers at 5.7x.
£21m to fund unprecedented demand
Published: Feb 25 2019

There are a multitude of reasons why companies tap investors for money. However, to us the most productive use of fresh capital is to enable businesses to satisfy unprecedented demand in their core areas of expertise. Exactly the situation that Kromek finds itself. 
Here, the D3S is already the de facto standard for ‘dirty bomb’ detection, whilst in medical imaging, a secular upgrade cycle (re CZT replacing scintillated materials) has already kicked off, augmented by the need for OEMs to respond to GE’s first mover advantage. 
Hence at today’s General Meeting, Kromek concluded its (previously announced) £20m placing & £1m open offer - issuing 84.0m new shares at 25p, and enlarging the equity base by 24.7% to 344.6m.
The funds will be invested in tried & tested technology, underpinned by multi-year contracts and an approx. $100m orderbook. Most of these deals were secured thanks to its proprietary technology, strong customer-centric ethos and long term commitment. A marvelous position to be in. The only slight headache ongoing forward, being able to simply make enough of these innovative products to meet requirements. 
That said, largely because of the higher sharecount, our valuation declines from 50p to 35p/share - albeit still >25% above today’s price. At 27.5p the stock trades on a CY EV/sales multiple of 5.0x, which is in broadly line with peers, yet does not reflect KMK’s faster growth.
Big game hunting
Published: Jan 28 2019

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride (CZT) crystals. Key markets include medical imaging, homeland/security screening and nuclear detection.
The healthcare industry has reached a seminal point. Faced with ageing populations, soaring demand and intense political pressure to improve patient outcomes, governments have realised that the only way to cope is to embrace ‘revolutionary’ new technologies. Not just those which deliver incremental improvements, but real ‘step changes’ that generate far superior results from much less resource.
To us, this strategic shift is a ‘no-brainer’, and next generation medical imaging equipment powered by CZT fits the bill. Accelerating the diagnosis & treatment of some of the world’s most common, yet serious conditions - such as cancer, heart disease, dementia, diabetes & osteoporosis. And this morning Kromek announced that it had been awarded a ‘ground-breaking’ $58.1m (minimum) 7 years contract to supply its patented CZT detectors to a leading medical imaging device manufacturer (and existing client) with 1st revenues expected to commence in FY20.
This watershed agreement is significant on numerous counts. Firstly, along with its unique D3S ‘dirty bomb detector’, KMK now has a 2nd monster ‘home-run’ to bolster its near-term pipeline. Next, given this OEM has decided to invest heavily CZT, then today’s news removes any lingering doubt (if there was any) concerning the magnitude of the opportunity. In fact, this secular upgrade cycle is likely to drive KMK’s growth over not just months & years, but probably decades too.
Better still, the RNS could potentially set the stage for a mini ‘gold rush’ across the industry. In one fell swoop, shifting the technology goal-posts and positioning KMK as the front-runner to sell its patented CZT detectors to other medical imaging OEMs. Organisations with whom we suspect discussions are already underway. 
Finally from a risk perspective, the announcement should also decrease the notional ‘discount rate’ (ie equity premium) built into investor returns. Not only because we estimate Kromek’s backlog presently hovers at around $100m, but also because future visibility has materially improved. 
So, despite (conservatively) not upgrading our projections for this year & next, we have lifted the valuation to 50p/share, reflecting the $58.1m (minimum) contract, higher anticipated growth rates and lower risk profile.
Could save 100ks of lives and £bns globally
Published: Jan 14 2019

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride (CZT) crystals. Key markets include medical imaging, homeland/security screening and nuclear detection. Headquartered in Sedgefield (UK), Kromek has c.109 employees, of which approx. 88 are in R&D, with a 3 further sites in California, Pittsburgh and Germany. The firm has filed/registered >270 patents.

Amid all the BREXIT hullabaloo, it is easy to forget that the government only last week committed another £20.5bn to the NHS – aiming to save a further 500,000 lives by 2029. Central to the plan is increasing the availability of next generation imaging equipment in hospitals (eg X-ray, BDM, SPECT, CT & MRI) in order to accelerate the diagnosis & treatment of serious illnesses (eg cancer, heart disease, dementia & osteoporosis).

It seems the only affordable solution is to combine cutting edge graphics (re Kromek’s CZT detectors) with Artificial Intelligence – ie to far more accurately and quickly identify such conditions at lower unit costs. The good news is that we are almost there, with KMK’s Healthcare division predicted to jump c.50% LFL in FY19, delivering approx. 60% (or £9m) of our targeted revenues (£15m). Here, the business has already won a slew of contracts for Gamma probes, BDM & SPECT - supported by a whole body of positive clinical data.

Some investors might be mildly queasy by the ‘headline’ 23% fall in H1 turnover, coming in at £3.7m vs £4.8m LY – and leaving £11.3m for H2. We recognise this concern, together with the associated 25:75 weighting. On the other hand, KMK is a small rapidly expanding business commercialising disruptive technology - so this type of bump along the road should not be too surprising. Big picture, we are far more focused on the long-term opportunity, especially with regards to the adoption of CZT within numerous different verticals. Not solely medical, but also homeland/airport security (eg $7.8m baggage screening contract won in Nov’18) and nuclear detection ($2m biological device detector – Dec’18).

