TIDMKMK
RNS Number : 7165Z
Kromek Group PLC
19 December 2017
19 December 2017
Kromek Group plc
("Kromek" or the "Group")
Interim Results
Kromek (AIM: KMK), a radiation detection technology company
focusing on the medical, security screening and nuclear markets,
announces its interim results for the six months ended 31 October
2017.
Financial Highlights
-- Revenue increased 27% to GBP4.8m (H1 2016/17: GBP3.8m)
-- Gross margin improved to 63% (H1 2016/17: 53%)
-- Loss before tax was GBP1.8m (H1 2016/17: GBP1.8m)
-- EBITDA* improved to GBP0.3m loss (H1 2016/17: GBP0.6m loss)
-- Gross cash and cash equivalents at 31 October 2017 were
GBP15m** (30 April 2017: GBP20.3m; 31 October 2016: GBP3.8m).
*EBITDA defined as earnings before interest, taxation,
depreciation, amortisation and share-based payments as detailed
below.
**This excludes GBP1.3m that has been invested into a money
market account that is classified as an investment rather than cash
and cash equivalents.
Operational Highlights
Another period of good progress and upscaling in commercial
activities with revenue growth driven by higher product sales in
Kromek's key markets.
Medical Imaging
The medical imaging detection systems significantly advance the
early identification of disease, such as cancer, dementia and
osteoporosis, by producing superior quality and higher resolution
colour digital images from its SPECT cameras.
-- Won a five-year contract, worth a minimum of $5.38m, to
provide detector modules for a new product offering for an existing
BMD customer
-- Progressed the development of CZT-based SPECT cameras for a
key customer and significantly advanced towards achieving a full
clinical validation
-- Won a four-year contract, post period end, worth a minimum of
$1.5m, from a new OEM customer to provide customised CZT-based
gamma cameras
Nuclear Detection
The D3S is the world's most advanced, portable, nuclear
radiation detection device used by counter-terrorist agencies to
protect civilians, key infrastructure in cities including ports,
borders and transport hubs.
-- D3S sensors continued to be field-tested in major areas of
strategic importance to the US by DARPA, and by other public
administrations across the globe
-- Named as a qualified contractor under the recently-announced
$8.2bn U.S. Department of Defense IDIQ for the Joint Enterprise -
Research, Development, Acquisition, and Production/Procurement
contract award vehicle following extensive due diligence
Security Screening
The Group's security screening solutions are being incorporated
into the next generation liquid and luggage scanners. These
upgraded machines are replacing legacy machines and are enhancing
the safety of passengers while minimising the inconvenience of the
security process at airports.
-- Won a five-year, $2m contract, from a new OEM customer to
upgrade its baggage security screening systems to enable enhanced
detection of threat materials
-- Commenced work on the Group's first long-term Security
Screening contact: a five-year agreement with an existing US-based
customer to provide OEM components
Five new patents were filed and 18 granted during the
period.
Dr Arnab Basu, CEO of Kromek, said: "During the period, Kromek
continued to deliver significant revenue growth and took meaningful
steps towards our stated aim of achieving EBITDA breakeven this
year. In the first half, we saw growth in sales through executing
on our previously-signed agreements while, at the same time,
continuing to win new high-value contracts.
"We also succeeded in enhancing our reputation in our key target
markets. Our D3S product was successfully deployed in high-profile
situations for safeguarding against nuclear terrorism; and we
achieved a significant milestone in SPECT by finalising the
development of a system capable of producing clinical grade images
that will improve early stage diagnosis of diseases such as cancer
and dementia.
"We have entered the second half of 2017/18 well-positioned to
deliver revenue growth for the full year and achieve EBITDA
breakeven, in-line with market expectations. This position is
underpinned by good visibility of revenues, with a significant
proportion under signed contract. With our increasing traction with
existing and potential customers, and with a strengthened order
book, the Board looks to the future with confidence."
Enquiries
Kromek Group plc
-------------------------------- ---------------
Arnab Basu, CEO +44 (0)1740
Derek Bulmer, CFO 626 060
-------------------------------- ---------------
Cenkos Securities plc
-------------------------------- ---------------
Bobbie Hilliam (NOMAD) +44 (0)20 7397
Julian Morse (Sales) 8900
-------------------------------- ---------------
Luther Pendragon Ltd
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Harry Chathli, Claire Norbury, +44 (0)20 7618
Alexis Gore 9100
-------------------------------- ---------------
Arnab Basu, CEO, and Derek Bulmer, CFO, will be hosting a
presentation for analysts at 9.00am GMT at the offices of Luther
Pendragon, 48 Gracechurch Street, London, EC3V 0EJ.
