Kromek Group plc Annual Report 2014

FY2014 Annual Report · Kromek Group plc
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Kromek Group plc 
Annual report and accounts 2014

Kromek is a leading 
provider of patented 
radiation technologies to 
the medical imaging, nuclear 
detection and security 
screening markets.

Our vision
To be the world-leading provider 
of multispectral radiation detection 
products and technologies enabling our 
customers and users to take more timely 
decisions based on superior information.

We operate in three large, growing 
global markets:

Overview
IFC  Overview

1  Highlights of our year

2  At a glance

4  Chairman’s statement

6  Chief Executive’s Q&A

Strategic report
8  Business review

10  Our key strengths

11  Our business model

12  Our strategy

14  Our technology

16  Our markets

Corporate governance
20  Board of Directors

22  Review of principal risks

24  Corporate governance report

26  Directors’ report

28  Directors’ remuneration report

Financial statements
30   Independent auditor’s report
32  Consolidated income statement

32   Consolidated statement 

of comprehensive income

33   Consolidated statement 
of ﬁnancial position

34   Consolidated statement of changes 

in equity

35  Consolidated statement of cash ﬂows

36   Notes to the consolidated 
ﬁnancial statements

61  Company statement of ﬁnancial position

62  Company statement of changes in equity
63  Company statement of cash ﬂows

64   Notes to the Company ﬁnancial statements
68  Ofﬁcers and professional advisors

Medical imaging
Improved and earlier 
diagnoses, better patient 
outcomes and lowering 
overall cost of healthcare.

Nuclear detection
More accurate information 
leads to better safeguarding 
of people and increases 
in operational efﬁciency.

Security screening
More detailed, reliable 
and efﬁcient detection of 
threats whilst maintaining 
operational efﬁciencies of 
airports.

Read more in the business 
model on page 11

Read more in the 
at a glance on page 2

Kromek Group plc  Annual report and accounts 2014

1

Highlights of our year

 (cid:180) Year on year revenue growth of 122%

 (cid:180) Product-based revenue increased from £1.8m to £4.7m

 (cid:180) Strong cash position of £6.6m

 (cid:180)  Successful IPO providing access to wider shareholder base 

and platform for future growth

 (cid:180)  Completed successful operational integration of eV Products, Inc., 

our second US acquisition

 (cid:180)  Further improvements in CZT material and detector 

manufacturing processes

 (cid:180) 28 new patents were ﬁled or awarded

 (cid:180) Investment in expanded sales and marketing capability

 (cid:180)  Multiple new and signiﬁcant contract wins in the medical imaging 
market: for CT, including a development contract with a top four OEM; 
in BMD; and also an agreement for the supply of imaging modules 
in China

 (cid:180)  A number of important contracts from both commercial and 
government customers won in the nuclear detection market

 (cid:180)  The start of phase one of the implementation of the EU regulatory 
framework on 31 January 2014, which is the key to sales of the 
bottle scanner product in Europe

2014 revenue (£m)

£6.0
+122%

2013 revenue (£m)

£2.7

2014 adjusted EBITDA (£m)

£(2.5)
+22%

2013 adjusted EBITDA (£m)

£(3.2)

2014 cash (£m)

£6.6

2014 debt (£m)

£0.0

2013 cash (£m)

£0.3

2013 debt (£m)

£2.5

Visit us online
 (cid:180) www.kromek.com

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Kromek Group plc  Annual report and accounts 2014

Overview
At a glance

Kromek designs, develops and produces 
x-ray and gamma-ray imaging and 
radiation detection products.

 (cid:180) Global customer base

 (cid:180)  Meeting needs of customers through providing both end user products (“EUPs”) 

and original equipment manufacturer (“OEM”) components

The Group’s business model provides a 
vertically integrated technology offering 
to customers. From the growth of cadmium 
zinc telluride (“CZT”) crystals to ﬁnished 
products or detectors, including software, 
electronics and application speciﬁc 
integrated circuits (“ASICs”).

Channel
Existing products and 
strong customer base

Production
World-leading CZT 
delivery capability

Experience
Experienced 
management team 
with 250 combined 
years’ experience

Demand
Large market with 
unmet needs

For a more in-depth look 
at our business model, 
turn to page 11

Read more about our 
markets on page 16

Integration
Vertically integrated 
technology offering

Employees

100+

Patents

240+

Kromek Group plc  Annual report and accounts 2014

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We constantly evaluate new 
opportunities for our existing 
and complementary technologies.

Where we operate

Kromek’s major operational facilities are in California, 
Pennsylvania and Durham. In addition to our sales ofﬁce 
in Germany, we have established sales and distribution 
relationships covering Europe, North America and 
Asia Paciﬁc.

Corporate facilities and sales

Sales and distribution partners

3

4

2

1

North America

Europe and Africa

Asia Paciﬁc

1

2

3

4

NOVA R&D, Inc.
California

eV Products, Inc.
Pennsylvania

Group headquarters, UK
Durham

Kromek Germany Limited
Düsseldorf

 
 
 
4

Kromek Group plc  Annual report and accounts 2014

Overview
Chairman’s statement

The Group has seen revenue growth 
across all three trading entities.

(cid:3)(cid:180) Richard Morgan, Chairman

Introduction

2013–14 was a very challenging year for Kromek but one 
in which important transformational changes were achieved. 
In addition to the successful rationalisation and integration 
of eV Products, which approximately doubled the number of 
employees in the Company, important achievements were made 
in the marketplace. The progress in the contractual partnership with 
one of the leading CT system manufacturers was an important 
step forward for the Company in the medical diagnostic imaging 
market, which is dominated by just four major companies. 
The foundations of this and other advances were laid while 
the Company was preparing for and successfully completing 
its initial public offering (“IPO”) and admission to AIM. 

Unfortunately, it became clear to the Board that some of 
the contracts that had been expected (most of which have 
subsequently been conﬁrmed) were not going to be booked and 
shipped in time for the revenue to be recognised in the ﬁscal 
year to the end of April. This included a promising alliance with 
an emerging Chinese company to develop novel components 
for the medical imaging market in China. As a result, the Board 
realised that the revenue was going to fall short of the budget 
prepared last summer and this was the subject of a public 
announcement on 28 March. While we have met the 
subsequently lowered sales forecast, which shows a signiﬁcant 
growth from the previous year, we are disappointed with the 
shortfall and have taken steps to ensure that our forecasting 
is much improved in the future. The Board continues to spend 
a lot of time reviewing in considerable detail both the strategic 
framework of the business and the operational procedures that 
feed into the ﬁnancial planning and budgeting system. I am 
pleased to report that the changes that were made to the Board 
at the time of the IPO and subsequently have strengthened it 
considerably and we are united in our commitment to improve 
all aspects of our business going forward.

Completing the IPO and raising the amount of funding aimed 
for was a critical step for Kromek. The Company managed to 

achieve a lot of progress in the years leading up to the IPO with 
barely adequate ﬁnancial resources. This culminated in the 
acute ﬁnancial challenges we faced in completing the acquisition 
of eV Products, which we regarded as a vital strategic step in many 
different dimensions. That belief has been more than justiﬁed by 
subsequent events, and the funding raised in the public offering 
has allowed the Company for the ﬁrst time to focus on a number 
of fundamental aspects of the business and improve our 
operational and strategic capability.

Good progress has been made in most of our target markets 
and the Company has started to build on the headway achieved 
in all three major sectors, with the addition of key sales and 
marketing personnel. While the security market (bottle scanners 
for the analysis of liquids, aerosols and gels or “LAGs”) has 
continued to prove challenging, we have conﬁdence in the 
performance capabilities of the Kromek product, which has been 
further reﬁned in the last two years. We have made progress 
in penetrating this market, which only started to become active 
in the second half of last year. Despite having seen some 
disappointments in Japan for our nuclear products, we have 
managed to build on the underlying product platform and have 
won some important new contracts from the US Government 
and other customers. Alongside the progress we have made 
in medical imaging, we feel conﬁdent that the basic metrics 
underpinning the business are moving in the right direction.

Kromek Group plc  Annual report and accounts 2014

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“A transformational year.”

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Financial results

The results for 2013–14 show an increase in revenue to £6.0m 
(2012–13: £2.7m), with the Group returning an adjusted loss 
before tax of £4.3m (2012–13: loss of £4.1m). This represents 
strong revenue growth across the business, up £3.3m on the 
prior year, with second half revenues of £3.7m, ahead of those 
in the ﬁrst half by over 60%. This increase was driven by both 
product sales and revenues from government contracts, as well 
as commercial technology development agreements. The result 
for the year is stated after internal research and development costs 
of £2.0m (2012–13: £0.5m), which have been expensed through 
the income statement. These costs relate to investment in core 
technology, platform development and driving manufacturing 
efﬁciency to provide a strong and enhanced base for future 
proﬁtability. The Group reported a basic and diluted loss per 
share of 5p (2012–13: loss of 8p per share) and an adjusted 
loss per share of 5p (2012–13: loss of 40p per share). At the balance 
sheet date, Group cash stood at £6.6m (2012–13: £0.3m).

Employees and partners

I would like to take this opportunity to thank all of our stakeholders 
– customers, suppliers, employees and shareholders – whose 
continued efforts and support have been key to our success. 
I would also like to extend my thanks to Charlotta Ginman for 
taking over the audit committee chair in March of this year and 
to Jerel Whittingham for chairing the remuneration committee.

Outlook

Kromek’s area of expertise, radiation detection and imaging, 
represents one of the most basic and important techniques used 
globally for gaining better information about objects and the 
environment. Its importance can be seen on a daily basis in 
hospitals and airports throughout the world, as well as in its 
importance to those, both civil and military, serving to keep 
us safe from threats of various sorts. 

Our ﬁnancial position is robust with no debt and a strong cash 
position. With a strong order book and such a rich opportunity 
set given the Group’s key proprietary technologies, international 
scope and integrated business model, the Board believes the 
Group is well positioned for continued growth and looks forward 
to the future with conﬁdence.

Richard Morgan
Chairman
27 August 2014

 
 
 
6

Kromek Group plc  Annual report and accounts 2014

Overview
Chief Executive’s Q&A

(cid:3)(cid:180) Dr Arnab Basu MBE,  
Chief Executive Ofﬁcer

How would you describe the last year for the Group?

Busy is the ﬁrst word that comes to mind! The business has 
moved from a technology development phase into a period where 
we are now focused on growth that years of investment in our 
technology have enabled. This has required us to be successful 
on several fronts: making good progress on customer-funded 
product development projects; completing the very successful 
operational integration of eV Products; attracting some important 
senior hires; and, of course, the IPO and admission to the 
AIM market.

What has the IPO achieved?

Joining the AIM market gave us capital, liquidity and credibility; 
all of these will help us grow. As well as accessing the capital 
needed for our expansion and scaling-up of activities, meeting 
the stringent requirements needed to successfully complete 
admission to a regulated market gives customers a higher level 
of trust and conﬁdence in us as potential partners. We have also 
beneﬁted from the greater proﬁle. Additionally, if any attractive 
merger and acquisition (“M&A”) opportunities present themselves, 
such as the eV Products and NOVA acquisitions, then our listing 
can only help.

What do you see as Kromek’s key competitive advantages?

Of course the market is competitive but we choose opportunities 
that best utilise our differentiators. We have deep experience, 
know-how and patent-protected manufacturing techniques, 
which allow us to produce world-leading CZT-based radiation 
detectors, as well as the electronics and software which 
analyse the improved information they capture.

With our vertical integration we can put solutions together 
using our range of capabilities in different ways, like “Lego bricks”. 
This allows us to meet the new, emerging needs of our customers 
quickly and can deliver components and products that meet 
their challenges. Collectively I believe these give us a signiﬁcant 
competitive advantage in our target markets.

Is the market adopting your products 
and technologies at the rate you expected?

We are pleased to have seen strong growth and traction this 
year, but at the same time, have had delays that impacted our 
revenues for the year, which we notiﬁed to the market in March. 
We were obviously disappointed that some contracts were 
delayed and we weren’t able to recognise the revenues in the 
period where they were expected within the ﬁscal year. There 
is, however, a strong match between our speciﬁc capabilities 
and urgent customer needs in our target sectors of medical 
imaging, nuclear detection and security screening.

Accurate, quarter by quarter proﬁling can be a challenge when 
dealing with very large organisations and government departments. 
We are proud to be selected by such large-scale organisations 
as there is no better validation of our technology, but what goes 
with that is working to their schedules. This is a lesson that we 
have had to learn. The pipeline and our ability to capitalise on it 
is as strong as ever and the focus for 2014–15 is to build on that.

Why do your customers choose you? 
What beneﬁts does Kromek bring?

Well, that can be answered in several ways, from our technology 
and performance differentiators to our offering of ready-to-use 
solutions. Ultimately, however, in all our application markets, 
the pressing need is for more useful and better quality information 
to make improved assessments of risks, whether that be of cancer, 
radiation contamination or a bomb. This allows either more 
rapid and effective interventions or, equally important, more 
conﬁdent reassurance that all is well.

It is this basic need for deeper insight that Kromek’s imaging 
and detection products are repeatedly demonstrating that they 
can satisfy, evidenced both by new customer sales and by daily 
use of our products in airports and scores of hospitals.

Kromek Group plc  Annual report and accounts 2014

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“ Technology leadership forms the basis of our ability to deliver superior 
value to our customers. It comes from focused investment and a deep 
understanding of how to produce, manipulate and engineer CZT into 
cost-effective products for use in multiple applications.”

Is your business model scalable?

Our development of future products and our manufacturing 
capacity are scalable and our approach was designed this way. 
We can share base technologies to a broad degree across sectors. 
This also reduces development cost and risk for us and our partners. 
Our manufacturing can also be stepped up incrementally in line 
with demand. As a result, we will never have to make massive 
capital-intensive generational “bets” as is typical in the 
microprocessor world. Of course, careful investment choices 
will still be required at various stages of our growth.

Do you have the right team in place?

We are always alert to attracting and retaining the right talent 
to help take us further, for example, we focused especially on our 
sales and marketing team this year. Our acquisition of eV Products 
brought in a lot of additional talent too. We have more than 
100 employees across the globe and 19 PhDs amongst them. 
We have a very accomplished and industry-experienced 
technology and product development team.

Why are you in your chosen markets? 
How were they selected?

Key factors are opportunity size and potential for growth and 
the match of the customer needs with our technology strengths. 
Additionally, we seek synergy overlaps in the base technologies 
required to address the selected segments. With competition 
and so many applications and needs for radiation detection, 
we cannot try to meet every possibility in every ﬁeld. We have 
to be disciplined and focused.

Does any one of your core markets excite you more 
than the others?

They excite me equally but in different ways. Medical is our 
biggest opportunity medium term in that, in the last year, we 
have made the biggest advances since the Company was founded. 
The development deal in CT with one of the top four OEMs is 
strategically important and potentially very rewarding.

Shorter term, the aviation security LAGs market is expanding, 
effectively playing catch-up after a period of regulatory delay. 
That, at least, gave us an opportunity to even further strengthen 

our product. Over the next few years, signiﬁcant opportunities 
are still to come in Europe and the rest of the world. Our unique 
ability to become fully integrated into OEM partners’ checkpoint 
scanners, once the current transitional phase of standalone 
equipment is over, is also exciting.

Finally, we are seeing some further opportunities in nuclear 
detection, which is already a large market and has developed 
a lot in the previous 12 months alone.

What are the challenges of being a young company 
competing in large and growing international markets?

Optimal channels to market can be a stretch for a youthful 
company with global opportunities in large markets. We cannot 
afford to ignore the terriﬁc opportunities that OEM partnerships 
offer, albeit with ultimate market access and time dependent on 
them. Our revenues this year represent considerable growth 
but we are still a small company in large competitive markets. 
However, despite these and other challenges, the foundation 
stones have now been laid for the success of the Company 
and the real growth phase is ahead of us. 

Are there further target markets?

In terms of applications markets, our technology platform has 
multiple areas where it could make a difference, but we are 
extremely focused on the three sectors that we have selected. 
In terms of geographic markets, Asia is a very large and attractive 
market and we are working hard to increase penetration. We have 
experienced some encouraging early traction, as evidenced 
by recent contract wins announced since the year end.

What are you hoping to achieve in the next 12 months?

With so many opportunities that could be addressed we will 
certainly need to stay very focused. The coming year is about 
growing revenues, strengthening our capabilities and ensuring 
Kromek is recognised as the radiation detection specialist of 
choice in our target sectors. We want to demonstrate the full 
potential of Kromek by securing further blue-chip contracts with 
world-leading companies and deliver on our existing commercial 
agreements. The combination of those can deliver signiﬁcant 
value back to our shareholders.

