TIDMKMK
RNS Number : 1469F
Kromek Group PLC
14 July 2021
14 July 2021
Kromek Group plc
("Kromek" or the "Group")
Final Results
Kromek (AIM: KMK), a worldwide supplier of detection technology
focusing on the medical, security screening and nuclear markets,
announces its final results for the year ended 30 April 2021.
Financial Summary
-- Revenue of GBP10.4m (2020: GBP13.1m)
-- Gross margin was 48.4% (2020: 47.3%)
-- Adjusted EBITDA* loss of GBP1.7m (2020: GBP0.4m loss)
-- Loss before tax was GBP6.3m (2020: GBP18.3m loss)
-- Cash and cash equivalents at 30 April 2021 were GBP15.6m (30 April 2020: GBP9.4m)
* Adjusted EBITDA is defined as earnings before interest,
taxation, depreciation, amortisation, exceptional items, early
settlement discounts and share-based payments. For further details,
see the Financial Review below.
Operational Summary
-- Resumption of orders and shipments across all segments in
final two months of the first half, following the impact of
COVID-19, with increased commercial activity in the second half,
resulting in revenue for H2 2021 being 26% higher than H1 2021
-- Medical imaging segment returned to growth trajectory in the second half of the year
o Ramp up in delivery under medical imaging contract expected to
be worth $58.1m as the customer began installing its scanner in
multiple countries
o Received a $600,000 order from an OEM customer for detectors
to be used in niche SPECT applications
o Progressed development programme for ultra-low dose MBI
technology and entered the new area of improving outcomes from
cancer surgery
-- Continuing commercial traction and development of nuclear
security products, with sales in Europe, the US and Asia
o Expansion of global footprint with sales commencing in 9 new
countries and engagement of 9 new distributors
o Continued to supply products to government agencies in the US
and UK; the Irish Civil Defence; and the European Commission
o Completion of development project with the Defense Threat
Reduction Agency ("DTRA"), an agency of the US Department of
Defense, for a ruggedised small form factor nuclear radiation
detector for military applications
o Launch of next-generation D3 PRD and D5 RIID high-performance radiation detectors
-- 24 new customers won in the civil nuclear segment and
widening interest for drone-based radiation mapping system,
including sales to the civil emergency services sector
-- Significant progress in fast-growing bio-security market
o Awarded $5.2m contract extension in the year and a further $6m
post period by the Defense Advanced Research Projects Agency
("DARPA"), an agency of the US Department of Defense, to advance
the development of a mobile wide-area bio-security system capable
of detecting and identifying airborne pathogens
-- Commenced field trials in an airport and, post period, in
schools, airports and other locations of an airborne COVID-19
detection system under a GBP1.25m project with funding from
Innovate UK
-- Received first commercial order from security screening OEM
customer that achieved highest level of European liquid explosive
detection certification for cabin baggage for its scanner
-- Continued improvement in CZT manufacturing processes in the
UK and US facilities, including introduction of further process
automation
-- 3 new patents were filed and 10 were granted during the year
Dr Arnab Basu, CEO of Kromek, said: "Against a backdrop of
significant global uncertainty, Kromek has emerged from the 2021
financial year in a stronger position than when we entered. While
the disruption across our markets in the early part of the year
impacted our sales, our revenue for the second half was 26% above
the first half, with the strong momentum continuing post year end.
In particular, we are seeing continued traction in the medical
imaging segment as our customers increasingly roll out their
products incorporating our technology. We are extremely encouraged
by the results that we are receiving from the piloting of our
biological-threat detection solution. We also believe that we are
well-positioned to benefit from the increase in government defence
and security spending globally, including in the UK, as evidenced
by our announcement today of the receipt of our first major order
for our D5 RIID.
As a result, and with excellent visibility over full year
forecasts, we are on track to deliver our highest ever annual
revenue for the full year to 30 April 2022, representing
significant growth over 2021. Consequently, and combined with the
successful fundraising completed in the year under review, we are
well-placed to capitalise on the substantial opportunities across
our business and the Board continues to look to the future with
increased confidence."
This announcement contains inside information.
For further information, please contact:
Kromek Group plc
Arnab Basu, CEO
Paul Farquhar, CFO +44 (0)1740 626 060
Cenkos Securities plc (Nominated Adviser
and Broker)
Camilla Hume/Giles Balleny (NOMAD)
Julian Morse (Sales) +44 (0)20 7397 8900
Luther Pendragon Ltd (Financial PR)
Harry Chathli
Claire Norbury +44 (0)20 7618 9100
Analyst Presentation
Arnab Basu, CEO, and Paul Farquhar, CFO, will be hosting a
presentation for analysts and investors at 9.30am BST today via
webinar. To register to participate, please contact
elsadarlington@luther.co.uk at Luther Pendragon.
About Kromek Group plc
Kromek Group plc is a technology group (global HQ in County
Durham) and a leading developer of high performance radiation
detection products based on cadmium zinc telluride ("CZT") and
other advanced technologies. Using its core technology platforms,
Kromek designs, develops and produces x-ray and gamma ray imaging
and radiation detection products for the medical, security
screening and nuclear markets.
The Group's products provide high resolution information on
material composition and structure and are used in multiple
applications, ranging from the identification of cancerous tissues
to hazardous materials, such as explosives, and the analysis of
radioactive materials.
The Group's business model provides a vertically integrated
technology offering to customers, from radiation detector materials
to finished products or detectors, including software, electronics
and application specific integrated circuits ("ASICs").
The Group has operations in the UK and US (California and
Pennsylvania), and is selling internationally through a combination
of distributors and direct OEM sales.
Currently, the Group has over 150 full-time employees across its
global operations. Further information on Kromek Group is available
at www.kromek.com and https://twitter.com/kromekgroup .
Operational Review
During a period of significant global uncertainty, Kromek
emerged from the year to 30 April 2021 in a stronger position than
when it entered. Whilst disruption across the Group's markets at
the beginning of the year, due to COVID-19, had a detrimental
impact on full year revenue the Board was pleased to note that from
the end of the first half and through the second half, normal
trading patterns increasingly resumed with progress being made with
all of the Group's business units delivering on previously awarded
contracts and winning new orders and customers. As a result, and
combined with the contribution from the Group's bio-security
development projects, revenue for the second half was 26% above H1
2021, with the strong momentum continuing post year end. In
addition, the Group successfully maintained tight cost control,
took action to support cash flow and the balance sheet was
significantly strengthened with a fundraise of GBP13m (net funds
received after costs of GBP12.2m). Consequently, the Board believes
that Kromek exited the year better positioned to capitalise on the
significant opportunities across the business.
Medical Imaging
In recent years, leading OEMs in medical imaging have been
increasingly adopting CZT detector platforms as the enabling
technology for their product roadmaps. CZT detector platforms
enable OEMs to significantly improve the quality of imaging, which
leads to earlier and more reliable diagnosis of diseases such as
cancer. Kromek's CZT detector solutions are increasingly being
adopted for single photon emission computed tomography ("SPECT"),
molecular breast imaging ("MBI") and bone mineral densitometry
("BMD") applications. These are key target areas for future growth
as they address diseases particularly associated with an ageing
population such as cancer, Parkinson's, cardiovascular illnesses
and osteoporosis.
While the outbreak of COVID-19 necessitated a temporary
redirection of resources in healthcare settings away from routine
scans and elective surgeries, shipments of the Group's detector
modules for medical imaging began to resume from the final two
months of the first half and business patterns started to
normalise. This momentum was sustained through the second half as
customers increasingly rolled out their high-performance medical
imaging products based on Kromek technology. In particular, in the
second half of the year the Group received an order, worth
$600,000, from an existing OEM customer for the supply of detectors
to be used in niche SPECT applications. Kromek commenced delivery
during the period and this will be completed by the end of this
calendar year.
Kromek continued to work with its significant OEM customer that
in H2 2019 awarded the Group a contract expected to be worth a
minimum of $58.1m over an approximately seven-year period. The
customer began installing its medical imaging scanners in multiple
countries towards the end of the first half, with installation
ramping up in the second half of the year. Delivery to this
customer of the Group's CZT detectors and associated advanced
electronics has continued to increase post year end and the Group
has full visibility over this contract for the remainder of the
current financial year.
The Group progressed the development of an ultra-low dose MBI
technology based on CZT-based SPECT detectors under its project
with partners in the Newcastle-upon-Tyne Hospitals NHS Foundation
Trust in the UK and an OEM partner. This technology can
significantly improve the early detection of breast cancer in women
with dense breast tissues, which is particularly prevalent among
younger women. The project entered the prototype, build and
validation stage following a successful proof-of-feasibility for
the target reduction of dose and scan time.
This year Kromek also entered a new area of medical application
for its CZT-based detectors: improving patient outcomes from cancer
surgery. In partnership with Adaptix Ltd and the University of
Manchester, the Group is developing a new system that will
distinguish between healthy and non-healthy tissue, enabling
surgeons to confidently remove the minimum amount of healthy tissue
and reducing the risks of multiple surgeries and of the cancer
spreading. The system is being developed under a three-year
programme with funding from Innovate UK.
Nuclear Detection
In nuclear detection, Kromek's nuclear security platforms - D3S
and newly launched D5 - consist of a family of products designed to
cater for the varying demands of homeland security and defence
markets. In particular, the D3S platform is widely deployed as a
networked solution to protect cities, buildings or critical
infrastructure against the threat of use of 'nuclear dirty bombs'
by terrorists. Defence and security spending is on the rise around
the world and Kromek's products meet a demand for technology-led
solutions to some of the most pressing global security challenges.