About Kromek Group plc
Kromek Group plc is a UK 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's vision is to enable its customers and users to take
more timely decisions based on superior information - whether this
is to combat terrorism or treat cancer - and the Group took
important strides towards reaching this goal during the first half
of the 2017/18 financial year. The Group continued to execute on
contracts that it had previously been awarded as well as to enter
into several new high-value agreements. The shift in the Group's
sales mix from R&D to products sales was sustained, with
product sales accounting for 87% of total revenue compared with 74%
in H1 2016/17. This transition reflects the increasing value of the
contracts being awarded, alongside a growing number of customers
moving from R&D programmes to full commercialisation.
The Group also enhanced its engagement and reputation with
leading organisations within its target markets. Key products were
deployed in significant trials and the Group reached performance
milestones, which contributed to the satisfaction of due diligence
conducted by customers ahead of potential order placement. As a
result, the Group strengthened its market position as a key
supplier of CZT detection systems to both commercial and government
customers globally, and is better positioned to capture the
opportunities that exist across all its target markets.
Medical Imaging
Kromek's Medical Imaging solutions are capable of producing high
resolution, digital images with superior specificity to standard
medical cameras currently available in the market. This is
providing clinicians with the necessary equipment to accurately
detect and monitor medical disorders, resulting in more efficient
treatment of patients.
Kromek made good progress in Medical Imaging during the period.
A key driver of revenue growth in the period was delivery on
contracts won over the last two years. The Group continued to win
new contracts, including a new five-year contract, worth a minimum
value of $5.38m, from an existing customer in the bone mineral
densitometry ("BMD") sector, for the incorporation of its CZT-based
detector modules into a new medical diagnostics product.
The Group also continued to make significant progress under its
contract, which was signed in 2014, for the development and
delivery of CZT-based single-photon emission computed tomography
("SPECT") modules, for an established manufacturer of x-ray
diagnostics and analysis equipment. The Group significantly
advanced towards achieving full clinical validation of its
newly-developed product for this market. This achievement is the
culmination of several years of intensive R&D. The Group's
management believe that the Kromek CZT-based SPECT camera will
significantly enhance the identification and management of diseases
such as cancer and dementia.
Post period end, the Group was awarded a four-year contract by a
new OEM customer to provide superior imaging and diagnostic
capability to the customer's existing imaging systems. Kromek will
leverage its expertise to customise its existing CZT-based gamma
camera product platform to meet the customer's requirements. Under
the terms of the agreement, which has already commenced, the Group
will receive a minimum of $1.5m.
Nuclear Detection
Kromek's state-of-the-art D3S gamma neutron spectroscopic
personal radiation detector, linked to a central server, produces a
detailed map of radiation levels across large urban areas. This
enables threats and non-threats to be clearly differentiated. The
data collected will subsequently trigger alarms if there is an
unexpected detection of radiation. The D3S can be worn by front
line security workers as part of a larger network, contributing to
the identification of unexplained build-ups of radioactive
isotopes. As a result, it offers an extensive and effective
safeguard against the threat of nuclear terrorism.
Kromek continued to advance in the Nuclear Detection market
during period. Its key product offerings underwent several
high-profile deployments and trials, resulting in the Group
enhancing its reputation with government agencies and global
OEMs.
The Group's standalone radiation detector, the D3S, for
intelligent radiation-detection networks continued to be
field-tested in major areas in the US by the Defense Advanced
Research Projects Agency ("DARPA"), an agency of the U.S.
Department of Defense. It was also used by European authorities to
protect the President of the United States during his visit to
Brussels in May 2017 and by other public administrations across the
globe for protection of government, parliamentary and defence
buildings. It is being well-received by these parties and Kromek
expects this to materialise into product purchase orders in due
course.