 
 
 
8

Kromek Group plc  Annual report and accounts 2014

Strategic report
Business review

Strategic report
(cid:3)(cid:180) with Dr Arnab Basu MBE, CEO, and Derek Bulmer, CFOCFO

Revenue

Gross margin (%)

EBITDA

Exceptional items

Adjusted EBITDA

Result before tax

Adjusted result before tax

Tax

Result after tax

Adjusted result after tax

Net cash

2013–14
£’000

5,972

65%

(2,483)

—

(2,483)

(4,295)

(4,295)

1,106

(3,189)

(3,189)

6,563

2012–13
£’000

2,691

47%

(773)

2,418

(3,191)

(1,656)

(4,074)

1,013

(643)

(3,061)

309

Overview
During the ﬁnancial year to 30 April 2014 the Group experienced 
a period of signiﬁcant change and took a number of steps towards 
becoming the leading provider of patented radiation technologies 
to the medical imaging, nuclear detection and security 
screening markets.

The Company acquired eV Products, Inc. in the US in February 2013, 
and the ﬁnancial and operational integration of the business 
has been successfully completed. The Group now has greater 
technological and production capability and has secured a strong 
range of products for the medical market to supplement those which 
it had previously. The management of the Group and the team in 
the US have successfully integrated the eV Products business 
during the year and executed a challenging turnaround, resulting 
in year on year growth and EBITDA proﬁtability for this business 
in a very short timescale.

The Group’s shares were also successfully admitted to trading 
on AIM during October 2013 following a successful IPO, which 
raised £13.4m net from new investors. This provides funding 
capital for the Group to drive its growth through the expansion 
of its product portfolio and technology platform; an increase 
and investment in its sales and marketing process and capacity; 
and the opportunity to undertake further capital expenditure in 
both the UK and US to facilitate continued efﬁciency and 
capacity improvements.

The results for 2013–14 show revenue of £6.0m (2012–13: £2.7m) 
and an adjusted EBITDA loss of £2.5m (2012–13: loss of £3.2m). 
Adjusted loss before tax was £4.3m (2012–13: loss of £4.1m), 
with cash at the balance sheet date of £6.6m. The Group 
is now debt free.

Revenue grew £3.3m on the prior year, an increase of over 122% 
(with like-for-like growth of over 40%, assuming a full year’s prior 
annual revenue of eV Products). The second half revenue of £3.7m 
represents growth on the ﬁrst half revenue to 31 October 2013 
of 60%.

Despite absorbing eV Products, which was previously loss making, 
the Group managed to return an adjusted loss before tax of £4.3m 
against a loss of £4.1m for the prior year.

Sales
Sales in the year were £6.0m (2012–13: £2.7m), representing 
growth across all of the trading entities of the Group, with the 
UK showing growth of 18% and the US growing nearly 228% 
year on year (47% on a like-for-like basis) despite the challenges 
set by contract delays and adoption rates during the period 
as noted in the trading update to the market in March 2014. 
Details of the sales growth can be seen in note 6 to the 
ﬁnancial statements.

The growth in sales resulted from contract wins with the bottle 
scanner, with devices installed in over 25 airports across Europe 
and Australia. The Group also saw growth in a range of medical 
products sold to businesses in the US, as well as securing and 
commencing a number of US Government contracts.

Growth in revenue is a fundamental driver for any business but 
especially so for one that seeks to commercialise its technology. 
The level of sales, despite being below original estimates, indicates 
accelerating traction and growing adoption of the products and 
technology offerings that the Group provides across our target 
markets. The Group has invested in expanding its sales and marketing 
team and has recruited both senior and ﬁeld sales personnel.

Kromek Group plc  Annual report and accounts 2014

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the result for the year was impacted by the level of depreciation 
and amortisation of intangible and tangible assets which rose to 
£1.3m (2012–13: £0.7m), largely due to the full impact of eV Products 
for the year. Further, the result was also subject to a higher interest 
charge of £0.5m (2012–13: £0.2m), which will not recur following 
the repayment of loans. The operating and overhead cost base 
of the business remained stable on a comparable basis, other 
than the impact of the recurring costs resulting from the admission 
to AIM, which were in line with expectations. 

Tax
The Group beneﬁts from the UK Research and Development Tax 
Credit and recorded a credit of £0.7m for the year (2012–13: £0.8m). 
In addition, the Group saw a movement in the deferred tax 
provision of £0.4m, resulting in an overall tax credit to the 
income statement of £1.1m (2012–13: £1.0m).

Earnings per share (“EPS”)
EPS are recorded in the year on a basic and diluted basis of a loss 
of 5p per share (2012–13: loss of 8p per share) and an adjusted 
basic and diluted loss of 5p per share (2012–13: loss of 40p per 
share). Due to the Group having losses in each of the two years, 
the diluted EPS for disclosure purposes is the same as the 
basic EPS.

Cash and debt 
Group cash stood at £6.6m following net receipts from the IPO of 
£13.4m and repayment of debt and accrued interest of £3.0m. The 
Group repaid all previously outstanding loans by 31 October 2013 
and consequently removed the debenture held over the assets 
of the Group by Polymer Holdings. 

Capital expenditure
Capital expenditure for the year amounted to £0.2m, of which 
£0.1m was supported by receipts of a grant from the Regional 
Growth Fund awarded during 2012–13.

Employees
Employee numbers are an important measure in the cost 
management of the business, representing expenditure in the year 
of £5.1m (2012–13: £3.4m). The average employee numbers 
for the year were 101 (2012–13: 75), though the actual number 
at the year end, excluding Non-Executive Directors, was 105 
(2012–13: 101), indicating that staff numbers remained broadly 
in line on a pro-rata basis.

During the year, Derek Bulmer (CFO), was appointed to the Board 
as an Executive Director and Lawrence Kinet, Peter Bains and 
Charlotta Ginman joined the Board as Non-Executive Directors. 

We would also like to extend our gratitude to all of our customers, 
suppliers and employees across the Group who have contributed 
to the growth and development of the business and we look forward 
to their valued input as we commercialise the technology during 
the next year.

Recent announcements relating to government contracts, the 
sale of bottle scanners into Asia and a number of contracts for 
the sale of the Group’s range of nuclear products and technology 
solutions provide clear evidence of the Group’s developing sales 
and marketing operations.

Gross margin
The gross margin (before direct overheads and labour costs) on 
sales for the year of 65% (2012–13: 47%) was favourably affected 
by the full-year impact of the acquisition of eV Products, stronger 
levels of product sales plus higher levels of revenue from 
government contracts and commercial development agreements.

The Group continually reviews and develops efﬁciency models 
and considers capital expenditure options to retain and improve 
the margins that are achieved. This is manifest in the year and 
also in the Company’s continued commitment to research and 
development, not only into core technology and products, but 
also production processes and methodology.

Research and development
As noted above, the Group continues to invest in the development 
of products and its technology platform in order to advance its 
commercial advantage and increase margin on sales. During the 
year the Group undertook a total expenditure on research and 
development of £3.1m (2012–13: £1.4m) with £1.9m undertaken 
in the UK (2012–13: £1.4m) and £1.2m in the US (2012–13: £nil). 
The increase in the US reﬂects the impact of eV Products and 
NOVA, where several products have been developed in the year.

Of the £3.1m spent on research and development during the year, 
£1.1m relates to commercial near-term product development that 
has been capitalised (2012–13: £0.9m). This expenditure saw eight 
new nuclear products and ﬁve new medical products developed. 
This provides further short and medium-term opportunities for sales 
and reﬂects the capability of the Group to draw from its technology 
platform and rapidly develop bespoke, need-speciﬁc products, 
utilising the vertical integration model that is reﬂected in the skill 
set and proﬁle of the employee base.

The balance of R&D expenditure of £2.0m for the year  
(2012–13: £0.5m) was expensed through the income statement 
and reﬂects further investment in Kromek’s core technology, 
platform developments and improved manufacturing efﬁciency. 
This investment provides a strong and enhanced basis for efﬁciency 
and proﬁtability in future years and strengthens the market position 
of the Group’s technology. During the period, a total of 28 patents 
were ﬁled or awarded.

All research and technology programmes, whether for product 
development or core technology, are subject to tightly controlled 
and monitored processes and project management. 

Result before tax 
Despite absorbing the full results of eV Products during the year 
(which was previously loss making), the Group managed to return 
an adjusted loss before tax of £4.3m (2012–13: loss of £4.1m) – see 
table opposite. Whilst the growth and change in the mix in revenue 
year on year has enhanced margin and resulted in an improved 
adjusted EBITDA of a loss of £2.5m (2012–13: loss of £3.2m), 

 
 
 
10

Kromek Group plc  Annual report and accounts 2014

Strategic report
Our key strengths

We are an experienced team delivering 
differentiated beneﬁts to an established 
and increasing customer base in large 
and growing world markets.

1. Established and growing blue-chip 
customer base

cancerous cells or special nuclear materials. These advanced 
systems require multispectral detection capabilities and the 
means to interpret the data they collect. 

The Group’s customer base is global and includes market leading 
OEMs in the medical imaging sector, government agencies, 
nuclear power plant operators and decommissioning contractors 
in the nuclear sector. Kromek also has an increasing customer 
base in the security market, which includes international 
airport groups and OEMs. 

2. Proprietary CZT production technology

Kromek is the world’s only multi-site, multipurpose CZT 
developer and supplier. The Company’s UK and US facilities 
have both been chosen by the US Government for materials 
delivery programmes. The Group has over 20 years of experience 
(the most extensive in the world) with successive generations 
of CZT production technology. In addition to its leading current 
capabilities in the travelling heater method (“THM”) (a method of 
producing CZT), the Group is the only organisation to have developed 
a patented vapour phase growth technique vital to its capability 
of producing bulk CZT material with good structural integrity, 
uniform composition and high purity, which are all important 
qualities for future product and market needs.

3. Vertical integration 

Kromek’s OEM customers are involved in developing and 
making x-ray or gamma-ray based detection and imaging 
systems. These systems are designed to have signiﬁcantly higher 
performance and functionalities, in order to aid better detection 
and identiﬁcation of harmful materials such as explosives, 

Kromek’s ability to provide the complete chain of technologies 
(detectors, electronics, simulators and application design) required 
by the customer to adopt multispectral or CZT detectors lowers 
the adoption barrier and provides lower cost and a faster path 
to ﬁnal product for the customer. Having the “semiconductor to 
solutions” model also allows Kromek to be a value-added partner 
to OEMs. Kromek also utilises the vertical integration model, its 
technology building blocks, to develop and compete at selected 
EUP levels in our core markets. 

4. Large and growing target markets 
with signiﬁcant unmet needs

Kromek’s products address three key sectors: medical imaging, 
nuclear detection and security screening. There is a growing need 
within each of these markets for improved radiation resolution and 
sensitivity, to provide accurate materials identiﬁcation or differentiate 
between closely related materials (e.g. harmful versus benign 
liquids, cancerous versus normal tissue). These needs are well 
matched to the Group’s capabilities. 

The Group’s products are in commercial use in all of its three 
target markets. Scanners with Kromek’s detection systems are 
being used to diagnose cancer, osteoporosis and other diseases 
in hospitals around the world; its detectors are being used in 
nuclear power plants, research centres and nuclear decommissioning 
sites; and its bottle scanners are in daily use to screen liquids 
in European airports. 

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Kromek Group plc  Annual report and accounts 2014

11

Our business model

Markets

Medical
imaging

Nuclear
detection

Security
screening

Products

OEM 
components

Contract 
development

End user 
products

Technology

Systems engineering

Applications development

Algorithms and software

ASICs and electronics

Bonding and hybridisation

Detector fabrication

Materials and detectors

Intellectual property (“IP”)

Patents

Trademarks

Trade secrets

Organisation

People and infrastructure

eV Products

NOVA R&D

Kromek UK

Kromek 
Germany

5. Experienced management 
and technology team

Kromek’s management team has a combined 
experience of over 250 years in relevant technical, 
commercial and operational areas. Members of 
senior management have worked in both large global 
corporates and successful high-growth start-ups, a 
combination that is important for the current growth 
phase of the Group. The team has also executed 
a number of successful M&A transactions and been 
active in managing post deal integration. The Board 
has a diverse and international background with 
substantial public market experience.

Cumulative market in 
Kromek’s target segments*

$2.67bn

* See page 13 for deﬁnition and further information.

 
 
 
12

Kromek Group plc  Annual report and accounts 2014

Strategic report
Our strategy

Our strategy is based on maximising the potential 
of our CZT technology and focusing on market 
segments where it can have most impact.

1

2

3

Element
Integration up the value 
chain with a “semiconductor 
to solutions” model

Element
Address three core markets: 
medical imaging, nuclear detection 
and security screening

Element
Revenue from both end product 
and OEM sales

Driver
 (cid:180) Enhance value capture and increase 

Driver
 (cid:180) Three of the largest growth sectors 

Driver
 (cid:180) Revenue optimisation of technology 

barriers to entry

in radiation detection

and product evolution

 (cid:180) Ease end user adoption in a specialised 
and non-commoditised technology

 (cid:180) Good match to capability and strong 

technology synergies

 (cid:180) Product optimisation given close 

 (cid:180) Balance focus and diversify 

relationship between technology layers

market risks

Example execution during the year
Kromek’s activity remains focused 
only in these markets and in carefully 
chosen sub-segments of each. There are 
signiﬁcant growth opportunities in each.

Example execution during the year
Additional contract wins in both OEM 
and EUP segments. 

Signiﬁcant new contract announcements 
in OEM medical imaging market.

Example execution during the year
Further strengthening of key areas. For 
example, additional CZT capacity in the 
UK, improvement in production process 
efﬁciency and further strengthening in 
software and simulation capabilities. 

Integrated offering allowed Kromek 
to effectively respond to several new 
opportunities, which resulted in new 
business wins.

We operate in three of the largest segments 
in radiation detection within very selective 
sub-segments of those markets based on:

 (cid:180) Existing or deﬁned need in a sizeable and growing market

 (cid:180) Match of core competency to market need

 (cid:180)  Synergy: strong overlap in base technologies required to serve these markets 

Kromek Group plc  Annual report and accounts 2014

13

Strategy will be formally reviewed 
on an annual basis to reﬂect technology 
and market developments.

4

5

6

Element
Focus only on applications 
where Kromek’s IP can have 
major commercial impact 
and utilise common product 
platforms where possible

Element
Use both organic growth and 
selective acquisition for growth

Element
Evolve towards a more sector-
focused divisionalised structure

Driver
 (cid:180) Higher margins and reduced adoption 
risk. Given broad opportunities, focus 
on those with highest differentiation 
and value

 (cid:180) Reduce cost and lower 
development time

Driver
 (cid:180) Maximising growth opportunity 

and rate

 (cid:180) Access channels to market

 (cid:180) Consolidation of capabilities

Driver
 (cid:180) Maximise the efﬁcacy of core technology 
and IP investments whilst recognising 
and addressing different cultures, buying 
cycles and needs in end user markets

 (cid:180) Better serve customers within 

the individual sectors

 (cid:180) Enhance sector expertise

Example execution during the year
Winning contract to supply Kromek’s 
CZT imaging modules in China.

New products developed (e.g. Quant for 
GR1) based on common core technology.

Example execution during the year
Completion of highly successful operational 
integration and turnaround of eV Products 
post acquisition in the second half of the 
previous ﬁnancial year with sales growth 
and advances made in CZT growth and 
detector manufacturing techniques.

Example execution during the year
Review of IP management processes 
and review of IP assets versus market 
needs and competition.

Investment in key additional sector-focused 
sales capability and resources.

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Medical  
imaging

$1.1bn

Nuclear 
detection

$1.2bn

Security  
screening

$370m

Cumulative market size of sub-segments addressed by Kromek.

 
 
 
14

Kromek Group plc  Annual report and accounts 2014

Strategic report
Our technology

Kromek has a diverse, IP-rich technology base 
and is continuing to build expertise based on 
its core competencies of materials technology 
and advanced x-ray imaging architectures.

Why CZT?

Kromek’s products are predominately based on CZT. CZT is 
a compound semiconductor made from the elements cadmium, 
zinc and tellurium and has long attracted strong market 
interest as the basis for advanced radiation detectors or 
imagers, due to its ability to absorb radiation efﬁciently and 
directly convert incoming radiation to an electronic signal. 
CZT is very dense, absorbing x-ray and gamma-ray radiation 
effectively, improving the sensitivity of positive detection 
and providing the ability to use lower doses in active 
imaging applications. 

