Kromek warns of contract delays from government and OEM customers

LONDON (ShareCast) - Shares (Berlin: DI6.BE - news) in x-ray and gamma-ray detection company Kromek were traded 10% lower after it warned that revenue growth for the full year would be lower than it had recently boasted. At the time of its interim results in January, Kromek, whose products are used by the security, narcotics, civil nuclear, counterfeit testing, medical and defence industries, had told investors that revenues in the second half would double over those of the first.

But delivery of a pair of contracts worth a combined £1m has been pushed back into the next financial year, meaning the second half will be 53% higher than the first.

Kromek, which recently secured its finances with a £3m revolving credit facility with HSBC, added that its increasing order book and strong pipeline provided it with improved visibility going forward, but that dealing with government agencies and OEMs was "making it difficult to predict the exact timing of some of the contracts".

The market was unimpressed despite the AIM-listed company saying full year sales will still increase 38% to £8.1m for the year to 30 April, with a further £0.5m contract subject of advanced-stage negotiations and an extension to its US Department of Defense contract announced on the same day.

Furthermore to the positive, the Anglo-American company expects full year earnings before interest, tax, depreciation and amortisation to be in line with market expectations, including being EBITDA-positive for the second six months of the year thanks to better revenue mix and tight cost control.

On its outlook for the new fiscal year, management said they believe the largest opportunities are in the three areas of computerised tomography (as used in CT scans), single-photon emission computed tomography (SPECT - providing 3D scans) and portable advanced radiation detectors, where its technologies bring "important and differentiated performance advantages".