Bearing all this in mind, and in light of the 86% and 72% of revenue cover for this year and next, we have held our projections intact, and reiterate the 40p/share valuation. Nevertheless we do accept the greater execution risk, reflecting the significant step up in H2 production and volumes. Conversely, no large-scale D3S US city roll-out has been factored into our numbers either, until after FY20. Meaning there could be substantial upside if any such deals were to be secured, say over the next 12-24 months. Finally in terms of valuation – at 27p, the stock trades on a CY EV/turnover multiple of 4.6x  - which is in line with peers, but does not reflect the much faster growth trajectory.



New biological threat detector
Published: Dec 10 2018

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging, homeland security and nuclear detection.
In the same fashion as cities require an early warning system to combat the threat from “dirty [nuclear] bombs” - perhaps detonated by terrorist groups, rogue nations and/or organised crime gangs - they also need protection against biological attack.
What’s more, there are very few (if any) companies that have the expertise, management capability and experience of delivering such technologically advanced projects. Kromek is one, with news today that it had been selected by DARPA, the US military’s research arm, to come up with a new proof-of-concept device to identify biological-threats. 
The initial contract is worth $2m over a 12 months period (starting immediately) and builds on the firm’s work with its cutting-edge D3S portable detector. In fact, assuming Phase 1 proves successful, then the agreement could be extended to cover the full development of a next-generation vehicle-mounted system, capable of identifying the pathogens used in any biological attack within 5 hours vs 36-48 hours currently. Hence, not only enabling faster response times by the emergency services, but also minimising the harm caused to the local population and the surrounding area. 
Although at this stage there is no change to our forecasts, we reiterate the 40p/share valuation with the deal further de-risking expectations for FY19 and beyond. 
New $7.8m CZT baggage screening contract
Published: Nov 19 2018

Kromek is pioneering digital colour imaging for x- and gamma rays and key markets include medical imaging, homeland security and nuclear detection.
Its cutting edge CZT (cadmium zinc telluride) detectors that have the potential to transform the medical imaging, home security and nuclear detection industries. Today the firm announced that it had won a ground-breaking contract (commencing immediately) worth a minimum of $7.8 million over 5 years, for the provision of next generation baggage screening systems with an existing X-ray OEM client. 
Although at this stage there is no change to forecasts, we reiterate our 40p valuation on the shares, and note that the deal further enhances visibility, along with de-risking expectations for FY19 & beyond. 
What’s more, it could have a hugely beneficial effect across the wider baggage screening sector. You see, by deploying CZT we think this will significantly lift the bar in terms of product performance. Meaning that in response, rivals might also need to upgrade quickly from legacy solutions - in turn, improving border security and generating a virtuous circle of demand for KMK.
Hugely significant $1.8m contract win
Published: Sep 27 2018

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging, homeland security and nuclear detection.
Encouragingly, this morning the US Defense Threat Reduction Agency (DTRA: part of the Dept of Defense) have awarded a 2 year $1.8m contract to Kromek to develop a new military-grade ‘Radionuclide Identification Device’. Or, in other words, the firm has been tasked with creating a much ‘tougher & ruggedized’ version of its state-of-the-art D3S – so that it can operate under harsher terrains and combat conditions. 
Although this certainly won’t be easy considering the levels of sophisticated gadgetry fitted inside each of these handheld detectors. Albeit we believe it is also comfortably within the scope of Kromek’s existing R&D and production capabilities.
It’s impossible to be too specific on the potential scale of this work at this stage. However, ultimately we reckon the magnitude of any follow-on commercial orders could be in the 10s of thousands – and importantly, too, at a higher price point than the civilian version of D3S. Hence our enthusiasm.
We make no change to our forecasts or 40p/share valuation, but recognise the potential upside and benefits to the group’s backlog and revenue visibility. This could have far wider connotations since, given the significance of NATO (re procurement), then eventually the D3S could even become the de facto standard for governments and armed forces worldwide to protect themselves against dirty bombs.
Increasingly more confident
Published: Aug 20 2018

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging, homeland security and nuclear detection.
Hot on the heels of winning up to $3.3m of home security contracts in late July with the US government, Kromek today said that it had secured two more significant orders. Both are within healthcare and together worth >$1m.
The first for $700k with a new OEM to supply CZT detectors for nuclear medicine applications to be shipped over the next 18 months. Here the devices will generate sharper images in quicker timeframes and at lower radiation levels – thus enabling much improved patient outcomes. The second being a £340k repeat order from an existing BMD customer (Bone Mineral Densitometry) which will be delivered in FY19. 
We are encouraged by these developments – ie two major announcements in <1 month - and suspect it might be a reflection of management’s increasing confidence in meeting our estimates for this year and next.
Better still, today’s news also reinforces the ongoing shift from CZT development work to selling commercial products, along with offering future upsell opportunities, bolstering the orderbook and enhancing revenue visibility (ED estimate for FY19 >2/3rds). 
Momentum building
Published: Jul 23 2018