High energy 
radiation

Scintillator converts 
radiation to light

Light is collected 
by photomultiplier 
or photodiode

Photodetector 
electronics

Low resolution 
spectra and images

High energy 
radiation

CZT directly 
converts radiation 
to electrical signals

ASIC signal readout

High resolution 
spectra and images

The direct generation of an electronic signal eliminates the 
need for the two stage process used in scintillations, providing 
a signiﬁcantly improved spacial and energy resolution. The 
improved spacial resolution provides the ability to resolve 
smaller features within an image, while better energy resolution 
is key to identify and differentiate materials in the image. CZT 
detectors have the additional advantage of being operational 
at room temperature, which reduces the cost and increases 
the versatility of its implementation, an important aspect 
to its commercial application.

CZT’s electrical properties allow the material to reveal sensitive 
information about the different energies of radiation being 
detected. The ability to detect and display different energies 
is analogous to detecting different colours of the spectrum 
of light. Energy discrimination in x-ray and gamma-ray 
detection, combined with Kromek’s additional proprietary 
technologies, can be used to reveal advanced information 
about the material content of an object or the environment, 
which aids detection of harmful substances such as explosives, 
cancerous cells or nuclear materials emitting dangerous 
levels of radiation.

Kromek Group plc  Annual report and accounts 2014

Group plc  Annual report and ac

15

The Group has a deep expertise in CZT detector production 
combined with a complete set of closely integrated capabilities 
to utilise them in meeting customers’ needs.

Commercial methods 
for the production for CZT:

High pressure 
Bridgman (“HPB”)

A mature method reaching the end of its lifespan. This method 
requires extraction of usable materials from a mixed quality boule; 
the quality of crystals are generally lower compared to other 
methods and it is limited to single-crystal grain size. The small 
single-crystal sizes are, however, well matched to x-ray applications.

Travelling heater 
method (“THM”)

Currently the most commonly used method. Further process 
improvements have been made by the Group during the past 
ﬁnancial year. The process takes longer than HPB; however 
little material extraction is required. Material uniformity offers 
beneﬁcial properties for gamma-ray applications.

Multi-tube physical 
vapour transport (“MTPVT”)

The most recently developed, its advantages are ﬂexibility and the 
ability to adapt to large wafer sizes with a high purity crystal boule 
requiring limited material extraction processes. One of the principal 
advantages of this process is the ability to tailor-make material 
properties. Kromek has the only vapour-based bulk growth method 
developed worldwide, developed over 25 years, initially at 
Durham University. Kromek’s technical lead in this emerging 
production process is critical in relation to its non-recurring 
engineering offerings and is an enabling technology for 
future products.

Our competitive advantage

Multispectral technology leadership based on 
CZT semiconductor capabilities and a complete 
“semiconductor to solutions” offering for customer 
applications and development.

Medical imaging
 (cid:180) Gamma probe

 (cid:180) CT

 (cid:180) SPECT/Molecular 
breast image

 (cid:180) BMD

Nuclear detection

Nuclear safeguard

Civil nuclear

 (cid:180) Handheld

 (cid:180) Network detectors

 (cid:180) Environmental 
monitoring 

 (cid:180) Health physics

 (cid:180) Waste management

Security screening
 (cid:180) Liquid scanning

 (cid:180) Checked baggage

 (cid:180) Carry-on luggage

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16

Kromek Group plc  Annual report and accounts 2014

Strategic report
Our markets

Kromek operates in three key global 
markets: medical imaging, nuclear 
detection and security screening.

The Group has developed and enhanced its 
market presence in 2013–14, resulting in revenue 
growth of 122% and important new contract wins.

Medical imaging, nuclear detection and security screening all have three common and 
growing trends: improved radiation resolution and sensitivity; the ability to identify different 
radiation energies (colour); and the direct and timely identiﬁcation of materials. The Group’s 
products are focused on addressing each of these needs within each market.

Medical imaging

Nuclear detection

Security screening

Market

CT

SPECT

BMD

Gamma 
probe

Safeguard

Civil

Liquid

Checkpoint

Checked

Kromek 
offering

Type

OEM component

Channel strategy

Direct

EUP and 
component

Distribution/
white labelling/
direct

EUP

EUP

OEM component 
and algorithm

Distribution

Distribution

Direct

Regulatory 
framework

Approval based but procurement not 
inﬂuenced by regulation

Standards-based 
regulations 
Low inﬂuence 
on procurement

Framework for 
customer high
Low inﬂuence 
on procurement

Approval and implementation 
time scales
In US, Transport Safety 
Administration (“TSA”) both 
regulator and procurement agency

Nature of 
customer

Global OEMs

Niche 
OEMs

Government 
agencies/OEMs

Private nuclear 
companies and 
government 
agencies

Public and 
private airport 
groups

Global OEMs

Competition

Niche component level 
companies for new generation
Established component 
level companies

Established OEMs
New EUP companies

Niche EUP 
companies

Established component 
level companies

The Group has a diverse and international customer base, 
including a number of leading international OEMs within the 
medical sector, international research institutions and end 
product users within the medical imaging, nuclear detection 
and security screening markets.

Kromek Group plc  Annual report and accounts 2014

17

Medical imaging

Adoption driver

Example Kromek beneﬁt to customers

Functional information-rich imaging, 
lower doses, earlier diagnosis, 
more efﬁcient treatment and lower 
cost of care, resulting in better 
clinical outcomes.

Better diagnosis because there is 
new and better quality information 
for detection of cancer, cardiac 
abnormalities and bone mineral 
density in the human body.

Potential addressable 
market for Kromek’s products

$1.1bn

This is a large and diverse global market estimated to be worth 
over $23bn p.a. with demand underpinned by growing global 
living standards and ageing populations. An average growth 
of around 5% contains signiﬁcant variation between markets. 
End users include hospitals, clinics and diagnostic centres. 
Regulators and large OEMs are both inﬂuential in market 
development. Various techniques involving ionising radiations 
(x-ray, etc.) jointly represent the largest market share. Kromek 
is involved only in certain sub-segments of these, including CT, 
bone mineral densitometry (“BMD”) and single photon emission 
computed tomography (“SPECT”). 

The largest vendors in the space are GE, Siemens, Toshiba 
and Philips, with over 80% market share in total. The US remains 
the single most important geographical market for medical 
diagnostic imaging (circa 35%) but the highest growth is in Asia, 
which already accounts for a little under 30% of the market.

Drivers include the increased efﬁciency of digital rather than 
analogue imaging, the desire for richer diagnostic information 
capture, a focus on reduced diagnostic radiation doses in OECD 
countries and the general rapid growth in health expenditure 
in BRIC economies.

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has 
Asia h
Asia has the highest growth 
ven b
driv
driven by the increasing 
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18

Kromek Group plc  Annual report and accounts 2014

Strategic report
Our markets continued

Nuclear detection

Adoption driver

Example Kromek beneﬁt to customers

More accurate radiation detection 
and proﬁling of radioactive sources 
for increasing drive to improve 
safety for people and the environment.

Better information on radiation 
and source type through use of high 
resolution CZT detectors; design 
allows for a small portable instrument 
suitable for ﬁeld and in situ use as 
single or networked detectors.

Potential addressable 
market for Kromek’s products

$1.2bn

(cid:3)(cid:180) Civil nuclear
Active and new reactors, decommissioning

(cid:3)(cid:180) Nuclear safeguard
First responders, military and civil defence

Kromek is active in the health physics, environmental monitoring, 
and waste management sub-segments. Kromek can meet user 
needs for portable radiation detectors that are both sensitive 
and versatile in usage, to both monitor and characterise any 
hazards. Kromek’s products enable our customers to cut operational 
time and carry out monitoring and investigative work in a ﬁeld 
that is often challenging with existing products.

In addition to standalone devices, Kromek has developed 
the capability to address the rapidly increasing interest in 
portable networked sensors for both civil and defence applications. 
There is an increasing trend towards establishing high performance 
detector networks that can provide real-time position and 
radiation information. 

As is common in this sector Kromek also has component level 
products businesses. Components provide revenue generation 
opportunities and are also the building blocks of EUPs 
in the portfolio.

Globally, there are around 950 power stations in operation, 
plus approximately 250 research reactors and around 200 
nuclear reactors on ships and submarines. Over 130 nuclear 
reactors have been shut down around the world, but fewer than 
20 have been fully decommissioned. Drivers come from both 
old and new infrastructure. Signiﬁcant new build programmes are 
underway, especially in Asia which is driven by a desire for energy 
independence and a lower carbon footprint. In the US and Europe 
the driver is both the monitoring of current plants and the 
multibillion decommissioning programmes that are to be 
completed over the next two decades. Costs per plant vary; 
they are in the order of a few hundred million dollars per plant. 
West Europe alone has 150 plants to decommission by 2030 
and GlobalData has estimated that it will cost at least $81bn.

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Kromek Group plc  Annual report and accounts 2014

19

Security screening

Adoption driver

Example Kromek beneﬁt to customers

Improved baggage scanning, 
lowering false alarms. Mandated 
demand (EU and other geographic 
areas) for LAGs scanners since 
January 2014.

Simple to use with high 
performance in terms of explosive 
detection and low false alarm rate 
through more accurate content 
characterisation and ability to scan 
all container types, including cans.

Potential addressable 
market for Kromek’s products

$370m

Kromek focuses on these areas of the security screening market: 
standalone liquid screening equipment, carry-on baggage screening 
and checked-in baggage screening. The total security screening 
market is estimated to be worth roughly $875m p.a. with a growth 
rate of about 5% with considerable variation between segments.

approved by ECAC. This ability to carry such cleared materials 
between ﬂights is the ﬁrst part of an overall programme to relax 
restrictions on passenger LAGs by 2016. The market is at an 
early stage in its development with the majority of the global 
procurement still to occur.

Signed on behalf of the Board of Directors

Dr Arnab Basu MBE 
Chief Executive Ofﬁcer   
Chief Executive Ofﬁcer 
27 August 2014
27 August 2014

Derek Bulmer
Chief Financial Ofﬁcer
Chief Financial Ofﬁcer

It is a strongly regulated environment with the TSA in the US and 
the European Regulatory Committee for Civil Aviation Security 
(“ECAC”) in Europe being the most inﬂuential standard setters 
worldwide, with considerable co-ordination between them. 
Regulation acts not only to set standards but as a driver of 
replacement and upgrade cycles.

Other growth drivers include: speciﬁc events (such as new 
w
threats), a steady increase in passenger volumes and airport 
ort 
expansion – especially in the Middle East and Asia – and the 
the 
globalisation of trade boosting airfreight volumes.

Material identiﬁcation is a primary focus for aviation security 
rity 
with regards to LAGs that are carried in hand luggage. EU 
legislation (EU Regulation 246/2013) that came into effect 
ct 
from 31 January 2014 states that it is mandatory to screen 
n 
all LAGs obtained at an airport or on board an aircraft and then 
d then 
presented at airport security for onward travel with equipment 
ment 

The LAGs market is at an 
early stage in its development 
with the majority of the global 
procurement still to occur

 
 
 
20

Kromek Group plc  Annual report and accounts 2014

Corporate governance
Board of Directors

Mr Richard Morgan, Chairman

is the CEO of Amphion Innovations plc, 
a London and New York-based venture 
capital ﬁrm listed on AIM. Richard has been 
directly involved in the start-up and 
development of more than 30 companies 
in the IT and medtech industries, including 
Celgene, MediSense, Sequus, Quidel and 
Vortech Data. He spent 15 years with British 
merchant bank Schroders plc, as a board 
member and founding head of the Schroder 
Strategy Group. Richard has a B.Eng ﬁrst 
class honours from Auckland University, 
New Zealand, and has completed the 
Advanced Management Program at 
Harvard Business School. He chaired 
the audit committee in an interim capacity 
until Charlotta Ginman’s appointment.

Dr Arnab Basu MBE, 
Chief Executive Ofﬁcer

has a PhD in physics from Durham 
University, specialising in semiconducting 
sensor materials. Arnab held senior 
management positions in his family 
business, which manufactured materials 
for the electronics industry serving over 
250 major telecommunications and 
consumer electronics manufacturers, 
including Siemens, GEC. He worked 
in commercial product development 
for Elmwood Sensors Ltd (Honeywell 
Group, UK). A prominent ﬁgure within 
the business community, he was awarded 
Ernst and Young Entrepreneur of the Year 
(2009) and received an MBE for services 
to regional development and international 
trade (2014).

Mr Derek Bulmer, Executive 
Director and Chief Financial Ofﬁcer

is a qualiﬁed chartered accountant and 
barrister. Derek has worked with KPMG 
and undertaken a number of senior 
management roles with blue-chip PLCs 
including Bass plc, AWG plc and Ibstock plc. 
Additionally, and more recently, a number 
of roles as ﬁnance director of privately 
owned groups in both the IT and oil and 
gas industries have provided a wealth of 
experience in executing and managing 
business acquisitions plus signiﬁcant 
aspects of the commercial and legal 
disciplines of corporate management.

Professor Brian Tanner, Director

is dean for university enterprise and 
professor of physics at Durham University. 
With an international reputation in x-ray 
characterisation of materials, and in 
particular semiconductors, he has published 
over 375 papers in international peer-
reviewed journals and is the author or 
co-author of four books. He received the 
Queen’s Award for Enterprise Promotion 
(2012) and the Barrett Award of the 
International Centre for Diffraction Data 
(2005). Brian holds, or has held, several 
directorships in addition to Kromek. He 
was a member of the governing council 
of Durham University for 15 years.

Mr Jerel Whittingham, Director and 
remuneration committee chairman

has extensive experience in investor, 
operational and strategy roles with 
technology-rich companies including 
Incuvest LLC, Generics Group PLC, 
Durlacher PLC, Inmarsat plc and a 
number of start-ups. He has been involved 
with Kromek since 2003 as its ﬁrst external 
advisor before joining the Board in 2005. 
Currently he combines non-executive director 
and operational roles in technology growth 
companies. Jerel is former managing 
director and then non-executive director 
of Amphion Innovations plc (AIM). He 
also served as CEO and later executive 
chairman of Myconostica Ltd. 

Mr Peter Bains, Director

had a 23-year career at GlaxoSmithKline, 
where he held senior strategic and operational 
roles including general manager of China, 
head of global marketing and senior VP 
of international commercial operations. 
A consultant since 2009, he specialises 
in supporting strategic growth opportunities 
in small/medium-sized innovation-based 
life science companies serving as 
non-executive director for Tokyo listed 
biotech company, Sosei, and Biocon 
subsidiary, Syngene, and as non-executive 
chairman of Fermenta Biotech Ltd. 
Peter holds a BSc combined honours 
in physiology/zoology from 
Shefﬁeld University.

Kromek Group plc  Annual report and accounts 2014

21

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Professor Max Robinson, 
Founder Director

provided business angel ﬁnance in order to 
establish Kromek. He is a highly respected 
academic and a pioneer, inventor and 
visionary in the ﬁeld of 3D x-ray imaging. 
He has been involved in the management 
of the interface between academic research 
and the commercialisation of its ﬁndings 
for 35 years. Max has been named as one 
of the top 100 academic entrepreneurs by 
the Times Higher Education supplement and 
currently holds the position of entrepreneur 
in residence at Newcastle University.

Dr Graeme Speirs, Director

is an experienced entrepreneur and 
owner of the Polymer Holdings Group 
and Polymer N2, an investment company 
focused on UK start-ups in the technology, 
life sciences and energy sectors. Graeme 
graduated with ﬁrst class honours in 
chemistry and a PhD in molecular physics 
from Aberdeen University, and holds 
a masters degree in technology and 
economics from Birmingham University. 
Involved in the oil and gas industry, 
Graeme is an expert in the design 
and manufacture of polymer 
composite products.

Mr Lawrence Kinet, Director

has 40 years’ experience in the medical 
device and bio-pharmaceutical industry 
in leadership positions, most recently as 
group chief executive of LMA International 
NV and president of Smiths Medical, 
London. Lawrence has raised more than 
$100m in funding for early stage companies, 
taking one through an IPO, and made over 
$1bn worth of acquisitions. His career began 
at Baxter International, running a number 
of overseas operations, eventually becoming 
president of Baxter’s international division. 
He holds a BSc from the University of 
Birmingham (UK) and an MBA from the 
University of Chicago.

