This announcement is an advertisement and not a prospectus or an admission document. This announcement does not constitute or form a part of, and should not be construed as, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities in Kromek Group plc (the "Company") nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto. This announcement does not constitute a recommendation regarding securities. Investors should not subscribe for or purchase any securities referred to in this announcement except on the basis of information in the admission document to be published by the Company in due course in connection with the proposed institutional placing (the "Placing") and admission of the Ordinary Shares of the Company to the trading on AIM (the "Admission"), a market operated by London Stock Exchange plc (the "Admission Document").
Kromek Group plc
("Kromek" or "the Company" or "the Group")
KROMEK ANNOUNCES INTENTION TO FLOAT
PROPOSED PLACING TO RAISE £15 MILLION AND ADMISSION TO AIM
Kromek, a UK based technology company, developing high performance materials and products for radiation detection, today announces its intention to launch an initial public offering ("IPO"). The Company intends to raise approximately £15 million in a placing of Ordinary Shares (the "Placing") and apply for the Admission of its Ordinary Share Capital to trading on AIM, a market operated by the London Stock Exchange plc.
· Kromek designs, develops and produces x-ray imaging and radiation detection products using its core CZT technology for the medical, security screening and nuclear markets. The Group's CZT based products provide high resolution information on material composition and structure and are used in multiple applications, ranging from the identification of cancerous tissues to hazardous materials, such as explosives, and the analysis of radioactive materials.
· In addition to more established liquid phase growth methods, the Group has developed a patented vapour phase growth technique capable of producing CZT on a commercial scale. The Directors believe that it is the only vapour based method developed worldwide for production of CZT.
· The Group's business model provides a vertically integrated technology offering to customers, from the growth of CZT crystals to finished products or detectors, including software, electronics and application specific integrated circuits ("ASICs")
· Customers include some of the world's most well-known OEMs and research institutions within the medical, security screening and nuclear markets.
· The Group has recently entered into a mutually exclusive multi-year development contract with one of the top four global OEMs within medical imaging for spectral CT application.
· The Group has developed a proprietary liquid explosive detection system for airport security which is ECAC Type-B Standard 3 qualified and for which the Group is targeting significant European sales following recent legislation mandating all European airports to screen liquids, aerosols and gels ("LAGs") presented at airport security with EC approved equipment, effective from 31 January 2014.
· With over 25 years of research in CZT production, the Group holds approximately 150 patents granted or pending across its product portfolio and a significant number of trade secrets which the Directors believe are unparalleled in the market place.
· Kromek has a broad range of technical and commercial experience across the Board and Management Team in Healthcare, Technology, Security and Defence.
Panmure Gordon (UK) Limited is acting as Nominated Adviser and Brokerto the Group.
Arnab Basu, Chief Executive Officer of Kromek, commented: "The demand for Kromek's materials identification technology in the medical imaging, security screening and nuclear detection markets is real and immediate. The business is established in its markets and its hybrid business model is proven. We have contracts in place with some of the leading OEMs in each of our chosen fields, including a development contract recently signed with a top four global OEM in the medical imaging market. Kromek is now seeking to raise additional capital to accelerate its growth and harvest value from our platform of technologies.
"Kromek is a well-established British technology business with a US presence and the opportunity to grow rapidly. To that end, admitting to AIM is an attractive option providing the Company with both access to capital and tradable equity should acquisition opportunities arise in the future. I now look forward to working with my colleagues and our shareholders to realise the Company's commercial potential." he added.
Key Strengths of the Group
Established and growing blue-chip customer base
The Group's customer base includes a number of leading global OEMs and research institutions including three of the leading global medical OEMs, Northrop Grumman, the European Synchrotron Radiation Facility the Institute of High Energy Physics Beijing and EDF. The Group also has existing contracts with US government agencies.
Proprietary CZT production technology
The Company's UK and US facilities have both been chosen by the US government for critical materials development/delivery programs and the Board believesthat the Group is the only organisation to have developed a patented vapour phase growth technique.
Significant barriers to entry
Customers developing products employing spectral detection of x-rays and gamma-rays must combine detectors, electronics and algorithms in their products. The Board believesthe level of vertical integration offered by the Group combined with the patents and trade secrets held within the Group, provides customers with low development costs and fast time to market, acting as significant barriers to entry for any potential competitor.
Large and growing target market with significant unmet needs
Kromek's products address three key sectors: medical imaging, security screening and nuclear detection. The Board believes that there is a growing need within each of these markets for more precise and timely detection of material composition and structure. By 2017, the CT scanner market alone is expected to grow by over 35 per cent. to $5.1 billion (source BCC Research).
Significant management experience
The Company's senior management and Directors have extensive experience working in the medical imaging, security screening, and nuclear detection sectors, and in developing advanced imaging technology, bringing together significant knowledge of the space.