In further progress with the U.S. Department of Defense, Kromek
was named as a qualified contractor under the department's $8.2bn
Indefinite Delivery Indefinite Quantity ("IDIQ") Joint Enterprise -
Research, Development, Acquisition, and Production/Procurement
(JE-RDAP) contract award vehicle. This followed an extensive
process of due diligence conducted on Kromek by the U.S. Department
of Defense. The JE-RDAP vehicle has been allocated $8.2 billion to
invest over a ten-year period in a number of programmes. These
programmes will be conducted jointly with companies selected from
the list of qualified contractors. While there is no certainty that
the Group will be awarded a contract under the JE-RDAP, the Group's
management believes that Kromek is well-placed to be selected under
the programme for the research, development, acquisition and
production/procurement of a 'Man-portable Radiological Detector
System (MRDS)', which is designed to 'provide the Army with a
capability to detect and identify a Weapons of Mass Destruction
threat'.
Security Screening
In the Security Screening market, Kromek's solutions for baggage
screening and for identifying the presence of hazardous material
within a container enhance national security and improve the safety
of passengers while minimising the inconvenience of the security
process at airports and other ports of entry and exit.
Kromek continued to deliver on contracts secured during previous
periods with global security groups for the supply of OEM
components for baggage screening products used in aviation
security. In particular, the Group commenced work under its first
long-term contract in the Security Screening market, a five-year
agreement, which was awarded in H2 2016/17 by an existing US-based
customer that is an emerging leader and global company in the
homeland security marketplace. In addition, during the period,
Kromek received its second long-term contract in this market with
the award of another five-year contract, worth $2.0m, by a new OEM
customer that is a leading company in x-ray imaging systems. This
customer will incorporate Kromek's technology into its baggage
security screening systems to enhance detection of an extensive
range of threat materials.
These developments represent the growing traction that Kromek
continues to gain through the increasing adoption of its technology
in the Security Screening market. This applies both to the
provision of OEM components and the use of Kromek's bottle
scanners, which are installed in over 50 airports in 11 countries
in Asia, Europe and Australia.
R&D
The Group has continued to work on both externally and
internally funded R&D activities to develop products and
platform technologies that form important elements of its future
product roadmap. In particular, the Group's investment in product
development increased slightly as it sought to capture the market
opportunity with new and enhanced products at a commercial price
point. The Group expects investment in R&D to remain at a
steady level over the next few years. During the period, five new
patents were filed and 18 patents were granted.
Financial Review
During the six-month period to 31 October 2017 revenue increased
by 27% to GBP4.8m (H1 2016/17: GBP3.8m) with product sales across
Nuclear Detection and Medical Imaging being key contributors to the
growth in the period. Product sales grew by 24% over the six-month
period ended 31 October 2016 and also continued to expand as a
proportion of total revenue, accounting for 87% of H1 2017/18
revenue compared with 74% in H1 2016/17 as summarised in the table
below:
Revenue H1 2017/18 H1 2016/17 Full year 2016/17
Mix
--------- ------------------ ------------------ --------------------
GBP'000 % share GBP'000 % share GBP'000 % share
---------
Product 4,179 87% 2,782 74% 6,671 74%
---------
R&D 623 13% 991 26% 2,297 26%
--------- -------- -------- ---------
Total 4,802 3,773 8,968
--------- -------- -------- -------- -------- --------- ---------
Gross margin for H1 2017/18 improved to 63% compared with 57%
for FY 2016/17 and is an increase of 10 percentage points over the
53% gross margin for the comparative six-month period to 31 October
2016. This increase in gross margin was due to product mix and
production efficiencies. However, the gross margin is expected to
normalise in the second half of 2017/18, resulting in the FY
2017/18 gross margin being at a similar level to that of FY
2016/17.
On an underlying basis, excluding the impact of foreign exchange
movements, the Group's administrative cost base reduced by GBP0.4m
to GBP4.5m for H1 2017/18 compared with GBP4.9m in H1 2016/17. This
reduction in costs for the period has been achieved through a net
increase in the capitalised development costs, less the higher
amortisation charge in the period. However, on a reported basis,
the Group's administrative expenses (including operating expenses)
increased by GBP1.0m (27%) to GBP4.7m for the period (H1 2016/17:
GBP3.7m) due to the negative impact of foreign currency exchange
movements on current assets held in foreign currencies as detailed
in the table below:
GBP'm
Balance sheet and working capital
conversion six months end 31
October 2016 (Net gain in the
P&L) 1.2
Balance sheet and working capital
conversion six months end 31
October 2017 (Net loss in the
P&L) (0.2)
------
Net movement in foreign exchange
impact to 31 October 2017 1.4
======
The EBITDA loss reduced during the period to GBP0.3m (H1
2016/17: GBP0.6m loss), due to the higher margin but partially
offset by the foreign exchange movement on current assets noted
above. The loss before tax remained static at GBP1.8m (H1 2016/17:
GBP1.8m loss) due to the offset of higher product and intangible
amortisation of GBP1.0m in the period (H1 2016/17: GBP0.7m).