Ms Charlotta Ginman, Director 
and audit committee chairman 

brings substantial experience in ﬁnancial 
and operational management gained 
during her career in investment banking 
and global telecommunications. Joining 
Ernst & Young and later appointed to senior 
roles with JP Morgan, Deutsche Bank 
and UBS, Charlotta progressed to director 
of ﬁnance at Nokia Corporation, overseeing 
a number of acquisitions and leading the 
successful sale of Nokia’s luxury mobile 
phone division, Vertu Corporation, to a 
private equity group. A chartered accountant, 
Charlotta also holds an MSc in Economics 
from the Swedish School of Economics 
and Business Administration in Helsinki.

 
 
 
22

Kromek Group plc  Annual report and accounts 2014

Corporate governance
Review of principal risks

Risks are reviewed on a regular basis by the 
Board to identify any changes in risk proﬁles and to 
consider the optimal range of mitigation strategies.

Risk description

Mitigation

Risks associated with competition

Kromek faces competition from two types of competitor: 
specialised companies targeting discrete markets and divisions 
of large integrated device manufacturers. 

The Group’s current and future competitors may develop 
superior technology or offer superior products, sell products 
at a lower price or achieve greater market acceptance in the 
Group’s target markets. Competitors may have longer operating 
histories, greater name recognition and access to larger customer 
bases and resources and so be able to respond more quickly 
to changing customer demands or to devote greater resources 
to the development, promotion and sale of their products 
than Kromek can.

To the extent possible, Kromek carefully monitors 
competing technologies and product offerings. The Group 
intends to continue to make commercially driven investments 
in developing new technologies and products to maintain a 
strong technology position and is investing in further and more 
specialised marketing and sales resources. Group IP gives some 
additional protection and we have invested in new IP management 
systems and processes in the last ﬁnancial year.

Risks associated with management of the Group’s growth strategy

The ability of the Group to implement its strategy in rapidly 
evolving and competitive markets will require effective 
management planning and operational controls. Signiﬁcant 
expansion will be required to respond to market opportunities 
and the Group’s future growth and prospects will depend on 
its ability to manage this growth and to continue to expand 
and improve operational and ﬁnancial performance, whilst 
at the same time maintaining effective cost controls. 

Kromek’s experienced management team is well versed in 
the current markets available to the Group and well positioned 
to adapt to any changes in those markets. The Company 
also has detailed control systems including R&D cost control 
and extensive project management criteria.

The Group has demonstrated its ability to identify, execute and 
integrate M&A opportunities with its two successful US acquisitions.

Risks associated with product and technology adoption rates

The rate of market acceptance of the Group’s products is 
uncertain as many factors inﬂuence the adoption of new 
products including changing needs, regulation, marketing 
and distribution, users’ habits and business systems 
and product pricing.

With a widely applicable technology base the Group only 
chooses opportunities in which it believes there is a good 
match between its rare or unique capabilities and strong 
adoption drivers in growing large markets. The use of 
common technology platforms across multiple markets 
and applications reduces the investment risk in any given 
market segment and diversiﬁes overall adoption risk.

Kromek Group plc  Annual report and accounts 2014

23

Risk description

Mitigation

Risks associated with timing of customer or third party projects

The Group’s strategy includes co-development with, or licensing 
its technologies to, large OEM partners for additional development, 
manufacturing or subsequent marketing. Consequently the 
Group will be increasingly reliant on securing and retaining 
such partners, and delays in the progress of the development, 
manufacturing or marketing of the end product, as a result 
of a partner’s action or inaction, may delay the receipt 
of product-related revenues.

Exchange rate ﬂuctuations

As a consequence of the international nature of its business, 
the Group is exposed to risks associated with changes in foreign 
currency exchange rates on both sales and operations. The 
Group is based in the UK and presents its ﬁnancial statements 
in pounds sterling. However, its subsidiaries eV Products, Inc. 
and NOVA R&D, Inc., operate in the US and earn revenues 
and incur costs in US dollars. A growing proportion of the 
Group’s future revenues are expected to be denominated in 
currencies other than pounds sterling. Exchange rate variations 
between currencies in which the Group operates could have a 
signiﬁcant impact on the Group’s reported ﬁnancial results.

The Group has a diversiﬁed customer base and operates in a 
carefully selected portfolio of markets with different adoption 
risk and cycles. As part of its business model it also more directly 
controls a certain fraction of its revenues via the sale of complete 
EUPs in nine competing market segments.

Kromek is predominantly exposed to currency risk on sales 
and purchases made from customers and suppliers. Sales 
and purchases from customers and suppliers are made on 
a central basis and the risk is monitored centrally but not 
hedged utilising any forward exchange contracts. Apart from 
these particular cash ﬂows, the Group aims to fund expenses 
and investments in the respective currency and to manage 
foreign exchange risk at a local level by matching the currency 
in which revenue is generated and expenses are incurred.

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24

Kromek Group plc  Annual report and accounts 2014

Corporate governance
Corporate governance report

As an AIM listed company, Kromek Group plc is not obliged 
to comply with the UK Corporate Governance Code published 
in September 2012 (the “Code”). However, the Board follows, 
as far as practicable, the recommendations on corporate 
governance of the Quoted Companies Alliance for companies 
with shares traded on AIM.

The Board

The Board normally meets at least eight times per year. Its 
direct responsibilities include setting annual budgets, reviewing 
trading performance, approving signiﬁcant capital expenditure, 
ensuring adequate funding, setting and monitoring strategy and 
reporting to shareholders. Between meetings there are monthly 
telephonic meetings between the Chairman, Chief Executive 
Ofﬁcer, Chief Financial Ofﬁcer and individual Non-Executive 
Directors. The Non-Executive Directors have a particular 
responsibility to ensure that the strategies proposed by the 
Executive Directors are fully considered.

Audit committee 

The audit committee is chaired by Charlotta Ginman, an 
Independent Non-Executive Director. The audit committee was 
previously chaired by Richard Morgan, the Chairman of the Group, 
who is currently a member of the audit committee. The other 
members are Peter Bains, an Independent Non-Executive Director, 
and Graeme Speirs, a large shareholder and Director of the Board. 
The committee meets at least once a year, but in practice, 
strives to meet at least four times a year. 

The audit committee is responsible for reviewing the half-year 
and annual ﬁnancial statements, interim management statements, 
preliminary results announcements and any other formal 
announcement or presentation relating to the Group’s ﬁnancial 
performance. The audit committee also reviews signiﬁcant 
ﬁnancial returns to regulators and any ﬁnancial information 
covered in certain other documents such as announcements 
of a price sensitive nature. 

The audit committee advises the Board on the appointment 
of external auditors and on their remuneration (both for audit 
and non-audit work) and discusses the nature, scope and 
results of the audit with the auditors. The audit committee 
reviews the extent of the non-audit services provided by the 
auditors and reviews with them their independence and 
objectivity. The Chairman of the audit committee reports 
the outcome of audit committee meetings to the Board 
and the Board receives minutes of the meetings.

Remuneration committee 

The remuneration committee is chaired by Jerel Whittingham, 
an Independent Non-Executive Director. The other members are 
Brian Tanner and Lawrence Kinet, Independent Non-Executive 
Directors. The committee is responsible for making recommendations 
to the Board, within agreed terms of reference, on the Group’s 
framework of executive remuneration and its cost. The committee 
determines the contract terms, remuneration and other beneﬁts 
for each of the Executive Directors, including performance 
related bonus schemes and pension rights. Further details 
of the Group’s policies on remuneration and service contracts 
are given in the Remuneration report. 

Relations with shareholders 

Communication with shareholders is given high priority. There 
is regular dialogue with major and/or institutional shareholders 
including presentations after the Group’s announcements of the 
half-year and full-year results. Presentations are also made to 
analysts at those times to present the Group’s results and report 
on developments. This assists with the promotion of knowledge 
of the Group in the investment marketplace and with shareholders. 

The Board uses both the annual report and ﬁnancial statements 
and the Annual General Meeting to communicate directly with 
private and institutional investors and welcomes their participation. 
The Chairman aims to ensure that the Chairs of the audit and 
remuneration committees are available at the Annual General 
Meeting to answer questions.

Internal control 

The Board is responsible for establishing and maintaining 
the Group’s system of internal control and for reviewing its 
effectiveness. The system is designed to manage rather than 
eliminate the risk of failure to achieve the Group’s strategic 
objectives and can only provide reasonable and not absolute 
assurance against material misstatement or loss. As an AIM 
listed company, the Group does not need to comply with Code 
provision C2.1 regarding the Directors giving a summary of the 
process applied by the Board in reviewing the effectiveness of 
the system of internal control. Instead, the Directors have set 
out below some of the key aspects of the Group’s internal 
control procedures.

An ongoing process has been established for identifying, 
evaluating and managing the signiﬁcant risks faced by the 
Group. The process has been in place for the full year under 
review and up to the date of approval of the annual report and 
ﬁnancial statements. The Board regularly reviews this process 
as part of its review of such risks within its meetings. Where any 
weaknesses are identiﬁed, an action plan is prepared to address 
the issues and is then implemented. 

Each year the Board approves the annual budget. Key risk 
areas are identiﬁed, reviewed and monitored. Performance is 
monitored against budget, relevant action is taken throughout 
the year and updated forecasts are prepared as appropriate. 

Capital and development expenditure is regulated by a budgetary 
process and authorisation levels. For expenditure beyond 
speciﬁed levels, detailed written proposals have to be submitted 
to the Board for approval. Reviews are carried out after the 
purchase is complete. The Board requires management to 
explain any major deviations from authorised capital proposals 
and to seek further sanction from the Board. 

Kromek Group plc  Annual report and accounts 2014

25

The Board has reviewed the need for an internal audit function 
and concluded that this is not currently necessary in view of the 
small size of the Group and the close supervision by the senior 
leadership team of its day-to-day operations. The Board will 
continue to keep this under review.

The Group has a whistle-blowing policy and procedures to 
encourage staff to contact the audit committee if they need to 
raise matters of concerns other than via the Executive Directors 
and senior leadership team. 

Going concern 

The Board of Directors has conﬁdence that the Group has 
adequate resources to continue in operational existence for 
the foreseeable future. Accordingly, it continues to adopt the 
going concern basis in preparing the annual report and 
ﬁnancial statements.

The Group has no external debt and at the statement of 
ﬁnancial position date had £6.6m of cash reserves. The Group 
prepares forecasts which show, taking into account reasonably 
possible changes in trading performance, that it has sufﬁcient 
resources to settle all of its liabilities as they fall due.

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26

Kromek Group plc  Annual report and accounts 2014

Corporate governance
Directors’ report 

The Directors present their annual report on the affairs of the 
Group, together with the ﬁnancial statements and auditor’s 
report, for the year ended 30 April 2014. 

Principal activities 

Kromek Group plc is the leading developer of radiation detectors 
based on cadmium zinc telluride, providing improved detection 
and characterisation capabilities within the medical imaging, 
nuclear detection and security screening markets.

Directors

The Directors of the Group are shown on pages 20 and 21. All of 
the Directors were Directors for the whole of the year, with the 
exception of the following: Derek Bulmer, who was appointed 
Executive Director on 10 December 2013; Charlotta Ginman, who 
was appointed as a Non-Executive Director on 18 February 2014; 
and Peter Bains and Lawrence Kinet, who were appointed 
Non-Executive Directors on 30 August 2013. The emoluments 
and interests of the Directors in the shares of the Group are set 
out in the Remuneration report. 

Future development 

Our development objectives for 2014–15 are disclosed in the 
Overview on page 7. 

Details of signiﬁcant events since the balance sheet date are 
contained in note 35 to the ﬁnancial statements. 

Capital structure

The capital structure is intended to ensure and maintain strong 
credit ratings and healthy capital ratios in order to support the 
Group’s business and maximise shareholder value. It includes 
the monitoring of cash balances, available bank facilities 
and cash ﬂows.

No changes were made to these objectives, policies 
or processes during the year ended 30 April 2014. 

Results and dividends

The consolidated income statement is set out on page 32. 
The Group’s loss after taxation amounted to £3.2m (2013: £0.6m). 

The Directors do not recommend the payment of a dividend 
for the year ended 30 April 2014.

During the year ended 30 April 2014, the Group made political 
donations of £nil (2013: £nil) and charitable donations of £nil 
(2013: £nil).

Information about the use of ﬁnancial instruments by the Group and 
its subsidiaries is given in note 34 to the ﬁnancial statements. 

The Directors, who served throughout the year except as noted, 
were as follows:

Dr A Basu MBE
Mr D Bulmer (existing CFO, joined the Board on 10 December 2013)
Mr R C E Morgan
Professor M Robinson
Professor B K Tanner
Mr J H Whittingham
Dr G K Speirs
Mr L Kinet (appointed 30 August 2013)
Mr P Bains (appointed 30 August 2013)
Ms C Ginman (appointed 18 February 2014)

Directors’ indemnities

The Group has made qualifying third party indemnity provisions 
for the beneﬁt of its Directors, which were made during the year 
and remain in force at the date of this report. 

Statement of Directors’ responsibilities in respect 
of the Directors’ report and the ﬁnancial statements

The Directors are responsible for preparing the annual report 
and the ﬁnancial statements in accordance with applicable law 
and regulations. Group law requires the Directors to prepare 
ﬁnancial statements for each ﬁnancial year. Under that law the 
Directors have elected to prepare Group and parent company 
ﬁnancial statements in accordance with International Financial 
Reporting Standards (“IFRSs”) as adopted by the European Union. 
Under Group law the Directors must not approve the ﬁnancial 
statements unless they are satisﬁed that they give a true and fair 
view of the state of affairs of the Group and the parent company 
and of the proﬁt or loss of the Group and the parent company for 
the period. The Directors are also required to prepare ﬁnancial 
statements in accordance with the rules of the London Stock 
Exchange for companies trading securities on the AIM. In preparing 
these ﬁnancial statements, the Directors are required to:

 (cid:180) select suitable accounting policies and then apply 

them consistently;

 (cid:180) make judgements and estimates that are reasonable 

and prudent;

 (cid:180) state whether applicable IFRSs have been followed, subject 
to any material departures disclosed and explained in the 
ﬁnancial statements; and

 (cid:180) prepare the ﬁnancial statements on the going concern basis 
unless it is inappropriate to presume that the Group will 
continue in business.

The Directors are responsible for keeping adequate accounting 
records that are sufﬁcient to show and explain the Group’s 
transactions and disclose with reasonable accuracy at any time 
the ﬁnancial position of the Group and enable them to ensure that 
the ﬁnancial statements comply with the Companies Act 2006. 
They are also responsible for safeguarding the assets of the 
Group and hence for taking reasonable steps for the prevention 
and detection of fraud and other irregularities.

Kromek Group plc  Annual report and accounts 2014

27

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The Directors conﬁrm that:

 (cid:180) so far as each Director is aware, there is no relevant audit 

information of which the Group’s auditors are not aware; and

 (cid:180) the Directors have taken all steps that they ought to have taken 
to make themselves aware of any relevant audit information 
and to establish that the auditors are aware of that information.

The Directors are responsible for ensuring the annual report 
and the ﬁnancial statements are made available on a website. 
Financial statements are published on the Group’s website in 
accordance with legislation in the United Kingdom governing 
the preparation and dissemination of ﬁnancial statements, which 
may vary from legislation in other jurisdictions. The Directors 
are responsible for the maintenance and integrity of the corporate 
and ﬁnancial information included on the Group’s website.

Auditors

Each of the persons who is a Director at the date of approval 
of this annual report conﬁrms that:

 (cid:180) so far as the Director is aware, there is no relevant audit 

information of which the Group’s auditors are unaware; and

 (cid:180) the Director has taken all the steps that he/she ought to 
have taken as a Director in order to make himself/herself 
aware of any relevant audit information and to establish 
that the Group’s auditors are aware of that information.

This conﬁrmation is given and should be interpreted in accordance 
with the provisions of Section 418 of the Companies Act 2006. 

Deloitte LLP have expressed their willingness to continue in 
ofﬁce as auditors and a resolution to reappoint them will be 
proposed at the forthcoming Annual General Meeting.

By order of the Board

Dr Arnab Basu MBE
Chief Executive Ofﬁcer
27 August 2014

 
 
 
28

Kromek Group plc  Annual report and accounts 2014

Corporate governance
Directors’ remuneration report

As the Group is AIM listed, the Directors are not required, under 
Section 420(1) of the Companies Act 2006, to prepare a Directors’ 
remuneration report for each ﬁnancial year of the Group and so 
Kromek Group plc makes the following disclosures voluntarily, 
which are not intended to, and indeed do not, comply with the 
requirements of the Companies Act 2006. 

The Group has executive share option and incentive schemes, 
which are designed to promote long-term improvement in the 
performance of the Group, sustained increase in shareholder 
value and clear linkage between executive reward and the 
Group’s performance. 