We think that what really differentiates good from truly great companies is the presence of ‘world beating and highly disruptive’ technology that not only addresses large untapped markets, but also is difficult to copy. We think Kromek has this in spades.
Indeed, this morning the company announced that it had secured two more top flight contracts with the US Government. The first is worth $1.5m (over 2 years) with the Department of Homeland Security to create a new CZT detector to enhance passenger baggage screening equipment. Here, Kromek is leveraging its expertise in SPECT (ie healthcare) to design a much more accurate and faster x-ray platform for airport border control purposes, that almost eliminates the incidence of ‘false alarms’.
And secondly an order ($1.05m over 3 years with a possible 2 year $0.7m extension) from the Defense Threat Reduction Agency (DTRA) to develop a new range of sophisticated handheld nuclear radiation detectors. Both agreements will further broaden Kromek’s product portfolio, are cashflow positive, and de-risk our FY19 revenue target (£15.0m) to the tune of circa £600k.
Elsewhere, last week came news that the D3S had been successfully deployed by Belgian Federal Police at the recent NATO Summit in Brussels – ie to protect President Donald Trump and other Heads of State from potential radiological attack (eg hidden in cargo, vehicles, buildings and other equipment).
In terms of the numbers, we maintain our forecasts and 40p/share valuation, but see scope for significant upgrades over the next couple of years – especially if the company can capture the substantial opportunities available within SPECT and D3S. 
As International Trade Secretary, Dr Liam Fox MP, says: “Kromek is recognised as one of the country’s most innovative businesses, and its products are making a tangible difference to people’s lives across the world.”
FY19 set to be another 'break-through' year
Published: Jul 02 2018

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging, homeland security and nuclear detection.
FY18 was pivotal in many ways. Not least, because it was the first time ever EBITDA turned positive (£482k vs -£1,462k) - reflecting record turnover of £11,845k, up 32.1% LFL (LY £8,968k; +37% constant currency) and favourable operational gearing (gross margin 56.4% vs 57.1%). However this is just the start.
In our view, strong double digit growth should continue for the foreseeable future, with FY19 setting up to be another landmark year. This time achieving cashflow neutrality, together with winning a number of new orders with blue chip OEMs and governments across the globe. The greatest demand expected to come from SPECT (single photon emission computed tomography), a $100m addressable market, and nuclear detection (worth >$1bn) on the back of KMK’s best-in-class ‘dirty bomb’ detector, the D3S.
Indeed Kromek is probably the only independent, end-to-end CZT manufacturer with the required design, engineering and technological skills to produce sufficient commercial quantities of the material in the desired timeframes and at the targeted price levels. A key reason too, why today the business has a coveted roster of 11 healthcare clients - across SPECT, bone mineral densitometry (BMD to treat osteoporosis) and gamma probes (used for radio-guided surgery).
Ok, but what was the cashburn? Net cash closed April’18 at a comfortable £7.7m (vs £17.3m), representing an outflow of -£9.6m in the period (split -£4.0m H1 vs -£5.6m H2). The decline was due to working capital (-£6.0m vs -£0.95m LY), -£3.5m of capitalised R&D, capex/IPR (-£0.9m) and forex (-£0.5m), partly offset by £0.9m of tax rebates and £0.5m EBITDA. 
Looking ahead, based on our estimated 60%-70% revenue cover, we have bumped up our FY19 EBITDA forecast from £1.40m to £1.66m on sales of £15.0m – in turn lifting the valuation from 37p to 40p/share.
Conservatively, no large-scale D3S US city roll-out has been factored into our numbers until after FY20. Meaning there could be substantial upside, if any such deals are secured (as we suspect they might) in the near term. Plus for benchmarking purposes, at 24p, the stock trades on a current year EV/sales multiple of 3.6x  - which is noticeably lower than the average, despite KMK’s faster growth trajectory.
EBITDA breakeven achieved on record sales
Published: May 01 2018

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging, homeland security and nuclear detection.
Recently the Turkish police, only after acting on a tip-off, managed to thwart a potentially heinous plan to sell 1.4kg of radioactive material (worth £49m) on the black market. Which is exactly why the US Department of Defense (DoD) has committed to develop an early warning system for the detection of ‘dirty bombs’. 
Here Kromek has already shipped >10,000 D3Ss to the DoD - and in March won another $1.6m contract to further enhance its state-of-the-art technology. The hope being ultimately to roll-out the device across 20+ US cities (each worth $10m+), along with securing similar orders in other geographies (eg Europe).
Encouragingly too, the company is hitting its numbers. Saying this morning that trading for the 12 months ended April 2018, had been “in line with expectations” - achieving “EBITDA breakeven” (Act -£311k H1 vs ED £300k H2) on top of positive revenue growth (ED £12.5m; Act £4.8m H1 vs ED £7.7m H2). 
Kromek also continues to “gain traction” across “all its business segments” – and expects further growth in FY19. As such, we make no change either to our numbers or 37p/share valuation. Albeit we note that at 22p, the stock trades on a modest 3.6x FY19 EV/sales multiple vs 5.2x peers, despite its superior growth trajectory.
On track for a record full year
Published: Dec 19 2017