Both EBITDA and loss before tax were negatively impacted by the
GBP1.4m net movement in foreign exchange. EBITDA is calculated as
per the following table:
Full Year
H1 2017/18 2016/17
H1 2016/17
(Unaudited) (Unaudited) (Audited)
------------------ ------------- ------------ -----------
GBP'000 GBP'000 GBP'000
------------------ ------------- ------------ -----------
Loss before
tax (1,847) (1,810) (3,794)
------------------ ------------- ------------ -----------
Adjustments:-
------------------ ------------- ------------ -----------
Net interest 124 7 40
------------------ ------------- ------------ -----------
Depreciation 409 379 762
------------------ ------------- ------------ -----------
Amortisation 957 692 1,417
------------------ ------------- ------------ -----------
Share-based
payments 46 96 99
------------------ ------------- ------------ -----------
Other income - - 15
------------------ ------------- ------------ -----------
EBITDA (311) (636) (1,461)
------------------ ------------- ------------ -----------
Foreign exchange
on working
capital 170 (1,233) (792)
------------------ ------------- ------------ -----------
Adjusted EBITDA (141) (1,869) (2,253)
------------------ ------------- ------------ -----------
EBITDA is a non-GAAP measure that the Group uses internally as a
key measure of profit and cash generation. Share-based payments are
also added back in the measure of EBITDA because it is a non-cash
charge that, at this stage in the Group's development, represents a
disproportionate share of the Group's operating expenses. Adjusted
EBITDA is a further non-GAAP measure that further excludes from
EBITDA the impact of foreign exchange movements, and the Group
considers this measure to best reflect the underlying
profitability.
Investment in product development was GBP1.9m (H1 2016/17:
GBP1.7m) reflecting the commitment to invest for future growth of
the business, capture the market opportunity with new and enhanced
products, and to meet the demands of accelerated customer
programmes.
Cash and cash equivalents at:
-- 31 October 2017 were GBP15m (including GBP3.0m utilised on
the revolving credit facility (RCF) and excluding GBP1.3m invested
into a money market account that is classified as an investment
rather than cash and cash equivalents)
-- 30 April 2017 were GBP20.3m (including GBP3.0m utilised on the RCF)
-- 31 October 2016 were GBP3.8m (including GBP1.5m utilised on the RCF)
The net decrease in cash and cash equivalents in the six months
to 31 October 2017 was GBP5.3m. This consists largely of the EBITDA
loss of GBP0.3m; investment in development costs of GBP1.9m; net
movement in working capital of GBP1.8m; and investment of GBP1.3m
into a long-term money market account that is classified as
non-current asset investment.
During the period the Group secured new premises for its US
operations in Pittsburgh. The new building, under a 20-year lease,
has been purpose-built and provides the Group with a significantly
more efficient and cost-effective office and manufacturing space.
The building is at a location that is more suitable for attracting
talent, has better connectivity and is closer to the growing
high-tech hub in Pittsburgh. The new facility also allows for
further expansion of the manufacturing facility and provides
security to the business as the previous lease was coming to an
end. An estimated capital investment of $3m in the facilities
element of the building, including new clean rooms and HVAC, will
be covered by a $3m loan from the landlord secured up to 50%
through a letter of credit. The Group deposited GBP1.3m into a
long-term money market account to operate as security.
Auditors
Kromek would like to welcome KPMG LLP as the newly appointed
Group auditors replacing the former Group auditors, Deloitte.
Kromek would like to extend its thanks to Deloitte for the past 11
years of engagement. However, as a form of best practice in
Corporate Governance, the Group has formally appointed KPMG. KPMG
has a significant presence in the North East of England, based in
Newcastle upon Tyne, and has an extensive portfolio of AIM-listed
clients.
Outlook
Kromek entered the second half of 2017/18 well-positioned to
deliver revenue growth for the full year and achieving EBITDA
breakeven in-line with market expectations. This expectation is
underpinned by good visibility of revenues with a significant
proportion under signed contract.