In November 2020, for example, the UK Government announced a
GBP329m spend programme on radiation and nuclear detectors over the
next four years and an increase of GBP24.1bn in defence spending
over the same period as part of the biggest programme of investment
in British defence since the end of the Cold War. In the nuclear
markets, Kromek's portfolio also includes a range of
high-resolution detectors and measurement systems used for civil
nuclear applications, primarily in nuclear power plants and
research.
Nuclear Security
The Group expanded its commercial footprint with the D3S
platform now having been sold in over 26 countries, and during the
year 9 new distributors were appointed across 9 countries. In
addition, new online platforms were developed for product training
and support activities for nuclear detector products, which allowed
the Group to support its customers globally at a time when travel
was restricted.
During 2021, the Group signed contracts and received orders
across the US, Europe and Asia for its nuclear security products,
reflecting the global nature of demand. This included gaining a new
government agency customer in the US for the Group's D3S-ID
product. Kromek also received and delivered a repeat order from an
existing US-based customer, worth $150,000, for the supply of
specialised CZT detectors for a nuclear security application.
In Europe, the Group was awarded two contract extensions by a UK
government-related company to provide network solutions of its
D3S-related technologies. The contract extensions, worth a total of
GBP460,000 and delivered during the year, are a further step
towards providing a full wide-area system rollout for this customer
to protect critical infrastructure and public spaces. The Group
also supplied further products to the Irish Civil Defence Agency
and received orders from the European Commission's
Directorate-General for Migration and Home Affairs for its D3S
Drone radiation detectors.
Kromek was awarded a significant contract in Asia, worth a
minimum of $960,000 over the approximate four-year term of the
project for both nuclear security and civil nuclear applications.
The first phase is to customise the Group's CZT detector platform
for integration into a new radiation detection product that will be
available in Asia. The Group will receive $260,000 for this
development work, which is due to be completed by the end of this
calendar year. Kromek will then supply the customised platform
under a three-year contract, worth a minimum of $700,000.
During the year, Kromek completed the delivery of a project with
the US Defense Threat Reduction Agency, an agency of the US
Department of Defense, to build out the technicality of the D3S
platform to develop a next-generation, ruggedised small form factor
device for use in the military field. By using advanced detector
materials, the device will generate higher resolution detection and
superior localisation and identification of radioactive material
for use by the US military in combat environments. This resulted in
the development of the D5 product range, which expands the Group's
portfolio to encompass devices specifically designed for more
challenging use cases and harsh environments.
Kromek launched two new nuclear security products this year: the
D3 PRD and the D5 RIID, with orders received from government
agencies in the US and UK for these products. The D3 PRD is an
all-in-one, high-accuracy personal radiation detector ("PRD") for
first responders, armed forces, border security and CBRNE experts.
This product meets a growing market demand for a standalone
gamma-only device, while offering market-leading dose accuracy,
speed to alarm and an ultra-low false positive number. The D5 RIID,
the world's smallest high-performance radioisotope identification
device ("RIID"), is a ruggedised device, with ultra-low false alarm
rate that is designed for military, homeland security and
industrial use. The D5 RIID is the first device to be launched in
the new D5 product range and the Group was honoured that it was a
winner at the R&D 100 Awards, held by R&D Magazine. In
addition, post period, as also announced today, we have received
our first major order for the D5 RIID, which is from our UK
government-related customer.
Civil Nuclear
In the civil nuclear segment, the pipeline of enquiries and
orders remained robust throughout the year. Kromek won 24 new
customers and continued to win repeat business from existing
customers. As noted above, the Group was awarded a significant
contract in Asia, worth a minimum of $960,000, which is for both
nuclear security and civil nuclear applications. Following a
successful online product demonstration of its drone-based
radiation mapping system, the Group has also seen widening interest
for this product from a range of new sectors, including sales to a
company operating in the civil emergency services sector.
Security Screening
In security screening, Kromek provides OEM and government
customers with components and systems for cabin and hold luggage
scanning as well as industrial applications. In travel settings,
Kromek's technologies enable customers to meet the high-performance
standards they require, and as demanded by regulatory bodies, to
ensure passenger safety while increasing the convenience and
efficiency of the security process.
There was a slowdown in security screening activity during the
year as a result of the impact of the COVID-19 pandemic on the
travel industry. However, the Group continued to make some progress
in this segment. In particular, the Group received its first
commercial order, and subsequent follow up orders, from an OEM
customer whose next-generation scanner, based on Kromek
technologies, achieved the highest level of European liquid
explosive detection certification for cabin baggage. The Group also
expanded its customer base, receiving orders for CZT modules to be
designed into an advanced baggage screening system of a new
US-based customer.
In its development work, Kromek completed, post period, a
two-year $1.6m development project funded by the US Department of
Homeland Security for a CZT detector platform for threat resolution
for hold baggage, hand baggage and cargo screening systems. The
Group expects commercial adoption and integration of this platform
in multiple commercial advanced baggage screening products.
In security screening for industrial applications, the Group
secured a development agreement, worth up to $660,000, with a
US-based, sector-leading OEM with a global customer base. This
contract was for the customisation of one of its CZT detector
platforms for incorporation into the customer's systems for
identifying contaminations during production processes. Delivery of
this programme was completed post period, and the Group expects it
to transition to a multi-year supply contract in due course. In
addition, post period, as also announced today, the Group was
awarded a $250,000 repeat order from a US-based customer that is a
global leader in aerospace and defence technologies and which has
incorporated Kromek detectors into its system that is used for
ammunition scanning.
Biological-Threat Detection
The outbreak of COVID-19 has exposed the world to the severity
of biological threats and their potential impact on public health
and the global economy, demonstrating the need to rapidly evolve
bio-security systems and associated technologies. Kromek had
already commenced development work on a biological-threat detection
solution prior to the outbreak of the pandemic and significantly
progressed its activities in this market during the year. This
development has continued post period.
Since H2 2019, Kromek has been working with the Defense Advanced
Research Projects Agency ("DARPA"), an agency of the US Department
of Defense, to develop a biological threat detection system that
senses, analyses and identifies airborne pathogens under a
programme that was established to combat bioterrorism. This
activity was accelerated during the year and Kromek was awarded a
contract extension worth up to $5.2m.
Over the past two years, milestones achieved under this DARPA
programme have included the development of a vehicle-mounted
biological-threat identifier that can be deployed as a mobile
wide-area bio-surveillance system. Post period, the Group received
a $6m contract from DAPRA for the next phase of the programme that
will seek to deliver a completely automated wide spectrum airborne
pathogen detection system that is fully mobile and runs
autonomously. This system is being designed to be networkable and
provide wide-area monitoring capability in near real time.
With the onset of the pandemic, Kromek also focused on the
development of its technology for applications specifically related
to COVID-19 detection. This included working under a programme
funded by Innovate UK to customise the Group's biological
threat-detection solution to support end-use cases for COVID-19
detection and mitigation, and to then undergo piloting with those
user groups. The Group engaged with potential customers for the
system to develop deployment models and identify how it can best
fit their needs ahead of customisation. In the second half of the
year, the Group commenced piloting the system for the detection of
airborne COVID-19 at an airport. Post period, the piloting has been
expanded to include schools, a second airport, being Teesside
International Airport, and other locations. The Group has also
engaged in validation of the technology in third party laboratories
and the results are very positive on both the detection levels,
sensitivity and false alarm rates, making the technology
performance comparable to existing RT PCR test protocols.
Manufacturing
Although the year was defined by the COVID-19 pandemic, Kromek
took that situation as an opportunity and used the time when demand
was lower than expected to substantially improve its CZT
manufacturing capabilities. The CZT growth facility in the UK has
developed a fully trained production group staffed by skilled
production operators supported by key equipment technicians and
experienced engineers. The US operations have used 2021 to continue
to install and improve the core CZT production process that ensures
Kromek CZT is of the highest quality for Kromek products shipped to
its customers. The Group continues to seek opportunities to enhance
product quality through its people and processes and is
continuously challenging itself to find better ways to manufacture
CZT and non-CZT products through a culture of continuous
improvement where data speaks and an openness to challenge each
other drives the Group forward. Both the UK and US manufacturing
sites continue to be certified to ISO9001:2015 with both sites
successfully completing annual audits with exemplary feedback from
the audit process. In the fourth quarter to 30 April 2021, the
Group has seen the demand for CZT based detectors recovering and
growing ever since. The manufacturing facilities for CZT products
are currently running at about 60% of installed capacity and
growing through 2021. Several capacity expansion projects are
ramping their resources to make ready additional capacity as CZT
demand grows through calendar year 2021 and into 2022. These
projects are focused on increased use of automated methods to
improve throughput and processing quality. It is expected that
these automation and process improvements will further improve
products yields, lowering cost of manufacturing and improving
margin.
R&D, Product and IP
Kromek is focused on developing the next generation of products
for commercial application in its core markets. As noted, during
the year the Group continued to advance development programmes with
a number of partners in the nuclear security and medical imaging
markets and, in particular, significantly progressed the
development of its biological-threat detection solution. The Group
also launched a number of new products in its D3S portfolio. In
2021, Kromek applied for 3 new patents and had 10 patents granted
across 9 patent families, bringing the total number of patents held
to in excess of 250. The new applications cover innovations in all
of the Group's segments, including biological-threat detection,
covering its specific product developments, but also providing
value beyond these fields. In particular, the biological
applications cover components that the Group believes will have
uses beyond terrorist threat detection.
Financial Review
As a result of the disruption caused by COVID-19, revenue for
the year was GBP10.4m (2020: GBP13.1m) and gross profit was GBP5.0m
(2020: GBP6.2m). Due to the lower gross profit and a small increase
in administration costs, adjusted EBITDA loss was GBP1.7m compared
with a loss of GBP0.4m for the prior year. A reconciliation between
adjusted EBITDA and results from operations is detailed on page
7.