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging, homeland security and nuclear detection.
What with North Korean missiles whistling over Japan, supreme leader Kim Jong Un threatening nuclear war against America and numerous other terrorist attacks, the world is undoubtedly a dangerous place. Demonstrated again just a fortnight ago, after a ‘lone wolf’ ISIS extremist, managed to explode a home-made ‘pipe-bomb’ in a busy New York underpass near Times Square. 
In response, the US Department of Defense (DoD) is developing an advanced early warning system, funded within a 10 year $8.2bn program. Here, Kromek‘s D3S is at the nerve-centre of the network, acting as the ‘eyes & ears’ for the emergency services in order to sniff out ‘dirty bombs’. Ok, but when will the technology be rolled-out across the US? Nobody knows for sure, yet  we suspect this process will commence sometime over the next 12 months and could potentially offer the D3S a $1bn+ opportunity globally.
The firm’s patented cadmium zinc telluride (CZT) detectors are also being enthusiastically embraced within the healthcare community. The technology produces far sharper 3D colour pictures than existing diagnostic images, at lower radiation levels and in quicker time. Key benefits for doctors who need to safely diagnose and treat life-threatening diseases like cancer, Alzheimer’s, Parkinson’s and osteoporosis. 
Although not disclosed in today’s interim results, we estimate that on top of repeat business, Kromek has now received long term contracts worth in the region of $45m across all three verticals. Thus providing excellent prospects, supported by a healthy orderbook and strong underlying demand. With a modest H1’18 EBITDA loss of -£0.3m on revenues up 26% to £4.8m, the company remains bang on track to hit our FY18 sales target of £12.5m. In the process, delivering record H2 turnover of £7.7m and becoming EBITDA positive for the 1st time ever. 
Since there is 88% sales cover, with only an extra £1.5m required by the end of April 2018 to hit our £12.5m figure, then FY18 looks almost in the bag. So we make no change to our FY18-19 projections, mirroring our confidence in Kromek’s growth trajectory. Likewise, we maintain our 37p per share valuation, but reiterate that this is prudent, assuming the organisation can successfully commercialise its leading position in several fast-growing multi-$billion markets.
The future's bright, the future is CZT
Published: Jun 28 2017

Graphene may grab all the headlines, but there is another ‘wonder material’ being championed by Kromek, perhaps Britain’s most unassuming tech-rich University spinout. The miracle substance is ‘Cadmium Zinc Telluride’, or CZT for short, which is gaining real traction in the multi-$billion healthcare (eg CT), homeland security and nuclear detection markets.
What makes it so special is its ability to generate much sharper images than existing X-rays and, importantly, at far lower radiation doses and in double quick time. So superior is the step-change in picture quality that we think CZT will leap from ‘cottage industry’ to ultimately dominate its target therapeutic areas. 
Better still, this now seems to be happening with Kromek’s FY17 results today showing product revenues climbing 23% to £6.7m, representing 74% (65% LY) of the total (£9.0m). FY17 turnover and adjusted EBITDA (pre share-based payments) came in slightly up on our estimates at £9.0m (vs ED £8.9m and £8.3m LY) and -£1.5m (-£1.85m ED and -£2.4m LY) respectively. Albeit net cash was lower at £17.3m (vs ED £20.0m), reflecting £3.1m of up-front development expenses (shown in WIP) incurred on the potentially huge Chinese agreement that will be recovered as product shipments are made. 
Looking ahead, we make no change to our FY18 projections, but for the first time introduce FY19 estimates, mirroring the improved visibility and management’s rising confidence. Note that for FY19 no large-scale D3S US city roll-out has been factored into the £16m turnover figure.
Accordingly, we have nudged up our valuation from 34p to 37p per share, but once again reiterate that this is conservative, assuming Kromek can successfully commercialise its leading position in several fast-growing, multi-$billion markets. 
£21m equity raise to accelerate growth
Published: Feb 22 2017

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging, homeland security and nuclear detection.
When an army of ‘super smart’ fund managers snap-up a big holding in a rapidly expanding small-cap that owns ‘disruptive’ technology addressing multi-$billion markets, then it is usually worth taking note.This is exactly what has happened at Kromek, successfully completing its oversubscribed £20m placing and £1m open offer at 20p/share - supported by esteemed investors such as Gervais Williams at Miton (largest shareholder at 19.0%) and Katie Potts (Herald 5.35%), as well as others like Schroders (5.0%) and Killik (4.1%).
Kromek now combines exciting prospects with a ‘fortress-like’ balance sheet. In fact, the latter was the main reason behind the net £19.9m raise. Despite winning orders worth $35.5m over past 18 months (Book-to-Bill of 2.3x), a few customers were still nervous about awarding strategically important deals to the firm, because of its ‘perceived’ lack of financial ballast to produce commercial quantities of product, provide ongoing aftermarket support and backstop (if necessary) any associated T&Cs.
The capital injection might act as a catalyst for the company to land a number of significant orders over the next few months/quarters, indeed a 5 year deal in Security Screening has been announced today. The majority of future wins are expected to come from within its core verticals.
The Board encouragingly added on 25th January that trading was on track to meet FY17 consensus (adjusted PBT of -£3.7m on turnover of £8.8m-£8.9m), with the objective of achieving EBITDA breakeven in FY18 from sales of £12.5m. Given the forward visibility and £20m+ in the bank, we think this is achievable – underpinning our updated 34p/share DCF valuation, lower than before the placing simply due to the higher share count (153m vs 259m).
View the Results Webinar
Published: Dec 09 2016