The Group continues to benefit from its customers commercially
launching next-generation CZT-based products and from the
increasing adoption of CZT-based technology across its target
markets. 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. As a result of this, combined with a
strengthened order book and improved revenue visibility, the Board
looks to the future with confidence.
Kromek Group plc
Consolidated condensed income statement
For the six months ended 31 October 2017
Six months Six months Year
ended 31 ended 31 ended
October October 30 April
2017 2016 2017
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Note
Continuing operations
Revenue 4 4,802 3,773 8,968
Cost of sales (1,758) (1,786) (3,851)
Gross profit 3,044 1,987 5,117
Other operating income - - (15)
Distribution costs (107) (106) (194)
Administrative expenses (including
operating expenses) (4,659) (3,684) (8,662)
Operating loss (1,722) (1,803) (3,754)
Finance income 9 - 5
Finance costs (134) (7) (45)
Loss before tax (1,847) (1,810) (3,794)
Tax 5 691 317 710
Loss from continuing operations (1,156) (1,493) (3,084)
Losses per share
-basic (p) 7 (0.4) (1.0) (1.8)
-diluted (p) (0.4) (1.0) (1.8)
Kromek Group plc
Consolidated condensed statement of comprehensive income
For the six months ended 31 October 2017
Six months Year
Six months
ended ended
31 October 31 October ended
30 April
2017 2016 2017
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Loss for the period (1,156) (1,493) (3,084)
------------- ------------- -----------
Items that may be recycled
to the income statement
Exchange (losses)/gains on
translation of foreign operations (56) 770 685
Total comprehensive loss for
the period (1,212) (723) (2,399)
============= ============= ===========
Kromek Group plc
Consolidated condensed statement of financial position
For the six months ended 31 October 2017
31 October 31 October 30 April
2017 2016 2017
Note GBP'000 GBP'000 GBP'000
Non-current assets (Unaudited) (Unaudited) (Audited)
Goodwill 1,275 1,275 1,275
Investments - Long
term cash deposits 1,250 - -
Other intangible assets 15,706 13,201 14,824
Property, plant and
equipment 8 3,357 4,050 3,698
21,588 18,526 19,797
Current assets
Inventories 2,697 3,174 3,204
Trade and other receivables 7,652 3,868 6,005
Current tax assets 429 210 596
Cash and bank balances 15,045 3,803 20,343
25,823 11,055 30,148
Total assets 47,411 29,581 49,945
Current liabilities
Trade and other payables (3,153) (4,028) (4,567)
Finance lease liabilities - - -
Borrowings (3,000) (1,500) (3,000)
Provisions for liabilities (169) - (169)
(6,322) (5,528) (7,736)
Net current assets 20,751 5,527 22,412
Non-current liabilities
Finance lease liabilities - - -
Deferred tax liabilities - - -
Total liabilities (6,322) (5,528) (7,736)
Net assets 41,089 24,053 42,209
Equity
Share capital 10 2,604 1,539 2,591
Share premium account 63,303 44,493 63,270
Capital redemption
reserve 1,175 1,175 1,175
Translation reserve 701 842 757
Retained earnings (26,694) (23,996) (25,584)
Total equity 41,089 24,053 42,209
Kromek Group plc
Consolidated condensed statement of changes in equity
For the six months ended 31 October 2017
Equity attributable to equity holders
of the Group
Share Capital
Share Premium Redemption Translation Retained
Capital Account Reserve Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 May
2017 2,591 63,270 1,175 757 (25,584) 42,209
Loss for the period - - - - (1,156) (1,156)
Other comprehensive
income for the
period - - - (56) - (56)
Total comprehensive
loss for the period - - - (56) (1,156) (1,212)
Transactions with
shareholders recorded
in equity
Issue of share
capital net of
expenses 13 - - - - 13
Premium on shares
issued less expenses - 33 - - - 33
Credit to equity
for equity-settled
share based payments - - - - 46 46
Balance at 31
October 2017 2,604 63,303 1,175 701 (26,694) 41,089
Balance at 1 May
2016 1,522 44,484 1,175 72 (22,599) 24,654
Loss for the period - - - - (1,493) (1,493)
Other comprehensive
income for the
period - - - 770 - 770
Total comprehensive
loss for the period - - - 770 (1,493) (723)
Transactions with
shareholders recorded
in equity
Issue of share
capital net of
expenses 17 - - - - 17
Premium on shares
issued less expenses - 9 - - - 9
Credit to equity
for equity-settled
share based payments - - - - 96 96
Balance at 31
October 2016 1,539 44,493 1,175 842 (23,996) 24,053
Balance at 1 May
2016 1,522 44,484 1,175 72 (22,599) 24,654
Loss for the year - - - - (3,084) (3,084)
Other comprehensive
income for the
period - - - 685 - 685
Total comprehensive
loss for the year - - - 685 (3,084) (2,399)
Transactions with
shareholders recorded
