TIDMKMK
RNS Number : 5729D
Kromek Group PLC
27 June 2019
27 June 2019
Kromek Group plc
("Kromek" or the "Group")
Final Results
Kromek (AIM: KMK), a worldwide supplier of detection technology
focusing on the medical, security screening and nuclear markets,
announces its final results for the year ended 30 April 2019.
Financial Highlights
-- Revenue increased 23% to GBP14.5m (2017/18: GBP11.8m)
-- Product sales accounted for 83% of total revenues (2017/18:
81%), representing a 25% increase in value
-- Gross margin improved to 57.2% (2017/18: 56.4%)
-- Adjusted EBITDA* increased fourfold to GBP2.0m (2017/18: GBP0.5m)
-- Loss before tax for the year reduced to GBP1.3m (2017/18: GBP2.5m loss)
-- Cash and cash equivalents at 30 April 2019 were GBP20.6m (30
April 2018: GBP9.5m), following a successful fundraising of
GBP21.0m during the second half of the year
*Adjusted EBITDA defined as earnings before interest, taxation,
depreciation, amortisation, other income and share-based payments.
For a reconciliation, see the Financial Review below.
Operational Highlights
-- Milestone year with growth driven by SPECT products in
medical imaging and D3S platform in nuclear detection - and
delivered key target of increasing adjusted EBITDA
-- Increasing commercial traction across Kromek's portfolio of
product families with the award of high-value, multi-year contracts
from commercial and large government customers worldwide giving
greater visibility
-- Successfully commenced operations from new high-volume
manufacturing facility in US following relocation to purpose-built
premises in Pittsburgh to cater for increased demand in medical
imaging
-- Fundraise in second half enables the Group to significantly
expand future capacity and efficiencies in US and UK
manufacturing
-- 11 new patents were filed and 16 were granted during the year
Medical Imaging
-- Awarded a significant contract, expected to be worth a
minimum of $58.1m over a seven-year period, by an existing OEM
customer to provide CZT detectors and associated advanced
electronics to be used in state-of-the-art medical imaging
systems
-- New OEM customer in the nuclear medicine instrumentation
market awarded a $700k contract to be delivered over 18 months
-- Received repeat orders from customers in the Bone Mineral
Densitometry and gamma detection markets
-- Continued to advance towards full clinical validation of
Kromek's CZT-based SPECT detector system
Nuclear Detection
-- D3S platform sold in 18 countries across Europe and Asia as well as in the US
-- Awarded a $1.8m contract by DTRA for two-year project to
develop ruggedised, small form-factor D3S platform for military
use
-- Awarded a $2.0m contract by DARPA to develop, over a 12-month
period, a proof-of-concept device for a vehicle-mounted
biological-threat identifier - Kromek's first contract for
biological threat detection
-- Secured a new nuclear security OEM customer with a three-year contract worth at least $1.4m
-- Won several new customers in the civil nuclear sector,
including the Spanish Army, and added new distributors in Europe
and Asia
Security Screening
-- Awarded a two-year $1.5m contract by the US Department of
Homeland Security to develop CZT detector modules for commercial
off-the-shelf detectors for advanced X-ray systems for passenger
baggage screening
-- Won a new five-year $7.8m contract from an existing OEM
customer to provide customised detector modules for incorporation
in baggage screening products
-- Received a $2.7m order expansion under five-year security
screening contract, increasing the total value to a minimum of
$5.8m
Dr Arnab Basu, CEO of Kromek, said: "This was a milestone year
for Kromek as we delivered on all of our objectives, including our
key target of growing adjusted EBITDA. We made progress across our
business segments as we continued to execute on previously-signed
agreements as well as win new, multi-year contracts from commercial
and large government customers worldwide. We significantly
strengthened the foundations of our business with the successful
relocation of our US operations to a new purpose-built facility,
and raised GBP21m to enhance our UK and US manufacturing
capabilities and to support expansion in our key growth areas of
SPECT in medical imaging and our D3S products in nuclear
detection.
"Looking ahead, we entered the 2019/20 fiscal year in a stronger
position than ever before. With the increasing market adoption of
customers' next-generation products that incorporate our radiation
detection solutions, we are receiving increasing demand from
existing customers as well as interest from potential customers -
and we are well-placed to capitalise on these opportunities. 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, and continue to look to the future with
confidence."
For further information, please contact:
Kromek Group plc
Arnab Basu, CEO
Derek Bulmer, CFO +44 (0)1740 626 060
Cenkos Securities plc (Nominated Adviser
and Broker)
Max Hartley (NOMAD)
Julian Morse (Sales) +44 (0)20 7397 8900
Luther Pendragon Ltd (PR)
Harry Chathli
Claire Norbury
Alexis Gore
Joe Quinlan +44 (0)20 7618 9100
Arnab Basu, CEO, and Derek Bulmer, CFO, will be hosting a
presentation for analysts at 9.00am BST today at the offices of
Luther Pendragon, 48 Gracechurch Street, London, EC3V 0EJ.
About Kromek Group plc
Kromek Group plc is a technology group (global HQ in County
Durham) and a leading developer of high performance radiation
detection products based on cadmium zinc telluride ("CZT") and
other advanced technologies. Using its core technology platforms,
Kromek designs, develops and produces x-ray and gamma ray imaging
and radiation detection products for the medical, security
screening and nuclear markets.
The Group's products provide high resolution information on
material composition and structure and are used in multiple
applications, ranging from the identification of cancerous tissues
to hazardous materials, such as explosives, and the analysis of
radioactive materials.
The Group's business model provides a vertically integrated
technology offering to customers, from radiation detector materials
to finished products or detectors, including software, electronics
and application specific integrated circuits ("ASICs").
The Group has operations in the UK and US (California and
Pennsylvania), and is selling internationally through a combination
of distributors and direct OEM sales.
Currently, the Group has over one hundred full-time employees
across its global operations. Further information on Kromek Group
is available at www.kromek.com and
https://twitter.com/kromekgroup.
Overview
This was a milestone year for Kromek as the Group delivered on
all of its objectives, including the key target of growing adjusted
EBITDA. For the full year, revenue increased by 23% to GBP14.5m
(2017/18: GBP11.8m) and adjusted EBITDA grew fourfold to GBP2.0m
(2017/18: GBP0.5m). In particular, the Group successfully delivered
its largest second half of revenue in its history, which was in
excess of GBP10m. This progress was based on Kromek continuing to
execute on previously-signed agreements as well as winning new
customers, new contracts and repeat orders across its target
markets, with growth driven by increasing adoption of the Group's
next-generation molecular imaging single photon emission computed
tomography ("SPECT") products in medical imaging and the D3S family
of products in nuclear detection. It also reflects the increasing
commercialisation of Kromek's technology, with product sales
accounting for 83% of total revenue (2017/18: 81%), representing
growth in value of 25%. Kromek was also awarded one of its most
significant contracts to date, expected to be worth a minimum of
$58.1m over a seven-year period, to provide cadmium zinc telluride
("CZT") detectors and associated advanced electronics to be used in
state-of-the-art medical imaging systems.
During the year, Kromek significantly strengthened the
foundations of the business and ability to deliver on future growth
with the successful relocation of its US operations to a new
facility that has been purpose-built for high-volume manufacturing
of world-class medical imaging products. This was furthered in the
second half of the year via a placing and open offer raising GBP21m
to support the growth of the medical imaging business and sales and
marketing of the D3S platform. In addition, the fundraise
strengthens the balance sheet to provide flexibility to address and
capitalise on identified and future opportunities as they
emerge.
Medical Imaging
Kromek made significant commercial progress in the medical
imaging markets during the year: delivering on previously-won
orders, receiving repeat orders from existing customers as well as
securing new contracts with new customers across its key segments
of SPECT, bone mineral densitometry ("BMD") and gamma probes.
As noted, during the year, Kromek secured one of its most
significant contracts to date, both from a strategic and monetary
perspective. The contract, which is from an existing OEM customer,
is expected to be worth a minimum of $58.1m over a seven-year
period. Kromek will provide the customer with CZT detectors and
associated advanced electronics to be used in its state-of-the-art
medical imaging systems.
Kromek is receiving significant interest in its SPECT products
as the market continues to grow, led by the major OEMs, such as GE
Healthcare, championing nuclear medical imaging and recognising CZT
as key to their next-generation systems. During the year, Kromek
advanced towards achieving clinical validation of its CZT-based
SPECT detector system under the contract signed in 2014 with an
established manufacturer of X-ray diagnostics and analysis
equipment, which the Group's management believe will significantly
enhance the identification and management of diseases such as
cancer and Parkinson's. Kromek was also awarded a $700k order from
a new OEM customer, to be delivered over 18 months, to supply CZT
detectors to be used to build next-generation nuclear medical
instrumentation.