In response to the pandemic, the Board took swift action early
in the 2020 calendar year to protect the business through the
activation of its business continuity plan. This included the
reduction of costs and overheads, the conservation of cash through
curtailing all non-essential spend as well as raising GBP1.4m of
additional loan funds with HSBC in the UK and GBP1.4m of loans via
the US Paycheck Protection Program loan scheme.
Revenue
The Group generated total revenue of GBP10.4m (2020: GBP13.1m).
The split between product sales and revenue from R&D contracts
is detailed in the table below. The significant increase in revenue
from R&D contracts primarily reflects the Group's
biological-threat detection activities.
Revenue Mix 2021 2020
GBP'000 % share % share
-------- -------
Product 5,836 56% 10,314 79%
-------- -------
R&D 4,516 44% 2,806 21%
-------- -------
Total 10,352 13,120
-------- -------- ------- --------
Revenue in the first four months of the year was disrupted as a
result of the initial impact of COVID-19 and the resultant lockdown
that significantly slowed economic activity, and particularly
impacted the markets in which the Group operates. However, there
was a r esumption of orders and shipments across all segments in
the final two months of the first half with business patterns
starting to return to normal and increased commercial activity.
Accordingly, the Group entered the second half of 2021 with an
extensive commercial pipeline and achieved revenue of GBP5.8m for
the six-month period, an increase of 26% over the first half
revenue.
Gross Margin
Gross profit at GBP5.0m (2020: GBP6.2m) represented a margin of
48.4% (2020: 47.3%). The increase in gross margin is attributable
to improvements in yields and efficiencies achieved through
production ramp up. This is as a result of the investment in
capital expenditure that was commissioned in the previous year.
Administration Costs
Administration costs and operating expenses increased by GBP0.3m
to GBP10.9m (2020: GBP10.6m). This increase is substantially the
net result of:
-- GBP0.3m of depreciation largely relating to the capital
expenditure on furnace and fabrication expansion;
-- GBP0.2m of amortisation due to continued investment in the
technology platform and product applications;
-- a GBP0.7m adverse movement in foreign exchange (in 2020,
there was a large foreign exchange gain due to the settlement
surplus realised on the Group's US$ overdraft facility);
-- a saving of GBP0.5m on travel and subsistence due to COVID-19
and the associated travel restrictions; and
-- additional savings of GBP0.3m relating to facility and general office expenses.
Adjusted EBITDA* and Result from Operations
Due to the impact of COVID-19 on the operations of the Group
and, consequently, the financial performance, adjusted EBITDA for
2021 was a loss of GBP1.7m compared with and a loss of GBP0.4m for
the prior year as set out in the table below:
2021 2020
GBP'000 GBP'000
-------- ---------
Revenue 10,352 13,120
-------- ---------
Gross profit 5,006 6,208
-------- ---------
Gross margin (%) 48.4% 47.3%
-------- ---------
Loss before Tax (6,331) (18,345)
-------- ---------
EBITDA Adjustments:
-------- ---------
Non- COVID-19 Related
Items:
-------- ---------
Net interest 546 544
-------- ---------
Depreciation of PPE and
Right-of-Use assets 1,685 1,185
-------- ---------
Amortisation 2,359 2,142
-------- ---------
Share-based payments 106 225
-------- ---------
COVID-19 Related Items:
-------- ---------
Early settlement discount - 746
-------- ---------
Exceptional Item (52) 13,062
-------- ---------
Adjusted EBITDA* (1,687) (441)
-------- ---------
*Adjusted EBITDA is defined as earnings before interest,
taxation, depreciation, amortisation, exceptional items, early
settlement discounts and share-based payments. In 2020, the impact
of COVID-19 resulted in an exceptional item of GBP13.1m relating to
receivables and AROC and a specific airport security customer early
settlement discount of GBP0.7m, as neither were in the normal
course of events and were significant in their size, practice and
nature. Share-based payments are added back when calculating the
Group's adjusted EBITDA as this is currently an expense with no
direct cash impact on financial performance. Adjusted EBITDA is
considered a key metric to the users of the financial statements as
it represents a useful milestone that is reflective of the
performance of the business resulting from movements in revenue,
gross margin and the costs of the business.
The increase in adjusted EBITDA loss in 2021 compared with 2020
is substantially as a result of the lower gross profit due to the
reduced revenue.
Loss before tax was GBP6.3m compared with GBP18.3m for the prior
year, which primarily reflects the impact of the exceptional
GBP13.1m relating to receivables and AROC in 2020. Loss before tax
for the year before any exceptional items was GBP6.4m (2020:
GBP5.3m loss before exceptional items), with the increase largely
due to the reduction in gross profit and additional administration
costs (including distribution) of GBP0.3m, partially offset by
other operating income of GBP0.4m.
During 2021, the Group recognised a loss of GBP2.0m (2020:
GBP1.0m income) as other comprehensive loss that arose from foreign
exchange rate differences on a net investment in a foreign
operation as described in note 2 to the financial statements.
Unlike the GBP0.1m loss resulting from foreign exchange on
consolidation and revaluations and realisation of working capital
balances noted above that were expensed to the profit and loss
account, this gain has been treated as a reserve movement,
consistent with the prior year.
Tax
The Group continues to benefit from the UK Research and
Development Tax Credit regime as it invests in developments of
technology. The Group recorded an R&D credit of GBP1.0m for the
year (2020: GBP0.9m credit) arising from the option of surrendering
tax losses in the year that qualify for cash credit, rather than
carrying forward the tax losses to set against future taxable
profits. The Group's deferred tax provision for the year remained
static at GBPnil (2020: GBP0.9m credit) due to the distribution of
losses between the UK and US operations, and accordingly there was
a total tax credit to the income statement for the Group of GBP1.0m
(2020: GBP1.8m credit).
Earnings per Share ("EPS")
Due to the GBP1.9m increase in loss for the period, the EPS is
recorded in the year on a basic and diluted basis as 1.5p loss per
share (2020: 1.0p loss per share after excluding exceptional
items).
R&D
The Group invested GBP5.5m in the year (2020: GBP5.3m) in
technology and product developments that were capitalised on the
balance sheet, reflecting the continuing investment in new
products, applications and platforms for the future growth of the
business. This expenditure was capitalised in accordance with IAS38
to the extent that it related to projects in the later stage
(development phase) of the project life-cycle. In addition, the
Group expensed GBP5.5m of R&D in the year (2020: GBP5.5m) to
the extent that it related to projects at the research phase of the
project life cycle.
During the year, the Group continued to advance its development
roadmap in relation to the automated wide-area detection of
biological and viral pathogens, involving portable DNA sequencing.
It is the Board's belief that this technology platform, which
enables the identification of COVID-19 and other biological
pathogens, offers significant medium-term opportunities for the
Group in this critical market. This view is endorsed by the US
government with DARPA awarding Kromek a major contract extension
amounting to $6m in May 2021 as part of the continuing development
of this technology platform.
The other key areas of development continue to be the expansion
of the D5 suite of products and the SPECT platforms. All such
investments in research and development are linked to contract
deliverables and, in the Board's belief, add to the significant
future revenue opportunities that the Group's technology offers.
The Group continues to undertake this investment to strengthen its
commercial advantage.
During the year, the Group undertook expenditure on patents and
trademarks of GBP0.2m (2020: GBP0.2m) with 3 new patents filed and
10 patents granted across 9 patent families.
Other Income
Other Income comprises grants of GBP0.1m (2020: GBPnil) received
from the Coronavirus Job Retention Scheme (CJRS) provided by the UK
Government in response to COVID-19's economic impact on businesses.
In addition, the Group received funding of GBP0.3m (2020: GBPnil)
from the Innovate UK COVID-19 Continuity Fund.
Capital Expenditure
Capital expenditure in the year amounted to GBP0.5m (2020:
GBP7.0m), which primarily relates to modest capital expenditure
across lab and computer equipment and manufacturing projects.
Financing Activities
During the year, the Group successfully announced a Firm
Placing, Director's Subscription and Open Offer to raise GBP13.0m
before expenses. The net proceeds of the transaction will be used
to de-risk and commercialise bio-security/pathogen detectors and
increase the rate of commercialisation, to expand sales and
marketing for the Group's nuclear detection and medical imaging
activities and to strengthen the balance sheet. This will provide
the Group with flexibility to address and capitalise on current and
emerging opportunities.
In addition to the fundraise completed in March 2021, during the
year, the Group secured a GBP1.4m Term Loan with HSBC UK for
investment in capital projects. The Group also secured GBP1.4m of
US government funding issued through the Paycheck Protection
Program (PPP) Loan scheme. Post year end, the Group applied for
full forgiveness on the first round of PPP loans, equating to
GBP0.8m, and the Group was successful in its application.
Cash Balance
Cash and cash equivalents were GBP15.6m as of 30 April 2021 (30
April 2020: GBP9.4m). The GBP6.2m increase in cash during 2021
primarily reflects net proceeds raised from the issue of new equity
shares of GBP12.2m partly offset by investment in product
development and other intangibles, with capitalised development
costs of GBP5.5m and IP additions of GBP0.1m.
Working capital increased by GBP0.8m as a result of a GBP0.2m
decrease in inventories held on 30 April 2021 to GBP6.2m (30 April
2020: GBP6.3m), which is the commencement of an anticipated unwind
of inventory that built up due to the disruption caused by
COVID-19; a GBP1.6m decrease in trade and other receivables,
reflecting the timing of receipts; and a GBP2.6m decrease in trade
and other payables to GBP7.2m (2020: GBP9.8m) due to the timing of
invoicing around the year end.
