Kromek : Final Results

24 July 2023

Kromek Group plc

("Kromek" or the "Company" or the "Group")

Final Results

Kromek (AIM: KMK), a leading developer of radiation and bio-detection technology solutions for the advanced imaging and CBRN detection segments, announces its final results for the year ended 30 April 2023.

Financial Summary

• Revenue increased 44% to £17.3m (2022: £12.1m)
• Gross margin improved to 51.6% (2022: 46.7%). Improvement largely due to sale mix and easing of supply chain challenges
• Adjusted EBITDA loss reduced to £1.0m (2022: £1.2m loss)* and positive for H2
• Loss before tax was £7.3m (2022: £6.1m loss)
• Cash and cash equivalents at 30 April 2023 were £1.1m (30 April 2022: £5.1m). Fundraise of £8m (gross) post year end

*A reconciliation of adjusted EBITDA can be found in the Financial Review.

Operational Highlights

Advanced Imaging

• Strong revenue growth with delivery under component supply agreements; secured new milestone contracts; and end products launched into the market
• Significant progress in medical imaging:

1. Signed a landmark 7-year collaboration agreement with a tier 1 OEM to provide CZT-based detectors for use in the customer's advanced medical imaging scanners

1. Entered a collaboration agreement with Analogic Corporation ("Analogic") to develop CZT-based detectors for photon counting computed tomography ("CT") applications in medical imaging and security screening

1. Launch by Spectrum Dynamics Medical ("Spectrum Dynamics") of the world's first digital single- photon emission computed tomography ("SPECT")/CT scanner for higher energy imaging, which uses Kromek's CZT technology

1. Received repeat orders totalling over $2.0m for the supply of detectors for bone mineral densitometry ("BMD") and SPECT applications and the gamma probes market

1. Awarded £2.5m from Innovate UK for two programmes to further develop a low dose molecular

breast imaging technology based on Kromek's CZT-based detectors

1. Further contract win of $1.4m post year end from a new Asia-based OEM customer for CZT-based detectors to be used in the customer's SPECT systems

CBRN Detection

• Record revenue in nuclear security, with the winning and delivery of new and repeat orders, including: o A $1.3m contract from a US customer for the D3M and two orders totalling $1.5m from US
  government customers for the D3S-ID
  o Two contracts, totalling £1.5m, for D3M and D3S-based product products for European government end-users
• Established distribution partnership with Smiths Detection for the distribution of the Group's nuclear security products to North and South American markets, the Middle East and certain key markets in Asia and Australasia
• Post year end, awarded a $1.5m contract in Asia for a new product in the civil nuclear market

Biological Threat Detection

• Concluded long-running programme with the Defense Advanced Research Projects Agency to develop a biological-threat detection solution
• Received a £4.9m contract from a UK government department for a three-year programme to deliver bio-security solutions

Manufacturing and IP

• Significant progress in improving yield and cost efficiency in CZT crystal growth and detector manufacturing
• Nine new patents were filed and four were granted during the year

Dr Arnab Basu, CEO of Kromek, said: "We are pleased to have delivered record revenues, with significant growth in advanced imaging and CBRN detection, and achieved positive adjusted EBITDA for the second half. During the year, we experienced our highest levels of customer engagement, with some of this transitioning to major agreements that are great endorsements of our offering as well as demonstrations of our strategy coming to fruition. Accordingly, we ended the year strongly, with enhanced foundations for future growth.

"We entered the 2024 financial year with a much-strengthened balance sheet and heightened commercial momentum - winning new orders in addition to a growing and substantial opportunity funnel. Accordingly, we anticipate a strong year-on-year increase in revenue and we remain on track to be adjusted EBITDA positive for the full year. This growth will be based on both of our segments, with demand continuing to be underpinned by macro-economic and market conditions. In advanced imaging, there is increasing widespread need for the early and accurate medical diagnosis facilitated by our CZT-based products. In CBRN, global insecurity and raised concern over potential nuclear threats continue to underscore the requirement for products such as ours in this sector. Consequently, the Board looks to the future with confidence."

Investor Webinar

Arnab Basu, CEO, and Paul Farquhar, CFO, will be hosting a webinar for investors at 6.00pm BST on Wednesday 26 July 2023.

