Kromek Group (LSE:KMK) — Capital Markets Day Live Q&A Session

0:01 Good afternoon, ladies and gentlemen. Welcome to the KROMEK GROUP PLC Capital Markets Day Q and A session. Throughout today's presentation, investors will be in listen only mode and questions are encouraged. You can submit them at any time just using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions at any time and press send. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. And I'd now like to hand over to CEO, Anab Basu. Good afternoon to you.

0:28 Thank you, Mark. Good afternoon, everybody. Thanks for joining. We had a Capital Markets Day last week, many of you may have seen the recording or on our website. Today, we have me and my colleagues. I'm Anna Basu, the CEO, and my colleagues are here. Claire Birches, our CFO. You'll hear from Claire. Barry Bumer, our president of the advanced imaging segment, will join us from our Pittsburgh facility. And Michael Stephenson, our commercial and strategy director, will be joining us from Poland where he's on a customer visit at the moment. So we'll we'll have a quick sort of recap of what we talked about in the Capital Markets Day. Many of you know the company for a while, and some of you may be new. So and just getting acquainted with the company. So let me give you a very quick introduction to the company. We are a global detection business operating in in the global medical imaging, security, defense, and civil nuclear markets.

1:43 And and we operate out of four facilities in The UK and The US, manufacturing both in The UK and The and US in in Durham and Pittsburgh, employing just over a 150 people and serving two very large growing markets market segment through two business units. So just a very quick recap. What we would like you to take away ultimately from from what you heard and and will be hearing Three things. KROMEK over the last twenty years or so, we have built quite a strong platform, quite a strong foundation based on which we we are building the business. And then and that foundation gives us the platform to grow. And and we are going to grow through our two business units of the two growth pillars, which are advanced imaging and the CBRN detection, which we are gonna hear a little bit about.

2:42 And and then based on those growth pillars is is going to be the way we are going to grow and ultimately build shareholder value. Just to have a quick recap in terms of where we are and and what we do in terms of technological advantage. This is something that is key in the markets we operate in. You know, over the last twenty years or so, we have built a very robust set of IP rich technology, which gives us a sustainable advantage in the markets we operate in. The heart, which which really beats and and binds the two businesses together, the two growth pillars together, is an innovation engine, which which allows us to develop high value IP and products and technologies, which ultimately led us to grow and develop some very deep strategic customer relationships based on which we we build a business from.

3:47 And and that is possible through, you know, a team that delivers a high skilled team working within very close and well structured systems and delivering the results in in a very agile sort of culture. In any any of our business segment, the barriers to entries are high. So if anybody wants to do what we are doing, particularly if you look at the the advanced imaging business with our CZT technology, we are the we are the globally single independent manufacturer of CZT.

4:24 We have a very high barrier to entry. If somebody wants to do that, it's going to take a long time, and it's going to cost probably more than what we we have spent in the last years. And similarly in the CBRN business, we have a very unique position in that business through the value proposition we bring. And again, barriers such as incumbency, customer relationship, validation, and all of that makes it quite difficult for new entrant to really break in in a very rapid way. The end markets are growing, and and that is important because we don't, sort of operate in vacuum. We operate within markets, global markets, and that those are growing. And and we are very well aligned. What we do are very is very well aligned to the megatrends in the market, whether it's early detection of cancer and diseases, which ultimately allows, earlier detection and reduce health care cost and have a better patient outcome, or having the ability to have good quality data in our frontline, civil defense or military personnel to make the best decision in in case of protecting, the people infrastructure and themselves against the attack of dirty bombs.

5:37 We we those markets are actually growing and what we are doing are very well aligned to those drivers. We are going to grow our top line, and we are going to evidence it by customer wins, and ultimately grow our profits and generate cash. And and that is going to be along the way we are going to provide proof points over the next years. And that is that is basically how we are going to build the company and ultimately build shareholder value. So in the CMD, one of the things we did, and and this is the first time kind of as a company, we are guiding the market a little bit into beyond the first twelve to eighteen months.