Outlook
The momentum of the second half of 2021 has been sustained into
2022 with Kromek experiencing a positive start to the new year. In
particular, the Group is seeing continued traction in the medical
imaging segment as customers increasingly roll out their products
incorporating Kromek's technology. The Group is extremely
encouraged by the results that it is receiving from the piloting of
its biological-threat detection solution, which it expects to
transition to the commercial phase in due course. The Group also
believes it is well-positioned to benefit from the increase in
government defence and security spending globally, including in the
UK.
As a result, Kromek is on track to deliver significant revenue
growth for full year 2022, in line with market expectations, which
would represent the Group's highest ever full year revenue. The
Group currently has visibility in excess of 75% of expected full
year revenue based on the contracts already won and supported by a
strong and increasing pipeline.
Consequently, and combined with the successful fundraising
completed in the second half of 2021, the Board believes that
Kromek is well-placed to capitalise on the significant
opportunities across the business and the Board continues to look
to the future with increased confidence.
Kromek Group plc
Consolidated income statement
For the year ended 30 April 2021
2021 2020
Note GBP'000 GBP'000
Continuing operations
Revenue 3 10,352 13,120
Cost of sales (5,346) (6,912)
--------- ---------
Gross profit 5,006 6,208
Other operating income 379 -
Distribution costs (287) (336)
Administrative expenses (10,935) (10,611)
--------- ---------
Operating loss (before exceptional
items) (5,837) (4,739)
Exceptional impairment reversal/(losses)
on trade receivables and amounts
recoverable on contract 6 52 (13,062)
Operating results (post exceptional
items) (5,785) (17,801)
--------- ---------
Finance income 2 60
Finance costs (548) (604)
--------- ---------
Loss before tax 4 (6,331) (18,345)
Tax 7 978 1,805
--------- ---------
Loss for the year from continuing
operations (5,353) (16,540)
========= =========
Loss for the year from continuing
operations (before exceptional
items) (5,405) (3,478)
========= =========
Loss per share 8
- basic (p) (1.5) (4.8)
* diluted (p) (1.5) (4.8)
Kromek Group plc
Consolidated statement of comprehensive income
For the year ended 30 April 2021
2021 2020
GBP'000 GBP'000
Loss for the year (5,353) (16,540)
------- --------
Items that are or may be subsequently
reclassified to profit or loss:
Exchange differences on translation
of foreign operations (1,981) 1,047
Total comprehensive loss for the year (7,334) (15,493)
------- --------
Kromek Group plc
Consolidated statement of financial position
As at 30 April 2021
2021 2020
Note GBP'000 GBP'000
Non-current assets
Goodwill 1,275 1,275
Other intangible assets 24,144 21,878
Property, plant and equipment 11,200 12,551
Right-of-use asset 4,076 3,852
-------- ---------
40,695 39,556
-------- ---------
Current assets
Inventories 6,202 6,416
Trade and other receivables 6,644 8,210
Current tax assets 1,015 1,031
Cash and bank balances 15,602 9,444
-------- ---------
29,463 25,101
-------- ---------
Total assets 70,158 64,657
-------- ---------
Current liabilities
Trade and other payables (6,174) (8,795)
Borrowings 9 (5,387) (3,669)
Lease obligation (399) (324)
-------- ---------
(11,960) (12,788)
Net current assets 17,503 12,313
-------- ---------
Non-current liabilities
Deferred income (1,071) (1,021)
Lease obligation (4,256) (3,844)
Borrowings 9 (2,816) (1,937)
-------- ---------
(8,143) (6,802)
-------- ---------
Total liabilities (20,103) (19,590)
-------- ---------
Net assets 50,055 45,067
-------- ---------
Equity
Share capital 4,319 3,446
Share premium account 72,943 61,600
Merger reserve 21,853 21,853
Translation reserve - 1,981
Accumulated losses (49,060) (43,813)
-------- --------
Total equity 50,055 45,067
-------- --------
The financial statements of Kromek Group plc (registered number
08661469) were approved by the Board of Directors and authorised
for issue on 13 July 2021. They were signed on its behalf by:
Dr Arnab Basu MBE
Chief Executive Officer
Kromek Group plc
Consolidated statement of changes in equity
For the year ended 30 April 2021
Share Accumulated
Share premium Merger Translation income/ Total
capital account reserve reserve (losses) equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
May 2019
restated 3,446 61,600 21,853 934 (27,498) 60,335
Loss for the
year - - - - (16,540) (16,540)
Exchange
difference
on translation
of foreign
operations - - - 1,047 - 1,047
--------- -------- --------------- --------------- -------------
Total
comprehensive
income for the
year - - - 1,047 (16,540) (15,494)
Credit to
equity
for
equity-settled
share-based
payments - - - - 225 225
--------- -------- --------- --------------- --------------- -------------
Balance at 30
April 2020 3,446 61,600 21,853 1,981 (43,813) 45,067
--------- -------- --------- --------------- --------------- -------------
Loss for the
year - - - - (5,353) (5,353)
Exchange
difference
on translation
of foreign
operations - - - (1,981) - (1,981)
--------- -------- --------- --------------- --------------- -------------
Total
comprehensive
income for the
year - - - (1,981) (5,353) (7,334)
Issue of share
capital 873 - - - - 873
Premium on
shares
issued less
expenses - 11,343 - - - 11,343
Credit to
equity
for
equity-settled
share-based
payments - - - - 106 106
--------- -------- --------- --------------- --------------- -------------
Balance at 30
April 2021 4,319 72,943 21,853 - (49,060) 50,055
--------- -------- --------- --------------- --------------- -------------
Kromek Group plc
Consolidated statement of cash flows
For the year ended 30 April 2021
2021 2020
Note GBP'000 GBP'000
Net cash (used in)/generated from
operating activities 10 (1,309) 179
-------- ---------
Investing activities
Investment receipts from money market
account - 1,250
Interest received 2 60
Purchases of property, plant and
equipment (454) (6,965)
Purchases of patents and trademarks (156) (243)
Capitalisation of development costs (5,463) (5,256)
-------- ---------
Net cash used in investing activities (6,071) (11,154)
-------- ---------
Financing activities
Net proceeds on issue of shares 12,216 -
New borrowings 3,215 2,100
Payment of borrowings (595) (2,105)
Payment of lease liability (395) (539)
Interest paid (309) (365)
-------- ---------
Net cash generated from/(used in)
financing activities 14,132 (909)
Net increase/(decrease) in cash
and cash equivalents 6,752 (11,884)
Cash and cash equivalents at beginning
of year 9,444 20,616
Effect of foreign exchange rate
changes (594) 712
Cash and cash equivalents at end
of year 15,602 9,444
-------- ---------
Kromek Group plc
Notes to the consolidated financial statements
For the year ended 30 April 2021
1. General information
Kromek Group plc is a company incorporated and domiciled in the
United Kingdom under the Companies Act 2006. These financial
statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the Group
operates. Foreign operations are included in accordance with the
policies set out in note 2.
The Group's financial information has been prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and on a basis
consistent with that adopted in the previous year.
New standards that have been adopted in the annual financial
statements for the year ended 30 April 2021, but have not had a
significant effect on the Group are:
-- IAS 1 Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Definition of Material)
-- IFRS 3 Business Combinations (Amendment - Definition of Business)
-- Revised Conceptual Framework for Financial Reporting
The Board are currently evaluating the impact of the adoption of
all other standards, amendments and interpretations but do not
expect them to have a material impact on the Group operation or
results.
2. Significant accounting policies
Basis of preparation
The Group's financial statements have been prepared in
accordance with IFRSs and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations.
The financial statements have been prepared on the historical
cost basis modified for assets recognised at fair value on
acquisition. Historical cost is generally based on the fair value
of the consideration given in exchange for the assets. The
principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the results
and net assets of the Group and entities controlled by the Group
(its subsidiaries) made up to 30 April each year. Control is
achieved where the Group has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits
from its activities.
The results of subsidiaries acquired during the year are
included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to results of
subsidiaries to bring the accounting policies used into line with
those used by the Group. All intra-group transactions, balances,
income and expenses, and profits are eliminated on
consolidation.
Going concern
In determining the basis for preparing the consolidated
financial statements, management are required to consider whether
the Group can continue in operational existence for the foreseeable
future, being a period of not less than twelve months from the date
of the approval of the consolidated financial statements.
Management prepare detailed cash flow forecasts that are reviewed
by the Board on a regular basis. The forecasts include assumptions
regarding the opportunity funnel from both existing and new
customers, growth plans, risks and mitigating actions. In
particular, operating cash flow is highly sensitive to revenue mix
and the positive contribution of continuing growth in the markets
the Group operates within. In reaching their going concern
conclusion, the Directors have considered that the Group had cash
and cash equivalents of GBP15.6m (30 April 2020: GBP9.4m),
including GBP4.9m (30 April 2020: GBP4.9m) draw down on the Group's
Revolving Credit Facility and therefore sufficient working capital
to continue operations. The Group's forecasts and projections,
taking account of sensitivities including a severe but plausible
downside less likely scenario, support the conclusion that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future, a period of not
less than twelve months from the date of this report. The Group,
therefore, continues to adopt the going concern basis in preparing
the consolidated financial statements.
Business combinations
The Group financial statements consolidate those of the Company
and its subsidiary undertakings. Subsidiaries are entities
controlled by the Group. Control exists when the Group has the
power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that are
currently exercisable or convertible are taken into account. The
financial information of subsidiaries is included from the date
that control commences until the date that control ceases.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial information.