In the BMD segment, which is used for the detection of
osteoporosis, Kromek was awarded a repeat contract by an existing
OEM customer to provide CZT-based detectors for the customer's
existing product line. The contract, which was worth $340k, was
delivered during the year.
In the gamma probes segment, which are used for radio guided
surgery, Kromek secured a long-term repeat order from an existing
medical customer for the supply of gamma detector modules for
incorporation in the customer's products. The contract, which
covers a five-year period, is worth $1.2m.
Nuclear Detection
Kromek's flagship D3S platform consists of a family of products
designed to cater for the varying demands of homeland security. The
D3S-ID is a wearable and concealable Radioisotope Identification
Device (RIID) gamma neutron detector for immediate area detection.
The D3S-NET builds on the features of the D3S-ID by adding a
networked solution, with each device acting as a building block for
wide area mapping on a remotely-hosted server. The recently
launched D3S-PRD has the same hardware as the D3S-ID, but is a more
cost-effective device without some of the specialised reporting
functionality of the D3S-ID and is designed for first-line users.
The D3S Drone uses an unmodified D3S gamma neutron radiation
detector plugged into a custom-built transmission unit, which
allows it to communicate at up to ten kilometres to a base
station.
During the year, Kromek continued to increase sales of its D3S
products. This was supported by the expansion, following the
successful fundraise, of the D3S distribution network and sales
team. As a result, the D3S family of products is sold in 18
countries worldwide.
The D3S platform was used in active deployments and field-tests
in multiple locations of strategic importance and high risk across
the US, Asia and Europe. With some of these multi-year trials
approaching a successful conclusion, this activity is expected to
translate to product and system-level sales in the future.
This included continued deployment and field-testing in major
areas in the US by the Defense Advanced Research Projects Agency
("DARPA"), an agency of the US Department of Defense, under its
SIGMA programme, and by other agencies. The D3S platform was also
used by the Belgian Federal Police (Airport Unit), supported by the
European Commission Counter Terrorism Unit of the Directorate
General for Home Affairs, during the July 2018 NATO Summit in
Brussels.
In addition, the D3S platform was selected by the European
Commission's Directorate-General for Migration and Home Affairs,
working alongside security authorities in Belgium, Luxembourg, The
Netherlands and Spain, under a new initiative to allow the law
enforcement authorities to validate new and emerging technologies
for homeland protection. Deployment commenced post period and over
the next 12 months, the European Commission will use the D3S-ID and
D3S Drone radiation detectors for the protection of public spaces
across multiple European locations covering high risk venues such
as airports, train stations and other public areas.
Kromek was awarded a $1.8m contract by the Defense Threat
Reduction Agency ("DTRA"), an agency of the US Department of
Defense, to develop a next-generation, ruggedised small form factor
D3S for use by the US military to identify radioactive threats in
combat environments. The project, which is scheduled to be
delivered over a two-year period, is progressing ahead of schedule
as customer demand is accelerating development towards
commercialisation.
Also during the year, Kromek was awarded a contract by DARPA, as
part of its new SIMGA+ initiative, to develop a proof-of-concept
vehicle-mounted device capable of detecting and identifying
pathogens used in a biological attack at significantly higher
speeds compared with current systems. This represents the Group's
first contract for biological-threat detection, which expands on
its existing capabilities in radiological and nuclear threat
detection. Development work under the contract commenced, which is
progressing on track. The contract is worth $2.0m over a
twelve-month period and could potentially be extended to a
multi-year contract for the development of a fully-deployable
system.
In the nuclear markets, Kromek's portfolio also includes a range
of high resolution detectors and measurement systems used for civil
nuclear applications, primarily in nuclear power plants and
research. During the year, this area of business continued to grow
as expected, as the Group won several new customers, including the
Spanish Army and a new OEM customer. The contract with the new OEM
customer, which is for the supply of CZT detectors, is worth at
least $1.4m and will be delivered over a three-year period, with
minimum annual volumes for each year. We also added new
distributors in Europe and Asia for our civil nuclear
portfolio.
Security Screening
In security screening, the regulatory framework in Europe
regarding explosive detection systems for cabin baggage (EDSCB),
overseen by the European Civil Aviation Conference, is focused on
increasing safety as well as convenience and efficiency for
passengers. This includes installing equipment that is sufficiently
sophisticated to allow passengers to keep their liquids and laptops
inside their cabin baggage when passing through security, which is
driving OEMs to adopt technologies such as Kromek's to meet these
higher performance standards. Kromek also provides OEM components
for hold luggage scanning.
During the year, Kromek received an order expansion under its
five-year contract that was awarded in 2017 by a US-based OEM
customer that is an emerging global leader in homeland security.
The order expansion increased the total value of the contract by at
least 90% to a minimum of $5.8m over the five years, with the
additional $2.7m relating to the orders for the third and fourth
years of the contract.
An existing OEM customer that is a leading company in X-ray
imaging systems awarded Kromek a new five-year supply contract
worth a minimum of $7.8m. The contract is for the customisation of
current technologies and CZT detector modules and supply for the
baggage security screening market.
The Group was also awarded a $1.5m two-year contract by the US
Department of Homeland Security to develop CZT detector modules for
commercial off-the-shelf detectors for advanced X-ray systems for
passenger baggage screening. This award reflects Kromek's
established relationship with the US government for developing
next-generation radiation detection solutions for national defence
and security applications.
Manufacturing Facilities and R&D
During the year, Kromek relocated its US operations to a new
purpose-built premises near Pittsburgh, Pennsylvania. The facility
offers a world-class platform upon which to build next-generation
CZT-based molecular imaging SPECT cameras and other medical imaging
products. The building, under a 20-year lease, also provides a
significantly more efficient facility, is in a preferable location
for attracting talent and enhances transport connectivity. It also
allows for further capacity expansion, which, combined with the
Group's fundraising, will enable the delivery of the anticipated
growth in medical imaging - which has already been evidenced by the
award of the significant seven-year $58.1m contract - and provides
a strong basis on which to strengthen this part of the
business.
Following the fundraising, Kromek also invested in expanding
capacity at its UK manufacturing facility as well as significantly
increasing process automation in both the UK and US. With greater
automation, the Group will expand throughput capacity as well as
improve efficiencies. These improvements are intended to be
implemented in a phased manner over the course of this current
financial year.
R&D efforts focused on two key areas: the continued
development and enhancement of products and platform technologies
that form elements of Kromek's product roadmap and to enable the
Group to maintain its leading market position; and, importantly,
value engineering to increase cost efficiencies to enable the Group
to offer competitively priced products whilst maintaining margins.
During the year, 11 new patents were filed and 16 patents were
granted.
Kromek worked on both externally and internally funded R&D
activities, with the proportion continuing to transition away from
externally funded R&D projects as its technologies are
increasingly commercialised. Investment in R&D is expected to
remain at a steady level over the next few years as the Group seeks
to maintain its commercial advantage.
Financial Review
Kromek achieved year-on-year revenue growth of 23% and a
fourfold increase in adjusted EBITDA resulting in loss before tax
being reduced to GBP1.3m (2017/18: GBP2.5m loss). The balance sheet
has been strengthened following the placing and open offer in
February 2019 where the Group raised funds of GBP19.8m net of
expenses.
During the year, three new accounting standards were adopted:
IFRS 15 'Revenue from Contracts with Customers'; IFRS 16 'Leases'
(early adopted); and IFRS 9 'Financial Instruments'. The impact of
these standards is described below.
Revenue
The Group achieved total revenue growth of 23% to GBP14.5m
(2017/18: GBP11.8m), which was driven by higher sales across both
product and R&D revenue activities. Product sales grew by 25%
to GBP12.1m (2017/18: GBP9.6m), which accounted for 83% of total
revenue (2017/18: 81%) and revenue from R&D contracts grew by
14% to GBP2.5m (2017/18: GBP2.2m), as detailed in the table
below:
Revenue Mix 2018/19 2017/18
GBP'000 % share GBP'000 % share
-------- --------
Product 12,060 83% 9,611 81%
-------- --------
R&D 2,457 17% 2,234 19%
-------- --------
Total 14,517 11,845
-------- -------- -------- --------
The continued year-on-year growth in product sales reflects
further traction with the D3S, SPECT and BMD products as Kromek
delivered on the supply of multi-year contracts that have been
announced over recent months and years.
The new revenue standard IFRS 15 'Revenue from Contracts with
Customers' came into mandatory effect for the Group during 2018/19.
However, following a comprehensive review, this mandatory change in
the Group's revenue recognition policy has not materially impacted
the value of revenue that would have been recognised under the
former revenue standards, IAS 18 Revenue and IAS 11 Construction
Contracts, in 2018/19 or during 2017/18.
Gross Margin
The year-on-year increase in revenue resulted in growth of gross
profit to GBP8.3m (2017/18: GBP6.7m). Due to a similar revenue mix,
the margin remained relatively static year-on-year, with a slight
improvement to 57.2% (2017/18: 56.4%).