6:24 What we are saying in the medium term, where what we want to get to and what we are setting our our eyes on is a £60,000,000 revenue with a with a 35% EBITDA, 30% EBITDA with a average, sort of CAGR of about 20%, over that period. So that sets some midterm targets, and what we we mean by midterm targets is in and around five years. So, I'll now hand over to, Claire, our CFO, who has joined us, in the last six six weeks. Yep. Six weeks. Thanks, Arnold. So we'll just quickly go over this slide, which was presented at the Capital Markets Day because I think it's really, really important.

7:14 We're in our fourth year of revenue growth. In May, we announced our, flash 2025 numbers, and the division was impacted last year, financial year '25 on on both sides of the business. But fundamentally, we've secured the business moving forward. We won a 37,500,000 enablement contract with Siemens. That's allowed us to significantly reduce debt and strengthen the balance sheet. And more importantly, we're PBT positive for the first time, which built on the EBITDA positive from the prior year. If we continue going forward, as I'm sure many of you saw when you watched the full presentation, we've got very strong fundamentals for the continued growth of revenue in financial year 2026 and beyond.

8:04 I'll pass over now to Barry who will just expand a little bit more on the AI division. Thank you, Claire. Let me perhaps set the stage a little bit that we are in the middle of a key transition in detection platforms in the medical imaging space. Medical imaging is our primary focus for the advanced imaging business. This transition is taking place because the legacy, the conventional detection platform has been, let's say, fully exhausted in its

8:45 capabilities. And patients, hospitals demand improved detection capability, and in order to deliver that, a new detection platform technology is needed. This detection platform has important benefits. The key benefit leads to better patient outcome, the ability to have clear, sharp, highly resolved images that allow very small features to be resolved in the human body results in earlier detection of cancers, allows you to see calcification around stents for for cardiac related issues, and many other applications would benefit from this.

9:47 And as a result, the patient benefits from it by earlier detection, better treatment options, but also the industry as a whole, the hospital and the insurance base benefit from this as the cost of treatment goes down. So we find ourselves in the middle of that transition, and the transition particularly takes place in this modality of computed tomography. The CT modality is transitioning to a photon counting, a PCCT detection platform, allowing for color images that are razor sharp that can resolve very small features.

10:34 So the industry is in a rate is in a race to get there. The tier ones the tier one OEMs on your left side of the screen are leading the charge, if you will, and you will recognize the names that are active in that space. And they occupy about 70% of the of the market or so. And the tier two suppliers similarly are very focused on this technology transition. So if we look ahead to 2030, we would look at the market and see a $15,000,000,000 systems market. So this is the actual full scanners, the value of the market in CT at that point.

11:26 This represents and this is an annual number, so it's $15,000,000,000 per year. This represents a total addressable market for KROMEK of $320,000,000 by 2030. Now that addressable market includes both captive and noncaptive or commercially available CCT

11:52 detector opportunities for KROMEK. But by 2030, if we look at the graphic on the left, about 16% of the CT space will have transitioned over to photon counting CT. So it's still in the early stages of transition, and these transitions in the medical space take some time. They they do not take place overnight. Very difficult to look at the granularity of those transitions in the in the three to six month time frame. We need to more broadly look at that and open up the aperture a little bit on the timeline for that. However, we are on track for that type of adoption of the technology.

12:39 What does that mean for for KROMEK? So the available space within photon counting CT is $320,000,000 worth of detection platforms by by 2030. So a significant compound average growth rate increase year over year. This is clearly unusual because of this technology transition, and it is, of course, affected by how quickly the hospitals, the main body of end users, draws through this new technology option. The adoption rate will be determined ultimately by them. However, once this adoption process has started, a platform new detection platform of this nature will have a life cycle of measured in decades, really. So the expected

13:42 life cycle for semiconductor based, CZT based detector platforms is is of that order of magnitude. So we find ourselves in the middle of this conversion. It is by far the key driver for the advanced imaging business moving forward beyond besides that, there's other segments including in the nuclear medicine field, specifically the SPECT modality that will continue to play an important role for us, but we are certainly positioned to take advantage of the scale and impact of the largest medical imaging modality, which is what the CT segment represents. So I just wanted to say a few words about that, and I yield back over to Michael.