Acquisitions on or after 1 May 2010
For acquisitions on or after 1 May 2010, the Group measures
goodwill at the acquisition date as:
-- the fair value of the consideration transferred; plus
-- the recognised amount of any non-controlling interests in the acquiree; plus
-- the fair value of the existing equity interest in the acquiree; less
-- the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, the negative goodwill is recognised
immediately in profit or loss.
Costs related to the acquisition, other than those associated
with the issue of debt or equity securities, are expensed as
incurred.
Goodwill
Goodwill arising in a business combination is recognised as an
asset at the date that control is acquired (the acquisition date).
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the acquirer's previously held
equity interest (if any) in the entity over the net of the
acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed.
If, after reassessment, the Group's interest in the fair value
of the acquiree's identifiable net assets exceeds the sum of the
consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer's
previously held equity interest in the acquiree (if any), the
excess is recognised immediately in profit or loss as a bargain
purchase gain.
Goodwill is not amortised but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to
benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill
is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
Contracts with customers
The Group recognises revenue in line with IFRS 15 'Revenue from
contracts with customers'. Revenue represents income derived from
contracts for the provision of goods and services by the Group to
customers in exchange for consideration in the ordinary course of
the Group's activities.
The Board disaggregates revenue by sales of goods or services,
grants and contract customers. Sales of goods and services
typically include the sale of product on a run rate or ad-hoc
basis. Grants include technology development with parties such as
Innovate UK as detailed above. Customer contracts represents
agreements that the Group has entered into that typically span a
period of more than 12 months.
Performance obligations
Upon approval by the parties to a contract, the contract is
assessed to identify each promise to transfer either a distinct
good or service or a series of distinct goods or services that are
substantially the same and have the same pattern of transfer to the
customer. Goods and services are distinct and accounted for as
separate performance obligations in the contract if the customer
can benefit from them either on their own or together with other
resources that are readily available to the customer, and they are
separately identifiable in the contract.
Transaction price
At the start of the contract, the total transaction price is
estimated as the amount of consideration to which the Group expects
to be entitled in exchange for transferring the promised goods and
services to the customer, excluding sales taxes. Variable
consideration, such as price escalation and early settlements, is
included based on the expected value or most likely amount only to
the extent that it is highly probable that there will not be a
reversal in the amount of cumulative revenue recognised. The
transaction price does not include estimates of consideration
resulting from contract modifications, such as change orders, until
they have been approved by the parties to the contract. The total
transaction price is allocated to the performance obligations
identified in the contract in proportion to their relative
standalone selling prices. Given the bespoke nature of many of the
Group's products and services, which are designed and/or
manufactured under contract to the customer's individual
specifications, there are sometimes no observable standalone
selling prices. Instead, standalone selling prices are typically
estimated based on expected costs plus contract margin consistent
with the Group's pricing principles or based on market knowledge of
selling prices relating to similar product.
Revenue and profit recognition
Revenue is recognised as performance obligations are satisfied
as control of the goods and services is transferred to the
customer.
For each performance obligation within a contract, the Group
determines whether it is satisfied over time or at a point in time.
The Group has determined that the performance obligations of the
majority of its contracts are satisfied at a point in time.
Performance obligations are satisfied over time if one of the
following criteria is satisfied:
- the customer simultaneously receives and consumes the benefits
provided by the Group's performance as it performs;
- the Group's performance creates or enhances an asset that the
customer controls as the asset is created or enhanced; or
- the Group's performance does not create an asset with an
alternative use to the Group and it has an enforceable right to
payment for performance completed to date.
For each performance obligation to be recognised over time, the
Group recognises revenue using an input method, based on costs
incurred in the period. Revenue and attributable margin are
calculated by reference to reliable estimates of transaction price
and total expected costs, after making suitable allowances for
technical and other risks. Revenue and associated margin are
therefore recognised progressively as costs are incurred, and as
risks have been mitigated or retired. The Group has determined that
this method faithfully depicts the Group's performance in
transferring control of the goods and services to the customer.
If the over-time criteria for revenue recognition are not met,
revenue is recognised at the point in time that control is
transferred to the customer, which is usually when legal title
passes to the customer and the business has the right to payment.
Kromek's standard terms of delivery are Ex works sellers' site
(Incoterms 2020), unless otherwise stated.
The Group's contracts that satisfy the over-time criteria are
typically product development contracts where the customer
simultaneously receives and consumes the benefit provided by the
Group's performance. In some specific arrangements, due to the
highly specific nature of the contract deliverables tailored to the
customer requirements and the breakthrough technology solutions
that Kromek provides, the Group does not create an asset with an
alternative use but retains an enforceable right to payment and
recognises revenue over time on that basis.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised immediately as an
expense.
Contract modifications
The Group's contracts are sometimes amended for changes in
customers' requirements and specifications. A contract modification
exists when the parties to the contract approve a modification that
either changes existing, or creates new, enforceable rights and
obligations. The effect of a contract modification on the
transaction price and the Group's measure of progress towards the
satisfaction of the performance obligation to which it relates, is
recognised in one of the following ways:
(a) prospectively as an additional, separate contract;
(b) prospectively as a termination of the existing contract and
creation of a new contract; or
(c) as part of the original contract using a cumulative catch
up.
The majority of the Group's contract modifications are treated
under either (a) (for example, the requirement for additional
distinct goods or services) or (b) (for example, a change in the
specification of the distinct goods or services for a partially
completed contract), although the facts and circumstances of any
contract modification are considered individually as the types of
modifications will vary contract-by-contract and may result in
different accounting outcomes.
Costs to obtain a contract
The Group expenses pre-contract bidding costs that are incurred
regardless of whether a contract is awarded. The Group does not
typically incur costs to obtain contracts that it would not have
incurred had the contracts not been awarded.
Costs to fulfil a contract
Contract fulfilment costs in respect of over-time contracts are
expensed as incurred. No such costs have been incurred in the year
under review or in previous years. Contract fulfilment costs in
respect of point-in-time contracts are accounted for under IAS 2,
Inventories.
Inventories
Inventories include raw materials, work-in-progress and finished
goods recognised in accordance with IAS 2 in respect of contracts
with customers that have been determined to fulfil the criteria for
point-in-time revenue recognition under IFRS 15. Also included are
inventories for which the Group does not have a contract. This is
often because fulfilment costs have been incurred in expectation of
a contract award. The Group does not typically build inventory to
stock. Inventories are stated at the lower of cost, including all
relevant overhead and net realisable value.
During the year, the Group adopted the policy of valuing its
recyclable material. In accordance with the standard, this is
valued at the lower of cost and net realisable value, less the cost
to bring the material back into use.
Contract receivables
Contract receivables represent amounts for which the Group has
an unconditional right to consideration in respect of unbilled
revenue recognised at the balance sheet date and comprises costs
incurred plus attributable margin.
The Group does not plan, anticipate or offer extended payment
terms within its contractual arrangements unless express payment
interest charges are applied and represent a value over and above
that contracted or invoiced with the customer.
Contract liabilities
Contract liabilities represent the obligation to transfer goods
or services to a customer for which consideration has been
received, or consideration is due, from the customer.
Leases
The Group recognises a Right-of-Use ("ROU") asset and a lease
liability at the lease commencement date. The ROU asset is
initially measured at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs
incurred, and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on
which it is located, less any lease incentives received.
The ROU asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the ROU or the end of the lease term.
The estimated useful lives of the ROU assets are determined on the
same basis as those of property and equipment. In addition, the ROU
is periodically reduced by impairment losses, if any, and adjusted
for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease, or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate.
Lease payments included in the measurement of the lease
liability comprise fixed payments.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, or if the Group
changes its assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the ROU
asset, or is recorded in profit or loss if the carrying amount of
the ROU has been reduced to zero.
The Group has elected not to recognise ROU assets and lease
liabilities for short-term leases of machinery that have a lease
term of 12 months or less and leases of low value assets, including
IT equipment. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over the
lease term.
Foreign currencies
The individual results of each Group company are presented in
the currency of the primary economic environment in which it
operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in pounds sterling,
which is the functional currency of the Company and the
presentation currency for the consolidated financial statements.
The Directors have applied IAS 21 The Effects of Changes in Foreign
Exchange Rates and have concluded that the inter-company loans held
by Kromek Limited substantially form part of the net investment in
Kromek USA (Kromek Inc, eV Products, Inc. and Nova R&D, Inc.),
and so any gain or loss arising on the inter-company loan balances
are recognised as other comprehensive income in the period.
In preparing the results of the individual companies,
transactions in currencies other than the entity's functional
currency (foreign currencies) are recognised at the rates of
exchange prevailing on the dates of the transactions. At each
statement of financial position date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences are recognised in profit or loss in the
period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the statement of
financial position date. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the
exchange rates at the date of transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive
income and accumulated in equity.
On consolidation, the results of overseas operations are
translated into pounds sterling at rates approximating to those
ruling when the transactions took place. All assets and liabilities
of overseas operations, including goodwill arising on the
acquisition of those operations, are translated at the rate ruling
at the statement of financial position date. Exchange differences
arising on translating the opening net assets at opening rate and
the results of overseas operations at actual rate are recognised
directly in other comprehensive income and are credited/(debited)
to the retranslation reserve.
Government grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching
to them and that the grants will be received.
Government grants towards job creation and growth are normally
recognised as income over the useful economic life of the capital
expenditure to which they relate.
Government grants are recognised in the income statement so as
to match them with the related expenses that they are intended to
compensate. Grants that relate to capital expenditure are offset
against related depreciation costs. Where grants are received in
advance of the related expenses, they are initially recognised in
the balance sheet and released to match the related expenditure.
Non-monetary grants are recognised at fair value.