Administration Costs
Administration costs and operating expenses increased by GBP0.2m
to GBP9.0m (2017/18: GBP8.8m). This increase is the net result
of:
-- GBP0.8m additional costs resulting from the impact of foreign
exchange fluctuations on consolidation and revaluations of working
capital balances (a weaker average Pound to US Dollar ratio during
2018/19 compared with 2017/18);
-- GBP0.2m costs being reallocated from administration costs to
finance costs as required under the new accounting standard IFRS 16
'Leases' (see note 2 in the consolidated financial statements
below); and
-- general cost savings of GBP0.4m made throughout 2018/19.
IFRS 16
As detailed in the Group's Interim Results announcement on 14
January 2019, the Group has adopted the new accounting standard,
IFRS 16 'Leases', and is accounting for its existing leases in
accordance with this standard.
Mandatory adoption of IFRS 16 comes into effect for the Group
for the accounting period ending 30 April 2020, and, therefore, the
Group has decided to early adopt this standard to best reflect the
new 20-year lease for the US facility. This adoption applies to the
accounting of all four existing property leases of the Group.
In accordance with IFRS 16, right of use (ROU) assets
representing the present value of future lease payments have been
recognised on the face of the balance sheet at 30 April 2019
totalling GBP4.0m (30 April 2018: nil). Corresponding liabilities
have also been recognised on the face of the balance sheet, which
are split between amounts due within one year and amounts due after
more than one year: at 30 April 2019 these liabilities totalled
GBP4.2m (30 April 2018: nil). For more information on IFRS 16, see
the notes to the consolidated financial statements below.
Adjusted EBITDA* and Result from Operations
Primarily due to increased revenues, which resulted in a GBP1.6m
increase in gross profit, adjusted EBITDA for 2018/19 was GBP2.0m
compared with GBP0.5m for the prior year as set out in the table
below:
2018/19 2017/18
GBP'000 GBP'000
-------- --------
Revenue 14,517 11,845
-------- --------
Gross margin (%) 57.2% 56.4%
-------- --------
Loss before Tax (1,270) (2,533)
-------- --------
EBITDA Adjustments:
-------- --------
Net interest 364 192
-------- --------
Depreciation 879 785
-------- --------
Amortisation 1,806 1,907
-------- --------
Share-based payments 195 131
-------- --------
Adjusted EBITDA 1,974 482
-------- --------
*Adjusted EBITDA is defined as earnings before interest,
taxation, depreciation, amortisation, other income and share-based
payments. Adjusted EBITDA is considered a key metric to the users
of the financial statements as it represents a useful milestone
that is reflective of the performance of the business as a result
of revenue growth. Share-based payments are added back when
calculating the Group's adjusted EBITDA as this is currently an
expense with a zero direct cash impact on financial
performance.
The GBP1.5m improvement in adjusted EBITDA in 2018/19 compared
with 2017/18 is substantially a result of additional gross margin
generated from higher revenues. This reflects the operational
gearing of the Group, supported by the control over administration
costs noted above.
Loss before tax for the year was reduced by 48% to GBP1.3m
(2017/18: GBP2.5m loss), largely driven by the GBP1.5m increase in
adjusted EBITDA and partially offset by higher interest,
depreciation and share-based payments that were largely due to the
impact of IFRS 16.
During 2018/19, the Group recognised other comprehensive income
of GBP1.2m (2017/18: GBP1.0m loss) that arose in respect of
exchange differences on a net investment in a foreign operation as
described in note 3 to the financial statements. Unlike the GBP0.8m
additional costs resulting from foreign exchange on consolidation
and revaluations of working capital balances noted above that were
expensed to the profit and loss account, this gain has been treated
as effectively a reserve movement only.
Tax
The Group continues to benefit from the UK Research and
Development Tax Credit resulting from the investment in
developments of technology and recorded a credit of GBP1.0m for the
year (2017/18: GBP1.4m). The Group's deferred tax provision
movement remained static at GBPnil (2017/18: GBPnil) due to the
distribution of losses between the UK and US operations. These two
elements led to an overall tax credit to the income statement for
the Group of GBP1.0m (2017/18: GBP1.4m).
Earnings per Share ("EPS")
Due to the GBP0.8m reduction in loss after tax for the year, the
EPS is recorded in the year on a basic and diluted basis as 0.1p
loss per share (2017/18: 0.4p loss per share).
R&D
The Group invested GBP2.7m in the year (2017/18: GBP3.4m) in
near-term product developments that were capitalised on the balance
sheet, reflecting the continued commitment to invest for the future
growth of the business with new and enhanced products. This
capitalisation is lower in the current year because of the facility
move in the US during the first half of 2018/19. Development work
was temporarily suspended in Kromek US to accommodate the shutdown
of the old facility and transfer to the new facility. Based upon
the existing portfolio of development projects that are currently
in operation primarily regarding SPECT and D3S, such amounts
capitalised are likely to increase in future financial years as the
Group continues with product development, unaffected by one-off
events such as a facility relocation.
This investment was offset by further amortisation of
development costs in 2018/19 of GBP1.2m (2017/18: GBP1.2m). Hence,
the net development cost capitalisation in 2018/19 was GBP0.7m
lower at GBP1.5m compared with GBP2.2m in 2017/18. A further
GBP5.3m (2017/18: GBP4.0m) was incurred in research relating to the
core technology platform and manufacturing capabilities and
expensed through the income statement.
Key areas of development continue to be the expansion in the D3S
suite of products and the SPECT and BMD platforms linked to
existing and expanding contract deliverables and of significant
future revenue opportunities. The Group continues to undertake this
investment in order to advance its commercial advantage.
During the year, the Group undertook expenditure on patents and
trademarks of GBP0.2m (2017/18: GBP0.6m) with 11 new patents filed
and 16 patents granted (2017/18: seven new patents filed and 29
patents granted).
Capital Expenditure
Capital expenditure in the year amounted to GBP3.6m (2017/18:
GBP0.3m). This increase consisted of:
-- GBP2.5m relating to the enhancements required for medical
imaging (including SPECT) manufacturing capabilities at the new US
facility. These additions were financed in full by a corresponding
loan with the Group's landlord;
-- GBP0.5m relating to assets under construction - primarily the
required increase in production capacity following the award of the
$58.1m seven-year supply contract with a key medical OEM. The Group
expects to spend up to a further GBP8m-GBP10m over the next 18
months in respect of such assets; and
-- GBP0.6m relating to modest capital expenditure across IT and general fixtures and fittings.
Cash Balance
Cash and cash equivalents were GBP20.6m at 30 April 2019 (30
April 2018: GBP9.5m). The GBP11.1m increase in cash during 2018/19
was a combination of the following:
-- Adjusted EBITDA profit for the year of GBP2.0m, less net finance costs of GBP0.3m
-- Increase in working capital of GBP7.5m (see below for more detail)
-- R&D Tax Credit receipts of GBP1.2m
-- Investment in product development and other intangibles, with
capitalised development costs of GBP2.7m and IP additions of
GBP0.2m
-- Net proceeds raised from the issue of shares of GBP19.8m
-- Capital expenditure net of financing loans of GBP1.2m
The GBP7.5m increase in key working capital balances is analysed
as follows:
-- A GBP0.2m increase in inventories held at 30 April 2019 to
GBP3.2m (30 April 2018: GBP3.0m). Following the $58.1m medical
imaging contract awarded in January 2019, the Group is holding more
component stock. This is an indicative feature of a contract that
is centred around product supply rather than R&D.
-- An GBP8.7m increase in trade and other receivables owed to
the Group at 30 April 2019 to GBP20.0m (30 April 2018:
GBP11.3m):
o The majority (55%) of this overall increase is directly due to
an expansion of amounts recoverable on contract ("AROC"). In line
with IFRS 15, the Group recognises revenue associated with the
performance obligations of such contracts "over time", which best
reflects the transfer of control. There has been an increase in the
value of the AROC over the last 12-24 months. The reason for this
increase is because of the lead time to build on a number of
long-term contracts. This position has been augmented due to the
relocation of the US facility; to some extent, forward build was
undertaken by the Group to mitigate any risk of delays that may
have resulted from the relocation. This ensures that through a
critical time of growth, the Group has sufficient product to
deliver on these contracts in line with delivery requirements and
expectations of customers. The Group expects shipment of products
and a corresponding conversion of this AROC balance into invoices
and then cash over the next 6 to 18 months. This timing will
coincide with the beneficial impact that the new US facility will
bring to the organisation.
o Other increases in trade and other receivables relate to the
timing of invoicing around the financial year end and the overall
23% increase in revenue for the year. The Group was also impacted
by the recent furlough of the US Government during the second half
of the year, which effectively delayed the invoicing of some
contracted revenues into months 11 and 12.
-- A GBP1.4m increase in current liabilities to GBP8.3m
(2017/18: GBP6.9m). This increase is a feature of additional
capital expenditure in the year relating to the continuation of the
assets under construction and the timing of invoicing around the
year end.