14:37 Thanks, Barry. Good afternoon, everyone, and greetings from Poznan in Poland. As Arnav has introduced, my name is Michael Stephenson. I've joined the company at a similar time to Claire, an exciting time for the for the evolution of KROMEK. I bring with me my with experience and expertise in leading and managing sales and marketing teams, growing and developing those teams, And, certainly, that's my remit and my hope for for what to achieve within KROMEK. I'm gonna give you a little bit of an over group overview of the CBRN business, some of the headwinds, some of the tailwinds that we're currently experiencing, and our strategy for growth in the short term and the mid to long term.

15:31 So as I can testify from my meetings today in Poland, the the threat within the CBRN community is certainly real. I think as you see in the news today, threat levels are increasing across the world. And with that, CBR and detection is a crucial part of how governments respond, how governments are able to collect good information to help them make better decisions. Within that that increased threat space, we're also experiencing an increase in defense spending from many countries around the world. And I think that'll be played out in events with NATO meetings ongoing this this week.

16:22 I think thirdly to that, the the position that KROMEK finds itself in currently is a really strong position. We've got established links to UK and US frameworks and tenders with products already established on those on those frameworks. And I think in the in the in the short term, the next twelve to thirty six months, we're really gonna see a lot of our organic growth come from from those the work that we've put in into those into those frameworks. In addition, there is already some contracted revenue, which forms the baseline of our expectations for that that short term. Going forward, I think the strategy, which is is my remit to to lead, we are actively looking to expand our distributor network.

17:18 Over the last couple of weeks, we've held a very successful event in Sedgefield where we saw a record amount of distributors attending our office, great engagement from them, and some really good plans for for the year ahead. Second to that, we obviously, I'm in in Poland now, but next month, we'll be in Asia, and we'll be looking to expand our reach and expand into new markets. We have established distributor networks in in Asia, but we want to bring those links closer. We want to help our distributors out there, and we wanna give them what what they need to to really accelerate the growth in over the next year year or two years.

18:05 I think the final piece in that jigsaw is is expanding our sales and marketing teams as well. We we've recently recruit recruited some new head counts into the team, and we'll be using that to maximize our reach in the CBRN CBRN world.

18:25 I think in the in the long term, we touched on on the cock the capital markets days about plans of bolt ons or mergers and acquisitions where we see it strategically necessary to fill gaps in our portfolio. But it's it's a strong future for CBRN. It's it's a strong market with with good growth. And, yeah, I'm I'm looking forward to kind of leading the team forward to some success in the years to come. So I'll hand back to Arnab so we can start our question and answers. Thank you very much, Michael. Thank you very much. So we probably will we've got some presubmitted questions, and I'm gonna straight get into those questions. The way we will do it is I'll read out the questions, and and I'll I'll ask

19:15 you know, either I will answer those, or I'll ask my relevant colleagues to answer those questions. So question one. With so many opportunities to grow the business available to you, how do you decide which ones to focus on so that you are not spread to 10? Great question. Let let me take that in to to start off with. Look. I mean, yes, we we we have a lot of opportunities in front of us, but as we have articulated in our message within the presentation itself, we are very focused. We are very focused to grow within our two growth pillars, which is advanced imaging and CBRN detection. And within those, as my colleagues just pointed out, within within advanced imaging, we have an absolute focus on capitalizing that very large opportunity that lies in the CTs market as the market is structurally shifting towards that.

20:14 And secondly, in the CBRN detection unit, we have a portfolio of products. We have a portfolio of proven products, and we are going to really accelerate and build on the commercial momentum we are having. And we will we will expand our commercial footprint and also the the the geographical sort of reach that we have. So we

20:39 are focused on those, and and over the next twelve to thirty six months, we are going to see commercial revenue coming in from bio as well, is now fully funded by The US and the UK government. So, yes, we have got opportunities, but we have got absolute focus to drive the organic growth that we have in front of us. Question two, following the move to report to reporting divisions performance, how does KROMEK allocate central cost to each division? Does KROMEK see value at some stage in operationally or corporately split splitting divisions?