You can now hear Arnab Basu, CEO, and Derek Bulmer, Chief Financial Officer, present the interim results for the 6 months to 31 October 2016 on behalf of Kromek Group plc.
To view simply click on the video below.
Exponential growth now in sight
Published: Dec 07 2016

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging, nuclear detection and security screening.
The potential for further major contracts remains promising. They would take time to flow through to the P&L,  yet even so the immediate signs are promising. At the interims this morning LFL sales impressively climbed 19% to £3.8m, reflecting triple digit gains in Asia (eg medical products including BMD) and the UK, allied to a solid performance again from the US.
Better still, Kromek is on track to achieve our FY17 sales target of £8.9m supported by in excess of “85% visibility” (RNS), and higher H2 gross margins (ie Est 58% vs 53% in H1) as the business scales. H1’17 adjusted EBITDA of -£636k was in line with our expectations, or -£1,836k if one backs out a £1.2m forex benefit from the balance sheet translation of $ denominated assets and working capital (re £ weakness). 
Despite absorbing £1.7m of capitalised R&D, H1 cash-burn was a modest £1.55m (vs -£3.9m H1’16 and -£2.6m H2’16), thanks to positive working capital and the receipt of £0.9m in R&D tax credits. Net funds closed October at a £2.3m, which should be sufficient until the group becomes self-funding in FY19, assuming things go to plan.
Kromek has already landed prestigious BMD and SPECT agreements with several blue-chip OEMs, which together are forecast to more than double revenues from circa £2.7m in FY17 to £6.5m next year. However, to us the biggest near-term opportunity relates to the further roll-out of its portable D3S ‘dirty bomb’ detectors, 10,000 such devices having already been shipped to the US Dept of Defense (DoD).
Looking ahead, visibility is building too for FY18 where we estimate there is now >50% cover of our £12.5m sales estimate - in turn driving adjusted EBITDA into the black at £0.3m. We make no change to our FY17 projections or 45p/share DCF valuation.
NB Management will present at a webinar tomorrow, Thurs 8th, at 11.45am :   Register here
Substantial new military opportunity
Published: Oct 19 2016

Kromek announced this morning that it had successfully shipped the first 10,000 of its award winning D3S’ handheld devices (approx. 5.5k in H1’17) under the DARPA (Defense Advanced Research Projects Agency) SIGMA programme. Here SIGMA is aimed at preventing attacks from “dirty bombs” and other nuclear threats in the US and globally.
In addition, on Monday the group announced it had won 6 more contracts worth $3.1m in aggregate across 3 new and 3 existing clients, including the US Defense Threat Reduction Agency (DTRA) and the UK MoD (Ministry of Defence). The work is expected to be delivered over the next 6-24 months. In particular the 2 year $1.6m DTRA agreement is significant, since it opens up another multi-$100m opportunity to provide high performance and ruggedised products for military and similarly harsh environments. We suspect the devices will be based on the company’s D3S platform, which has recently been enhanced to cope with such homeland security and defence applications.
So why is all this important? Well not only does it once again demonstrate the scientific advantage, technological lead and delivery capability of the company, but for investors it also significantly enhances revenue cover, which we now pitch at around 80% for this year and a significant proportion next. Consequently, given the derisking of the outlook, FY18 forecasts have been introduced the 1st time, where we predict that Kromek will achieve another milestone by breaking even at the EBITDA level on turnover of £12.5m. Remember too that the firm secured >$30m of orders in FY16 – equivalent to a book to bill ratio of 2.5x – so momentum has been building for some time. Based on the robust backlog, our price target has been held at 45p/share, offering 80% potential upside from today.
Buoyant demand with over $30m of orders won
Published: Jul 19 2016

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals.
This morning the firm reported that >$30m of new orders were secured for the 12 months ending April 2016, equivalent to an approx. book to bill ratio of 2.5x. This growth was helped by multiple landmark deals with new and existing blue chip customers, particularly in Nuclear Detection and Medical Imaging - thus providing excellent revenue cover for this year and next.
Indeed we reckon that the 12,000 unit DARPA D3S contract alone could generate $6m of sales in FY17, equating to around 50% of our £8.9m target. Better still, there are several other multi-$m orders in medical imaging (Re SPECT and BDM) set for fulfilment this year, on top of normal repeat business, development work for Canberra Industries and likely rising demand for bottle-scanners.
With regards to Kromek's competitive moat, 44 new patents were granted and another 16 filed in FY16, thus taking the total to over 290. In fact, we believe Kromek's proprietary technology is becoming more and more sought after, as evidenced by the quality of its new business wins.
In terms of FY16 figures, turnover at £8.3m was in line with our estimates of £8.4m  - driven largely by product sales up 41% YoY, representing 65% of the total. Going forward, we have prudently held our FY17 turnover and EBITDA targets at £8.9m and -£1.85m respectively, with closing net funds of £2.1m.
Based on the burgeoning backlog, our price target has been lifted to 45p/share (from 42p), offering considerable upside from current levels upon good execution.   
$27.6m+ of orders won in 2016
Published: Apr 28 2016