-- During March 2019, the Group renewed its existing revolving
credit facility with HSBC. The facility has been extended from
GBP3.0m to GBP5.0m and the renewal period has increased to a
minimum of 3 years, with an additional option for up to 5 years.
Further, up to GBP2.0m of the facility can be used to fund plant
and machinery as well as supporting working capital expansion. This
is a continuation of a strong relationship with HSBC and provides
the Group with additional funding capacity and options as it grows
over the coming years. At 30 April 2019, GBP3.0m of the facility
was drawn (30 April 2018: GBP3.0m).
Outlook
Kromek entered 2019/20 in a stronger position than ever before.
The Group is delivering on existing customer product contracts as
well as continuing to gain traction in all of its business segments
with the award of high-value, multi-year contracts from commercial
and large government customers worldwide. This has provided strong
visibility over revenues for the next six to 24 months. As a
result, the Board is confident of delivering growth for full year
2019/20, in line with market expectations.
Looking further ahead, with the increasing market adoption of
customers' next-generation products that incorporate Kromek's
radiation detection solutions, the Group is receiving increasing
demand from existing customers as well as interest from potential
customers. As a result of the new high-volume manufacturing
facility in the US for medical imaging products, combined with the
fundraising completed in the second half of 2018/19 to support
growth across the business, Kromek is well-placed to capitalise on
these expanding opportunities. Consequently, the Board continues to
look to the future with confidence.
Kromek Group plc
Consolidated income statement
For the year ended 30 April 2019
2019 2018
Note GBP'000 GBP'000
Continuing operations
Revenue 4 14,517 11,845
Cost of sales (6,208) (5,161)
--------- --------
Gross profit 8,309 6,684
Other operating income 4 - -
Distribution costs (184) (214)
Administrative expenses (9,031) (8,811)
--------- --------
Operating loss (906) (2,341)
Finance income 155 35
Finance costs (519) (227)
--------- --------
Loss before tax 5 (1,270) (2,533)
Tax 987 1,429
--------- --------
Loss for the year from continuing
operations (283) (1,104)
Loss per share 7
- basic (p) (0.1) (0.4)
* diluted (p) (0.1) (0.4)
Kromek Group plc
Consolidated statement of comprehensive income
For the year ended 30 April 2019
2019 2018
GBP'000 GBP'000
Loss for the year (283) (1,104)
------- --------
Items that are or may be subsequently
reclassified to profit or loss:
Exchange differences on translation
of foreign operations 1,218 (1,026)
Total comprehensive income/(loss)
for the year 935 (2,130)
------- --------
Kromek Group plc
Consolidated statement of financial position
As at 30 April 2019
2019 2018
Note GBP'000 GBP'000
Non-current assets
Goodwill 1,275 1,275
Other intangible assets 18,165 16,555
Investments - long-term cash
deposits 1,250 1,250
Property, plant and equipment 6,252 3,097
Right-of-use asset 3,975 -
-------- --------
30,917 22,177
-------- --------
Current assets
Inventories 3,227 3,014
Trade and other receivables 19,997 11,334
Current tax assets 987 1,167
Cash and bank balances 20,616 9,488
-------- --------
44,827 25,003
-------- --------
Total assets 75,744 47,180
-------- --------
Current liabilities
Trade and other payables (4,884) (3,500)
Borrowings (3,133) (3,000)
Provisions for liabilities - (424)
Lease obligation (273) -
-------- --------
(8,290) (6,924)
Net current assets 36,537 18,079
-------- --------
Non-current liabilities
Lease obligation (3,938) -
Loans (2,313) -
-------- --------
(6,251) -
-------- --------
Total liabilities (14,541) (6,924)
-------- --------
Net assets 61,203 40,256
-------- --------
Equity
Share capital 3,446 2,604
Share premium account 61,600 42,625
Merger reserve 21,853 21,853
Translation reserve 949 (269)
Accumulated losses (26,645) (26,557)
-------- --------
Total equity 61,203 40,256
-------- --------
Kromek Group plc
Consolidated statement of changes in equity
For the year ended 30 April 2019
Share Accumulated
Share premium Merger Translation income/ Total
capital account reserve reserve (losses) equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
May 2017 2,591 42,592 21,853 757 (25,584) 42,209
Loss for the
year - - - - (1,104) (1,104)
Exchange difference
on translation
of foreign
operations - - - (1,026) - (1,026)
--------- -------- ------------- -------- ---------
Total comprehensive
losses for the
year - - - (1,026) (1,104) (2,130)
Issue of share
capital net
of expenses 13 33 - - - 46
Credit to equity
for equity-settled
share based
payments - - - - 131 131
--------- -------- --------- ------------- -------- -------- ---------
Balance at 30
April 2018 2,604 42,625 21,853 (269) (26,557) 40,256
IFRS 15 adjustment - - - - - -
--------- -------- --------- ------------- -------- -------- ---------
Loss for the
year - - - - (283) (283)
Exchange difference
on translation
of foreign
operations - - - 1,218 - 1,218
--------- -------- --------- ------------- -------- ---------
Total comprehensive
income/(losses)
for the year - - - 1,218 (283) 935
Issue of share
capital net
of expenses 842 18,975 - - - 19,817
Credit to equity
for equity-settled
share based
payments - - - - 195 195
--------- -------- --------- ------------- ------------------- ------------
Balance at 30
April 2019 3,446 61,600 21,853 949 (26,645) 61,203
--------- -------- --------- ------------- ------------------- ------------
Kromek Group plc
Consolidated statement of cash flows
For the year ended 30 April 2019
2019 2018
Note GBP'000 GBP'000
Net cash used in operating activities 8 (4,777) (4,613)
-------- --------
Investing activities
Investment into Money Market account - (1,250)
Interest received 155 35
Purchases of property, plant and
equipment (3,644) (272)
Purchases of patents and trademarks (210) (641)
Capitalisation of development costs (2,731) (3,450)
-------- --------
Net cash used in investing activities (6,430) (5,578)
-------- --------
Financing activities
Net proceeds on issue of shares 19,817 46
New loans and borrowings 2,557 -
Payment of loan and borrowings (111)
Payment of lease liability (486) -
Interest paid (293) (227)
-------- --------
Net cash generated from/(used in)
financing activities 21,484 (181)
Net increase/(decrease)in cash and
cash equivalents 10,277 (10,372)
Cash and cash equivalents at beginning
of year 9,488 20,343
Effect of foreign exchange rate
changes 851 (483)
Cash and cash equivalents at end
of year 20,616 9,488
-------- --------
Kromek Group plc
Notes to the consolidated financial statements
For the year ended 30 April 2019
1. General information
Kromek Group plc is a company incorporated and domiciled in the
United Kingdom under the Companies Act. These financial statements
are presented in pounds sterling because that is the currency of
the primary economic environment in which the Group operates.
Foreign operations are included in accordance with the policies set
out in note 3.
The Group's financial information has been prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and on a basis
consistent with that adopted in the previous year.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 April 2019 or
2018 but is derived from those accounts. Statutory accounts for
2018 have been delivered to the registrar of companies, and those
for 2019 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006
2. Adoption of new and revised Standards
Adoption of New and Revised Standards
The accounting policies used in this financial report are
consistent with International Financial Reporting Standards.
However, new accounting standards have been adopted as described
below:
IFRS 15 Revenue from contracts with customers (effective for
year ends beginning on or after 1 January 2018)
The new accounting standard IFRS 15 sets out a single and
comprehensive framework for revenue recognition. The guidance in
IFRS 15 is more detailed than previous IFRSs for revenue
recognition (IAS 11 Construction Contracts and IAS 18 Revenue and
associated interpretations).
The Group has adopted IFRS 15 from 1 May 2018 and has chosen to
apply the cumulative effect approach. As a result, the Group is
required to restate its opening equity position as at 1 May 2018 to
reflect the impact of transitioning to IFRS 15. However, when
transitioning to IFRS 15, on 1 May 2018, there has been a zero
impact on its opening equity position.
In line with the requirements of the standard in regard to the
transition option adopted, the Group has not restated its
comparative information which continues to be reported under
previous revenue standards, IAS 11 and IAS 18. As noted below, the
financial impact of this is zero.
