Kromek (KMK), a leading developer of radiation and bio-detection technology solutions, has released its final results for the year ending April 32023 that saw it deliver a 44% increase in revenue to £17.3 million, a record level driven by strong growth in advanced imaging and CBRN detection.
A favourable sales mix and the resolution of supply chain challenges saw its gross margin improve to 51.6% from 46.7% in the previous year, which saw it deliver an adjusted EBITDA profit in the second half and, overall, a reduced adjusted EBITDA loss of £1.0 million, an improvement from the £1.2 million loss in 2022.
In terms of operational highlights, Kromek demonstrated substantial progress in its Advanced Imaging segment. Notably, the company signed a significant 7-year collaboration agreement with a tier 1 Original Equipment Manufacturer (OEM) to provide CZT-based detectors for advanced medical imaging scanners.
Additionally, Kromek collaborated with Analogic Corporation to develop CZT-based detectors for photon counting computed tomography (CT) applications in medical imaging and security screening. Spectrum Dynamics Medical launched the world's first digital single-photon emission computed tomography (SPECT)/CT scanner, which utilized Kromek's CZT technology.
The company also received substantial repeat orders for detectors used in bone mineral densitometry (BMD), SPECT applications, and gamma probes markets. Furthermore, Kromek was awarded £2.5 million from Innovate UK to develop low-dose molecular breast imaging technology based on CZT-based detectors. After the fiscal year ended, Kromek secured a contract worth $1.4 million from an Asia-based OEM customer for CZT-based detectors for use in SPECT systems.
In the CBRN Detection segment, Kromek reported record revenue in nuclear security and successfully secured new and repeat orders from various customers. Notably, the division received a $1.3 million contract from a US customer for the D3M and two orders totalling $1.5 million from US government customers for the D3S-ID.
Additionally, Kromek secured two contracts worth £1.5 million for D3M and D3S-based products for European government end-users, and also entered into a distribution partnership with Smiths Detection to distribute its nuclear security products in North and South American markets, the Middle East, and key markets in Asia and Australasia. Post-year end, the company was awarded a $1.5 million contract in Asia for a new product in the civil nuclear market.
In the Biological Threat Detection segment, Kromek successfully concluded a long-running program with the Defense Advanced Research Projects Agency (DARPA) to develop a biological-threat detection solution. It also received a £4.9 million contract from a UK government department for a three-year program to deliver bio-security solutions.
Meanwhile, the company made significant strides in manufacturing and intellectual property (IP) development, which led to improved yield and cost efficiency in CZT crystal growth and detector manufacturing. The company filed nine new patents and had four granted during the fiscal year.
Overall, Kromek's FY 2023 results reflect strong growth and innovation in the advanced imaging and CBRN detection sectors. With its expanding portfolio and promising partnerships and a strengthened balance sheet after an £8m fundraise after the period end the company is well-positioned to capitalize on emerging opportunities in the radiation and bio-detection technology markets. It anticipates full year adjusted EBITDA profitability in 2024.
Broker finnCap has a sum-of-the-parts valuation of c.£134-202m on the company, which implies a target price of 21-31p on a fully diluted basis, against the current price of 5.2p.