21:22 Are individual divisions separate from a future acquisition perspective? I think it's probably appropriate for Claire to answer that. Yeah. That's good. Well, actually, we've we've have restructured operationally the business, so we we're there moving forward. People have clear chains of command and accountability. Operationally, there are very minimal overlaps, but both divisions do benefit from central overheads of finance, legal, IT, which kind of maximizes efficiencies within the business and and doesn't end up duplicating or wasting costs. IP and overheads allocated on a fifty fifty basis, which is kind of reflective of the the revenue split overall within the business on an underlying basis.

22:12 And Barry's leading the AI division. Michael's come in to lead the commercial function of the CBRN division. Thanks, Claire.

22:23 The next question is, are receivables increasing in proportion to sales? Receivables seems to be growing faster than revenue. Can you clarify whether this is due to a change in customer payment terms? Or are the cons are there concerns around collections or revenue recognition practices? Claire, it's for you as well. This question obviously refers to the 2024 accounts. And within 2024, at the end of the year, there was an unusually high proportion of revenue. It was back ended. So, yes, at the end of the year, the receivables as a proportion of the annual sales did look quite high, but it really just reflected the timing of the revenue. So I don't expect that to see receivables increasing as a proportion of sales.

23:19 Thank you. Is the gross margin on sales stable? Gross margins appears relatively stable despite a volatile revenue base. What are the cost cost controls of contract structures that are supporting this margin consistency? It's So you as the underlying gross margin for the different revenue streams is very, very stable. We manage this very carefully by managing costs, operational efficiency, pricing to customers. That said, as we said in January, the product mix will be impacted by the Siemens enablement contract revenue this year and for the four years that the enablement contract spans. And that is quite a high margin. So because of product mix, you will see the gross margin go up.

24:12 But for an underlying business, the gross margin will remain very, very stable across the two divisional pillars.

24:22 Thank you. The next question is, is the quality of the asset base stable, especially regarding inventory and intangible asset? Have there been recent write downs or reevaluation revaluations? See you as well, Claire. As well. Yeah. We believe the quality of the assets to be very, very stable. We assess the quality of the assets every year alongside our auditors, as you would expect, and we will continue to do so. Looking at the balance sheet, there's a significant proportion of assets tied up in intangibles and receivables alongside rising debt and ongoing operating losses.

25:10 Can you clarify how management ensures these asset valuations remains realistic?

25:17 Again, this question relates to the financial year 2024 annual report. In May this year, we reported that our debt is reduced to £500,000. We've also shared the move to PBT profitability in financial year 2025. But taking the other side of that question, yeah, we still believe in the stability of our assets.

25:39 A large proportion of the intangibles are capitalized r and d, and we've evidenced with the Siemens enablement contract that that capitalized R and D has significant value to the business. The next question, are intangibles being amortized appropriately and reviewed for impairment regularly?

26:06 Yeah. I think this is a bit of an overlap with one of the previous questions, but, yes, absolutely. As I said earlier, we do a full impairment review every year alongside the auditors, and I I believe that that is appropriate, and we are doing it every year. So it is regular as well. The next one I think is you as well, Claire. Are accruals a low as a proportion of total assets? Has there been any change in how you estimate key accruals like warranty provisions, bonuses, or long term contracts? Yeah. There's been no change in how we estimate accruals. We're we're very consistent on that basis. I believe accruals are very appropriate to the business as we stand. It's worth noting that long term contracts are all product based, so revenues recognized as a product shipped were not into contract accounting and and estimates.

27:00 So I don't think there's any issue there. The next question is, is sales growth not excessive given the long term average growth of about 6% and a projected surge to 27,100,000 by 2026. Can you explain what's driving this expected acceleration and how recurring it is? Well, through the presentations, and hopefully, you've had chance to watch the the full Capital Markets Day presentation, I think the team has explained the growth plans for both divisions in the short and medium and into the long term. And we announced to the market in May that our financial year 2025 revenue will be in excess of 26,000,000.

27:45 So from '26 to '27 next next year as in is not a huge leap. But and in the medium term, the 60,000,000 target, which will average 20% annual compound growth rate, don't think is excessive when you take into account the potential growth rate of the AI division and the strength coming through from CBRN.