The remuneration committee is responsible for recommending 
the remuneration and other terms of employment for the 
Executive Directors of Kromek Group plc.

In determining remuneration for the year, the committee has 
given consideration to the requirements of the UK Corporate 
Governance Code. 

Remuneration policy 
The remuneration of Executive Directors is determined by the 
committee and the remuneration of Non-Executive Directors is 
approved by the full Board of Directors. The remuneration of the 
Chairman is determined by the Independent Non-Executive Directors. 

The remuneration packages of Executive Directors comprise 
the following elements: 

Basic salary and beneﬁts 
Basic salaries for Executive Directors are reviewed annually having 
regard to individual performance and market practice. In most 
cases beneﬁts provided to Executive Directors comprise the 
provision of a Group car, or appropriate allowance, health insurance 
and contributions to a Group personal pension scheme. 

Annual bonus 
A bonus may be awarded at the end of each ﬁnancial year, 
at the discretion of the remuneration committee, currently 
ranging from a maximum of 25–75% of basic salary to reward 
for Executives’ contribution to the growth in revenue, and 
speciﬁc targeted or strategic objectives.

Long-Term Incentive Plan (“LTIP”) 
The Group believes that share ownership by Executive Directors 
and employees strengthens the link between their personal 
interests and those of the Group and the shareholders. 

The LTIP is based on total shareholder return (“TSR”) relative to an 
AIM peer group. Any awards made vest only after three years.

Service contracts 
Arnab Basu and Derek Bulmer each have a service contract with a 
notice period (to the Company) of nine and six months respectively.

The committee considers the Directors’ notice periods to be 
appropriate as they are in line with the market and take account 
of the Directors’ knowledge and experience. 

Non-Executive Directors 
The fees of the Non-Executive Directors are determined by 
the full Board within the limits set out in the Memorandum 
and Articles of Association. The Non-Executive Directors are 
not eligible for bonuses, pension beneﬁts or share options. 

Directors’ emoluments 
Emoluments of the Directors for the year ended 30 April 2014 
are shown below. 

Pension contributions 
During the year, the Group made annual pension contributions 
for Arnab Basu and Derek Bulmer to a personal pension scheme 
(i.e. a deﬁned contribution scheme). Neither beneﬁts in kind nor 
bonuses are pensionable. 

Details of contributions payable by the Group are: 

Director 

Arnab Basu

Derek Bulmer

30 April 2014
£’000

30 April 2013
£’000

30

4

24

—

Directors’ shareholdings 

Beneﬁcial interests of the Directors in the shares of the Group are shown below:

Arnab Basu

Richard Morgan*

Graeme Speirs**

Jerel Whittingham

Brian Tanner

Max Robinson

30 April 2014

30 April 2013

Number

2,000,000

12,782,730 

14,792,730 

110,450

750,000

9,500,000

%

1.9

Number

2,000,000

11.8 

12,782,730 

13.8 

14,792,730 

0.1

0.7

8.8

110,450

750,000

9,720,000

%

2.6

16.3 

18.9 

0.1

1.0

12.4

*   Richard Morgan is interested in Kromek Group plc through Amphion Innovations plc which owns 12,450,420 ordinary shares amounting to 11.5% of the issued share capital.
**  Graeme Speirs is interested in Kromek Group plc through Polymer Holdings Ltd which owns 11,377,790 ordinary shares amounting to 10.6% of the issued share capital.

Kromek Group plc  Annual report and accounts 2014

29

Directors’ emoluments for the year ended 30 April 2014

Salary
£’000

Fees
£’000

Beneﬁts
£’000

Bonus
£’000

Pension
contributions
£’000

Total
emoluments
2014
£’000

Total
emoluments
2013
£’000

Non-Executive Chairman

Richard Morgan

Executive

Arnab Basu

Derek Bulmer*

Non-Executive

Graeme Speirs

Max Robinson

Brian Tanner

Jerel Whittingham

Charlotta Ginman**

Peter Bains***

Lawrence Kinet***

—

177

48

—

—

—

—

—

—

—

225

39

—

—

22

20

22

24

8

28

28

191

—

4

—

—

—

—

—

—

—

—

4

—

—

—

—

—

—

—

—

—

—

—

—

30

4

—

—

—

—

—

—

—

34

39

211

52

22

20

22

24

8

28

28

—

205

—

—

—

—

—

—

—

—

454

205

*   Derek Bulmer joined the Board on 10 December 2013.
**  Charlotta Ginman joined the Board on 18 February 2014.
***  Peter Bains and Lawrence Kinet joined the Board on 30 August 2013.

Executive Directors’ share incentive scheme 
Share incentive scheme for Arnab Basu, Chief Executive 
Ofﬁcer, and Derek Bulmer, Chief Financial Ofﬁcer

The remuneration committee agreed, in October 2013, an incentive 
award scheme for Arnab Basu and Derek Bulmer, to offer them 
shares up to 372,057 and 158,292 respectively, at a price of 
1p per share to vest based on speciﬁed performance criteria. 

These are measured by a TSR condition, calculated as the 
average total return in comparison to a peer group. The Board 
receives specialist advice from the Group’s accountants.

As at 30 April 2014, no shares had vested under this 
incentive scheme.

Executive Directors’ share options 

Director

Date
of grant

Exercise 
price
p

Arnab Basu

22 September 2006

Arnab Basu

15 May 2007

Arnab Basu

20 November 2011

Derek Bulmer

13 September 2010

Derek Bulmer

15 October 2012

Derek Bulmer

31 May 2013

1.5

1.5

20.0

20.0

20.0

20.0

2013
Number

720,000

160,000

1,000,000

500,000

125,000

Share price during the year 

During the year to 30 April 2014, the highest share price was 
81.0p and the lowest share price was 36.0p. The market price 
of the shares at 30 April 2014 was 41.5p. 

Directors’ interests in material contracts 

No Director was materially interested either at the year end 
or during the year in any contract of signiﬁcance to the Group 
other than their employment or service contract.

Awarded
during the
year

Exercised
during the
year

At 30 April
2014
Number

Expiry
date

—

—

—

—

—

—

—

720,000

22 September 2016

160,000

15 May 2017

— 1,000,000

20 November 2021

—

—

—

500,000

13 September 2020

125,000

250,000

15 October 2022

31 May 2023

—

250,000

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30

Kromek Group plc  Annual report and accounts 2014

Financial statements
Independent auditor’s report
To the members of Kromek Group plc

We have audited the ﬁnancial statements of Kromek Group plc for the year ended 30 April 2014 which comprise the consolidated 
income statement, the consolidated statement of comprehensive income, the consolidated and company statements of ﬁnancial 
position, the consolidated and company statements of changes in equity, the consolidated and company statements of cash ﬂows 
and the related notes 1 to 51. The ﬁnancial reporting framework that has been applied in their preparation is applicable law and 
IFRSs as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them 
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility 
to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions 
we have formed.

Respective responsibilities of Directors and auditor

As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the ﬁnancial 
statements and for being satisﬁed that they give a true and fair view. Our responsibility is to audit and express an opinion on the 
ﬁnancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards 
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the ﬁnancial statements

An audit involves obtaining evidence about the amounts and disclosures in the ﬁnancial statements sufﬁcient to give reasonable 
assurance that the ﬁnancial statements are free from material misstatement, whether caused by fraud or error. This includes an 
assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have 
been consistently applied and adequately disclosed; the reasonableness of signiﬁcant accounting estimates made by the Directors; 
and the overall presentation of the ﬁnancial statements. In addition, we read all the ﬁnancial and non-ﬁnancial information in the 
annual report to identify material inconsistencies with the audited ﬁnancial statements and to identify any information that is 
apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing 
the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on ﬁnancial statements

In our opinion:

 (cid:180) the ﬁnancial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 30 April 2014 

and of the Group’s and the parent company’s loss for the year then ended;

 (cid:180) the Group ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

 (cid:180) the parent company ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European 

Union and as applied in accordance with the provisions of the Companies Act 2006; and

 (cid:180) the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards 

the Group ﬁnancial statements, Article 4 of the IAS Regulation.

Kromek Group plc  Annual report and accounts 2014

31

Separate opinion in relation to IFRSs as issued by the IASB

As explained in note 3 to the Group ﬁnancial statements, the Group, in addition to complying with its legal obligation to apply IFRSs 
as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (“IASB”).

In our opinion the Group ﬁnancial statements comply with IFRSs as issued by the IASB.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Strategic report and the Directors’ report for the ﬁnancial year for which the ﬁnancial 
statements are prepared is consistent with the ﬁnancial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

 (cid:180) adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been 

received from branches not visited by us; or

 (cid:180) the parent company ﬁnancial statements and the part of the Directors’ remuneration report to be audited are not in agreement 

with the accounting records and returns; or

 (cid:180) certain disclosures of Directors’ remuneration speciﬁed by law are not made; or

 (cid:180) we have not received all the information and explanations we require for our audit.

David Wilkinson FCA CF (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne, United Kingdom
27 August 2014

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32

Kromek Group plc  Annual report and accounts 2014

Financial statements
Consolidated income statement 
For the year ended 30 April 2014

Continuing operations

Revenue

Cost of sales

Gross proﬁt

Other operating income

Distribution costs

Administrative expenses (including operating expenses)

Operating loss

Finance income

Finance costs

Negative goodwill released to the income statement

Loss before tax

Tax

Loss for the year from continuing operations

Losses per share:

– Basic and diluted (£)

– Adjusted basic and diluted (£)*

* The adjusted losses per share do not take into account the negative goodwill released to the income statement in 2013.

Consolidated statement of comprehensive income
For the year ended 30 April 2014

Loss for the year

Exchange differences on translation of foreign operations

Total comprehensive losses for the year

Note

5

5

10

11

12

14

Year
ended
2014
£’000

5,972

(2,101)

3,871

719

(144)

(8,226)

(3,780)

15

(530)

—

(4,295)

1,106

(3,189)

(0.05)

(0.05)

Year
ended
2013
£’000

2,691

(1,431)

1,260

25

(110)

(5,077)

(3,902)

—

(171)

2,417

(1,656)

1,013

(643)

(0.08)

(0.40)

Year
ended
2014
£’000

(3,189)

(641)

(3,830)

Year
ended
2013
£’000

(643)

200

(443)

Consolidated statement of ﬁnancial position
As at the year ended 30 April 2014

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Current assets

Inventories

Trade and other receivables

Current tax assets

Cash and bank balances

Total assets

Current liabilities

Trade and other payables

Current tax liabilities

Borrowings

Net current assets/(liabilities)

Non-current liabilities

Deferred tax liabilities

Total liabilities

Net assets

Equity

Share capital

Share premium account

Capital redemption reserve

Translation reserve

Accumulated losses

Total equity

Kromek Group plc  Annual report and accounts 2014

33

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30 April
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£’000

1,275

6,965

2,285

10,525

2,389

1,907

696

6,563

11,555

22,080

30 April
2013
£’000

1,275

6,137

3,005

10,417

2,098

1,579

767

309

4,753

15,170

(3,210)

(3,149)

—

—

(3,210)

8,345

(1,134)

(4,344)

17,736

1,080

34,612

1,175

(482)

(1)

(2,449)

(5,599)

(846)

(1,544)

(7,143)

8,027

1,175

22,278

—

159

(18,649)

(15,585)

17,736

8,027

Note

15

16

17

19

20

12

23

21

22

25

26

27

28

29

The ﬁnancial statements of Kromek Group plc (registered number 8661469) were approved by the Board of Directors and authorised 
for issue on 27 August 2014. They were signed on its behalf by:

Dr Arnab Basu MBE
Chief Executive Ofﬁcer

 
 
 
34

Kromek Group plc  Annual report and accounts 2014

Financial statements
Consolidated statement of changes in equity
For the year ended 30 April 2014

Equity attributable to equity holders of the Company

Balance at 1 May 2012

Loss for the year

Other comprehensive income for the year

Total comprehensive income/(losses) 
for the period

Issue of share capital

Credit to equity for equity-settled 
share-based payments

Balance at 30 April 2013

Loss for the year

Other comprehensive losses for the year

Total comprehensive losses for the period

Issue of share capital net of expenses

Share reorganisation

Share buyback

Credit to equity for equity-settled 
share-based payments

Balance at 30 April 2014

Share
capital
£’000

1,175

—

—

—

—

—

Share
premium
account
£’000

20,330

—

—

—

1,948

—

1,175

22,278

—

—

—

301

779

(1,175)

—

1,080

—

—

—

13,113

(779)

—

—

34,612

Capital
redemption
reserve
£’000

Translation
reserve
£’000

Accumulated
losses
£’000

Total
equity
£’000

(15,064)

6,400

—

—

—

—

—

—

—

—

—

—

—

—

1,175

—

1,175

(41)

—

200

200

—

—

159

—

(641)

(641)

—

—

—

—

(643)

—

(643)

—

122

(15,585)

(3,189)

—

(3,189)

—

—

—

125

(482)

(18,649)

(643)

200

(443)

1,948

122

8,027

(3,189)

(641)

(3,830)

13,414

—

—

125

17,736

Consolidated statement of cash ﬂows
For the year ended 30 April 2014

Net cash used in operating activities

Investing activities

Interest received

Purchases of property, plant and equipment

Purchases of patents and trademarks

Capitalisation of research and development costs

Acquisition of overseas trade and assets

Deferred consideration

Net cash used in investing activities

Financing activities

Loans (paid)/received

Proceeds on issue of shares

Interest paid

Net cash from ﬁnancing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Effect of foreign exchange rate changes

Cash and cash equivalents at end of year

Kromek Group plc  Annual report and accounts 2014

35

Year
ended
2014
£’000

Year
ended
2013
£’000

(2,149)

(1,245)

Note

30

15

(187)

(567)

(1,061)

—

—

—

(58)

(400)

(906)

(1,272)

(53)

(1,800)

(2,689)

(2,449)

13,414

(530)

10,435

6,486

309

(232)

6,563

1,949

1,948

(171)

3,726

(208)

477

40

309

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36

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements
For the year ended 30 April 2014

1.  General information

Kromek Group plc is a company incorporated in the United Kingdom under the Companies Act. The address of the registered ofﬁce is 
given on page 68. The nature of the Group’s operations and its principal activities are set out in the Strategic report on pages 8 to 19.

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 3.

2.  Adoption of new and revised standards

During the current reporting period there were no new standards or amendments that had a material impact on the net assets 
of the Group. 

The following standards and interpretations issued by the IASB or IFRIC have not been adopted by the Group as these are not 
effective for the current year. The Group is currently assessing the impact these standards and interpretations will have on the 
presentation of its consolidated results in future periods:

 (cid:180) IFRS 15 ‘Revenue from Contracts with Customers’ (effective for accounting periods beginning on or after 1 January 2017). 

This amendment has not yet been endorsed for use in the EU.

3.  Signiﬁcant accounting policies
Basis of preparation

The ﬁnancial statements have been prepared in accordance with IFRSs as adopted by the European Union and IFRIC interpretations. 
Therefore the Group ﬁnancial statements comply with Article 4 of the EU IAS Regulation.

The ﬁnancial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and 
ﬁnancial instruments. 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 are eliminated on consolidation.

Merger accounting

In October 2013, when Kromek Group plc was included as the new ultimate parent entity as part of a Group reconstruction 
arrangement, the reconstructed Group was consolidated using merger accounting principles as outlined in Financial Reporting 
Standard 6 (“FRS”) “Acquisitions and Mergers” (UK) and treated the reconstructed Group as if it had always been in existence. 

The Company has taken advantage of merger relief available under Companies Act 2006 in respect of the share for share 
exchange as the issuing company has secured more than 90% equity in the other entity. The carrying value of the investment 
is carried at the nominal value of the shares issued.

Kromek Group plc  Annual report and accounts 2014

37

3.  Signiﬁcant accounting policies continued
Going concern

The Board of Directors has conﬁdence that the Group has adequate resources to continue in operational existence for the foreseeable 
future. Accordingly, it continues to adopt the going concern basis in preparing the annual report and ﬁnancial statements. 

The Group has no external debt and at the statement of ﬁnancial position date had £6.6m of cash reserves. The Group prepares 
forecasts which show, taking into account reasonably possible changes in trading performance, that it has sufﬁcient resources 
to settle all of its liabilities as they fall due. 

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:

 (cid:180) the fair value of the consideration transferred; plus

 (cid:180) the recognised amount of any non-controlling interests in the acquiree; plus

 (cid:180) the fair value of the existing equity interest in the acquiree; less

 (cid:180) 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 (“CGUs”) expected to beneﬁt from the synergies of the combination. CGUs 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 CGU 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.