in equity
Issue of share
capital net of
expenses 1,069 18,786 - - - 19,855
Credit to equity
for equity-settled
share based payments - - - - 99 99
Balance at 30
April 2017 2,591 63,270 1,175 757 (25,584) 42,209
Kromek Group plc
Consolidated statement of cash flows
For the six months ended 31 October 2017
Six months Six months Year
ended ended 31 ended
31 October October 30 April
2017 2016 2017
Note GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Net cash generated (used
in)/from operating activities 9 (2,009) 799 (1,500)
Investing activities
Investment in long term
cash deposits (1,250)
Interest received 9 - 5
Purchases of property, plant
and equipment (100) (128) (261)
Purchases of patents and
trademarks (122) (115) (320)
Capitalisation of research
and development costs (1,884) (1,665) (4,187)
Net cash used in investing
activities (3,347) (1,908) (4,763)
Financing activities
Loans paid - - -
Loans received - 1,500 3,000
Proceeds on issue of shares 46 26 19,855
Interest paid (133) (7) (45)
Net cash generated from
financing activities (87) 1,519 22,810
Net increase in cash and
cash equivalents (5,443) 410 16,547
Cash and cash equivalents
at beginning of period 20,343 3,857 3,857
Effect of foreign exchange
rate changes 145 (464) (61)
Cash and cash equivalents
at end of period 15,045 3,803 20,343
Kromek Group plc
Notes to the unaudited interim statements
For the six months ended 31 October 2017
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 2017; 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 2017 have been filed with the Registrar of
Companies and are available on the Group's website
www.kromek.com.
The accounting policies used in this interim financial report
are consistent with International Financial Reporting Standards.
Except for the amortisation of capitalised development expenditure,
the same accounting policies, presentation and methods of
computation are followed in this condensed set of financial
statements as applied in the Group's latest annual audited
financial statements other than standards, amendments and
interpretations which became effective after 1 May 2017 and were
adopted by the Group. These have had no significant impact on the
Group's result for the period or its equity.
Following the Amended Clarification of Acceptable Methods of
Amortisation effective for annual accounting periods beginning on
or after 1 January 2016, the Group now amortise the capitalised
development costs on a straight-line basis over a period 3-15 years
rather than against product sales directly relating to the
development expenditure. Provision is made for any impairment.
The condensed set of financial statements included in this
interim report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union.
This interim report for the period ending 31 October 2017 was
approved by the Board of Directors on 18 December 2017.
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 Six months Year
ended ended ended
31 October 31 October 30 April
2017 2016 2017
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
United Kingdom 172 425 931
North America 1,622 2,202 4,455
Asia 2,891 991 3,276
Europe 112 144 296
Australasia 5 11 10
Total revenue 4,802 3,773 8,968
4. Business and geographical segments (continued)
A geographical analysis of the Group's revenue by origin is as
follows:
Six months ended 31 October 2017
UK Operations USA Operations Total
GBP'000 GBP'000 for Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 1,029 1,735 2,764
-Revenue from grants 32 - 32
-Revenue from contract customers 103 2,644 2,746
Total sales by segment 1,163 4,379 5,542
Removal of inter-segment sales (245) (495) (740)
-------------- --------------- -----------
Total external sales 918 3,884 4,802
============== =============== ===========
Segment result - operating
(loss)/profit (2,120) 397 (1,723)
Net interest (124) - (124)
(Loss)/profit before tax (2,244) 397 (1,847)
Tax credit 691 - 691
-------------- --------------- -----------
(Loss)/profit for the year (1,553) 397 (1,156)
============== =============== ===========
Other information
Property, plant and equipment
additions 17 83 100
Depreciation of property,
plant and equipment 149 260 409
Intangible asset additions 790 1,216 2,006
Amortisation of intangible
assets 563 394 957
-------------- --------------- -----------
Balance Sheet
Total assets 31,059 16,352 47,411
-------------- --------------- -----------
Total liabilities (5,315) (1,007) (6,322)
-------------- --------------- -----------
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 2016
UK Operations USA Operations Total
