Kromek (AIM: KMK) uses high-performance sensor materials (mainly cadmium zinc telluride – CZT) to detect radiation in the medical, nuclear and security markets. Its technology was spun out of Durham University and the company listed in 2013 but sales have been slower to build than hoped. Despite that, the company was able to raise a further £20 million in February which provides healthy financial support and reassurance for customers looking to make Kromek a single-source supplier on long-term contracts. Importantly management say these resources will see the company through to profitability.
Dirty bomb detection
One of the most exciting opportunities is the hand-held radiation detection product for the US Defense Advanced Research Projects Agency (DARPA), which you can read about here. These were used to protect the President during a recent trip to Brussels and 10,000 units have been shipped already. After a testing programme this year, prospects are for a major deployment in cities across the US funded by the ‘Securing the Cities’ initiative. It has the potential to be a $1 billion programme over a decade, with sales to other agencies possible.
The other big opportunity is the SPECT nuclear medicine imaging product. This provides higher resolution, more accurate images with a reduced scan time. These can be retrofitted to existing scanners as well as incorporated in new equipment. A long-term Chinese contract signed in 2014 is now ready to ship and there’s hopes of signing further deals this year in what is seen as a $100 million annual market. GE has launched its own CZT scanner, which leaves the other three manufacturers who have a combined 70 per cent market share as an opportunity for Kromek.
Revenue for the year to April was £9 million and the company is confident of achieving the £12.5 million needed to break even at the EBITDA level this year. There’s an impression of a step-change in the business taking place, which is something investors must have sensed too during the fundraise. So with the company well funded, it’s a case of how quickly DARPA orders come through and medical deals are signed. The market cap is £88 million which expresses some confidence in things coming good.