- $5.9mn US government agency contract
- $1mn of new orders for nuclear security and biodetection
Geopolitical instabilities and terrorism threats to sovereign states are driving demand for Sedgefield-based Kromek (KMK:5p), a radiation detection technology company. Its CZT-based dirty-bomb detectors protect buildings and critical infrastructure against nuclear threat and the technology is used in the development of government-funded biological threat detection systems, too.
In the past week, Kromek has announced a $5.9mn (£4.8mn) contract from the US Department of Homeland Security Countering Weapons of Mass Destruction Office to develop and pilot an agent-agnostic bio-detection system under a four-year programme. It is focused on the detection, classification and identification of bioterrorism attacks, an increasing priority for governments, particularly in light of the Covid-19 pandemic.
In addition, Kromek’s chemical, biological, radiological and nuclear (CBRN) detection business has secured more than $1mn of orders in nuclear security and bio-security. Chief executive Arnab Basu revealed that one of the orders is from “a new customer [undisclosed for commercial reasons], a substantial, global defence corporation, which we believe represents a significant opportunity for further sales”.
Governments and their agencies are buying Kromek’s products because of their market-leading capabilities and rapid deployment. It’s difficult to envisage a scenario where ongoing geopolitical insecurity, combined with other global threats, will not drive further demand given that the products contribute to public safety and security.
Investors are finally recognising the commercial opportunity, with the share price rallying 56 per cent since my last article (‘Why Kromek shares are a bargain buy’, 23 October 2023). However, it has only taken it back to the May 2023 placing and open offer price when the group raised £7.4mn even though the board has since secured its debt financing.
Importantly, the new orders add to revenue visibility for the CBRN segment, which house broker Cavendish forecasts will deliver 46 per cent higher revenue of £8.9mn in the 12 months to 30 April 2023. It de-risks the broker’s full-year revenue estimate of £21mn, too, which underpins a return to cash profitability. Buy.
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