The Group has received Government grants in relation to the
Coronavirus Job Retention Scheme (CJRS) provided by the UK
Government in response to COVID-19's impact on business. The Group
has elected to account for these grants as other operating income,
rather than to off-set the Government grants within administrative
expenses; accordingly, the gross impact is disclosed on the face of
the Statement of Comprehensive Income. Total Government grants
included as other operating income total GBP379k (2020:
GBPnil).
Operating result
Operating loss is stated as loss before tax, finance income and
costs.
Exceptional items
Exceptional items are those items that, in the judgement of
management, need to be disclosed separately by virtue of their
nature, size or incidence. Exceptional items have been classified
separately in order to draw them to the attention of the reader of
the accounts and, in the opinion of the Board, to show more
accurately the underlying results of the Group.
Retirement benefit costs
The Group operates two defined contribution pension schemes for
UK employees, one of which is an auto-enrolment workplace pension
scheme established following the UK Pensions Act 2008. The
employees of the Group's subsidiaries in the US are members of a
state-managed retirement benefit scheme operated by the US
government.
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due. For these schemes, the
assets are held separately from those of the Group in independently
administered funds. Payments made to US state-managed retirement
benefit schemes are dealt with as payments to defined contribution
schemes where the Group's obligations under the schemes are
equivalent to those arising in a defined contribution retirement
benefit scheme.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax. Tax is recognised in the income statement except
to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity. The R&D tax
credit is calculated using the current rules as set out by HMRC and
is recognised in the income statement during the period in which
the R&D programmes occurred.
i) Current tax
The tax credit is based on the taxable loss for the year.
Taxable loss differs from net loss as reported in the income
statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted at the date of the statement of financial
position.
ii) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the Consolidated Statement of Financial Position and the
corresponding tax bases used in the computation of taxable profit
and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each
statement of financial position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset is
realised, based on tax laws and rates that have been enacted or
substantively enacted at the date of the statement of financial
position. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited in
other comprehensive income, in which case the deferred tax is also
dealt with in other comprehensive income. Deferred tax assets and
liabilities are offset when there is a legally enforceable right to
set off current tax assets against current tax liabilities and when
they relate to income taxes levied by the same taxation authority
and the Group intends to settle its current tax assets and
liabilities on a net basis.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is recognised so as to write off the cost or
valuation of assets (other than land and properties under
construction) less their residual values over their useful lives,
using the straight-line method, on the following bases:
Plant and machinery 6% to 25%
Fixtures, fittings and equipment 15%
Computer equipment 25%
Lab equipment 6% to 25%
The gain or loss arising on the disposal or scrappage of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset, and is recognised in
income.
Internally-generated intangible assets - research and
development expenditure
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
An internally-generated intangible asset arising from the
Group's product development is recognised only if all of the
following conditions are met:
-- the technical feasibility of completing the intangible asset
so that it will be available for use or sale;
-- its intention to complete the intangible asset and use or
sell it;
-- its ability to use or sell the intangible asset;
-- how the intangible asset will generate probable future
economic benefits. Among other things, the entity can demonstrate
the existence of a market for the output of the intangible asset or
the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset;
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
-- its ability to measure reliably the expenditure attributable
to the intangible asset during its development.
Research expenditure is written off as incurred. Development
expenditure is also written off, except where the Directors are
satisfied as to the technical, commercial and financial viability
of individual projects. In such cases, the identifiable expenditure
is deferred and amortised over the period during which the Group is
expected to benefit. This period normally equates to the life of
the products to which the development expenditure relates. Where
expenditure relates to developments for use rather than direct
sales of product, the cost is amortised straight-line over a
2-15-year period. Provision is made for any impairment.
Amortisation of the intangible assets recognised on the
acquisitions of Nova R&D, Inc. and eV Products, Inc. are
recognised in the income statement on a straight-line basis over
their estimated useful lives of between five and fifteen years.
Patents and trademarks
Patents and trademarks are measured initially at purchase cost
and are amortised on a straight-line basis over their estimated
useful lives.
Impairment of tangible and intangible assets, excluding
goodwill
At each statement of financial position date, the Group reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the
extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash generating unit
(CGU) to which the asset belongs. When a reasonable and consistent
basis of allocation can be identified, corporate assets are also
allocated to individual CGUs, or otherwise they are allocated to
the smallest group of CGUs for which a reasonable and consistent
allocation basis can be identified.
An intangible asset with an indefinite useful life is tested for
impairment at least annually and whenever there is an indication
that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate of 9.47% (2020: 14.86%) that reflects current
market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to
be less than its carrying amount, the carrying amount of the asset
(or CGU) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss, unless the relevant
asset is carried at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or CGU) is increased to the revised estimate
of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (or
CGU) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable
value. During the year, the Group adopted a policy of valuing
recyclable material. Costs comprise direct materials and, where
applicable, direct labour costs and those overheads that have been
incurred in bringing the inventories to their present location and
condition. Cost is calculated in the statement of financial
position at standard cost, which approximates to historical cost
determined on a first in, first out basis. Net realisable value
represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and
distribution. Work in progress costs are taken as production costs,
which include an appropriate proportion of attributable
overheads.
Provision is made for obsolete, slow moving or defective items
where appropriate. This is reviewed by operational finance at least
every 6 months. Given the nature of the products and the gestation
period of the technology, commercial rationale necessitates that
this provision is reviewed on a case-by-case basis.
Provisions for liabilities
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is more
likely than not that an outflow of resources will be required to
settle the obligation, and the amount can be reliably estimated.
Such provisions are measured at the present value of management's
best estimate of the expenditure required to settle the present
obligation at the balance sheet date. The discount rate used to
determine the present value reflects current market assessments of
the time value of money. Provisions are not recognised for future
operating losses.
Financial instruments
(i) Recognition and initial measurement
Trade receivables are initially recognised when they are
originated. All other financial assets and financial liabilities
are initially recognised when the Group becomes a party to the
contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a
significant financing component) or financial liability is
initially measured at fair value plus, for an item not at Fair
Value Through Profit or Loss (FVTPL), transaction costs that are
directly attributable to its acquisition or issue. A trade
receivable without a significant financing component is initially
measured at the transaction price.
(ii) Classification and subsequent measurement
Financial assets
(a) Classification
On initial recognition, a financial asset is classified as
measured at: amortised cost; Fair Value through Other Comprehensive
Income (FVOCI) - debt investment; FVOCI - equity investment; or
FVTPL.
Financial assets are not reclassified subsequent to their
initial recognition unless the Company changes its business model
for managing financial assets in which case all affected financial
assets are reclassified on the first day of the first reporting
period following the change in the business model.
A financial asset is measured at amortised cost if it meets both
of the following conditions:
-- It is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- Its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
On initial recognition of an equity investment that is not held
for trading, the Group may irrevocably elect to present subsequent
changes in the investment's fair value in OCI. This election is
made on an investment-by-investment basis.
All financial assets not classified as measured at amortised
cost or FVOCI as described above are measured at FVTPL.
Investments in subsidiaries are carried at cost less
impairment.
Cash and cash equivalents comprise cash balances and call
deposits.
(b) Subsequent measurement and gains and losses
Financial assets at FVTPL - these assets (other than derivatives
designated as hedging instruments) are subsequently measured at
fair value. Net gains and losses, including any interest or
dividend income, are recognised in profit or loss.
Financial assets at amortised cost - these assets are
subsequently measured at amortised cost using the effective
interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and
impairment are recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Financial liabilities and equity
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions:
(a) They include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(b) Where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group's own
equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Group's own shares, the
amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to
those shares.
Financial liabilities are classified as measured at amortised
cost or FVTPL. A financial liability is classified as at FVTPL if
it is classified as held for trading, it is a derivative or it is
designated as such on initial recognition. Financial liabilities at
FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised
cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss.
Any gain or loss on derecognition is also recognised in profit or
loss.
Where a financial instrument that contains both equity and
financial liability components exists these components are
separated and accounted for individually under the above
policy.
Intra-group financial instruments
Where the Group enters into financial guarantee contracts to
guarantee the indebtedness of other companies within its Group, the
Group considers these to be insurance arrangements and accounts for
them as such. In this respect, the Group treats the guarantee
contract as a contingent liability until such time as it becomes
probable that the Group will be required to make a payment under
the guarantee.
(iii) Impairment
The Group recognises loss allowances for expected credit losses
(ECLs) on financial assets measured at amortised cost, debt
investments measured at FVOCI and contract assets (as defined in
IFRS 15).
The Group measures loss allowances at an amount equal to
lifetime ECL, except for other debt securities and bank balances
for which credit risk (i.e. the risk of default occurring over the
expected life of the financial instrument) has not increased
significantly since initial recognition, which are measured as
twelve-month ECL.
Loss allowances for trade receivables and contract assets are
always measured at an amount equal to lifetime ECL. When
determining whether the credit risk of a financial asset has
increased significantly since initial recognition and when
estimating ECL, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the Company's historical experience and
informed credit assessment and including forward-looking
information.
The Group assumes that the credit risk on a financial asset may
have increased if it is more than 60 days past due. This is
assessed on a case by case basis, taking into consideration the
commercial relationship and historical pattern of payments.
The Group considers a financial asset to be at risk of default
when:
-- The borrower is unlikely to pay its credit obligations to the
Group in full, without recourse by the Group to actions such as
realising security (if any is held); or
-- The financial asset is more than 120 days past due, subject
to management discretion and commercial relationships.
Lifetime ECLs are the ECLs that result from all possible default
events over the expected life of a financial instrument.
Twelve-month ECLs are the portion of ECLs that result from
default events that are possible within 12 months after the
reporting date (or a shorter period if the expected life of the
instrument is less than 12 months).
