COVID-19 impacts short-term outlook

Operating theatres have been converted into ICUs and non-critical procedures understandably postponed to free up resource for COVID-19 patients: so it was no great surprise either to hear today that part of Kromek’s scheduled deliveries for H2’20 have also been pushed to the right - exacerbated by some near-term supply chain issues (eg sub-contractors, site access).

Despite trading well up to February, FY20 revenues are now expected to come in at £14.5m (£18.5m ED Est, £14.5m LY). Delivering a breakeven adjusted EBITDA (£2.0m ED, £0.5m LY), with April closing net cash of £5.0m (£9.2m ED, £7.9m LY) & gross funds of £10.0m.

The Group also now has two substantial coronavirus opportunities. It announced a fortnight ago that it would soon be manufacturing ventilators under license from Metran Co. Ltd. Japan’s leading such OEM and is planning to produce at least 2,000 of these much needed units by end July 2020.

And in December 2018 Kromek was awarded a $2.0m contract by DARPA (research arm of US Dept. of Defense) to develop a ground-breaking vehicle-mounted biological-threat detector. The project is well advanced and we understand the same 1st-of-its-kind science can also accurately & consistently recognise COVID-19.

We think their financial liquidity, augmented by £3m of annualised cost savings should provide sufficient financial ballast for the group to weather this temporary soft patch. As already shown in the fight vs Covid-19, where there is disruption, there is also opportunity