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include: medical imaging, homeland security and nuclear detection. Recent wins suggest it is punching way above its weight: in February the company announced a landmark $6m contract to supply the US Dept of Defence with 12,000 of its revolutionary 'on body' D3S portable radiation detectors to help combat 'dirty bombs'. 
This morning comes news that it had secured another terrific endorsement of its technology, this time a contract from a leading Bone Mineral Densitometry OEM worth $12.6m over 5 years, beginning in H1'17. Here, Kromek's cutting edge CZT detectors will be incorporated into the existing customer's diagnostics systems to accurately assess the strength and health of bones in patients suffering from osteoporosis. 
The duration of the deal will not only bring in regular revenues, but should also help optimise the supply chain given the relatively linear production loading. Gross margins too are anticipated to be in line with our profit estimates. 
Looking ahead, we believe FY17 forecasts are now well underpinned - impressively 12 months' ahead of time - after receiving over $27.6m of orders in FY16, equivalent to a book:bill ratio of 230%, based on turnover of £8.4m. Although no changes are being made yet to our increasingly conservative projections or 42p/share Price Target, we hope to revisit numbers at the prelims in mid-late June.
Protecting the US public against the 'dirty bombs'
Published: Feb 21 2016

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include: medical imaging, homeland security and nuclear detection.
'Dirty bombs'are a terrifying prospect that, if detonated, would wreak havoc in large cities like New York. Not only causing death and destruction at the blast zone, but also widespread contamination of public areas potentially to be cordoned off for weeks or months. 
This is why the US Department and Defense (DoD), via its DARPA division (Defense Advanced Research Projects Agency), has just placed two landmark orders with Kromek worth $6.75m in total, to help safeguard the nation from such bombs. 
DARPA's long term vision is to establish a comprehensive security blanket across large swathes of the country - meaning that this contract could ultimately be expanded to cover literally 100ks (if not millions) of government employees under one huge integrated network. Better still, the $500/unit price point is a global first, and we understand active discussions are already in motion with at least 2-3 other major customers to deploy this patented technology.
When this is added to the $7m of deals secured in H1, and January's $1m bone mineral densitometry contract, we estimate that total FY16 order intake will be >$15m - representing a book:bill ratio of at least 125%, based on turnover of £8.4m. Demand also shows that the adoption of truly disruptive technologies is likely to occur even in the face of macro-economic headwinds.
Our estimates suggest that Kromek should become EBITDA and cashflow positive on annualised revenues of circa £11.5m and £14.5m. No changes are made to our 42p/share price target.
Backlog up 19% after $7m of new orders
Published: Dec 16 2015

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Indeed we have long felt that its revolutionary new cadmium zinc telluride (CZT) products could soon materially change the face of the global medical imaging, homeland security and nuclear detection markets. 
Encouraging signs can be seen in today's interims for the 6 months ending October 2015: the backlog closed up a healthy 19% (YoY) following $7m of orders (spread over 6-36 months, with Medical Imaging being the divisional standout) - representing a book:bill ratio of 1.4x and providing solid revenue cover for H2. 
Another key message from today's results was that the H1 numbers were bang on track with the Board's strategic aims - albeit with slightly higher near term investment, reflecting an acceleration of the business plan due to strong demand. 
Capital is being invested by Kromek, but that is why £11m (net £10.3m) was raised in August at 25p in an over-subscribed placing and open offer. As things stand, we think this funding should be more than adequate to see the company through to EBITDA profitability.
News to hope for, barring any late hitches, would be if  DARPA in the USA place an order for c. 12,000 DS3 (on-body detectors) worth in the region of $6m; followed possibly by another much larger contract sometime in FY17.
We maintain our 42p share price target, but would highlight that if the company can achieve its strategic goals, then there is considerable upside for investors - possibly multiples of today's valuation.
Helping protect the public from 'dirty bombs'
Published: Nov 05 2015