The maximum period considered when estimating ECLs is the
maximum contractual period over which the Group is exposed to
credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the
entity in accordance with the contract and the cash flows that the
Group expects to receive). ECLs are discounted at the effective
interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial
assets carried at amortised cost and debt securities at FVOCI are
credit impaired. A financial asset is "credit impaired" when one or
more events that have a detrimental impact on the estimated future
cash flows of the financial asset have occurred.
Write-offs
The gross carrying amount of a financial asset is written off
(either partially or in full) to the extent that there is no
realistic prospect of recovery.
Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date and spread over the period
during which the employees become unconditionally entitled to the
options, which is based on a period of employment of three years
from grant date. In accordance with IFRS 2, from a single entity
perspective, Kromek Group plc recognises an increase in investment
and corresponding increase in equity to represent the
settlement.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. The vesting date is
determined based on the date an employee is granted options,
usually three years from date of grant. At each statement of
financial position date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the
effect of non-market-based vesting conditions and taking into
account the average time in employment across the year. The impact
of the revision of the original estimates, if any, is recognised in
profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to equity
reserves.
Cash
Cash, for the purposes of the statement of cash flows, comprises
cash in hand and term deposits repayable between one and twelve
months from balance sheet date, less overdrafts repayable on
demand.
3. Operating segments
Products and services from which reportable segments derive
their revenues
For management purposes, the Group is organised into two
geographical business units from which the Group currently operates
(US and UK) and it is these operating segments for which the Group
is providing disclosure. Both business units serve the three
principal key markets in which the Group operates (nuclear
detection, medical imaging and security screening). However,
typically, the US business unit focuses principally on medical
imaging and the UK focuses on nuclear detection and security
screening. However, this arrangement is flexible and can vary based
on the geographical location of the Group's customer. In addition
to the three principal key markets described above, the Group's UK
operations are developing a biological-threat detection technology,
which the Board believes will be a key market for the Group in the
near future.
The chief operating decision maker is the Board of Directors,
which assesses the performance of the operating segments using the
following key performances indicators; revenues, gross profit and
operating profit. The amounts provided to the Board with respect to
assets and liabilities are measured in a way consistent with the
financial statements.
The turnover, profit on ordinary activities and net assets of
the Group are attributable to two business segments. The first
segment relates to the development of digital colour X-ray imaging
enabling direct materials identification, as well as developing a
number of detection products in the industrial and consumer
markets. The second segment relates to the development of a
technology platform, as described above, which aims to identify
airborne pathogens.
Analysis by geographical area
A geographical analysis of the revenue from the Group's
customers, by destination, is as follows:
2021 2020
GBP'000 GBP'000
United Kingdom 1,627 2,541
North America 5,693 7,606
Asia 610 893
Europe 2,387 2,075
Australasia 3 5
Africa 32 -
-------- --------
Total revenue 10,352 13,120
-------- --------
Total revenue from the sale of goods and services and from
contracts with customers was GBP9,878k (2020: GBP12,835k).
The Group has aggregated its market sectors into two reporting
segments being the operational business units in the UK and US. The
UK operations comprise Kromek Group plc and Kromek Limited and the
US operations comprise Kromek Inc, eV Products Inc, and Nova
R&D Inc. The Board currently considers this to be the most
appropriate aggregation due to the main markets that are typically
addressed by the UK and US business units and the necessary
skillsets and expertise.
A geographical analysis of the Group's revenue by origin is as
follows:
Year ended 30 April 2021:
UK Operations US Operations Total for
GBP'000 GBP'000 Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 5,346 5,395 10,741
-Revenue from grants 474 - 474
-Revenue from contract customers 3,346 894 4,240
Total sales by segment 9,166 6,289 15,455
Removal of inter-segment sales (3,526) (1,577) (5,103)
-------------- -------------- ----------
Total external sales 5,640 4,712 10,352
-------------- -------------- ----------
Segment result - operating
(loss)/profit before exceptional
items (1,594) (4,243) (5,837)
Interest received 2 - 2
Interest expense (324) (224) (548)
Exceptional items - 52 52
Loss before tax (1,916) (4,415) (6,331)
Tax credit 989 (11) 978
-------------- -------------- ----------
Loss for the year (927) (4,426) (5,353)
-------------- -------------- ----------
Reconciliation to adjusted
EBITDA:
Net interest 322 224 546
Tax (989) 11 (978)
Depreciation of PPE and right-of-use
asset 997 688 1,685
Amortisation 1,370 989 2,359
Share-based payment charge 106 - 106
Reversal of exceptional - (52) (52)
Adjusted EBITDA 879 (2,566) (1,687)
-------------- -------------- ----------
Other segment information
Property, plant and equipment
additions 354 100 454
Right-of-use assets 2,048 3,131 5,179
Depreciation of PPE and right-of-use
asset 997 688 1,685
Release of capital grant (44) - (44)
Intangible asset additions 4,576 1,043 5,619
Amortisation of intangible
assets 1,370 989 2,359
--------- -------- ---------
Statement of financial position
Total assets 47,466 22,692 70,158
--------- -------- ---------
Total liabilities (13,638) (6,465) (20,103)
--------- -------- ---------
Year ended 30 April 2020:
UK Operations US Operations Total for
GBP'000 GBP'000 Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 8,312 7,205 15,517
-Revenue from grants 285 - 285
-Revenue from contract customers 811 342 1,153
Total sales by segment 9,408 7,547 16,955
Removal of inter-segment sales (2,600) (1,235) (3,835)
-------------- -------------- ----------
Total external sales 6,808 6,312 13,120
-------------- -------------- ----------
Segment result - operating
(loss)/profit before exceptional
items (1,906) (2,833) (4,739)
Interest received 60 - 60
Interest expense (326) (278) (604)
Exceptional items - (13,062) (13,062)
(Loss)/profit before tax (2,172) (16,173) (18,345)
Tax credit 904 901 1,805
-------------- -------------- ----------
(Loss)/profit for the year (1,268) (15,272) (16,540)
-------------- -------------- ----------
Reconciliation to adjusted
EBITDA:
Net interest 266 278 544
Tax (904) (901) (1,805)
Depreciation of PPE and right-of-use
asset 545 640 1,185
Amortisation 1,148 994 2,142
Share-based payment charge 225 - 225
One-off customer financing
discount - 746 746
Exceptional items - 13,062 13,062
Adjusted EBITDA 12 (453) (441)
-------------- -------------- ----------
Other segment information
Property, plant and equipment
additions 5,888 1,077 6,965
Right-of-use assets 1,136 3,429 4,565
Depreciation of PPE and right-of-use
asset 545 640 1,185
Release of capital grant (33) - (33)
Intangible asset additions 3,973 1,526 5,499
Amortisation of intangible
assets 1,148 994 2,142
-------------- -------------- ----------
Statement of financial position
Total assets 40,997 23,660 64,657
-------------- -------------- ----------
Total liabilities (13,925) (5,665) (19,590)
-------------- -------------- ----------
Inter-segment sales are charged on an arms-length basis.
No other additions of non-current assets have been recognised
during the year other than property, plant and equipment, and
intangible assets.
No impairment losses were recognised in respect of property,
plant and equipment and intangible assets including goodwill.
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 2. Segment
loss represents the loss reported by each segment. This is the
measure reported to the Group's Chief Executive for the purpose of
resource allocation and assessment of segment performance.
Revenues from major products and services
The Group's revenues from its major products and services were
as follows:
2021 2020
GBP'000 GBP'000
Product revenue 5,836 10,314
Research and development revenue 4,516 2,806
--------------- ---------------
Consolidated revenue 10,352 13,120
--------------- ---------------
Information about major customers
Included in revenues arising from US operations are revenues of
approximately GBP1,934k (2020: GBP2,234k) that arose from the
Group's largest commercial customer. Included in revenues arising
from UK operations are revenues of approximately GBP2,784k (2020:
GBP1,542k) that arose from a major Governmental organisation
customer.
4. Loss before tax for the year
Loss before tax for the year has been arrived at after
charging/(crediting):
2021 2020
GBP'000 GBP'000
Net foreign exchange losses/(gains) 80 (653)
Research and development costs recognised
as an expense* 5,483 5,457
Depreciation of property, plant and equipment 1,685 1,185
Release of capital grant (44) (33)
Amortisation of internally-generated intangible
assets 2,359 2,142
Cost of inventories recognised as expense 3,899 4,654
Exceptional items - (reversal)/impairment
of trade receivables and AROC (see note 6) (52) 13,062
Early settlement costs - 746
Staff costs (see note 5) 8,806 8,791
---------------- ----------------
* Of the total research and development cost recognised as an
expense in the period, GBP3,196k (2020: GBP4,053k) is included
within cost of sales and GBP2,287k (2020: GBP1,404k) within
administrative expenses.
5. Staff costs
The average monthly number of employees (excluding non-executive
directors) was:
2021
Number 2020 Number
Directors (executive) 2 2
Research and development, production 118 116
Sales and marketing 7 8
Administration 12 13
------- -----------
139 139
------- -----------
Their aggregate remuneration comprised:
2021 2020
GBP'000 GBP'000
Wages and salaries 7,618 7,437
Social security costs 682 754
Pension scheme contributions 400 375
Share-based payments 106 225
--------- ---------
8,806 8,791
--------- ---------
The current period classification of certain wage and salary
expenses has been revised and comparatives have been represented on
a consistent basis. There is no impact to the statement of profit
and loss as all of the reclassifications occur within the
administrative expense line item on the income statement.
The total Directors' emoluments (including non-executive
directors) was GBP612k (2020: GBP580k). The aggregate value of
contributions paid to money purchase pension schemes was GBP28k
(2020: GBP21k) in respect of four directors (2020: three
directors). There has been no exercise of share options by the
Directors in the period and therefore no gain recognised in the
year (2020: nil).