Impact of the adoption of IFRS 15
As reported
1 May 2018
GBP'000
Retained earnings as previously reported (26,557)
Adjustment to earnings from adoption of IFRS -
15 - profit before tax
Adjustment to earnings from adoption of IFRS -
15 - deferred tax
---------------------------------------------- ------------
Retained earnings on adoption of IFRS 15
- 1 May 2018 (26,557)
---------------------------------------------- ------------
Impact on the result for the year ended Result Impact Result
30 April 2019 before of after
adoption change adoption
of IFRS in GAAP of IFRS
15 15
GBP'000 GBP'000 GBP'000
Revenue 14,517 - 14,517
Cost of sales (6,208) - (6,208)
---------- --------- ----------
Gross profit 8,309 - 8,309
Distribution costs (184) - (184)
Administration expenses (9,031) - (9,031)
---------- --------- ----------
Operating loss (906) - (906)
Finance income 155 - 155
Finance costs (519) - (519)
---------- --------- ----------
Loss before tax (1,270) - (1,270)
Tax 987 - 987
---------- --------- ----------
Loss for the year from continuing operations (283) - (283)
Revenue before the adoption of IFRS 15 was accounted for under
IAS 11 and IAS 18.
An assessment of the impact of IFRS 15 was completed during the
year across the Group's revenue streams, including a comprehensive
review of contracts that were not completed at the date of initial
application.
This review ascertained that under IFRS 15 all revenue that had
been recognised in previous accounting periods up to and including
30 April 2018 under the former revenue standards of IAS 11 and IAS
18 are consistent with how the revenue would have been recognised
under IFRS 15 should this standard have been applied
retrospectively to the same period.
In addition to this, IFRS 15 has not impacted the revenue and
profit recognition of contracts commencing during the year which
were incomplete at 30 April 2019. The revenue from contracts that
were formerly assessed under IAS 11 have been accounted for under
IFRS 15 as "over time" and, revenue from contracts that were
formerly assessed under IAS 18 have been accounted for under IFRS
15 as "point in time".
A summary of the new accounting policies and the nature of the
changes to previous accounting policies in relation to the revenues
derived from the Group's various goods and services are set out
below:
Type of product or Nature, timing and satisfaction Nature, timing
service of performance obligations and satisfaction
and significant payment of performance
terms
-------------------------- --------------------------------- -------------------
Revenue from the sale Revenue from the sale No material impact
of radiation detection of radiation detection on adoption of
equipment equipment is recognised IFRS 15.
at a point in time on
despatch unless the customer
specifically requests
deferred delivery. For
deliveries deferred, at
the customer's request,
revenues are recognised
at a point in time when
the customer takes title
of the goods provided
that it is probable that
delivery will be made,
the goods are identifiable
and ready for delivery
and usual payment terms
apply.
-------------------------- --------------------------------- -------------------
Revenue from construction Construction contracts No material impact
contracts and grants comprise contracts specifically on adoption of
negotiated for the construction IFRS 15.
and design, development
and delivery of specific
radiation equipment to
a particular customer.
The transaction price
of the contract is known
from inception of the
contract.
Each contract is reviewed
to identify the number
of distinct performance
obligations and the transaction
price is assigned accordingly,
usually by the value of
work performed on an input
cost basis. Based on the
performance of the contract
to date, revenue is recognised
over time.
If relevant, an expected
loss on a contract is
recognised immediately
in the income statement.
-------------------------- --------------------------------- -------------------
In order to demonstrate a consistent revenue recognition of IFRS
15 compared to IAS 18 and IAS 11, the timing of the Group's revenue
recognition can be disaggregated in 2018/19 and 2017/18 as
follows:
2019 2018
GBP'000 GBP'000
Product and services transferred at a point in
time - IFRS 15 (2018: IAS 18) 8,952 6,035
Products and services transferred over time -
IFRS 15 (2018: IAS 11) 5,565 5,810
--------- ---------
14,517 11,845
--------- ---------
IFRS 16 Leases
The Group has early adopted IFRS 16 Leases using the modified
retrospective approach. Leases are initially recorded on the
statement of financial position whereby the right of use ("ROU")
asset is measured at an amount equal to the current outstanding
lease liability. Under this methodology, the comparative
information has not been restated and continues to be reported
under IAS 17 and IFRIC 4.
The Group recognises a ROU asset and a lease liability at the
transition date (1 May 2018). Leases subject to IFRS 16 are
recorded on the balance sheet, showing a ROU asset and a
corresponding lease liability. The lease liability is initially
measured at the present value of future lease payments that are not
paid at the commencement date, discounted using the relevant
incremental borrowing rate in line with the standard.
The ROU asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the ROU or the end of the lease
term.
The standard allows two options for adoption - fully
retrospective and modified retrospective. The Group has elected to
take the modified retrospective approach. As a result of this the
Group has:
- recognised a lease liability at 1 May 2018 for leases
previously classified as operating leases applying IAS 17. The
Group has measured lease liabilities at the present value of the
remaining lease payments, discounted using the Group's incremental
borrowing rate at the date of initial application;
- recognised a right-of-use asset at 1 May 2018 for leases
previously classified as operating leases applying IAS 17. The
Group has chosen to measure right-of-use assets at an amount equal
to the lease liabilities, adjusted by the amount of any prepaid or
accrued lease payments relating to those leases recognised in the
statement of financial position as at 30 April 2018; and
- 2018 comparatives are left unchanged, and any opening
adjustment to net assets was recognised on 1 May 2018.
The Group has also applied the low value and short-term
expedients.
All these leases adopted under IFRS 16 relate to property
rentals; no other material leases that are above the expedient
threshold are required for IFRS 16 treatment.
As noted above, no comparatives are given for the adoption of
IFRS 16. The Group has calculated that the right-of-use asset
recognised and corresponding liability as at 1 May 2018 is
GBP1.3m.
The impact on adoption within the results reported as continued
operations for the year ended 30 April 2019 is as follows:
- Finance costs have increased by GBP226k;
- Depreciation expense has increased by GBP334k due to the
depreciation of the right-of-use asset;
- EPS has not changed; and
- Adjusted EBITDA has improved by GBP0.5m due to the reduction of rental expense.
IFRS 9 Financial Instruments
The Group have adopted IFRS 9 Financial Instruments which is
mandatory for years commencing on or after 1 January 2018. The
Group does not believe that the new classification requirements
have a material impact on its accounting for financial assets,
financial liabilities, loans, investments in debt securities that
are all managed on a fair value basis.
At the end of each reporting period, financial instruments are
assessed for impairment. Any impairment charge is recognised in the
profit and loss account.
3. Significant accounting policies
Basis of preparation
The Group financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by the
European Union ("IFRSs") and IFRIC interpretations.
The financial statements have been prepared on the historical
cost basis modified for assets recognised at fair value on
acquisition. Historical cost is generally based on the fair value
of the consideration given in exchange for the assets. The
principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the results
and net assets of the Group and entities controlled by the Group
(its subsidiaries) made up to 30 April each year. Control is
achieved where the Group has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits
from its activities.
The results of subsidiaries acquired during the year are
included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to results of
subsidiaries to bring the accounting policies used into line with
those used by the Group. All intra-group transactions, balances,
income and expenses, and profits are eliminated on
consolidation.
Going concern
As at 30 April 2019, the Group had net assets of GBP61.2m (2018:
GBP40.3m) and cash and cash equivalents of GBP20.6m (2018: GBP9.5m)
including GBP3m (2018: GBP3m) drawn down on the Group's Revolving
Credit Facility as set out in the consolidated statement of
financial position. The Directors have prepared detailed forecasts
of the Group's financial performance over the next five years. As a
result of this review, which incorporated sensitivities and risk
analysis, the Directors believe that the Group has sufficient
resources and working capital to meet their present and foreseeable
obligations for a period of at least twelve months from approval of
these financial statements. Accordingly, they continue to adopt the
going concern basis in preparing the Group financial
statements.
Business combinations
The Group financial statements consolidate those of the company
and its subsidiary undertakings. Subsidiaries are entities
controlled by the Group. Control exists when the Group has the
power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that are
currently exercisable or convertible are taken into account. The
financial information of subsidiaries is included from the date
that control commences until the date that control ceases.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial information.
Acquisitions on or after 1 May 2010
For acquisitions on or after 1 May 2010, the Group measures
goodwill at the acquisition date as:
-- the fair value of the consideration transferred; plus
-- the recognised amount of any non-controlling interests in the acquiree; plus
-- the fair value of the existing equity interest in the acquiree; less
-- the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, the negative goodwill is recognised
immediately in profit or loss.
Costs related to the acquisition, other than those associated
with the issue of debt or equity securities, are expensed as
incurred.
Goodwill
Goodwill arising in a business combination is recognised as an
asset at the date that control is acquired (the acquisition date).
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the acquirer's previously held
equity interest (if any) in the entity over the net of the
acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed.
If, after reassessment, the Group's interest in the fair value
of the acquiree's identifiable net assets exceeds the sum of the
consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer's
previously held equity interest in the acquiree (if any), the
excess is recognised immediately in profit or loss as a bargain
purchase gain.
Goodwill is not amortised but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to
benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill
is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
Contracts with customers - accounting policies applied since 1
May 2018
The Group has adopted IFRS 15 retrospectively from 1 May 2018 in
accordance with paragraph C3(a) and has chosen to apply the
cumulative effect approach. As a result, the Group has restated its
opening equity position as at 1 May 2018 to reflect the impact of
transitioning to IFRS 15. Comparatives for the year ended 30 April
2018 have not been restated.