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include: medical imaging, security screening, homeland security and nuclear detection.
In the war versus terror the US Department of Defense, via its DARPA (Defense Advanced Research Projects Agency) unit, wants to move quickly towards a next generation system. Indeed ultimately it would like to issue light-weight 'on-body' radiation detectors (ie the size of a mobile phone) to 100ks (if not millions) of government employees that can be networked together. Thus, together with sensors on fixed masts and vehicles, would create a huge defence blanket in order to alert law enforcement agencies immediately and accurately of potential 'dirty bombs'. 
Consequently over the past 2 years, and at a cost of $4.35m, DARPA contracted Kromek to develop just such a state-of-the-art device; the D3S based on patented technology. It costs a mere $400, plus another $100 for each charging cradle. Indeed,  barring any last minute hitches, we think DARPA will shortly award Kromek an approx. 12,000 unit order (1,000/month beginning 15th March 2016) worth >$6m; followed by another for 100k+ (or >$50m) sometime in FY17.
Also Kromek said this morning that it had signed a mutually beneficial cross licensing agreement with one of the world's leading manufacturers of medical equipment involving 3 patents from each company - further demonstrating the substantial value of the firm's intellectual property.
Encouragingly too, Sir Peter Williams, former CEO of Oxford Instruments, has now taken up the reins as the new non-exec Chairman. We believe Sir Peter's extensive experience/knowledge in running a science-rich tech business will prove invaluable in the next stage of the group's development.
Following a succession of positive announcements we have lifted our outer year projections (ie from FY18 onwards), which in turn has lifted the price target from 35p to 42p/share. We understand that Kromek should be able to break-even at the EBITDA and cashflow levels, on annualised revenues of about £11.5m and £14.5m respectively.
£11m fund raise after 36% revenue surge
Published: Jul 30 2015

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include: medical imaging, security screening, homeland security and nuclear detection.
Today it announced an intention to raise up to £11m at 25p via an over-subscribed £9m placing and a £2m open offer - the latter being predicated on 2 new shares for every 27 held.
Kromek also released its prelims for the y/e April 2015, which were both in line with our forecasts, and showed strong underlying momentum. Like-for-like turnover climbed 36% to £8.10m, with H2 sales coming in at £4.94m - sequentially +56% up on H1 (£3.16m) - driven by new commercial/government deployments across all three target markets and in multiple geographies.
These types of major wins tend to be lumpy, and therefore by their very nature difficult to forecast. As such, despite a bulging £20m pipeline, we have prudently resized our projections, such that they now only include either signed orders from the backlog (£5m flow-through in FY16) or visible short-term opportunities. Consequently our FY16-17 sales forecasts of £8.5m and £9.0m respectively should be treated as ultra-cautious.
We adjust our fair value share price target down to 35p / share, mostly due to the higher share-count, but think that Kromek offers risk-tolerant investors considerable upside at current levels. Indeed at 27p / share the stock trades on an undemanding 4.0x FY16 EV/sales multiple, which appears cheap for such an IP-rich business compared to many high potential 'disruptive technology' companies trading on Nasdaq that are valued at in excess of 10x revenues.
Sees 37% H2 revenue growth, positive EBITDA
Published: Apr 17 2015

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include: medical imaging, security screening, homeland security and nuclear detection.
They have reported that due to contract re-scheduling (thought to include deferred shipments of bottle-scanners and CZT medical detectors), turnover for the year ending April 2015 should be £8.1m, or £1.1m lower than our  estimate. 
However, the forecast of £8.1m will be a record for the group, up +35.6% on FY14 - with H2 revenues to come in 37% higher YoY at £4.9m (vs £3.6m) and 53% sequentially on H1 (£3.2m).
Furthermore, building up sales is yielding results: $1.1m of new orders were signed in February, along with today's landmark $2.0m contract extension for the volume supply of portable radiation detectors to DARPA, an agency of the US Department of Defense. 
Progress is also being made in medical imaging (CT scans, SPECT), nuclear detection and security screening - all contributing towards a healthy pipeline and solid revenue cover for FY16. Better still with regards to profitability, Kromek will be EBITDA positive in H2
Kromek is definitely heading in the right direction - expanding strongly, winning new business with blue chip customers and moving firmly into the black. We plan to publish FY16 estimates at the prelims, but for the time being prudently maintain our price target of 45p/share.
New $bn opportunity in homeland security
Published: Jan 13 2015

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include: medical imaging, security screening, and very topically after recent tragic events: homeland security and nuclear detection.
Today's interims show H1'15 revenues were up +33% to £3.2m YoY (vs ED Est £4m) driven by robust product sales, US Government and OEM contracts, and the sale of bottle scanners in Asia taking the total up to 40 airports worldwide. 
In terms of profitability, adjusted EBITDA improved from a -£2.0m loss last year to -£1.6m in H1'15. The balance sheet closed October sporting net cash of £2.9m (vs £6.6m April) despite capex of £1.4m in H1. 
CEO Arnab Basu is confident that the company 'can deliver in excess of 100% revenue growth from the first half to second half of the current financial year'. As a result of lowered forecasts, our price target has been prudently reduced to 45p per share, still well above current levels. 
On track to double revenues this year
Published: Aug 28 2014

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride (CZT) crystals. Key markets include: medical imaging security screening, and nuclear detection
Encouragingly, after a profit warning earlier in the year, Kromek today released in line figures for the year to April 2014: turnover was up 40% LFL to £6.0m (H2 £3.7m vs H1 £2.3m). The increase was driven by both product and R&D revenues, together with excellent performances in both the US (+47%) and in the UK (+18%).
The Board reiterated its confidence in the outlook. We are forecasting FY15 sales to double to £12m (H2 weighted). They will be  underpinned by a growing order-book, as evidenced by the substantial new business wins so far this year.
Net cash closed April at £6.6m, slightly better than our estimate of £6.0m. We believe this should provide more than enough funds to fully commercialise the Group's next generation CZT technology, despite continuing to invest in R&D, manufacturing IPR and sales/marketing resource. 
We make no change to FY15 forecasts, but think our 53p/share price target (raised 1p due to higher cash balance) is conservatively biased. Indeed we are very optimistic that over time the direction of travel for the stock will be up - and possibly much higher, as the company is targeting several $ multi-billion markets. 
Substantial new contract wins
Published: Jun 23 2014