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38

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

3.  Signiﬁcant accounting policies continued
Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods 
and services provided in the normal course of business, net of discounts, VAT and other sales related taxes and comprises:

 Sale of goods

i) 
The Group’s income derives from the sale of goods and from the research and development contracts that are typically with 
government agencies. Revenue on product sales is recognised when the risk and reward of ownership pass to the customer. 
The terms of sale are agreed with each customer on an individual basis, which is generally when the goods are dispatched 
to the carrier. Revenue from research and development contracts is recognised as revenue in the accounting period in which 
the milestones and performance are achieved. 

ii)  Long-term contracts
The Group reﬂects revenue from long-term contracts by reference to the stage of completion of the contract activity at the 
statement of ﬁnancial position date. Revenue and proﬁts are determined by estimating the outcome of the contract and determining 
the costs and proﬁt attributable to the stage of completion. Any expected contract loss is recognised immediately.

iii)  Exclusivity contracts
The Group reﬂects exclusivity payments as revenue at the point that it contractually agrees to become exclusive. Where terms 
of exclusivity require performance the Group reﬂects the revenue as performance is delivered.

Interest revenue

iv) 
Interest income is recognised when it is probable that the economic beneﬁts will ﬂow to the Group and the amount of revenue 
can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective 
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the 
ﬁnancial asset to that asset’s net carrying amount on initial recognition.

Leases

Leases are classiﬁed as ﬁnance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership 
to the lessee. All other leases are classiﬁed as operating leases.

The Group as lessee
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease except 
where another more systematic basis is more representative of the time pattern in which economic beneﬁts from the lease asset 
are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. 
The aggregate beneﬁt of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another 
systematic basis is more representative of the time pattern in which economic beneﬁts from the leased asset are consumed.

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.

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.

Kromek Group plc  Annual report and accounts 2014

39

3.  Signiﬁcant accounting policies continued
Foreign currencies continued

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 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 (“GBI”) costs are recognised as income over the periods necessary to match them with 
the related costs and are deducted in reporting the related expense.

Government grants relating to research and development (“GRD”) costs are treated as deferred income and released to proﬁt 
or loss over the expected useful lives of the assets concerned.

Operating result

Operating loss is stated as loss before tax, ﬁnance income and costs and other gains and losses.

Retirement beneﬁt costs 

The Group operates a deﬁned contribution pension scheme for employees.

Payments to deﬁned contribution retirement beneﬁt schemes are charged as an expense as they fall due. For these schemes 
the assets of the schemes are held separately from those of the Group in independently administered funds. Payments made 
to 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.

i)  Current tax
The tax currently payable is based on taxable proﬁt for the year. Taxable proﬁt differs from net proﬁt 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 by the statement of ﬁnancial position date.

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40

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

3.  Signiﬁcant accounting policies continued
Taxation continued

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 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 statement of ﬁnancial position date. 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

Fixtures and equipment are 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 

Fixtures, ﬁttings and equipment 

Computer equipment 

25%

15%

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:

 (cid:180) an asset is created that can be identiﬁed (such as crystal production methodology);

 (cid:180) it is probable that the asset created will generate future economic beneﬁts; and

 (cid:180) the development cost of the asset can be measured reliably.

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 
the development expenditure relates to. Provision is made for any impairment.

 
 
Kromek Group plc  Annual report and accounts 2014

41

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3.  Signiﬁcant accounting policies continued
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 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 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. 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.

Financial instruments

Financial assets and ﬁnancial liabilities are recognised in the Group’s statement of ﬁnancial position when the Group becomes 
a party to the contractual provisions of the instrument.

Financial assets

i) 
All ﬁnancial assets are recognised and derecognised on a trade date where the purchase or sale of a ﬁnancial asset is under a 
contract whose terms require delivery of the ﬁnancial asset within the timeframe established by the market concerned, and are 
initially measured at fair value, plus transaction costs, except for those ﬁnancial assets classiﬁed as at fair value through proﬁt 
or loss, which are initially measured at fair value. 

Financial assets are classiﬁed into the following speciﬁed category: “loans and receivables”. The classiﬁcation depends on 
the nature and purpose of the ﬁnancial assets and is determined at the time of initial recognition. The Group held no fair value 
through proﬁt and loss (“FVTPL”), available for sale (“AFS”) or held-to-maturity (“HTM”) ﬁnancial assets during the historical 
ﬁnancial information period.

 
 
 
42

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

3.  Signiﬁcant accounting policies continued
Financial instruments continued

ii)  Loans and receivables
Trade receivables, loans, and other receivables that have ﬁxed or determinable payments that are not quoted in an active market 
are classiﬁed as “loans and receivables”. Loans and receivables are measured at amortised cost using the effective interest method, 
less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when 
the recognition of interest would be immaterial.

iii)   Impairment of ﬁnancial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each statement of ﬁnancial position date. 
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial 
recognition of the ﬁnancial asset, the estimated future cash ﬂows of the investment have been affected. 

 Derecognition of ﬁnancial assets

iv) 
The Group derecognises a ﬁnancial asset only when the contractual rights to the cash ﬂows from the asset expire, or when it 
transfers the ﬁnancial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group 
neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the 
Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains 
substantially all the risks and rewards of ownership of a transferred ﬁnancial asset, the Group continues to recognise the ﬁnancial 
asset and also recognises a collateralised borrowing for the proceeds received.

v)   Financial liabilities and equity
Debt and equity instruments are classiﬁed as either ﬁnancial liabilities or as equity in accordance with the substance 
of the contractual arrangement. 

vi)   Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. 
Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

vii)   Financial liabilities 
Financial liabilities are classiﬁed as “other ﬁnancial liabilities”. The Group held no ﬁnancial liabilities that would be classiﬁed as FVTPL.

viii)  Other ﬁnancial liabilities 
Other ﬁnancial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other ﬁnancial liabilities 
are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective 
yield basis. 

The effective interest method is a method of calculating the amortised cost of a ﬁnancial liability and of allocating interest expense 
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the 
expected life of the ﬁnancial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

ix)   Derecognition of ﬁnancial liabilities
The Group derecognises ﬁnancial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

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. Details regarding the determination 
of the fair value of equity-settled share-based transactions are set out in note 32.

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. 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.

Kromek Group plc  Annual report and accounts 2014

43

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3.  Signiﬁcant accounting policies continued
Cash

Cash, for the purposes of the statement of cash ﬂows, comprises cash in hand and deposits repayable on demand, less overdrafts 
repayable on demand.

4.  Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgements, 
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. 
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 
Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in 
the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods 
if the revision affects both current and future periods.

Critical judgements in applying the Group’s accounting policies

The following are the critical judgements that the Directors have made in the process of applying the Group’s accounting policies 
and that have the most signiﬁcant effect on the amounts recognised in the ﬁnancial statements.

Development costs

As described in note 3, the Group expenditure on development activities is capitalised if it meets the criteria as per IAS 38. 

These capitalised assets are amortised on a straight-line basis over their useful lives. Where no internally generated intangible 
asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. 

Impairment of non-ﬁnancial assets

The Group assesses whether there are any indicators of impairment as at the transition date and thereafter for all non-ﬁnancial 
assets at each reporting date. Goodwill is tested for impairment annually and at other times when such indicators exist, such as 
negative cash ﬂows and operating losses of subsidiaries. Other non-ﬁnancial assets are tested for impairment when there are 
indicators that the carrying amounts may not be recoverable.

When value in use calculations are undertaken, management must estimate the expected future cash ﬂows from the asset 
or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash ﬂows.

Valuation of acquired intangible assets

Acquisitions may result in identiﬁable intangible assets such as customer relationships, supplier relationships, licences and 
technology being recognised. These are valued by professional valuation ﬁrms, using discounted cash ﬂow methods that require 
the application of certain key judgements, and estimates are required to be made in respect of discount rates and future cash ﬂows.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of ﬁnancial position 
date, that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next 
ﬁnancial year are discussed below.

i)  Development costs
Development costs are capitalised in accordance with the accounting policy noted above. Initial capitalisation of costs is based on 
management’s judgement that technological and economic feasibility is conﬁrmed, usually when a product development project has 
reached a deﬁned milestone.

Impairment of goodwill

ii) 
The Group determines whether goodwill is impaired on at least an annual basis or more frequently when there are indications 
of possible impairment. The impairment review requires a value in use calculation of the CGUs to which the goodwill is allocated. 
In estimating the value in use, management is required to make an estimate of the expected future cash ﬂows attributable to the 
CGU and to choose an appropriate discount rate to calculate the present value of those cash ﬂows. The carrying amount of goodwill 
at 30 April 2014 was £1,275k (2013: £1,275k). Further details are given in note 15.

 
 
 
44

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

5.  Revenue

An analysis of the Group’s revenue is as follows:

Continuing operations

Sales of goods and other services

Other revenue

Total revenue

Grant income

Insurance claims

Legal settlement

Total income

Year
ended
2014
£’000

5,329

643

5,972

229

—

490

6,691

Year
ended
2013
£’000

2,691

—

2,691

—

25

—

2,716

6.  Operating segments
Products and services from which reportable segments derive their revenues

For management purposes, the Group is organised into two business units (US and UK) and it is on these operating segments 
that the Group is providing disclosure.

The chief operating decision maker is the Board of Directors, which assesses performance of the segments using the following key 
performance 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 one business segment, i.e. 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.

Analysis by geographical area

A geographical analysis of the Group’s revenue by destination is as follows:

United Kingdom

North America

Asia

Europe

Australasia

Total revenue

Year
ended
2014
£’000

385

3,416

1,089

1,054

28

5,972

Year
ended
2013
£’000

85

1,240

1,165

199

2

2,691

6.  Operating segments continued
Analysis by geographical area continued

A geographical analysis of the Group’s revenue by origin is as follows:

Year ended 30 April 2014

Revenue from sales

Revenue by segment:

– Sale of goods and services

– Other revenue

Total sales by segment

Removal of inter-segment sales

Total external sales

Segment result – operating loss

Interest received

Interest expense

Loss before tax

Tax credit

Loss for the year

Adjusted EBITDA

Other segment information

Property, plant and equipment additions

Depreciation of property, plant and equipment 

Intangible asset additions

Amortisation of intangible assets

Statement of ﬁnancial position

Total assets

Total liabilities

Kromek Group plc  Annual report and accounts 2014

45

UK
operations
£’000

US
operations
£’000

Total for
Group
£’000

1,832

—

1,832

(10)

1,822

(3,143)

15

(530)

(3,658)

1,106

(2,552)

(2,526)

98

364

1,230

253

3,764

643

4,407

(257)

4,150

(637)

—

—

(637)

—

(637)

43

89

373

398

307

5,596

643

6,239

(267)

5,972

(3,780)

15

(530)

(4,295)

1,106

(3,189)

(2,483)

187

737

1,628

560

15,290

(3,649)

6,790

(695)

22,080

(4,344)

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46

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

6.  Operating segments continued
Analysis by geographical area continued

Year ended 30 April 2013

Revenue from sales

Revenue by segment:

– Sale of goods and services

Removal of inter-segment sales

Total external sales

Segment result – operating loss

Interest received

Interest expense

Gain on a bargain purchase 

Loss before tax

Tax credit

Loss for the year

Adjusted EBITDA

Other segment information

Property, plant and equipment additions

Depreciation of property, plant and equipment 

Intangible asset additions

Amortisation of intangible assets

Statement of ﬁnancial position

Total assets

Total liabilities

UK
operations
£’000

US
operations
£’000

Total for
Group
£’000

1,548

—

1,548

(3,407)

—

(148)

2,417

(1,138)

765

(373)

(2,909)

58

346

1,298

152

1,343

(200)

1,143

(495)

—

(23)

—

(518)

248

(270)

(282)

2,222

101

2,114

112

8,370

(5,108)

6,800

(2,035)

2,891

(200)

2,691

(3,902)

—

(171)

2,417

(1,656)

1,013

(643)

(3,191)

2,280

447

3,412

264

15,170

(7,143)

Inter-segment sales are charged at prevailing market prices.

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 goodwill.

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment 
loss represents the loss earned by each segment without allocation of the share of losses of associates, central administration costs 
including Directors’ salaries, investment revenue and ﬁnance costs, and income tax expense. This is the measure reported to the 
Group’s Chief Executive for the purpose of resource allocation and assessment of segment performance.

Kromek Group plc  Annual report and accounts 2014

47

6.  Operating segments continued
Revenues from major products and services

The Group’s revenues from its major products and services were as follows:

Product revenue

Research and development revenue

Consolidated revenue (excluding investment revenue)

Information about major customers

Year
ended
2014
£’000

4,746

1,226

5,972

Year
ended
2013
£’000

1,786

905

2,691

Included in revenues arising from US operations are revenues of approximately £1,249k (2013: £899k) which arose from sales 
to the Group’s largest customer.

7.  Loss for the year 

Loss for the year has been arrived at after (crediting)/charging:

Net foreign exchange gains

Research and development costs recognised as an expense

Depreciation of property, plant and equipment

Amortisation of internally generated intangible assets

Release of negative goodwill to income statement

Cost of inventories recognised as expense

Staff costs (see note 9)

8.  Auditor’s remuneration

The analysis of the auditor’s remuneration is as follows:

Fees payable to the Company’s auditor and their associates for other services to the Group

– The audit of the Company’s subsidiaries

Total audit fees

– Audit related assurance services

– Taxation compliance services

– Other taxation advisory services

– Corporate ﬁnance transaction services

Total non-audit fees

Year
ended
2014
£’000

(84)

2,020

737

560

—

1,911

5,104

Year
ended
2014
£’000

35

35

—

6

107

139

252

Year
ended
2013
£’000

(1)

580

447

264

(2,417)

1,023

3,431

Year
ended
2013
£’000

38

38

40

6

3

—

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48

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

9.  Staff costs

The average monthly number of employees (including Executive Directors) was:

Directors

Research and development, production, sales and distribution

Administration

Their aggregate remuneration comprised:

Wages and salaries

Social security costs

Pension scheme contributions

Share-based payments

Year
ended
2014
Number

4

81

16

101

Year
ended
2014
£’000

4,177

439

363

125

5,104

Further details on the remuneration of the Directors are included in the Directors’ remuneration report on pages 28 and 29.

Key management compensation:

Wages and salaries and other short-term beneﬁts

Social security costs

Pension scheme contributions

Share-based payment expense

Key management comprises the Executive Directors and senior operational staff.

10.  Finance income

Interest revenue

Investment revenue earned on ﬁnancial assets, analysed by category of asset, is as follows:

Loans and receivables (including cash and bank balances)

Total interest income for ﬁnancial assets not designated at FVTPL

Year
ended
2014
£’000

790

99

76

45

1,010

Year
ended
2014
£’000

15

Year
ended
2014
£’000

15

15

Year
ended
2013
Number

6

58

11

75

Year
ended
2013
£’000

2,806

218

285

122

3,431

Year
ended
2013
£’000

575

55

99

70

799

Year
ended
2013
£’000

—

Year
ended
2013
£’000

—

—

Kromek Group plc  Annual report and accounts 2014

49

11.  Finance costs

Interest on bank overdrafts and loans

Interest on loans due to related parties

Total interest expense

12.  Tax
Recognised in the income statement

Current tax credit:

– UK corporation tax on losses in the year

– Adjustments in respect of previous years

– Foreign taxes paid

Total current tax

Deferred tax:

– Origination and reversal of timing differences

– Adjustment in respect of previous years

Total deferred tax

Total tax credit in income statement

Year
ended
2014
£’000

17

513

530

Year
ended
2014
£’000

696

—

(1)

695

411

—

411

1,106

Corporation tax is calculated at 22.83% (2013: 23.92%) of estimated taxable loss for the year. Taxation for other jurisdictions 
is calculated at the rates prevailing in the respective jurisdictions.

Reconciliation of tax credit

The charge for the year can be reconciled to the proﬁt in the income statement as follows:

Loss before tax

Tax at the UK corporation tax rate of 22.83% (2013: 23.92%)

Expenses not deductible for tax purposes

Effect of R&D

Rate differences effect of R&D

Negative goodwill non-taxable write-off

Income not taxable

Unrecognised movement on deferred tax

Effects of overseas tax rates

Adjustments in respect of previous periods

Total tax credit for the year

Year
ended
2014
£’000

4,295

981

(57)

791

(727)

—

155

(360)

323

—

1,106

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£’000

59

112

171

Year
ended
2013
£’000

767

(2)

(1)

764

201

48

249

1,013

Year
ended
2013
£’000

1,656

396

(14)

195

—

578

—

(248)

60

46

1,013

 
 
 
50

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

12.  Tax continued
Reconciliation of tax credit continued
Deferred tax liabilities of £1,329k (2013: £1,612k) arose on the acquisition of eV Products, Inc. during the year ended 30 April 2013. 
Further details of deferred tax are given in note 22. There are no tax items charged to other comprehensive income.

