‘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. Based on the assumption demand picks up in H2, the Board is ‘cautiously optimistic’ for the year ahead.