The following expedients have been used in accordance with
paragraph C5:
- revenue in respect of completed contracts that begin and end
in the same accounting period has not been restated;
- revenue in respect of completed contracts with variable
consideration reflects the transaction price at the date the
contracts were completed; and
- in the financial statements for the year ending 30 April 2019,
the comparative information for the year ending 30 April 2018 will
not disclose the amount of the transaction price allocated to the
remaining performance obligations or an explanation of when the
Group expects to recognise that amount as revenue.
Following the adoption of IFRS 15, the Group's accounting policy
in respect of revenue is as follows:
Revenue represents income derived from contracts for the
provision of goods and services by the Group to customers in
exchange for consideration in the ordinary course of the Group's
activities.
Performance obligations
Upon approval by the parties to a contract, the contract is
assessed to identify each promise to transfer either a distinct
good or service or a series of distinct goods or services that are
substantially the same and have the same pattern of transfer to the
customer. Goods and services are distinct and accounted for as
separate performance obligations in the contract if the customer
can benefit from them either on their own or together with other
resources that are readily available to the customer and they are
separately identifiable in the contract.
Transaction price
At the start of the contract, the total transaction price is
estimated as the amount of consideration to which the Group expects
to be entitled in exchange for transferring the promised goods and
services to the customer, excluding sales taxes. Variable
consideration, such as price escalation, is included based on the
expected value or most likely amount only to the extent that it is
highly probable that there will not be a reversal in the amount of
cumulative revenue recognised. The transaction price does not
include estimates of consideration resulting from contract
modifications, such as change orders, until they have been approved
by the parties to the contract. The total transaction price is
allocated to the performance obligations identified in the contract
in proportion to their relative stand-alone selling prices. Given
the bespoke nature of many of the Group's products and services,
which are designed and/or manufactured under contract to the
customer's individual specifications, there are sometimes no
observable stand-alone selling prices. Instead, stand-alone selling
prices are typically estimated based on expected costs plus
contract margin consistent with the Group's pricing principles.
Revenue and profit recognition
Revenue is recognised as performance obligations are satisfied
as control of the goods and services is transferred to the
customer.
For each performance obligation within a contract, the Group
determines whether it is satisfied over time or at a point in time.
The Group has determined that the performance obligations of the
majority of its contracts are satisfied at a point in time.
Performance obligations are satisfied over time if one of the
following criteria is satisfied:
- the customer simultaneously receives and consumes the benefits
provided by the Group's performance as it performs;
- the Group's performance creates or enhances an asset that the
customer controls as the asset is created or enhanced; or
- the Group's performance does not create an asset with an
alternative use to the Group and it has an enforceable right to
payment for performance completed to date.
For each performance obligation to be recognised over time, the
Group recognises revenue using an input method, based on costs
incurred in the period. Revenue and attributable margin are
calculated by reference to reliable estimates of transaction price
and total expected costs, after making suitable allowances for
technical and other risks. Revenue and associated margin are
therefore recognised progressively as costs are incurred, and as
risks have been mitigated or retired. The Group has determined that
this method faithfully depicts the Group's performance in
transferring control of the goods and services to the customer.
If the over-time criteria for revenue recognition are not met,
revenue is recognised at the point in time that control is
transferred to the customer, which is usually when legal title
passes to the customer and the business has the right to payment,
for example, on delivery.
The Group's contracts that satisfy the over time criteria are
typically product development contracts where the customer
simultaneously receives and consumed the benefit provided by the
Group's performance.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised immediately as an
expense.
Contract modifications
The Group's contracts are sometimes amended for changes in
customers' requirements and specifications. A contract modification
exists when the parties to the contract approve a modification that
either changes existing or creates new enforceable rights and
obligations. The effect of a contract modification on the
transaction price and the Group's measure of progress towards the
satisfaction of the performance obligation to which it relates is
recognised in one of the following ways:
(a) prospectively as an additional, separate contract;
(b) prospectively as a termination of the existing contract and
creation of a new contract; or
(c) as part of the original contract using a cumulative catch
up.
The majority of the Group's contract modifications are treated
under either (a) (for example, the requirement for additional
distinct goods or services) or (c) (for example, a change in the
specification of the distinct goods or services for a partially
completed contract), although the facts and circumstances of any
contract modification are considered individually as the types of
modifications will vary contract-by-contract and may result in
different accounting outcomes.
Costs to obtain a contract
The Group expenses pre-contract bidding costs which are incurred
regardless of whether a contract is awarded. The Group does not
typically incur costs to obtain contracts that it would not have
incurred had the contracts not been awarded.
Costs to fulfil a contract
Contract fulfilment costs in respect of over time contracts are
expensed as incurred. No such costs have been incurred in current
or previous years. Contract fulfilment costs in respect of point in
time contracts are accounted for under IAS 2 Inventories.
Inventories
Inventories include raw materials, work-in-progress and finished
goods recognised in accordance with IAS 2 in respect of contracts
with customers which have been determined to fulfil the criteria
for point in time revenue recognition under IFRS 15. It also
includes inventories for which the Group does not have a contract.
This is often because fulfilment costs have been incurred in
expectation of a contract award. The Group does not typically build
inventory to stock. Inventories are stated at the lower of cost,
including all relevant overhead
Contract receivables
Contract receivables represent amounts for which the Group has
an unconditional right to consideration in respect of unbilled
revenue recognised at the balance sheet date and comprises costs
incurred plus attributable margin.
Contract liabilities
Contract liabilities represent the obligation to transfer goods
or services to a customer for which consideration has been
received, or consideration is due, from the customer.
Leases
The Group has applied IFRS 16 using the modified retrospective
approach and therefore the comparative information has not been
restated and continues to be reported under IAS 17 and IFRIC 4.
The Group recognised a ROU asset and a lease liability at the
lease commencement date. The ROU asset is initially measured at
cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of
costs to dismantle and remove the underlying asset or to restore
the underlying asset or the site on which it is located, less any
lease incentives received.
The ROU asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the ROU or the end of the lease term.
The estimated useful lives of the ROU assets are determined on the
same basis as those of property and equipment. In addition, the ROU
is periodically reduced by impairment loses, if any, and adjusted
for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease, or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate.
Lease payments included in the measurement of the lease
liability comprise of fixed payments.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, or if the Group
changes its assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the ROU
asset, or is recorded in profit or loss if the carrying amount of
the ROU has been reduced to zero.
The Group has elected not to recognise ROU assets and lease
liabilities for short-term leases of machinery that have a lease
term of 12 months or less and leases of low value assets, including
IT equipment. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over the
lease term.
Foreign currencies
The individual results of each Group company are presented in
the currency of the primary economic environment in which it
operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in pound sterling,
which is the functional currency of the Company, and the
presentation currency for the consolidated financial statements.
The Directors have applied IAS 21 The Effects of Changes in Foreign
Exchange Rates and have come to the conclusion that the
inter-company loans held by Kromek Limited, substantially form part
of the net investment in Kromek USA, and so any gain or loss
arising on the inter-company loan balances are recognised as other
comprehensive income in the period.
In preparing the results of the individual companies,
transactions in currencies other than the entity's functional
currency (foreign currencies) are recognised at the rates of
exchange prevailing on the dates of the transactions. At each
statement of financial position date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences are recognised in profit or loss in the
period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the statement of
financial position date. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the
exchange rates at the date of transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive
income and accumulated in equity.
On consolidation, the results of overseas operations are
translated into Sterling at rates approximating to those ruling
when the transactions took place. All assets and liabilities of
overseas operations, including goodwill arising on the acquisition
of those operations, are translated at the rate ruling at the
statement of financial position date. Exchange differences arising
on translating the opening net assets at opening rate and the
results of overseas operations at actual rate are recognised
directly in other comprehensive income and are credited/(debited)
to the retranslation reserve.
Government grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching
to them and that the grants will be received.
Government grants towards job creation and growth (RGF) costs
are recognised as income over the periods necessary to match them
with the related costs of creating those jobs.
Operating result
Operating loss is stated as loss before tax, finance income and
costs.
Retirement benefit costs
The Group operates a defined contribution pension scheme for
employees.
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due. For these schemes the
assets of the schemes are held separately from those of the Group
in independently administered funds. Payments made to state-managed
retirement benefit schemes are dealt with as payments to defined
contribution schemes where the Group's obligations under the
schemes are equivalent to those arising in a defined contribution
retirement benefit scheme.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax. Tax is recognised in the income statement except
to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity. The R&D tax
credit is calculated using the current rules as set out by HMRC and
is recognised in the income statement during the period in which
the R&D programmes occurred.
i) Current tax
The tax credit is based on taxable loss for the year. Taxable
loss differs from net loss as reported in the income statement
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group's liability for current tax
is calculated using tax rates that have been enacted or
substantively enacted by the statement of financial position
date.
ii) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the Consolidated Statement of Financial Position and the
corresponding tax bases used in the computation of taxable profit,
and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each
statement of financial position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the statement of financial position date.