The Finance Act 2013 enacted a rate reduction in the main rate of corporation tax to 21% from 1 April 2014 and to 20% from 1 April 2015. 
As there is no UK deferred tax recognised there is no impact on the tax provisions reported in these accounts.

There is a potential deferred tax asset on excess tax deductions arising from share-based payments on exercise of share options 
of £1,147k (2013: £1,420k). The asset has not been recognised as it is not considered probable that there will be future proﬁts available. 

13.  Dividends

The Directors do not recommend the payment of a dividend (2013: £nil). 

14.  Losses per share

The calculation of the basic and diluted earnings per share is based on the following data:

Losses

Losses for the purposes of basic and diluted losses per share being net losses attributable to owners 
of the Group

Number of shares

Year
ended
2014
£’000

Year
ended
2013
£’000

(3,189)

(643)

Year
ended
2014
Number

Year
ended
2013
Number

Weighted average number of ordinary shares for the purposes of basic losses per share

61,870,643

7,572,337

Effect of dilutive potential ordinary shares:

– Share options

Weighted average number of ordinary shares for the purposes of diluted losses per share

Basic and diluted

Adjusted basic and diluted

5,080,789

341,429

66,951,432

7,913,766

Year
ended
2014
£

(0.05)

(0.05)

Year
ended
2013
£

(0.08)

(0.40)

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.

15.  Goodwill

Cost

At 1 May 2013

At 30 April 2014

Accumulated impairment losses

At 1 May 2013

At 30 April 2014

Carrying amount

At 30 April 2014

At 30 April 2013

£’000

1,275

1,275

—

—

1,275

1,275

Kromek Group plc  Annual report and accounts 2014

51

15.  Goodwill continued
Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to beneﬁt from that business 
combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated as follows:

US operations

Year
ended
2014
£’000

1,275

Year
ended
2013
£’000

1,275

The goodwill arose on the acquisition of NOVA R&D, Inc. in 2011 and represents the excess of the fair value of the consideration 
given over the fair value of the identiﬁable assets and liabilities acquired. 

Goodwill has been allocated to NOVA R&D, Inc. as a CGU and is reported in note 6 within the segmental analysis of the US operations. 
Negative goodwill arose on the acquisition of eV Products, Inc. which has been released to the income statement in 2013.

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired, by 
comparing the net book value of the goodwill and non-current assets for the CGU to its value in use on a discounted cash ﬂow basis.

The recoverable amount has been determined on a value in use basis on each CGU using the management approved ﬁve year 
forecasts for each CGU. The base ﬁve year projection is year on year growth over the next ﬁve years, with overheads remaining 
relatively stable. The growth rate of the CGU is expected to increase to 50% in year two as a result of the CGU continuing to develop 
its technical capabilities in the forthcoming year. Growth is then expected to fall to 7% in year two, 38% in year three and 2% in year four 
as a result of the rapid growth in year two, and 10% in year ﬁve. These cash ﬂows are then discounted at the Company’s weighted 
average cost of capital of 16% (2013: 18%).

Based on the results of the current year impairment review, no impairment charges have been recognised by the Group in the year 
ended 30 April 2014 (2013: £nil). Management has considered various sensitivity analyses in order to appropriately evaluate the 
carrying value of goodwill. 

Having assessed the anticipated future cash ﬂows the Directors do not consider there to be any reasonably possible changes in 
assumptions that would lead to such an impairment charge in the year ended 30 April 2014. Purely for illustrative purposes, a compound 
reduction in revenue of 5% in each of years one to ﬁve whilst holding overheads constant would not affect the conclusion of the review.

The Directors have reviewed the recoverable amount of the CGU and do not consider there to be any indication of impairment in 2014 or 2013.

16.  Other intangible assets

Cost

At 1 May 2013

Additions

Exchange differences

At 30 April 2014

Amortisation

At 1 May 2013

Charge for the year

Exchange differences

At 30 April 2014

Carrying amount 

At 30 April 2014

At 30 April 2013

Development
costs
£’000

Patents,
trademarks
and other
intangibles
£’000

2,477

1,061

—

3,538

—

56

—

56

3,482

2,477

4,296

567

(278)

4,585

636

504

(38)

1,102

3,483

3,660

Total
£’000

6,773

1,628

(278)

8,123

636

560

(38)

1,158

6,965

6,137

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The amortisation period for development costs incurred on the Group’s product development is over the period during which the 
Company is expected to beneﬁt and the amortisation will be based on the number of units sold over the expected product lifetime.

Patents and trademarks are amortised over their estimated useful lives, which is on average 10 years.

 
 
 
52

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

17.  Property, plant and equipment

Cost or valuation

At 1 May 2013

Additions

Exchange differences

At 30 April 2014

Accumulated depreciation and impairment

At 1 May 2013

Charge for the year

Exchange differences

At 30 April 2014

Carrying amount

At 30 April 2014

At 30 April 2013

Computer
equipment*
£’000

Plant and
machinery*
£’000

Fixtures
 and ﬁttings*
£’000

520

4,529

71

(5)

112

(215)

586

4,426

272

127

(1)

398

188

248

1,859

583

(53)

2,389

2,037

2,670

144

4

(4)

144

57

27

—

84

60

87

Total
£’000

5,193

187

(224)

5,156

2,188

737

(54)

2,871

2,285

3,005

*  The Directors have reviewed the property, plant and equipment in 2013, and have reclassiﬁed, at cost, £2,174k of computer equipment and £13k of ﬁxtures and ﬁttings 
into plant and machinery. Accumulated depreciation has also been reclassiﬁed in 2013, with £103k being reclassiﬁed from computer equipment into plant and machinery.

18.  Subsidiaries

A list of the signiﬁcant investments in subsidiaries, including the name, country of incorporation, and proportion of ownership 
interest, is given in note 39 to the Company’s separate ﬁnancial statements.

19.  Inventories

Raw materials

Work in progress

Finished goods

Year
ended
2014
£’000

465

1,391

533

Year
ended
2013
£’000

408

790

900

2,389

2,098

The cost of inventories recognised as an expense during the year in respect of continuing operations was £1,911k (2013: £1,023k).

The Directors have reviewed the inventory in 2013 and have reclassiﬁed £790k of ﬁnished goods into work in progress to ensure 
the correct disclosure of inventory between the three components disclosed above. 

20. Trade and other receivables

Amount receivable for the sale of goods 

Other receivables

Prepayments

Year
ended
2014
£’000

1,501

90

316

1,907

Year
ended
2013
£’000

1,161

324

94

1,579

Kromek Group plc  Annual report and accounts 2014

53

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20. Trade and other receivables continued
Trade receivables

Trade receivables disclosed above are classiﬁed as loans and receivables and are therefore measured at amortised cost.

The average credit period taken on sales of goods is 60 days. No interest is charged on the receivables. The Group recognises an 
allowance for doubtful debts of 100% against all receivables over 120 days because historical experience has been that receivables 
that are past due beyond 120 days are not recoverable. Allowances against doubtful debts are recognised against trade receivables 
between 30 days and 120 days based on estimated irrecoverable amounts determined by reference to past default experience 
of the counterparty and an analysis of the counterparty’s current ﬁnancial position. 

Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer’s credit 
quality and deﬁnes credit limits by customer. 

The Group does not hold any collateral or other credit enhancements over any of its trade receivables nor does it have a legal right 
of offset against any amounts owed by the Group to the counterparty.

Ageing of past due but not impaired receivables:

31–60 days 

61–90 days

91–120 days

Total

Year
ended
2014
£’000

70

13

550

633

Year
ended
2013
£’000

111

26

109

246

Included within receivables past due but not impaired of 91–120 days are amounts relating to a distributor for whom the Group 
is supporting during the commercialisation process.

In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable 
from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base 
being large and unrelated.

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

21.  Borrowings

Total borrowings

Amount due for settlement within 12 months

Amount due for settlement after 12 months

Year
ended
2014
£’000

—

—

Year
ended
2013
£’000

2,449

—

Amounts included within loans and borrowings of £nil (2013: £1,060k) carry interest of nil% (2013: 5%) per month charged 
on the outstanding loan balances. 

22. Deferred tax liabilities

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current 
and prior reporting period.

At 1 May 2013

Charge/(credit) to proﬁt or loss

At 30 April 2014

Revaluation
of intangibles
£’000

1,765

(307)

1,458

Accelerated
capital
allowances
£’000

Short-term
timing
differences
£’000

441

186

627

(74)

57

(17)

Tax
losses
£’000

(588)

(346)

(934)

Total
£’000

1,544

(410)

1,134

 
 
 
54

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

22. Deferred tax liabilities continued
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The following is the analysis 
of the deferred tax balances (after offset) for ﬁnancial reporting purposes:

Deferred tax liabilities

Deferred tax assets

Year
ended
2014
£’000

2,085

(951)

1,134

Year
ended
2013
£’000

2,206

(662)

1,544

At the statement of ﬁnancial position date, the Group has unused tax losses of £12,075k (2013: £9,869k) available for offset against 
future proﬁts. A deferred tax asset has been recognised in respect of £3,845k (2013: £2,220k) of such losses. No deferred tax asset 
has been recognised in respect of the remaining £8,230k (2013: £7,650k) as it is not considered probable that there will be future 
taxable proﬁts available. All losses may be carried forward indeﬁnitely subject to a signiﬁcant change in the nature of the Group’s 
trade with US losses having a maximum life of 20 years.

23. Trade and other payables

Trade payables and accruals 

Year
ended
2014
£’000

3,210

Year
ended
2013
£’000

3,149

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit 
period taken for trade purchases is 175 days. For all suppliers no interest is charged on the trade payables. The Group has ﬁnancial 
risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

The Directors consider that the carrying amount of trade payables approximates to their fair value.

24. Derivatives, ﬁnancial instruments and hedge accounting
At 30 April 2014 and 30 April 2013 the Group had no derivatives in place for cash ﬂow hedging purposes.

25. Share capital

Allotted, called up and fully paid

108,010,790 ordinary shares of £0.01 each

453,841 ordinary shares of £0.00004 each

950,000 A ordinary shares of £0.00004 each

600,000 B ordinary shares of £0.00004 each

550,000 C ordinary shares of £0.00004 each

174,962 D ordinary shares of £1 each

1,000,000 E ordinary shares of £0.00004 each

358,500 F ordinary shares of £0.00004 each

421,000 F preference shares of £0.00004 each

1,000,000 G ordinary shares of £0.99996 each

297,500 H ordinary shares of £0.00004 each

577,593 H preference shares of £0.00004 each

658,956 J ordinary shares of £0.00004 each

1,526,181 J preference shares of £0.00004 each

279,768 K ordinary shares of £0.00004 each

64,762 K preference shares of £0.00004 each

Year
ended
2014
£’000

1,080

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Year
ended
2013
£’000

—

—

—

—

—

175

—

—

—

1,000

—

—

—

—

—

—

1,080

1,175

Kromek Group plc  Annual report and accounts 2014

55

25. Share capital continued
During the year, a capital restructure was undertaken as part of the IPO. The class D and G shares of total nominal value of 
£1.175m in Kromek Limited were acquired by the Group for £1 each and then cancelled, thus creating a capital redemption reserve. 

The remaining ordinary share capital in Kromek Limited of 0.004p per share were merged into a single class of ordinary 1p shares 
and a bonus issue of 10% was also issued for the K ordinary and preference shares. The ordinary shares were then exchanged 
on a 10:1 basis for shares in Kromek Group plc. In addition, a further 29m shares were issued for a net consideration of £13.4m.

During the year 532,000 shares (2013: 2,619,000) were allotted under EMI share option schemes.

Unpaid share capital

At the year ended 30 April 2014, unpaid share capital amounted to £nil (2013: £241k).

26. Share premium account

Balance at 1 May 2013

Premium arising on issue of equity shares

Transfer to capital redemption reserve

Expenses of issue of equity shares

Balance at 30 April 2014

27. Capital redemption reserve

£’000

22,278

14,460

(779)

(1,347)

34,612

During the year, a capital restructure was undertaken as a result of the IPO. The class D and G shares of total nominal value of 
£1.175m in Kromek Limited were acquired by the Group for £1 each and then cancelled, thus creating a capital redemption reserve.

28. Translation reserve

Balance at 1 May 2013

Exchange differences on translating the net assets of foreign operations

Balance at 30 April 2014

£’000

159

(641)

(482)

Exchange differences relating to the translation of the net assets of the Group’s foreign operations, which relate to subsidiaries only, 
from their functional currency into the parent’s functional currency, being sterling, are recognised directly in the translation reserve.

29. Accumulated losses

Balance at 1 May 2013 

Net loss for the year

Effect of share-based payment credit

Balance at 30 April 2014

£’000

(15,585)

(3,189)

125

(18,649)

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56

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

30. Notes to the cash ﬂow statement

Loss for the year

Adjustments for:

– Finance income

– Finance costs

– Income tax credit

– Depreciation of property, plant and equipment

– Amortisation of intangible assets

– Negative goodwill released to income statement

– Share-based payment expense

Year
ended
2014
£’000

(3,189)

(15)

530

(1,106)

737

560

—

125

Year
ended
2013
£’000

(643)

—

171

(1,013)

447

264

(2,417)

122

Operating cash ﬂows before movements in working capital

(2,358)

(3,069)

Increase in inventories

Increase in receivables

Increase in payables

Cash used in operations

Income taxes received

Net cash used in operating activities

Cash and cash equivalents

Cash and bank balances

(291)

(386)

120

(2,915)

766

(2,149)

Year
ended
2014
£’000

6,563

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, 
net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal to their fair value.

31.  Operating lease arrangements
The Group as lessee

Lease payments under operating leases recognised as an expense in the year

Year
ended
2014
£’000

577

At the statement of ﬁnancial position date, the Group had outstanding commitments for future minimum lease payments under 
non-cancellable operating leases, which fall due as follows:

Within one year

In the second to ﬁfth years inclusive

Year
ended
2014
£’000

310

68

378

Operating lease payments represent rentals payable by the Group for certain of its ofﬁce properties. Leases are negotiated for an 
average term of ﬁve years.

At 30 April 2014 and 2013, the Group had no capital commitments or contingencies.

(284)

(625)

1,374

(2,604)

1,359

(1,245)

Year
ended
2013
£’000

309

Year
ended
2013
£’000

333

Year
ended
2013
£’000

386

391

777

Kromek Group plc  Annual report and accounts 2014

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32. Share-based payments
Equity-settled share option scheme

The Company has a share option scheme (EMI scheme) for all employees of the Group. Options are exercisable at a price equal to 
the average quoted market price of the Company’s shares on the date of grant. The average vesting period is three years. If the options 
remain unexercised after a period of 10 years from the date of grant the options expire. Options are forfeited if the employee leaves 
the Group before the options vest. 

Details of the share options outstanding during the year are as follows:

Outstanding at beginning of the year

Effect of share reorganisation

Granted during the year

Exercised during the year

Outstanding at the end of the year

Exercisable at the end of the year

2014

2013

Number of
share options

3,556,656

8,146,754

532,000

(522,500)

11,712,910

7,360,160

Weighted
average
exercise
price
 £

1.13

1.13

0.24

0.07

0.16

0.18

Number of
share options

937,656

—

2,619,000

—

3,556,656

678,356

Weighted
average
exercise
price
 £

1.13

—

1.98

—

1.34

1.34

The weighted average share price at the date of exercise for share options exercised during the year was £0.20 (2013: £nil). 
The options outstanding at 30 April 2014 had a weighted average exercise price of £0.18 (2013: £0.13) and a weighted average 
remaining contractual life of six years. In 2014, the aggregate of the estimated fair values of the options granted is £37k 
(2013: £112k). The inputs into the Black-Scholes model are as follows:

Weighted average share price

Weighted average exercise price

Expected volatility

Expected life

Risk-free rate

Expected dividend yields

2014

39p

16p

55.33%

 6 years

0.37%

0%

2013

20p

4.9p

53.13%

6 years

0.42%

0%

Expected volatility was determined by calculating the historical volatility of similar listed businesses over the previous three years. 
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, 
exercise restrictions and behavioural considerations.

