Battlespace Editor, Julian Nettlefold met up with Kromek CEO Arnab Basu to discuss the latest trading update.
On May 30th Kromek provided the following update on trading for the 12-month period ended 30 April 2024. As announced in its interim results, Kromek started the second half of FY 2024 with increasing commercial momentum whilst delivering on multi-year contracts. Both the advanced imaging and CBRN detection segments showed increased commercial traction and the Group expects to report record revenues for FY 2024. Kromek is also experiencing improvements in its gross margin due to the product mix sold. The Group continues to exert tight cost control whilst driving further operational efficiencies, particularly within its advanced imaging manufacturing process. Consequently, Kromek expects to report positive EBITDA for FY 2024, and ahead of market expectations.
“Do these results prove what you have been saying for years that Kromek is about to prove the true worth of its patented CZT Technology?”
“Absolutely, and there is more to come, we are on the verge of a mountain of new orders in both the civil, nuclear and military segments. Covid virtually brought our key markets in aviation and medical to a complete halt as the airlines were not flying and the hospitals were concentrating on Covid. At the same time Kromek had to raise funds to keep our core teams in place ready for the predicted upturn. Although this had a severe effect on our share price in the short term, the investments are now gaining fruition with the launch of new products and new orders. In 2023 we entered into a partnership with a blue-chip technology group to develop cadmium zinc telluride (CZT) based detectors for the medical imaging sector. The unnamed partner, which will provide technology solutions to more than 100,000 customers for healthcare and other applications. Kromek will integrate their CZT sensors to develop photon-counting computed tomography (CT) applications. We have also been winning orders recently in the US in particular and also an order for dog mounted nuclear detectors for Ukraine. Kromek’s radiation detectors have been mounted on drones, UAVs, vehicles, and now, dogs. Facilitating the implementation of early warning capability in high-risk environments is Kromek’s versatile portfolio of high-performance radiation detectors. Early warning capabilities are essential for supplying rapid, reliable data to inform preventative action. Such innovations in radiation detection are necessary to avoid repeats of Chernobyl 1986 and Fukushima 2011.”
“Do you expect this order momentum to continue?”
“Yes, we continue to experience excellent momentum in CBRN Detection as the threats to public security persist across the globe. We believe our products provide best-in-class capability to manage these threats and, consequently, we expect to receive further nuclear security orders in the near term.”
Equipped with Kromek’s D3S ID, eight dogs in Ukraine are helping to enhance early-warning capabilities in radiation detection and identification, providing troops with the information they need to keep themselves and their Kromek’s radiation detectors have been mounted on drones, UAVs, vehicles, and now, dogs. Eight dogs equipped with D3S IDs have been deployed in Ukraine, supplying troops with key early warning capabilities in radiation detection and identification. The real-time isotope ID and gamma and neutron alerts allow handlers and their canine companions to respond rapidly to the radiological or nuclear threat at hand and keep themselves safe in high-risk environments.
This innovative solution significantly enhances the early warning capabilities of those protecting and monitoring the field, delivering real-time isotopic ID along with gamma and neutron alerts to users, enabling troops to take the appropriate responses rapidly to the radiological threat at hand. Widespread situational awareness is supported by spectral data made available from large focal areas, four times faster than the RIID standard.
Handlers and their canine companions are kept as safe as possible, with the high sensitivity of the D3S ID ensuring even the lowest levels of radiation don’t go undetected. The dogs on patrol can immediately be moved from danger when the distanced handler receives a real-time alert from the detector on their paired mobile phone.
“Can you outline other key order wins?”
“Yes in March and April we won two key contracts. In March we received a $2.1m order from an existing US-based OEM customer that is an emerging leader and global company in the homeland security marketplace. The order is for the supply of key detector components for incorporation into the customers’ advanced security screening system for the detection of explosives. Delivery will commence in the current year and complete in the first half of FY 2025. We have been supplying this customer since 2017 when we were awarded a five-year delivery contract, following the completion of an R&D phase to design components to meet the customer’s requirements, and it expects to enter another long-term delivery contract.”