Deferred tax is charged or credited in the income statement, except
when it relates to items charged or credited in other comprehensive
income, in which case the deferred tax is also dealt with in other
comprehensive income. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to
income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net
basis.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is recognised so as to write off the cost or
valuation of assets (other than land and properties under
construction) less their residual values over their useful lives,
using the straight-line method, on the following bases:
Plant and machinery 6% to 25%
Fixtures, fittings and equipment 15%
Computer equipment 25%
The gain or loss arising on the disposal or scrappage of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in
income.
Internally-generated intangible assets - research and
development expenditure
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
An internally-generated intangible asset arising from the
Group's product development is recognised only if all of the
following conditions are met:
-- the technical feasibility of completing the intangible asset
so that it will be available for use or sale;
-- its intention to complete the intangible asset and use or
sell it;
-- its ability to use or sell the intangible asset;
-- how the intangible asset will generate probable future
economic benefits. Among other things, the entity can demonstrate
the existence of a market for the output of the intangible asset or
the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset;
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
-- its ability to measure reliably the expenditure attributable
to the intangible asset during its development.
Research expenditure is written off as incurred. Development
expenditure is also written off, except where the Directors are
satisfied as to the technical, commercial and financial viability
of individual projects. In such cases, the identifiable expenditure
is deferred and amortised over the period during which the Group is
expected to benefit. This period normally equates to the life of
the products the development expenditure relates to. Where
expenditure relates to developments for use rather than direct
sales of product the cost is amortised straight-line over a
2-15-year period. Provision is made for any impairment.
Amortisation of the intangible assets recognised on the
acquisitions of Nova R&D, Inc. and eV Products, Inc. are
recognised in the income statement on a straight-line basis over
their estimated useful lives of between five and fifteen years.
Patents and trademarks
Patents and trademarks are measured initially at purchase cost
and are amortised on a straight-line basis over their estimated
useful lives.
Impairment of tangible and intangible assets excluding
goodwill
At each statement of financial position date, the Group reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the
extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash generating unit
(CGU) to which the asset belongs. When a reasonable and consistent
basis of allocation can be identified, corporate assets are also
allocated to individual CGUs, or otherwise they are allocated to
the smallest group of CGUs for which a reasonable and consistent
allocation basis can be identified.
An intangible asset with an indefinite useful life is tested for
impairment at least annually and whenever there is an indication
that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
post-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or CGU) is estimated to
be less than its carrying amount, the carrying amount of the asset
(or CGU) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss, unless the relevant
asset is carried at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or CGU) is increased to the revised estimate
of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (or
CGU) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs comprise direct materials and, where applicable,
direct labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition.
Cost is calculated in the statement of financial position at
standard cost, which approximates to historical cost determined on
a first in, first out basis. Net realisable value represents the
estimated selling price less all estimated costs of completion and
costs to be incurred in marketing, selling and distribution. Work
in progress costs are taken as production costs, which include an
appropriate proportion of attributable overheads.
Provision is made for obsolete, slow moving or defective items
where appropriate. Items which have not shown activity for between
12-18 months will be provided for at a rate of 50%, and those which
have not shown activity in 18 months or longer will be provided for
at a rate of 100% after consideration is given to the full or
residual value where appropriate. Given the nature of the products
and the gestation period of the technology, commercial rationale
necessitates that this provision is reviewed on a case by case
basis.
Provisions for liabilities
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is more
likely than not that an outflow of resources will be required to
settle the obligation, and the amount can be reliably estimated.
Such provisions are measured at the present value of management's
best estimate of the expenditure required to settle the present
obligation at the balance sheet date. The discount rate used to
determine the present value reflects current market assessments of
the time value of money. Provisions are not recognised for future
operating losses.
Financial instruments
(i) Recognition and initial measurement
Trade receivables are initially recognised when they are
originated. All other financial assets and financial liabilities
are initially recognised when the Group becomes a party to the
contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a
significant financing component) or financial liability is
initially measured at fair value plus, for an item not at Fair
Value Through Profit or Loss (FVTPL), transaction costs that are
directly attributable to its acquisition or issue. A trade
receivable without a significant financing component is initially
measured at the transaction price.
(ii) Classification and subsequent measurement
Financial assets
(a) Classification
On initial recognition, a financial asset is classified as
measured at: amortised cost; Fair Value through Other Comprehensive
Income (FVOCI) - debt investment; FVOCI - equity investment; or
FVTPL.
Financial assets are not reclassified subsequent to their
initial recognition unless the Company changes its business model
for managing financial assets in which case all affected financial
assets are reclassified on the first day of the first reporting
period following the change in the business model.
A financial asset is measured at amortised cost if it meets both
of the following conditions:
-- It is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- Its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
On initial recognition of an equity investment that is not held
for trading, the Group may irrevocably elect to present subsequent
changes in the investment's fair value in OCI. This election is
made on an investment-by-investment basis.
All financial assets not classified as measured at amortised
cost or FVOCI as described above are measured at FVTPL.
Investments in subsidiaries are carried at cost less
impairment.
Cash and cash equivalents comprise cash balances and call
deposits.
(b) Subsequent measurement and gains and losses
Financial assets at FVTPL - these assets (other than derivatives
designated as hedging instruments) are subsequently measured at
fair value. Net gains and losses, including any interest or
dividend income, are recognised in profit or loss.
Financial assets at amortised cost - these assets are
subsequently measured at amortised cost using the effective
interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and
impairment are recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Financial liabilities and equity
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions:
(a) They include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(b) Where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group's own
equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Group's own shares, the
amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to
those shares.
Financial liabilities are classified as measured at amortised
cost or FVTPL. A financial liability is classified as at FVTPL if
it is classified as held for trading, it is a derivative or it is
designated as such on initial recognition. Financial liabilities at
FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised
cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss.
Any gain or loss on derecognition is also recognised in profit or
loss.
Where a financial instrument that contains both equity and
financial liability components exists these components are
separated and accounted for individually under the above
policy.
Intra-group financial instruments
Where the Group enters into financial guarantee contracts to
guarantee the indebtedness of other companies within its Group, the
Group considers these to be insurance arrangements and accounts for
them as such. In this respect, the Group treats the guarantee
contract as a contingent liability until such time as it becomes
probable that the Group will be required to make a payment under
the guarantee.
(iii) Impairment
The Group recognises loss allowances for expected credit losses
(ECLs) on financial assets measured at amortised cost, debt
investments measured at FVOCI and contract assets (as defined in
IFRS 15).
The Group measures loss allowances at an amount equal to
lifetime ECL, except for other debt securities and bank balances
for which credit risk (i.e. the risk of default occurring over the
expected life of the financial instrument) has not increased
significantly since initial recognition, which are measured as
twelve-month ECL.
Loss allowances for trade receivables and contract assets are
always measured at an amount equal to lifetime ECL. When
determining whether the credit risk of a financial asset has
increased significantly since initial recognition and when
estimating ECL, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the Company's historical experience and
informed credit assessment and including forward-looking
information.
The Group assumes that the credit risk on a financial asset has
increased significantly if it is more than 30 days past due.
The Group considers a financial asset to be in default when:
-- The borrower is unlikely to pay its credit obligations to the
Group in full, without recourse by the Group to actions such as
realising security (if any is held); or
-- The financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default
events over the expected life of a financial instrument.
Twelve-month ECLs are the portion of ECLs that result from
default events that are possible within twelve months after the
reporting date (or a shorter period if the expected life of the
instrument is less than twelve months).
The maximum period considered when estimating ECLs is the
maximum contractual period over which the Group is exposed to
credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the
entity in accordance with the contract and the cash flows that the
Group expects to receive). ECLs are discounted at the effective
interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial
assets carried at amortised cost and debt securities at FVOCI are
credit impaired. A financial asset is "credit impaired" when one or
more events that have a detrimental impact on the estimated future
cash flows of the financial asset have occurred.
Write-offs
The gross carrying amount of a financial asset is written off
(either partially or in full) to the extent that there is no
realistic prospect of recovery.
Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date and spread over the period
during which the employees become unconditionally entitled to the
options, which is based on a period of employment of three years
from grant date.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. The vesting date is
determined based on the date an employee is granted options,
usually three years from date of grant. At each statement of
financial position date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the
effect of non-market-based vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in profit
or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to equity reserves.
Cash
Cash, for the purposes of the statement of cash flows, comprises
cash in hand and deposits repayable on demand, less overdrafts
repayable on demand.