28:11 Moving on to the next one. Is the rate of depreciation stable or increasing? Depreciation seems consistent relative to net as fixed assets. Can you confirm if there's been any change in asset lives or depreciation policies recently? No. There's been there's been no change. Our depreciation rates are stable. There's no change in asset lives or depreciation policy. So that's quite an easy one. The next question, tech and AI seem to have skills shortages. Has KROMEK experienced this in recruiting talent?

28:48 Let me take that. You know, we we we recruit on both sides of The Atlantic, and and over the last three or four years, we we have not seen really a massive, you know, problem in recruiting. So at the moment, that is not really an issue for us. Our core teams are very stable. The the where where intellectual properties are developed, and and the operational team and the sales team that are growing, we have been able to attract talent and recruit appropriately. The next question is, KROMEK previously announced their desire to link up with a partner for COVID and other pathogen detection IP product commercialization.

29:35 What discussions and progress has been made, and what is ongoing? I'll probably take this one, you know, given the given the historical context to this. So in in in the bi biosecurity part of the business, there are two programs running. One with the US CWMD, which is developing a platform for air based pathogens for monitoring and as an advanced and early warning system for any any accidental release of pathogens or an occurring pandemic

30:14 that is coming in. And the other is a UK government agency program, which which I can't talk a lot about. Both these programs are actually leading on to products, and and we expect the UK government program to actually get into a product phase in in the first half in mid next year.

30:37 So we are absolutely focused on delivering the contracts at the moment. And as we start to commercialize through that early adoption with key customer groups, that will be the time when we will be starting to have those strategic discussions in terms of partnerships, commercialization, and how we actually commercialize the the bio pathogen detection platform and and products itself.

31:10 The next question, KROMEK previously mentioned application of its pathogen detection IP for within agriculture. What steps and progress have been taken to commercialize this opportunity? Maybe Michael can take that. Michael. Yep. Absolutely. So as you just mentioned, Anab, in in the in the bio sector, there are two programs running. One in The US, one for The UK. And like you said, commercialization will be expected twelve months, plus. For for the agricultural side, we see that as an opportunity. We know that there is there is government interest in this area. We know that there is investments in this area, and we're really plugged into conversations that are going on in that space at the moment.

31:57 But as yet as as as you said, the the current programs are the two that you've, you've mentioned, and there is, nothing for clarity in in this space at the moment. But as you say, we're we're we're we're plugged into it. Thank you, Michael. The next one, can KROMEK steer as to the pace of end product rollout and announcements it expects in the next six months from clients in the medical product space?

32:26 Has the speed been slower than KROMEK expected? Barry, I think you're in the best place to answer that. Yeah. Thanks. Thanks, Arnab. The direct answer to that is is is no. We we think we're in the right place, and and we're moving forward within the near future on with with sort of the timeline as we we expected. As I mentioned earlier, with within the advanced imaging business, the life cycles are are really not to be looked at within sort of a few month type of granularity. There's the OEMs principally drive the launch and the speed at which the the product development takes place, and and, ultimately, the end users determine the speed at which a new technology is introduced and and adopted across the the the the full segment.

33:33 So our ability to to steer this is by supporting our OEM customers the way we are doing it. We are exactly on track there. We have very close relationships with our OEMs. This is clearly one of the the unique selling points for our business is our long running deep connections, both technically and otherwise with our OEM customers. And and so we put the full weight of of KROMEK and our resources in supporting our OEM customers. Largely, they are on track with with their road maps and their timelines, and and we feel good about what what our position is on that. So we are a supporting player, perhaps not the the lead actor when it comes to technology road maps for new systems, but we're we're doing what we need to do.

34:31 Thank you. Does KROMEK see any material commercial activity in the short or medium terms with its Chinese clients? How active are discussions with potential clients in India and the Far East? As as as you know, our customer base is quite different in the two divisions. So in in AI, we have a very different customer base and a target base than our CBRN detection. So I'll probably ask Barry to perhaps say a few words about Asia and the importance of Asia and China and where we are in in the AI division, and then I'll invite Michael to address the for the CBRN detection the same.