“The momentum continued and in April we were awarded a contract, worth up to $2.9m, from a US federal entity for the provision of nuclear security products. The contract, which is from an existing customer, covers the provision of the Group’s D5 RIID, D3M and D3S-ID wearable high-performance radiation detectors. The Group has received a $358k order under this contract for immediate delivery, with up to $2.5m to be awarded over the next 24 months. This new contract, which reflects the strength of our longstanding business relationships and the quality of our nuclear security offering”
“Is there momentum in the development of new products through research funding?”
“Very much so, R&D is key to the success of Kromek. In February Kromek was awarded a grant of £1.3m under the UK Research and Innovation (“UKRI”) Horizon Europe guarantee scheme to participate in the Intelligent Radiation Sensor Readout System (“i-RASE”) project to develop a new class of radiation sensor powered by artificial intelligence (“AI”). “
The i-RASE project, to be led by DTU Space, is a collaboration between industrial and academic partners in Denmark, Germany, Norway and Italy to design, build and test a new class of radiation sensor based on cadmium zinc telluride (“CZT”) and other advanced technologies. The aim is to develop a radiation detector that leverages the latest developments in AI to facilitate the retrieval of comprehensive information on incident radiation to improve measurement accuracy and speed, while increasing energy efficiency. This offers transformational potential for various radiation applications, such as medical imaging, industrial inspection, scientific space instrumentation and environmental monitoring. The project will start on 1 March 2024 and will run for a period of 48 months.
“With the increasing prevalence of AI, Kromek has for several years been exploring the application of machine learning across its technologies, and has generated some significant IP in this area. This collaboration brings an opportunity to enhance our expertise by working with field-leading partners throughout Europe, and ultimately lead to improved capabilities of our products across our market segments.”
i-RASE is part of the European Union’s Horizon Europe programme, with which the UK is associated, and is designed to facilitate collaboration and strengthen the impact of research and innovation in developing, supporting and implementing EU policies while tackling global challenges. Kromek is receiving £1.3m from UKRI, on behalf of the UK government’s Department for Science, Innovation & Technology, to participate in the project.
“Tell our readers about new product developments.”
In May Kromek launched its new generation RayMon detector. This is a high-performance handheld spectrometer with a set of interchangeable probes: CZT, NaI and Alpha Beta. It is ideal for protecting critical national infrastructure such as nuclear power stations or military installations and for security screening, civil defence, homeland security or peace keeping/peace support operations. It is portable, easy to deploy and can undertake previously-lab-based spectral analysis directly in the field with speed and precision.
“What is the significance of this new product?”
“The new generation RayMon is the most advanced detector designed specifically for the protection of critical national infrastructure. It is a product of the innovation of our in-house scientists and engineers who are able to respond quickly to meet new customer requirements.” Arnab Basu said.
The new generation RayMon has a built-in library of 94 radionuclides, to which custom nuclides can be added. Key information such as dose rate and counts per second can be viewed on the Dose Screen in real-time. In Search Mode, the clear visual graphs indicate when count rate is increasing or decreasing, directing the user to the location of the source. All reports and data files on the RayMon can either be exported onto a USB or shared via email.
Enhancing the RayMon’s capabilities are three additional probes: a high resolution CZT probe, a high sensitivity NaI (sodium iodide) smart probe and an Alpha Beta smart probe.
The CZT probe provides precise identification of radionuclides, even when faced with mixed or shielded sources. With its small form factor, operation at room temperature without the need for cooling, and direct conversion, the CZT Probe is a cost-effective and user-friendly alternative to HPGe detectors. Its small form factor alleviates the difficulty of taking measurements in hard-to-reach areas.
CZT Market Overview
Market Research Analysis published an upbeat survey of the CZT market in May.