The event is open to all existing and potential shareholders. Interested parties should register to attend, and submit any questions, using the following link: https://forms.gle/dbLNhSfdUMuJ7WCx6. Participants are requested to submit questions in advance by 12.00pm on 26 July 2023.

Kromek Group plc

Kromek Group plc is a leading developer of radiation detection and bio-detection technology solutions for the advanced imaging and CBRN detection segments. Headquartered in County Durham, UK, Kromek has manufacturing operations in the UK and US, delivering on the vision of enhancing the quality of life through innovative detection technology solutions.

The advanced imaging segment comprises the medical (including CT and SPECT), security and industrial markets. Kromek provides its OEM customers with detector components, based on its core cadmium zinc telluride (CZT) platform, to enable better detection of diseases such as cancer and Alzheimer's, contamination in industrial manufacture and explosives in aviation settings.

In CBRN detection, the Group provides nuclear radiation detection solutions to the global homeland defence and security market. Kromek's compact, handheld, high-performance radiation detectors, based on advanced scintillation and solid-state readout technology, are primarily used to protect critical infrastructure, events, personnel and urban environments from the threat of 'dirty bombs'.

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The Group is also developing bio-security solutions in the CBRN detection segment. These consist of fully automated and autonomous systems to detect a wide range of airborne pathogens.

Kromek is listed on AIM, a market of the London Stock Exchange, under the trading symbol 'KMK'.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

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Operational Review

In the year to 30 April 2023, Kromek achieved its highest ever revenue - reflecting record revenue in both advanced imaging and CBRN detection respectively - and was adjusted EBITDA positive for the second half of the year. The Group delivered on its existing contracts and development programmes, won new and repeat orders across the business and from around the world, and experienced significantly increased customer engagement regarding future projects. Importantly, some of this engagement transitioned to significant agreements during the year - most notably, with a tier 1 OEM and Analogic in the advanced imaging segment and Smiths Detection in the CBRN detection segment. These agreements are great endorsements of Kromek's technology and solutions, but are also tangible demonstrations of the Group's strategy coming to fruition. Accordingly, the Group continues to deliver on its strategy, and ended the year strongly with a foundation for continued growth.

Advanced Imaging

In the advanced imaging segment, Kromek primarily operates in the medical imaging market with some opportunities in the security screening and industrial screening sectors. Kromek provides OEM customers with detector components, based on its core cadmium zinc telluride ("CZT") platform, to enable better detection of diseases such as cancer and Alzheimer's, contamination in industrial manufacture and explosives in aviation settings. The Group designs, develops and produces CZT detectors and solutions along with specialist electronics, which, when incorporated into its customers' systems, significantly enhance imaging quality to provide high resolution information on material composition and structure, which enables more effective identification and analysis.

In this segment, commercial engagement with customers consists of an initial design phase followed by incorporation of the Group's detectors and technologies into a customer's system and then the award of a multi-year supply contract, which provides long-term revenue visibility.

Medical Imaging

As the only independent commercial producer of CZT at scale, Kromek is well-positioned in the medical imaging market. The rate of introduction by leading OEMs of new medical imaging products that include CZT detector platforms as the enabling technology has been increasing in recent years. GE Healthcare and Siemens Healthineers introduced new products in their clinical SPECT and CT businesses in 2021 and Spectrum Dynamics launched the VERITON-CT 400 Series in 2022. SPECT and CT, as well as molecular breast imaging ("MBI") and BMD, are key target areas for future growth as they address diseases particularly associated with an ageing population such as cancer, Alzheimer's, Parkinson's, cardiovascular illnesses and osteoporosis - with higher resolution images enabling earlier diagnosis for better patient outcomes and reduced overall cost of care. Kromek also serves the gamma probes market in this sector, which are used during surgeries for the removal of lymph nodes.

This has been a milestone year in terms of the Group's medical imaging activity. Most notably, Kromek signed collaboration agreements with a recognised tier 1 OEM and with Analogic to develop CZT-based detectors for use in their advanced imaging scanners. The agreement with the tier 1 OEM, which is a leading health- technology company, has an initial period of seven years. This comprises a short development phase when the parties will work together to integrate Kromek's CZT-based detectors into the customer's medical imaging scanners, with the agreement then transitioning to a longer commercial supply phase.