The Group and its technology
Kromek's products are predominately based on CZT and a closely related material CdTe. 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 detection 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. 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. 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 additional proprietary Kromek technologies, can be used to reveal advanced information about an object or the environment.
The Group's current product offering includes:
The majority of Kromek's medical products are in the form of detectors or significant subcomponents for OEM Customers for use in Gamma Ray Spectroscopy, Bone Mineral Densitometry and Lymph Node Biopsy. In some cases the Company enters into research contracts for the development of SPECT, PET, BMD and CT technology components. The Group has recently entered into a mutually exclusive two year development contract with one of the top four global OEMs within medical imaging for spectral human CT application.
The Group also develops custom detector designs or subassemblies for academic research and OEM customer projects. Additionally, the Group currently has one complete end user product for sale within the medical offering, the MARS spectral CT imaging system, through a partnership with MARS bio imaging, CERN's partner to commercialise developed technology into medical applications. Kromek is the exclusive global distributer of the MARS spectral CT imaging system.
Kromek has developed a liquid explosive detection system for airport security. The "Identifier", which is a Standard 3 Type-B certified Bottle Scanner, and is a desktop inspection unit that can quickly classify LAGs based on multi-spectral analysis of x-rays using a combination of energy resolving detectors and the Group's proprietary software. The system is container agnostic and scans, analyses and classifies liquids with a one button press operation in under 20 seconds, with a high degree of accuracy and low false alarm rates. The system has been developed to meet the specific challenges for the aviation security market in light of recent European legislation mandating all European airports to screen LAGs presented at airport security with EC approved equipment, effective from 31 January 2014.
In addition to the bottle scanner, Kromek Group provides ASICs and detectors to OEMs for use in third party products for industrial and security applications.
In addition to the medical and security screening products, Kromek has a portfolio of high-resolution end-user products for gamma-ray detection and isotope analysis in complex nuclear environments, differentiated by their sensitivity, high resolution and small form factor, creating flexibility in deployment.
Non recurring engineering ("NRE")
The Group offers NRE services and has recently secured two major US defence programs ($2.5 million for small detector development through its relationship with a major US defence OEM, in addition been selected for a $1.2 million program with the US Department of Defense Domestic Nuclear Detection Office for materials for radiation detection systems for radiological detectors.
Furthermore, in the aviation security sector, Kromek has the lead role in a €1.2 million (24 month) Eurostars collaborative development program with European partners aiming to resolve issues regarding advanced materials identification and false alarm rates, both of which are important issues in aviation security.
Strategy for Growth
The Board's current business strategy comprises the following aspects:
Increased product integration
Kromek aims to satisfy increasing customer demand for more integrated and complete solutions. Following the acquisition of eV Products, the Board plans to fully integrate its products into the Group's existing offering and develop enhanced solutions. The Directors believe integration is desired by many customers to avoid issues with the management of disparate supply chain partners.
Further commercialisation of the core technology
The Group plans to further commercialise its core technology through new product development, expansion into new geographical markets with existing products, including the opening of a German sales office and the continuing development of key strategic relationships.
Strategic and complementary acquisitions
The Directors believe that Kromek has substantial scope for organic growth, but that an opportunity exists for consolidation in the markets and technologies in which the Group is active. The Directors will consider strategic or complementary acquisitions which provide increased market access and/or enhance the Group's vertically integrated technology offering.
Reasons for Admission
The Directors believe that Admission will be an important step in the Group's development and will assist the Group in its development by:
· Providing resources to accelerate commercial growth utilising the developed technology platform, particularly through additional sales and marketing capability and by accelerated product roll-out;
· Providing a platform for further acquisitions; and
· Raising its profile in the Group's target markets.
The Placing and Use of Proceeds
The Group plans to use the proceeds from the Placing primarily to drive growth in the business.
The funds raised will contribute to:
· Selective research and development, building on the current portfolio and developing new capabilities where significant future commercial impact is identified;
· Expansion of the sales and marketing team;
· Working capital for growth of sales of existing products.
For further information, please contact:
Arnab Basu, CEO
Derek Bulmer, CFO
Tel: 01740 626060
As Nominated Adviser and Broker
Fred Walsh / Freddy Crossley/ Grishma Patel
Adam Pollock/ Charlie Leigh-Pemberton/ Hannah Woodley
Tel: 020 7886 2500
Tel: 020 7920 3150
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This announcement does not constitute or form part of, and should not be construed as, an offer for sale or subscription or solicitation of or invitation to make any offer to buy or subscribe for any securities, and neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever. No reliance may or should be placed by any person for any purposes whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. The information in this announcement is subject to change.
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Panmure Gordon (UK) Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and no-one else in connection with this announcement, proposed Placing and Admission. Panmure Gordon (UK) Limited will not regard any other person as its client in relation to the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the Placing and Admission, the contents of this announcement or any transaction, arrangement or other matter referred to herein.