The highest paid director received emoluments of GBP216k (2020:
GBP221k) and amounts paid to money purchase pension schemes was
GBP15k (2020: GBP10k).
After 10 years as Chief Financial Officer of the Group, Mr
Bulmer advised the Board in the third quarter of 2021 of his wish
to resign in order to pursue alternative opportunities. The Group
entered into a settlement agreement with Mr Bulmer on 28 October
2020, and he left the Company at the conclusion of the Annual
General Meeting on 31 October 2020. In lieu of notice, a sum
equivalent to 12 months remuneration, defined as basic salary,
pension contributions and car allowance was paid to Mr Bulmer
totalling GBP192,250.
Key management compensation:
2021 2020
GBP'000 GBP'000
Wages and salaries and other short-term
benefits 888 980
Social security costs 125 130
Pension scheme contributions 29 28
Share-based payment expense 106 185
-------- --------
1,148 1,323
-------- --------
Key management comprise the Executive Directors and senior
operational staff.
6. Exceptional Items
Exceptional items, booked to operating costs, comprised the
following:
2021 2020
GBP'000 GBP'000
(Reversal)/impairment of trade
receivables and AROC (52) 13,062
--------- ---------
Total exceptional items (52) 13,062
--------- ---------
The immediate and ongoing impact of the COVID-19 pandemic has
created significant economic uncertainty on a global scale. The
expected credit losses are reviewed annually, or when there is a
significant change in external factors potentially impacting credit
risk, such as COVID-19, and are updated where management's
expectations of credit losses change.
Management group and measure the expected credit losses of trade
receivables based on operational market and geographical region. As
illustrated in note 3, the Group operates across a number of
geographical areas.
The Group has reversed GBP52k in 2021 in relation to items
impaired in the prior year. The 2020 impairment related to two
separate contracts with specific customers in Asia who were
identified as having a significantly elevated credit risk. The
assessment carried out by management suggested delays in delivery
due to travel restriction and subsequent doubt over expected future
cash flow, increasing the likelihood of credit default by these
specific debtors in the next 12 months due. This charge of
GBP13,062k was presented in the prior year as an exceptional item
arising as a result of COVID-19 in accordance with the Group's
accounting policy, as it was considered to be one-off in nature,
size and incidence. It represented a full write down of invoiced
debtors and AROC. The amounts have been fully written down as
management have concluded that any collateral is not considered to
be material. No adjustment or reversal to the impairment calculated
in 2020, specific to one of the contracts, has been included in
2021 on the basis that the recoverability of this receivable
remains uncertain.
From a tax perspective, this impairment has increased the
taxable losses in the prior year period, however no deferred tax
asset has been recognised as it is not yet certain that there will
be future taxable profits available.
Asia still represents a significant technology opportunity for
the Group; however, the Group is currently uncertain of timescales
to full market traction. Any subsequent reversal of the amount
recognised in future years would also be recognised as an
exceptional item.
7. Tax
Recognised in the income statement
2021 2020
GBP'000 GBP'000
Current tax credit:
UK corporation tax on losses in the year 1,014 1,030
Adjustment in respect of previous periods (25) (129)
Foreign taxes paid (11) -
-------- ---------
Total current tax 978 901
Deferred tax:
Origination and reversal of timing differences - 904
Adjustment in respect of previous periods - -
Total deferred tax - 904
-------- ---------
Total tax credit in income statement 978 1,805
-------- ---------
A UK corporation rate of 19% (effective 1 April 2020) was
substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. This will increase
the Company's future current tax charge accordingly. The deferred
tax asset at 30 April 2021 has been calculated at 19% (2020: 19 %).
The corporate tax rate will increase from increase to 25% from 19%
with effect from April 2023.
Reconciliation of tax credit
The charge for the year can be reconciled to the profit in the
income statement as follows:
2021 2020 GBP'000
GBP'000
Loss before tax (6,331) (18,345)
Tax at the UK corporation tax rate of 19%
(2020: 19%) 1,203 3,486
Non-taxable income/expenses not deductible 614 (3,754)
Effect of R&D 451 553
Rate differences effect of R&D - (255)
Share scheme deduction under Part 12 CTA 2009 5 1
Unrecognised movement on deferred tax (1,648) 239
Adjustment in respect of previous periods (26) (129)
Effects of overseas tax rates 379 1,664
Total tax credit for the year 978 1,805
---------- ---------------
There are no tax items charged to other comprehensive
income.
The effect of R&D is the tax impact of capitalised
development costs being deducted in the year in which they are
incurred.
The rate of corporation tax for the year is 19% (2020: 19%). A
UK corporation rate of 19% (effective 1 April 2020) was
substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. Accordingly,
deferred tax has been provided in line with the rates at which
temporary differences are expected to reverse.
The other tax jurisdiction that the Group currently operates in
is the US. Any deferred tax arising from the US operations is
calculated at 27.85% which represents the federal plus state tax
rate.
8. Losses per share
As the Group is loss making, dilution has the effect of reducing
the loss per share. The calculation of the basic and diluted
earnings per share is based on the following data:
Losses
2021 2020
GBP'000 GBP'000
Losses for the purposes of basic and
diluted losses per share being net
losses attributable to owners of the
Group (5,353) (16,540)
----------- -----------
2021 2020
Number of shares Number Number
Weighted average number of ordinary
shares for the purposes of basic losses
per share 358,912,092 344,644,492
Effect of dilutive potential ordinary
shares:
Share options 372,638 1,084,826
----------- -----------
Weighted average number of ordinary
shares for the purposes of diluted
losses per share 359,284,730 345,729,318
----------- -----------
2021 2020
Basic (p) (1.5) (4.8)
Diluted (p) (1.5) (4.8)
------ -----
Due to the Group having losses in each of the years, the fully
diluted loss per share for disclosure purposes, as shown in the
income statement, is the same as for the basic loss per share.
9. Borrowings
2021 2020
GBP'000 GBP'000
Secured borrowing at amortised
cost
Revolving credit facility and
capex facility 4,900 4,900
Other borrowings 3,303 706
-------- --------
8,203 5,606
-------- --------
Total borrowings
Amount due for settlement within
12 months 5,387 3,669
-------- --------
Amount due for settlement after
12 months 2,816 1,937
-------- --------
The Group has a GBP5.0m revolving credit facility (RCF) with
HSBC, which also incorporates a capex facility. This facility is
for a 36-month period with an option to extend to years 4 and 5.
This loan is repaid on a quarterly basis in an amount equal to
1/20th of the drawn capex loan. Once repaid, the Group is able to
draw down the repaid amount against the original RCF. This facility
is secured by a debenture and a composite guarantee across the
Group. The interest rate on the RCF is LIBOR+2.5% with a repayment
term of six months from date of drawdown. The fair value equates to
the carrying value.
During the year, the Group successfully secured a 2-year,
GBP1.4m Term Loan with HSBC which attracts interest at 3.49% per
annum over Base Rate. This loan is repayable over 36 months,
commencing on the date which is 13 months after the date of
drawdown.
Other borrowings comprise a loan with the landlord in the US in
respect of the facility occupied by eV Products, Inc. This loan is
repaid in equal instalments on a monthly basis and attracts
interest at 7.50% per annum. At 30 April 2021, the total loan due
to the landlord was GBP0.5m (2020: GBP0.7m). Of this, GBP0.2m is
due within 12 months (2020: GBP0.1m) and GBP0.3m (2020: GBP0.6m) is
due after 12 months.
As a result of COVID-19, the Group's US operations successfully
secured GBP0.8m of Paycheck Protection Program Loans from the US
Government. A second draw of Paycheck Protection Program Loans was
announced in January 2021 and the Group successfully applied for
and secured a further loan of GBP0.6m.
The first round of Paycheck Protection Program Loans were
forgiven post year end.
In addition to the Paycheck Protection Program Loans, the
Group's US operations were eligible to apply for an Economic Injury
Disaster Loan. A loan of GBP0.1m was approved and secured in June
2020. This loan attracts interest at a rate of 3.75% per annum and
the maturity date is 30 years from the date of loan note.
Finance lease liabilities are secured by the assets leased. The
borrowings are at a fixed interest rate with repayment periods not
exceeding five years.
The weighted average interest rates paid during the year were as
follows:
2021 2020
% %
Revolving credit facility 3.00 3.30
Other borrowing facilities 6.70 5.20
10. Notes to the cash flow statement
2021 2020
GBP'000 GBP'000
Loss for the year (5,353) (16,540)
Adjustments for:
Finance income (2) (60)
Finance costs 548 604
Income tax credit (978) (1,805)
Depreciation of property, plant and equipment
and ROU 1,685 1,185
Amortisation of intangible assets 2,359 2,142
Share-based payment expense 106 225
Impairment of intangible asset 30 -
Loss on disposal 82 -
-------- ---------
Operating cash flow before movements in
working capital (1,523) (14,249)
Decrease/(increase) in inventories 214 (3,189)
Decrease in receivables 1,566 11,787
(Decrease)/increase in payables (2,571) 4,932
Cash used in operations (2,314) (719)
Income taxes received 1,005 898
-------- ---------
Net cash (used in)/generated from operating
activities (1,309) 179
-------- ---------
Cash and cash equivalents
2021 2020
GBP'000 GBP'000
Cash and bank balances 15,602 9,444
-------- --------
Cash and cash equivalents comprise cash and term bank deposits
repayable between one and twelve months from balance sheet date,
net of outstanding bank overdrafts. The carrying amount of these
assets is approximately equal to their fair value.
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END
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