With Analogic, who have been global leaders in CT detector technology for over 50 years, Kromek is developing CZT-based detector solutions for photon counting CT applications in both the medical imaging and security screening sectors. Its CZT sensors will be integrated with Analogic's detector designs and, as the project progresses towards commercialisation, Kromek will ensure production capacity is available to support their demand.

Another key milestone during the year was the introduction by Spectrum Dynamics of the VERITON-CT 400 Series, the world's first digital SPECT/CT scanner capable of high energy imaging, which uses Kromek's CZT detector technology. Kromek believes that this product is receiving wide-ranging interest, and the Group's business with Spectrum Dynamics is tracking as expected.

Post year end, Kromek received an order worth $1.4m from a new OEM customer that is an established player in the medical imaging sector in Asia. The order is for CZT-baseddetector-modules for use in the

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customer's next generation SPECT systems. Delivery and revenue recognition are expected in the current financial year.

In total, Kromek is now working with nine OEMs in SPECT and CT, including its current customers, and the Group expects some of the engagements to transition to formal significant contracts for final design and integration followed by the supply of CZT detectors and modules in the near term.

In its regular repeat business, the Group received two orders during the first half of the year worth £751k, with one being for the supply of detectors for BMD applications and the other for the gamma probes market. Kromek has seen an increase in demand for detectors in the BMD segment and the Group expects that demand to grow significantly over the next two years as rapid adoption of its customer's systems continue in China. In the second half, the Group received three further orders totalling $1.1m, which were primarily for SPECT applications.

Kromek continued to make progress under its development programme for ultra-low dose MBI technology based on its CZT-based SPECT detectors, which can significantly improve the early detection of breast cancer in women with dense breast tissue. The Group is expecting to enter the clinical study phase of this technology development with a US-based OEM customer over the next year. Kromek also received approximately £2.5m in funding from Innovate UK for two programmes to further develop an MBI system. The projects are being conducted in collaboration with the Newcastle-upon-Tyne Hospitals NHS Foundation Trust, the University of Newcastle-Upon-Tyne and University College London.

Security & Industrial Screening

In security screening, the Group's technologies are used in travel, primarily aviation, settings to enable its 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. The Group provides OEM and government customers with components and systems for cabin and hold luggage scanning. In industrial screening, Kromek provides OEM customers with detector components for incorporating into scanning systems used during manufacturing processes to identify potential contaminants.

During the year, Kromek continued to deliver under its existing component supply agreements and development programmes. As noted above, the detector solutions to be developed under its collaboration agreement with Analogic, that was entered during the year, will be for security applications as well as medical.

CBRN Detection

In CBRN detection, the Group provides nuclear radiation detection solutions to the global homeland defence and security market. Kromek's compact, handheld, high-performance radiation detectors, based on advanced scintillation and solid-state readout technology, are primarily used to protect critical infrastructure, events, personnel and urban environments from the threat of 'dirty bombs'. 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 establishments.

Nuclear Security

The Group experienced a significant increase in demand for its nuclear security products - with multiple new and repeat orders being won and delivered during the year - as geopolitical instabilities continued to drive greater global government defence and security spending. Kromek also established key distribution partnerships to support continued expansion in this market. Accordingly, the Group delivered record revenues in nuclear security in 2023. Its detector solutions were used in multiple high-profile sporting, political and state events in the UK, across Europe and in the US. In May 2023, for example, the Group's D3S product range was used by the EU Commission Protective Security Advisor team to provide security at an event in Aachen, Germany where President Zelensky of Ukraine was awarded the Charlemagne Prize for work done in the service of European unification.

During the year, Kromek received, and delivered, a $1.3m contract from a US customer for the D3M and two orders totalling $1.5m from US government customers for the D3S-ID, all of which were repeat orders. The Group also received, and delivered, two contracts, totalling £1.5m, for the supply of the D3M and D3S-based nuclear security products to European government end-users - with the contracts having been secured through its distribution and procurement partners. The large proportion of repeat orders reflects the increasingly regular nature of the Group's business in this market.

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