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals.
The Group announced today that it had won a flagship 2-year homeland security deal (worth $1.45m) with the US Defense Threat Reduction Agency (DTRA) to develop next generation radiation detectors. 
Additionally the company has secured $0.95m of other nuclear detection work, along with signing £0.15m of medical contracts with the UK's Technology Strategy Board
We are encouraged by this positive newsflow, and believe that these orders provide further endorsements of Kromek's cutting edge technology by blue chip customers.  These agreements also support our forecasts, albeit at this early stage in the financial year we do not plan to make any changes to our FY15 numbers. 
Major contract win in China
Published: Apr 04 2014

Kromek has today signed a long term supply contract with a manufacturer of x-ray diagnostics and analysis equipment in China, worth up to $159m
This is further concrete evidence that the company's proprietary CZT (Cadmium Zinc Telluride) detectors have the potential to revolutionise existing monochrome X- and gamma ray technology; especially in its core healthcare imaging, nuclear detection and security screening markets. 
An upfront payment of $260,000 is due this year, then commercial deliveries should commence in October 2014, with a minimal off-take of $1.4m in FY15.Thereafter shipments should ramp significantly, generating expected minimum sales of $10.2m in FY16.
As yet we make no change to our FY14 and FY15 estimates, but plan to release FY16 forecasts at time of the prelims.
Resetting the bar
Published: Mar 27 2014

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include medical imaging  security screening, and nuclear detection.

As so often occurs when commercialising 'break-through' technologies, adoption of the products can take longer than originally expected due to events sometimes totally outside of an organisation's control. This has been the case for Kromek in H2 with the company announcing this morning that turnover will be "significantly below current market expectations".

We estimate (as a worst case) that up to £3m of deliveries could slip into FY15, on top of a £2.5m shortfall in new orders. Consequently we have cut our FY14 turnover, EBITDA and cash forecasts to £5.8m (-49%), -£2.5m (from +£1.3m) and £6.0m (from £10.0m) respectively. Going forward, the lower H2 run-rate also feeds through into FY15 (again worst case scenario) and so our target price falls from 100p to 52p/share.

The proposition remains robust and there were significant positives from the trading update regarding commercial progress and the order pipeline. Importantly, the group is fully funded (est. April '14 net cash of £6m) to a point well beyond when we anticipate it will become cashflow positive. 

Strong H1: Strategic Contracts Secured
Published: Jan 14 2014

Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include: medical imaging, security screening, and nuclear detection.
Revenues for the 6 months to 31 October were up 3-fold to £2.4m compared to £0.7m last time. More significant was the signing of a raft of new deals with industry heavyweights across its 3 main verticals.
In H1 it landed c. £8m of orders, equivalent to a book-to-bill ratio of 3.3x. After the period close Kromek said that it was part of a consortium led by Northrop Grumman which has been awarded a homeland defence contract.
We maintain our FY14 turnover and EBITDA projections of £11.3m and £1.3m respectively. In terms of valuation our target price is unchanged at 100p/share. This is equivalent to FY16 EV/EBIT and EV/EBITDA multiples of 12.2 and 9.5 respectively, which we consider good value given the exponential growth offered by this science-rich stock.
'Go to' partner for next generation X-rays
Published: Nov 20 2013

Kromek has recently listed on the AIM market and is a UK company pioneering digital colour imaging for x-rays using cadmium zinc telluride crystals.
Today's mono-chrome x-rays are still figuratively speaking 'stuck in the dark ages' but by using proprietary Cadmium Zinc Telluride detectors from Kromek, it is now possible to generate high definition colour X-rays at much lower (and safer) radiation levels.
Unique vertical integration and manufacturing breadth are key advantages when it comes to winning new business. Indeed so critical is this expertise, that the group has already done business with 3 of the top 4 global medical-imaging companies.
As well as medical usage, the firm's products are sold into nuclear (eg radiation detection for decommissioning) and security screening (eg bottle scanning at airports) sectors. Clients here include EDF, NASA, Northrop Grumman & US Department of Defence. Great endorsements, indicating that Kromek is fast becoming the world's de facto CZT X-ray expert.
We are forecasting sales to accelerate sharply from £2.7m in FY13 to £11.3m this year, on the back of a strong October orderbook, c. £8m of bookings secured in H1 and a rapidly expanding pipeline.
Compared to a current level of 69p our target price has been set at 100p/share, equivalent to a FY 2016 EBITDA multiple of 9.5x, which we think is good value for such a pioneering science-rich stock, set to generate exponential growth from its 'game-changing' technology.