The CZT Radiation Detector Market Size is expected to grow from 54 million in 2022 to USD 108.33 million by 2031 at a Compound Annual Growth (CAGR) of 8% from 2022 to 2031.
In more technical terms, cadmium zinc telluride, often known as CZT, is an alloy of cadmium telluride and zinc telluride. It is a compound of cadmium, zinc, and tellurium. It is a direct bandgap semiconductor and has a number of uses, such as photorefractive gratings, solar cells, electro-optic modulators, semiconductor radiation detectors, and terahertz generation and detection. Due to its advantages over conventional semiconductor materials, CdZnTe (CZT) has gained a lot of interest for the detection of radiation at room temperature by meeting a variety of diverse and strict requirements. Cadmium Zinc Telluride (CZT) detector quality is constantly rising. Thus, readout noise is a factor that is becoming more crucial for the total energy resolution of state-of-the-art detectors.
The COVID-19 problem has had an impact on the global economy, causing a strict lockdown and a halt to day-to-day activities in every industry. With the limits imposed by the government, the panic scenario has had a negative influence on the industries. This has resulted in a market drop as well; there was a direct and indirect impact from numerous sectors producing CZT radiation detectors. With the revival of the market following COVID-19, we are seeing a recovery of the market where the blanks are restructured with product innovation and investments into R&D activities to develop advanced technologies to meet advanced requirements, which will project a proposed increase in the CZT radiation detector market share in the forecasted period.
List of CZT Players
* Redlen Technologies (British Columbia)
* Mirion Technologies (U.S.A)
* Kromek (U.K)
* Imdetek (China)
* XZ LAB (U.S.A)
* ZRF Ritec SIA (Russia)
* Baltic Scientific Instruments (BSI) (Russia)
* Eurorad (France).
“Although the shares have started to gain momentum since this announcement, they have failed to gain the momentum you would have expected after the funding arrangements announced in February.”
On February 5th Kromek Group plc announced that two holders of the convertible loan issued in August 2022 have elected to convert them into new ordinary shares of 1 penny each in the Company (“Ordinary Shares”) at conversion prices of 6.3 pence and 7.1 pence, per Ordinary Share. Including accrued interest, the Loan Note holders are converting £1,509,211 of debt into 23,639,520 new Ordinary Shares and accordingly these new Ordinary Shares have been issued and allotted by the board. The issue prices of 6.3 and 7.1 pence per new Ordinary Share represent the closing price of the Company’s Ordinary Shares on AIM on 31 January 2024 and 2 February 2024, respectively, being the repayment date of the convertible loan note facilities.
Application has been made for the 23,639,520 Ordinary Shares to be admitted to trading on AIM and dealings are expected to commence on or around 8.00 a.m. on 9 February 2024 (“Admission”). The new Ordinary Shares will rank pari passu with the existing shares of the Company. Following Admission, the Company’s issued share capital will consist of 623,886,340 Ordinary Shares, none of which are held in treasury. Accordingly, the figure of 623,886,340 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company under the FCA’s Disclosure Guidance and Transparency Rules.
“Yes, you are right, particularly as the AGM held on March 4th agreed all these arrangements. As I told the Times in an earlier interview, in my view, it was a mistake to list on AIM as there are limited analysts and investors who understand the true worth of Kromek and our technology. There are many trades making 2 or 3p a share gains but few long-term holders. Perhaps we should have considered a Nasdaq listing?”
“Notwithstanding that lack of understanding in your technology, which I compare to that excellent company Graseby in the 1908s which was eventually gobbled up by Smiths. Would you consider a trade sale?”
“I have always said that I would prefer Kromek to remain a standalone company. We are the sole remaining CZT technology company not to be part of a larger company. Our three competitors were all purchased, one for 4x earnings. Having said that, if an offer came along, I wouldn’t turn it down!”
Julian Nettlefold is a shareholder in Kromek