35:18 Let me say, this that that, within advanced imaging, we have, for years, focused on aging, particularly, in in the markets that that drive the application for advanced imaging. Of course, we've been active in living in South Korea with with some of the early adoption of of our technology and our detectors for bone mineral density systems there. However, the the of course, the prize is is China. It's by far the largest market in in the region. We have been quite active in the Chinese market in the past. We will continue to do so. However, we take a reasonably conservative view of of our role in the in the China market in this sense that while we are fully invested to support the the OEMs and and partners and collaborations that we have in China, at the same time, we we take somewhat of a cautious approach as perhaps macro factors may may affect ultimately our ability to to fully take advantage of of some of the developments over there.

36:36 So we we are cautious on the one hand and our predictions on the other hand. We are fully in to make sure, that as a as a detector supplier of CCT detectors, we are, front and center, particularly in the China market where where so much organic growth is taking place. Michael, do you want to talk a little bit about what what's going on in in the Asia for CBRN? Yeah. Absolutely. So China is difficult. Obviously, with the applications of a lot of the CBRN equipment, the military applications, police fire, that type of thing. Export licenses, and restrictions make it difficult to do business in China.

37:23 So, it's certainly not a not a focus at the moment. That said, the other part of the question, India and the Far East, take them separately. India, we we don't see much potential in the short to medium term. We do have representation. We do have distributors there, and they're keeping an active, look at the market, but we don't anticipate that to be a huge area of of growth going forward, in in the short term. But Asia, it's most certainly is, and we are actively engaged in visits to there. We've had some really good success with working with, the department of business and trade, giving us help. They've got a particular focus on, defense exports.

38:14 So we've been working closely with them to help our cause over there. We've got trips planned to, Philippines, Vietnam, Indonesia. We've got good discussions going on in Korea and, Japan. And before the year is year is out, we'll have multiple visits, and we'll be pushing hard for business over there because there's some some good opportunities for growth that will fit into our plans from from that area of, of the globe. Thank you, Michael. So the next question is obviously for me. Why is the CEO positive about the company when the share price over a five year period has fallen? Surely, understands shareholders are important too and want a positive ROI over a five plus year period.

39:07 Look. I mean, let me let me make the case in terms of what in the CMD, we what we have done is outline outline what the opportunities are, outline what our growth parts are, outline what our focus are focus is, really. And and and we believe, as a management team, we we can do the right thing in delivering the business results. Ultimately, the financial results, ultimately, the customer wins and building top line, building sort of earnings, and ultimately generating cash. And and that's what we are absolutely focused on. We also strongly believe that the inherent value of the business when we look at peers is is perhaps doesn't is not fully reflected in in the in in the share price as it stands.

39:59 And and CMD is, you know, what what we see is, but maybe there is a gap in what we are doing and how we are communicating and and understanding within the market is. And CMD is a first step towards while we are building the business, also to improve our communication and and our way of articulating how we are going to build value in a better way. So the what we are doing now, what we did last week, are all step towards that. So ultimately, our responsibility is to build a successful growing profitable cash generative business, and that's where we are absolutely focused on in in in the short term. Next question. When will KROMEK be able to get listed on the London main stock exchange or the US stock exchange, for example, NASDAQ, to attract more analyst reviews to increase visibility as well as liquidity for the stock?

41:01 Let me take that question as well. At the moment, our we see AIM as our home. This is where we want to build value. This is where we want to demonstrate and and and prove growth and on a profitable basis and a sustained profitable basis. And if in the future, there there are there are reasons and and the right reasons to list in another exchange or move to another exchange or do do a list, that's for the future. But at the moment, our firm plans is to deliver growth and build shareholder value in AIM as we are. Next question. Acknowledging KROMEK will always be alert to any value additive acquisitions or merger opportunities.

41:49 How active are KROMEK currently with this also acknowledging commercial sensitive sensitivity? Look, I mean, we outlined that bolt on m and a will be a part of our growth strategy. Strategy. But our absolute focus is to deliver organic growth. That is where the priority is. You know, this the growth that we have outlined is not dependent or based on bolt on acquisition. It will be part of it. But where our focus is is that building and capitalizing on that CT opportunity, as Barry pointed out, a a significant large opportunity in CT where we we are very well positioned strategically and ultimately growing, selling more, winning more customers, and delivering more revenue within the CBRN business by increasing the footprint within within within the global market. So we are absolutely focused on that organic growth, where opportunities will will will come across based on our balance sheet strength. We will make those acquisitions, and we have outlined very clear rules that these will be done in a responsible and very methodical fashion.