4. Operating segments
Products and services from which reportable segments derive
their revenues
For management purposes, the Group is organised into two
geographical business units from which the Group currently operates
from (US and UK) and it is on these operating segments that the
Group is providing disclosure. Both business units focus on the
three key markets of the Group (Medical Imaging, Nuclear Detection
and Security Screening). Typically, the US business unit focuses on
Medical Imaging and the UK on Nuclear Detection and Security
Screening. However, this arrangement is flexible and can vary based
on the geographical location of the Group's customer.
The chief operating decision maker is the Board of Directors,
who assess performance of the segments using the following key
performances indicators: revenues, gross profit and operating
profit. 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.
Analysis by geographical area
A geographical analysis of the Group's revenue by destination is
as follows:
2019 2018
GBP'000 GBP'000
United Kingdom 2,267 1,253
North America 4,869 3,547
Asia 5,452 6,080
Europe 1,905 949
Australasia 24 16
-------- --------
Total revenue 14,517 11,845
-------- --------
The Group has aggregated its market sectors into two reporting
segments being the operational business units in the UK and US.
A geographical analysis of the Group's revenue by origin is as
follows:
Year ended 30 April 2019
UK Operations US Operations Total for
GBP'000 GBP'000 Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 6,718 4,694 11,412
-Revenue from grants 1,020 - 1,020
-Revenue from contract customers 82 4,534 4,616
Total sales by segment 7,820 9,228 17,048
Removal of inter-segment sales (1,251) (1,280) (2,531)
-------------- -------------- ----------
Total external sales 6,569 7,948 14,517
-------------- -------------- ----------
Segment result - operating
(loss)/profit (1,652) 746 (906)
Interest received 155 - 155
Interest expense (197) (322) (519)
(Loss)/profit before tax (1,694) 424 (1,270)
Tax credit 1,020 (33) 987
-------------- -------------- ----------
(Loss)/profit for the year (674) 391 (283)
-------------- -------------- ----------
Reconciliation to adjusted
EBITDA:
Net interest 42 322 364
Other operating income - - -
Tax (1,020) 33 (987)
Depreciation of PPE 432 447 879
Amortisation 1,085 721 1,806
Non-recurring other income - - -
Share-based payment charge 184 11 195
Adjusted EBITDA 49 1,925 1,974
-------------- -------------- ----------
Other segment information
Property, plant and equipment
additions 569 3,075 3,644
Right-of-use assets 1,051 3,257 4,308
Depreciation of PPE 432 447 879
Intangible asset additions 1,309 1,632 2,941
Amortisation of intangible
assets 1,085 721 1,806
-------------- -------------- ----------
Statement of financial position
Total assets 41,370 34,374 75,744
-------------- -------------- ----------
Total liabilities (7,097) (7,444) (14,541)
-------------- -------------- ----------
Year ended 30 April 2018
UK Operations US Operations Total for
GBP'000 GBP'000 Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 2,914 5,585 8,499
-Revenue from grants 1,024 - 1,024
-Revenue from contract customers 129 5,293 5,422
Total sales by segment 4,067 10,878 14,945
Removal of inter-segment sales (940) (2,160) (3,100)
-------------- -------------- ----------
Total external sales 3,127 8,718 11,845
-------------- -------------- ----------
Segment result - operating
loss (3,955) 1,614 (2,341)
Interest received 35 - 35
Interest expense (227) - (227)
Loss before tax (4,147) 1,614 (2,533)
Tax credit 1,429 - 1,429
-------------- -------------- ----------
Loss for the year (2,718) 1,614 (1,104)
-------------- -------------- ----------
Reconciliation to adjusted
EBITDA:
Net interest 192 - 192
Other operating income - - -
Tax (1,429) - (1,429)
Depreciation of PPE 307 478 785
Amortisation 1,132 775 1,907
Non-recurring other income - - -
Share-based payment charge 111 20 131
Adjusted EBITDA (2,405) 2,887 482
-------------- -------------- ----------
Other segment information
Property, plant and equipment
additions 17 83 100
Depreciation of PPE 307 478 785
Intangible asset additions 790 3,300 4,090
Amortisation of intangible
assets 1,132 775 1,907
-------------- -------------- ----------
Statement of financial position
Total assets 26,975 20,205 47,180
-------------- -------------- ----------
Total liabilities (5,503) (1,421) (6,924)
-------------- -------------- ----------
Inter-segment sales are charged on an arms-length basis.
No other additions of non-current assets have been recognised
during the year other than property, plant and equipment, and
intangible assets.
No impairment losses were recognised in respect of property,
plant and equipment and intangible assets including goodwill.
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 3. Segment
(loss) represents the (loss) earned by each segment. This is the
measure reported to the Group's Chief Executive for the purpose of
resource allocation and assessment of segment performance.
5. Loss before tax for the year
Loss before tax for the year has been arrived at after
(crediting)/charging:
2019 2018
GBP'000 GBP'000
Net foreign exchange losses/ (gains) 82 (593)
Research and development costs recognised
as an expense 5,432 4,015
Depreciation of property, plant and equipment 879 785
Amortisation of internally-generated intangible
assets 1,806 1,907
Cost of inventories recognised as expense 4,152 4,672
Staff costs (see note 6) 7,372 6,642
--------------- ---------------
6. Staff costs
The average monthly number of employees (excluding non-executive
directors) was:
2019
Number 2018 Number
Directors (executive) 2 2
Research and development, production 95 89
Sales and marketing 7 6
Administration 12 11
------- -----------
116 108
------- -----------
Their aggregate remuneration comprised:
2019 2018
GBP'000 GBP'000
Wages and salaries 6,297 5,662
Social security costs 551 504
Pension scheme contributions 329 345
Share based payments 195 131
--------- --------
7,372 6,642
--------- --------
The total Directors' emoluments (including non-executive
directors) was GBP780k (2018: GBP744k). The aggregate value of
contributions paid to money purchase pension schemes was GBP20k
(2018: GBP20k) in respect of two directors (2018: two directors).
For a breakdown of remuneration by director, refer to the
Directors' emoluments table within the Remuneration Committee
Report of the annual report and accounts.
The highest paid director received emoluments of GBP354k (2018:
GBP346k) and amounts paid to money purchase pension schemes was
GBP10k (2018: GBP10k).
Key management compensation:
2019 2018
GBP'000 GBP'000
Wages and salaries and other short-term
benefits 1,162 1,307
Social security costs 136 258
Pension scheme contributions 27 57
Share based payment expense 184 97
-------- --------
1,494 1,719
-------- --------
Key management comprise the Executive Directors and senior
operational staff.
7. Losses per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Losses
2019 2018
GBP'000 GBP'000
Losses for the purposes of basic and
diluted losses per share being net
losses attributable to owners of the
Group (283) (1,104)
----------- -----------
2019 2018
Number of shares Number Number
Weighted average number of ordinary
shares for the purposes of basic losses
per share 275,073,400 260,161,744
Effect of dilutive potential ordinary
shares:
Share options 2,581,104 2,606,464
----------- -----------
Weighted average number of ordinary
shares for the purposes of diluted
losses per share 277,654,504 262,768,208
----------- -----------
2019 2018
Basic (p) (0.1) (0.4)
Diluted (p) (0.1) (0.4)
------ -----
Due to the Group having losses in each of the years, 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. Notes to the cash flow statement
2019 2018
GBP'000 GBP'000
Loss for the year (283) (1,104)
Adjustments for:
Finance income (155) (35)
Finance costs 519 227
Income tax credit (987) (1,429)
Depreciation of property, plant and
equipment 879 783
Amortisation of intangible assets 1,806 1,907
Share-based payment expense 195 131
-------- --------
Operating cash flows before movements
in working capital 1,974 480
(Increase)/decrease in inventories (213) 191
Increase in receivables (8,663) (5,330)
Increase/(decrease) in payables 1,384 (1,067)
(Decrease)/Increase in provisions (424) 255
-------- --------
Cash used in operations (5,942) (5,471)
Income taxes received 1,165 858
-------- --------
Net cash used in operating activities (4,777) (4,613)
-------- --------
Cash and cash equivalents
2019 2018
GBP'000 GBP'000
Cash and bank balances 20,616 9,488
-------- --------
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less, net of
outstanding bank overdrafts. The carrying amount of these assets is
approximately equal to their fair value.
Revenues from major products and services
The Group's revenues from its major products and services were
as follows:
2019 2018
GBP'000 GBP'000
Product revenue 12,060 9,611
Research and development revenue 2,457 2,234
--------------- ---------------
Consolidated revenue 14,517 11,845
--------------- ---------------
Information about major customers
Included in revenues arising from USA operations are revenues of
approximately GBP4,092k (2018: GBP4,773k) which arose from the
Group's largest customer. Included in revenues arising from UK
operations are revenues of approximately GBP1,066k (2018:
GBP1,265k) which arose from a major customer.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAFKKADANEAF
(END) Dow Jones Newswires
June 27, 2019 02:01 ET (06:01 GMT)
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