The Group recognised total expenses of £117k (2013: £122k) related to equity-settled share-based payment transactions.

The Kromek Group plc 2013 LTIP

On 10 October 2013 a new LTIP was adopted. Under the plan, awards will be made annually to key employees. Subject to the 
satisfaction of the required TSR performance criteria, these grants will vest at the end of a three year reporting period with the ﬁrst 
ending on 30 April 2016. 

On 10 October 2013 735,093 (2013: nil) options were granted under the 2013 LTIP to a number of key employees, including 
two Executive Directors of the Group. The fair value of these options granted was £70k (2013: £nil), and the amount recognised 
as a share-based payment expense for the year ended 30 April 2014 was £8k (2013: £nil). 

 
 
 
58

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

32. Share-based payments continued
The Kromek Group plc 2013 LTIP continued

The 2013 LTIP award was valued using the Monte Carlo pricing model. The inputs into the Monte Carlo pricing model are as follows:

Weighted average share price

Weighted average exercise price

Expected volatility

Expected life

Risk-free rate

Expected dividend yields

33. Retirement beneﬁt schemes
Deﬁned contribution schemes

2014

20p

1p

53.13%

3 years

0.42%

0%

2013

—

—

—

—

—

—

The Group operates deﬁned contribution retirement beneﬁt schemes for all employees. Where there are employees who leave the schemes 
prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

The employees of the Group’s subsidiaries in the US are members of a state-managed retirement beneﬁt scheme operated by 
the Government of the US. The subsidiaries are required to contribute a speciﬁed percentage of payroll costs to the retirement 
beneﬁt scheme to fund the beneﬁts. The only obligation of the Group with respect to the retirement beneﬁt scheme is to make 
the speciﬁed contributions. 

The total cost charged to income of £363k (2013: £285k) represents contributions payable to these schemes by the Group at rates 
speciﬁed in the rules of the schemes. As at 30 April 2014, contributions of £27k (2013: £22k) due in respect of the current reporting 
period had not been paid over to the scheme.

34. Financial instruments

The Group’s principal ﬁnancial instruments are cash and trade receivables. 

The Group has exposure to the following risks from its operations:

Capital risk 

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising 
the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy has remained 
unchanged between 2013 and 2014.

The capital structure of the Group consists of net debt, which includes the borrowings disclosed in note 21 after deducting cash 
and cash equivalents, and equity attributable to equity holders of the Company, comprising issued capital, reserves and accumulated 
losses as disclosed in notes 25 to 29. 

The Group is not subject to any externally imposed capital requirements.

The Group’s primary source of capital is equity. By pricing products and services commensurately with the level of risk and focusing 
on the effective collection of cash from customers, the Group aims to maximise revenues and operating cash ﬂows. 

Cash ﬂow is further controlled by ongoing justiﬁcation, monitoring and reporting of capital investment expenditures and regular 
monitoring and reporting of operating costs. Working capital ﬂuctuations are managed through employing the overdraft facility 
available, which at the year end was £nil (2013: £nil). 

The Group considers that the current capital structure will provide sufﬁcient ﬂexibility to ensure that appropriate investment 
can be made, if required, to implement and achieve the longer-term growth strategy of the Group. 

Kromek Group plc  Annual report and accounts 2014

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34. Financial instruments continued
Market risk

The Group may be affected by general market trends, which are unrelated to the performance of the Group itself. The Group’s success 
will depend on market acceptance of the Group’s products and there can be no guarantee that this acceptance will be forthcoming.

Market opportunities targeted by the Group may change and this could lead to an adverse effect upon its revenue and earnings.

Foreign currency risk 

The Group’s operations are split between the UK and the US, and as a result the Group incurs costs in currencies other than its 
presentational currency of pounds sterling. The Group also holds cash and cash equivalents in non-sterling denominated bank accounts.

The following table shows the denomination of the year-end cash and cash equivalents balance:

Pounds sterling

US dollar sterling equivalent

Euro sterling equivalent

Year
ended
2014
£’000

6,342

200

21

Year
ended
2013
£’000

249

60

—

Had the foreign exchange rate between sterling, US dollar and euro changed by 5%, this would affect the loss for the year and net 
assets of the Group by £34k (2013: £23k).

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in ﬁnancial loss to the Group. 
The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufﬁcient collateral, where appropriate, 
as a means of mitigating the risk of ﬁnancial loss from defaults. The Group only transacts with entities that are rated the equivalent 
of investment grade and above. This information is supplied by independent rating agencies where available, and if not available, 
the Group uses other publicly available ﬁnancial information and its own trading records to rate its major customers. The Group’s 
exposure and the credit ratings of its counterparties are continually monitored and the aggregate value of transactions concluded 
is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved 
by the risk management committee annually. 

Trade receivables consist of a small number of customers, spread across diverse industries and geographical areas. Ongoing credit 
evaluation is performed on the ﬁnancial condition of accounts receivable and, where appropriate, credit guarantee insurance cover 
is purchased.

The Group’s standard credit terms are 30 to 60 days from date of invoice. Invoices greater than 60 days old are assessed as 
overdue. The maximum exposure to credit risk is the carrying value of each ﬁnancial asset included on the statement of ﬁnancial 
position as summarised in note 20.

The Group’s management considers that all the above ﬁnancial assets that are not impaired or past due for each of the reporting 
dates under review are of good quality.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity 
risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management 
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, 
by continually monitoring forecast and actual cash ﬂows, and by matching the maturity proﬁles of ﬁnancial assets and liabilities.

The table overleaf details the Group’s remaining contractual maturity for its non-derivative ﬁnancial liabilities with agreed repayment 
periods. The table has been drawn up based on the undiscounted cash ﬂows of ﬁnancial liabilities based on the earliest date on 
which the Group can be required to pay. The table includes both interest and principal cash ﬂows. The contractual maturity is based 
on the earliest date on which the Group may be required to pay.

 
 
 
60

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the consolidated ﬁnancial statements continued
For the year ended 30 April 2014

34. Financial instruments continued
Liquidity risk continued

1 May 2013

Repayments

30 April 2014

Weighted
average
effective
interest rate
%

60

—

—

Less than
1 month
£’000

1–3 months
£’000

53

(53)

—

158

(158)

—

3 months
to 1 year
£’000

2,502

(2,502)

—

1–5 years
£’000

5+ years
£’000

—

—

—

—

—

—

Total
£’000

2,713

(2,713)

—

Signiﬁcant accounting policies

Details of the signiﬁcant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement 
and the bases for recognition of income and expenses) for each class of ﬁnancial asset, ﬁnancial liability and equity instrument 
are disclosed in note 3.

Categories of ﬁnancial instruments

Financial assets

Cash and bank balances (including cash and bank balances in a disposal group held for sale)

Loans and receivables 

Financial liabilities

Year
ended
2014
£’000

6,563

1,907

Year
ended
2013
£’000

309

1,579

Amortised cost (including trade payables balance in a disposal group held for sale)

(3,210)

(5,599)

35. Events after the balance sheet date

Since the end of the ﬁnancial year, the Directors are not aware of any other matter or circumstance not otherwise dealt within 
this report or the ﬁnancial statements that has signiﬁcantly or may signiﬁcantly affect the operations of the Group. 

36. Related party transactions

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on 
consolidation and are not disclosed in this note. Transactions between the Group and its related parties are disclosed below. 

During the year, Amphion Innovations charged the Group £154k (2013: £20k) in relation to management fees. At the year end 
the Group owed Amphion Innovations £nil (2013: £nil).

Directors’ transactions

During the year Professor M Robinson, a Director, charged the Group £72k (2013: £72k) for consultancy fees. At the year end 
the Group owed Professor M Robinson £7k (2013: £44k). This amount was included within trade payables. 

Loans from related parties

Michael McBraida (shareholder)

Russell Grant (shareholder)

Max Robinson (Director)

Roger Kendrick (shareholder)

Arnab Basu (Director)

Amphion Innovations (shareholder)

Polymer Holdings (shareholder)

Year
ended
2014
£’000

—

—

—

—

—

—

—

Year
ended
2013
£’000

150

445

48

300

146

365

830

There have been no other transactions with related parties other that what has been disclosed within this note.

Kromek Group plc  Annual report and accounts 2014

61

Company statement of ﬁnancial position
As at 30 April 2014

Non-current assets

Investment in subsidiaries

Current assets

Trade and other receivables

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Total liabilities

Net assets 

Equity

Share capital

Share premium account

Accumulated losses

Note

39

40

41

45

46

47

30 April
2014
£’000

—

—

14,765

257

15,022

15,022

(66)

—

(66)

14,956

1,080

13,934

(58)

14,956

The ﬁnancial statements of Kromek Group plc (registered number 8661469) were approved by the Board of Directors and authorised 
for issue on 27 August 2014. They were signed on its behalf by:

Dr Arnab Basu MBE
Chief Executive Ofﬁcer

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62

Kromek Group plc  Annual report and accounts 2014

Financial statements
Company statement of changes in equity
For the period ended 30 April 2014

Balance at 1 September 2013

Loss for the period

Other comprehensive income for the period

Total comprehensive losses for the period

Share reorganisation

Shares issued on IPO

Issue of ordinary shares

IPO costs recognised in equity

Balance at 30 April 2014

Equity attributable to equity holders of the Company

Share 
capital
£’000

—

—

—

—

779

294

7

—

Share
premium
account
£’000

Accumulated
losses
£’000

—

—

—

—

—

14,706

34

(806)

—

(58)

—

(58)

—

—

—

—

Total
equity
£’000

—

(58)

—

(58)

779

15,000

41

(806)

1,080

13,934

(58)

14,956

Company statement of cash ﬂows
For the period ended 30 April 2014

Net cash used in operating activities

Financing activities

Proceeds from issue of share capital

Net cash from ﬁnancing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Kromek Group plc  Annual report and accounts 2014

63

Note

44

Period
ended
30 April
2014
£’000

(14,743)

15,000

15,000

257

—

257

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64

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the Company ﬁnancial statements
For the period ended 30 April 2014

37. Signiﬁcant accounting policies

The separate ﬁnancial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, 
the separate ﬁnancial statements have been prepared in accordance with IFRSs adopted by the European Union.

The ﬁnancial statements have been prepared on the historical cost basis except for the remeasurement of certain ﬁnancial 
instruments to fair value. The principal accounting policies adopted are the same as those set out in note 3 to the consolidated 
ﬁnancial statements except as noted below.

Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.

38. Auditor’s remuneration

The auditor’s remuneration for audit and other services is disclosed in note 8 to the consolidated ﬁnancial statements.

39. Subsidiaries

Details of the Company’s direct and indirect subsidiaries as at 30 April 2014 are as follows:

Name

Kromek Limited

Kromek Germany Limited

Kromek, Inc.

NOVA R&D, Inc.

eV Products, Inc.

The investments in subsidiaries are all stated at cost.

40. Trade and other receivables

Amount receivable for the sale of goods 

Allowance for doubtful debts

Amounts due from subsidiary undertakings

Prepayments

Amounts due from subsidiary undertakings are due within one year.

41. Trade and other payables

Trade payables and accruals

Place of
incorporation
(or registration)
and operation

Proportion of
ownership
interest
%

Proportion of
voting power
held
%

United Kingdom

United Kingdom

United States of America

United States of America

United States of America

100

100

100

100

100

100

100

100

100

100

Period
ended
30 April
2014
£’000

—

—

—

14,749

16

14,765

Period
ended
30 April
2014
£’000

(66)

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit 
period taken for trade purchases is 30 days. For all suppliers no interest is charged on the trade payables. The Group has ﬁnancial 
risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

The Directors consider that the carrying amount of trade payables approximates to their fair value.

Kromek Group plc  Annual report and accounts 2014

65

42. Financial assets
Inter-company balances

The carrying amount of these assets approximates their fair value. There are no past due or impaired receivable balances.

Cash and cash equivalents

These comprise cash held by the Company and short-term bank deposits with an original maturity of three months or less. 
The carrying amount of these assets approximates their fair value.

43. Financial liabilities
Trade and other payables

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken 
for trade purchases is 30 days.

The carrying amount of trade payables approximates to their fair value.

44. Notes to the statement of cash ﬂows

Loss for the year

Adjustments for:

– Increase in receivables

– Increase in payables

Net cash from operating activities

45. Share capital

Allotted, called up and fully paid

108,010,790 ordinary shares of £0.01 each

46. Share premium account

Balance at 1 October 2013

Premium arising on issue of equity shares

Expenses of issue of equity shares

Balance at 30 April 2014

47. Accumulated losses

Balance at 1 October 2013

Net loss for the year

Balance at 30 April 2014

Period
ended
30 April
2014
£’000

(58)

(14,751)

66

(14,743)

Period
ended
30 April
2014
£’000

1,080

1,080

£’000

—

14,740

(806)

13,934

£’000

—

(58)

(58)

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66

Kromek Group plc  Annual report and accounts 2014

Financial statements
Notes to the Company ﬁnancial statements continued
For the period ended 30 April 2014

48. Financial instruments

The Company’s principal ﬁnancial instruments are cash and trade receivables. 

The Company has exposure to the following risks from its operations:

Capital risk 

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while 
maximising the return to shareholders through the optimisation of the debt and equity balance. 

The capital structure of the Company consists of equity attributable to equity holders of the Company, comprising issued capital, 
reserves and accumulated losses as disclosed in notes 25 to 29. 

The Company is not subject to any externally imposed capital requirements.

Cash ﬂow is controlled by ongoing justiﬁcation, monitoring and reporting of capital investment expenditures and regular monitoring 
and reporting of operating costs. 

The Company considers that the current capital structure will provide sufﬁcient ﬂexibility to ensure that appropriate investment 
can be made, if required, to implement and achieve the longer-term growth strategy of the Company. 

Market risk

The Company may be affected by general market trends, which are unrelated to the performance of the Company itself. 
The Company’s success will depend on market acceptance of the Company’s products and there can be no guarantee 
that this acceptance will be forthcoming. 

Market opportunities targeted by the Company may change and this could lead to an adverse effect upon its revenue and earnings.

Foreign currency risk 

The Company currently does not undertake transactions denominated in foreign currencies. 

Credit risk 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in ﬁnancial loss to the Company. 
The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufﬁcient collateral, where 
appropriate, as a means of mitigating the risk of ﬁnancial loss from defaults. The Company only transacts with entities that are rated 
the equivalent of investment grade and above. This information is supplied by independent rating agencies where available, and if 
not available, the Company uses other publicly available ﬁnancial information and its own trading records to rate its major customers. 
The Company’s exposure and the credit ratings of its counterparties are continually monitored and the aggregate value of transactions 
concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed 
and approved by the risk management committee annually. 

The Company’s management considers that all the above ﬁnancial assets that are not impaired or past due for each of the reporting 
dates under review are of good quality.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity 
risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management 
requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, 
by continually monitoring forecast and actual cash ﬂows, and by matching the maturity proﬁles of ﬁnancial assets and liabilities. 

Kromek Group plc  Annual report and accounts 2014

67

49. Ultimate controlling parent and party

In the opinion of the Directors, there is no ultimate controlling parent or party.

50. Events after the balance sheet date

Since the end of the ﬁnancial year, the Directors are not aware of any other matter or circumstance not otherwise dealt 
within this report or the ﬁnancial statements that has signiﬁcantly or may signiﬁcantly affect the operations of the Company. 

51.  Related party transactions

No transactions have been noted with Directors during the period ended 30 April 2014.

No dividends were paid in the period in respect of ordinary shares held by the Company’s Directors.

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68

Kromek Group plc  Annual report and accounts 2014

Financial statements
Ofﬁcers and professional advisors

Directors 

Dr A Basu MBE
Mr D Bulmer
Mr R C E Morgan
Professor M Robinson
Professor B K Tanner
Mr J H Whittingham
Dr G K Speirs
Mr L Kinet
Mr P Bains
Ms C Ginman

Secretary

Mr D Bulmer

Registered ofﬁce

NETPark
Thomas Wright Way
Sedgeﬁeld
County Durham
TS21 3FD

Bankers

HSBC Bank Plc
1 Saddler Street
Durham
County Durham
DH1 3NR

Auditors

Deloitte LLP 
Chartered Accountants and Registered Auditors
Newcastle upon Tyne
NE1 2HF

Legal advisors

Pinsent Masons LLP
1 Park Row
Leeds
LS1 5AB

Kromek Group plc 
NETPark
Thomas Wright Way
Sedgeﬁeld
County Durham
TS21 3FD

Tel:  +44 (0) 1740 626060
Fax: +44 (0) 1740 626061