43:10 The next question, please describe your relationship with Spectrum Dynamics currently, and how do you see this developing in future years? Barry, that's for you. Thanks, Arnab. We we have a particularly close relationship with Spectrum Dynamics. We've we've worked with them for years. We believe that our technology, our our detector platforms has has has provided a differentiation for for Spectrum Dynamics. So this is a close relationship. This is this is one relationship like a number of others in this space where the collaboration is is is very close, and we we continue to to expect to see that relationship grow and expand. I I think Spectrum Dynamics is is is generally quite successful in in the spec market. So our expectations for for the for the future, near term, midterm, long term, is that we continue to build on the relationship with Spectrum Dynamics, and we wish them good luck from time to time. We make announcements together.

44:39 So you can you can look for that, but the the relationship is close and and very productive. Thank you. The next question is who are your main competitors? Let me let me again frame this up a little bit. The I think, Barry, you can talk a little bit about our position on CZT and and and the competitive space within that perhaps. And then, Michael, if you could give a a little a little color on on the competition we we see in the various markets, and I can perhaps join join in on on the CBR inside as well if if needed. Let me let me let me see if that if that's okay.

45:30 Okay. So we we we can we can think of competition perhaps in through in through two lenses. One is who competes with with us directly as a CZT detector manufacturer. The the answer there is we really don't see anybody on the horizon commercially that is capable of of responding either from a detector performance point of view or from a scale point of view or any of the metrics that matter within within the the medical imaging space. So in that sense, we we we somewhat stand alone, if you will, and and in the in are certainly leading the charge there.

46:18 It's, by the way, very important that that our OEM customers can rely on us for for for this very long life cycle that these medical imaging systems have. So scale, stability, and the ability to continue to expand the operation if needed is is very key. So in in that sense, we we certainly are seen as as as the only supplier in CCT detector space commercially offering these detectors. I'll say the other cut, if you will, at at looking at competition is other alternative technologies around that would threaten CZT perhaps as a as a detection platform, other other solutions on the horizon.

47:12 I I will say two things. One is for for niche areas of application, there will always be some other detection platform that that may, for in a limited way, may be able to offer some of the the characteristics that that an OEM may be looking for. But by far, by and large, the the medical imaging space is focused on CZT as the detection platform, leading leading both SPECT and CT into the future, And we we do not see any any meaningful incursions of alternative technologies that we'll be able to address the full breadth of the medical imaging space from not just the premium premium hospitals, the academic institutions perhaps, all the way down to the bread and butter hospitals that are very much focused on price and and and and the commercial economic value propositions.

48:27 To address that full segment, CCT is by far the the leading technology and the only technology that that can cover that segment in its entirety. Thank you. Thank you, Barry. The next question, given the importance of innovation, how much are you allocating to R and D annually? Are you planning to ramp up capital expenditure to support manufacturing scale on new product lines? Claire, do you want to Yep. Yeah. Answer that? So we've got kind of two sides of the the CapEx expenditure.

49:12 As you you highlight there, we've got the r and d side, and we've got the CapEx that supports manufacturing scale up. As a business, CapEx targets will will have minimal maintenance CapEx going forward as we win large contracts for for future, particularly on the AI side. The contracts will be structured so that the customers are paying for that CapEx infrastructure that supports their orders. So you you may see the CapEx going there, but it will be fully funded through the customer contracts. From an r and d side, yeah, we will continue to invest in r and d, but as a proportion of sales, this will come down over time. And we will continue to attract the types of contracts that we have in bio where those that r and d expenditure is substantially fully funded, whilst KROMEK as a business retains the IP.