GBP'000 GBP'000 for Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 2,611 1,288 3,899
-Revenue from grants 80 - 80
-Revenue from contract customers 32 530 562
Total sales by segment 2,723 1,818 4,541
Removal of inter-segment sales (299) (469) (768)
-------------- --------------- -----------
Total external sales 2,424 1,349 3,773
============== =============== ===========
Segment result - operating
loss (505) (1,298) (1,803)
Net interest (7) - (7)
Loss before tax (512) (1,298) (1,810)
Tax credit 317 - 317
-------------- --------------- -----------
Loss for the period (195) (1,298) (1,493)
============== =============== ===========
Other information
Property, plant and equipment
additions 74 55 128
Depreciation of property,
plant and equipment 162 217 379
Intangible asset additions 787 993 1,780
Amortisation of intangible
assets 448 244 692
-------------- --------------- -----------
Balance Sheet
Total assets 19,197 10,384 29,581
-------------- --------------- -----------
Total liabilities (5,348) (180) (5,528)
-------------- --------------- -----------
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 GBP429k (six
months ended 31 October 2016: GBP317k) for the six months ended 31
October 2017.
Deferred tax liabilities were GBPnil (six months ended 31
October 2015: GBP59k) for the six months ended 31 October 2016.
6. Dividends
The directors do not recommend the payment of a dividend (six
months ended 31 October 2016: GBPnil).
7. Losses per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Losses
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2017 2016 2017
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Losses for the purposes of basic
earnings per share being net profit
attributable to owners of the
Group (1,156) (1,493) (3,084)
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2017 2016 2017
'000 '000 '000
(Unaudited) (Unaudited) (Audited)
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
losses per share 259,745 153,285 174,573
Effect of dilutive potential ordinary
shares:
Share options and warrants 4,393 3,746 3,565
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 264,138 157,031 178,137
Basic (p) (0.4) (1.0) (1.8)
Diluted (p) (0.4) (1.0) (1.8)
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 2017, the Group acquired
property, plant and equipment with a cost of GBP100k (six months
ended 31 October 2016: GBP129k).
9. Notes to the cash flow statement
Six months Six months Year
ended 31 ended 31 ended
October October 30 April
2017 2016 2017
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Loss for the period (1,156) (1,493) (3,084)
Adjustments for:
Finance income (9) - (5)
Finance costs 133 7 45
Income tax credit (691) (317) (710)
Depreciation of property,
plant and equipment 409 379 762
Amortisation of intangible
assets 957 692 1,417
Share-based payment expense 46 96 99
Operating cash flows before
movements in working capital (311) (636) (1,476)
Decrease/(increase) in inventories 507 (364) (394)
(Increase)/decrease in receivables (1,648) 1,291 (846)
(Decrease)/increase in payables (1,415) (417) 122
Increase in provisions - - 169
Cash used in operations (2,867) (126) (2,425)
Income taxes received 858 925 925
Net cash (used in)/generated
from operating activities (2,009) 799 (1,500)
10. Share capital
During the period, 1,300,000 ordinary shares (six months ended
31 October 2016: 1,675,000) were issued because of the exercise of
employee share options.
11. Related party transactions
During the period Arnab Basu, a director, purchased 80,000 (six
months ended 31 October 2016: 800,000) ordinary shares of the Group
through exercising some outstanding share options.
During the period Derek Bulmer, a director, purchased 36,066
(six months ended 31 October 2016: nil) ordinary shares of the
Group in the open market.
During the period Sir Peter Williams, Chairman, purchased 20,000
(six months ended 31 October 2016: nil) ordinary shares of the
Group in the open market.
11. Related party transactions (continued)
During the period Jerel Whittingham, a non-executive director,
purchased 250,000 (six months ended 31 October 2016: nil) ordinary
shares of the Group through exercising some outstanding
options.
During the period Lawrence Kinet, a non-executive director,
purchased 50,000 (six months ended 31 October 2016: nil) ordinary
shares of the Group in the open market.
12. Events after the balance sheet date
There are no significant or disclosable post-balance sheet
events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UWSKRBSAUAAA
(END) Dow Jones Newswires
December 19, 2017 02:00 ET (07:00 GMT)
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