Through the eye of the Covid storm
‘What doesn’t kill you makes you stronger’. Ditto for radiation detection expert Kromek, which was hit by a ‘perfect storm’ in the Spring, after the pandemic forced hospitals to postpone operations, borders to close and governments to impose national lockdowns. FY20 was impacted by the coronavirus as site/hospital access was restricted, and further suffered from a one-off £13.1m debtor/AROC impairment. All told, reporting turnover down -9.6% LFL to £13.1m (vs £14.5m LY), gross margins of 47.3% (57.2%) & EBITDA (pre SBPs) at -£0.4m (£2.0m). Nonetheless, client activity (re RFPs) has recently started to improve, with Medical Imaging coming back first (Europe & US), followed by Nuclear Security (government contracts), and lastly Airport Screening, which is on a slightly longer timeline reflecting continued modest passenger traffic. In addition, Kromek has cut costs/capex and crucially renegotiated its banking covenants with HSBC. Such that going forward the group believes it has sufficient liquidity – ie £9.4m as at April 2020, including £3.8m of net cash vs £16.4m LY - to fund itself until at least March 2022. Fundamentals remain intact, as evidenced by [we understand] only a handful contracts being cancelled - leaving the backlog (including commercial call-offs & development agreements) still at near record levels (ED estimate $90m) even after entirely removing the AROC agreement. Kromek continues to develop the world’s first “biothreat” detector, which is being funded by DARPA (part of the US DoD) and, assuming demand picks up in H2, the Board is ‘cautiously optimistic’ for the year ahead.Kromek Group is a developer of radiation detectors based on cadmium zinc telluride, providing detection and characterization capabilities within the medical imaging, nuclear detection and security screening markets. Co. designs, develops and produces x-ray and gamma-ray imaging and radiation detection products.
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