50:09 Thank you. Which regions are you prioritizing for growth and why? Are there logistical, political, or trade hurdles that might slow sales in key markets? This probably is more relevant for the CBRN segment, and I think, Michael, you probably have answered a little bit about, you know, some of the markets, but perhaps add a little bit where our primary Yeah. You know, focus is. Absolutely. Yes. I mean, we have established channels, for sales in Asia, so there don't seem to be any kind of export concerns or, political issues there. As we've said, the the target markets are, you know, The UK and The US and, Europe will always be very important, but areas where we're looking to gain traction and and develop the the Asian markets.

51:11 And that'll be, as I've I've already explained, a focus for the rest of the year. Thank you. The next question, does the recent announcement of the UK Compound Semiconductor Centre under the aegis of the Compound Semiconductor application Catapult have any implications for the company? Let me let me take that question. You know, in in in general, we the compound semiconductor catapult it stood, the application catapult was not particularly relevant for what we were doing.

51:56 However, we have over the over over the years have attracted UK innovation funding through innovation Innovate UK and UK various UKRI type funding mechanisms, and we'll continue to do so. And and with an increased, you know, emphasis on on supply chain resilience and and sovereign capability and sovereign sources, we are seeing number of opportunities to attract funding to improve our process. Because if you look at the capital allocation slide, which we talked about in in in our CMD slide deck, one of the key areas where we are going to prioritize sort of spending our money is going to be operational excellence within the AI business, because that is where significant scale up is is is happening and is going to happen. And that is where we want to be more efficient.

52:52 We want to be investing in in in processes as we have done over the last few years. I mean, we have made some significant improvement in processes in terms of recycling and and which has had a major impact on cost, recycling of our raw material itself. And and also, we'll continue to do so to improve yield, to improve productivity, to improve getting more out of what we have in our CapEx inventory, and and we'll continue to do so. So a a big portion of our capital allocation is is going to be in that operationally excellence achievement within within the AI part. So so, yes, to answer that question.

53:40 The next question, I think it's more m and a focus. So bolt on m and a makes me nervous. I have worked on m and a books before, and everyone thinks they can do it well, but m and a is fraught with risks. Why is it necessary if we are well positioned with very high revenue growth over the next few years? Is m and a activity modeled into the revenue growth figures? That is that is, is m and a needed to get us to £60,000,000 of revenue? Let me answer that question as well. We have led you know, if you look back on KROMEK's history, we have done two very successful m and a's in The US. So of Nova and EV products, which forms absolutely the key backbone of the advanced imaging business, which has given us the ability to have that very strong strategic position as the global source, you know, in the the only independent supplier of c z of this technology today in the market.

54:41 We executed. We outsourced those M and As. We executed them. We integrated them, and we have driven value, which the enablement contract of Siemens actually is a demonstration in a in the smaller of the two markets that we are in the medical imaging market where of SPECT and CT, the value it brought in in licensing and enabling Siemens for that particular application. So this wouldn't be our first foray into m and a. So we have done it before. We have done it well, and we have shown that we can do it. Where our m and a priority is going to lies in CBRN now, of course. And it'll be very focused, and it'll be very disciplined. Organic growth remains our key priority and will remain the key focus. So, no, we don't need bolt on m and a to get to 60,000,000, but what we see is an accelerated growth path by doing bolt on m and a, which either gives us access to markets, new markets, or fills gaps within the product portfolio in in in the in our CBRN product product portfolio itself.

55:53 Our approach will be disciplined. We have set out our fiscal rules on the balance sheet, what we will do. We are not going to come back to the market to raise money to do these m and a's. These will be self funded by nature as and when do we do it, and it will be done on strength of the balance sheet itself. Next question. Ian, KROMEK has had a number of false starts and jam tomorrow plans since IPO. What will be different moving forward to ensure shareholder value is delivered and increased? Perhaps I I should take that question as well. So I think the CMD presentation outlines the solid foundation we have got at the moment and we have built over the last twenty years of effort. It's not only the foundation we have built, but also the two clear growth pillars or the two clear growth divisions through which we are going to deliver growth.

56:56 The mark you know, our technology is ready, proven, applied in the market, in in both our sectors, in in advanced imaging through Spectrum Dynamics, through other many other OEM customers in BMD, Gamma probe Gamma probes. We have proven our technology. We have won customers, and we continue to win contracts with tier one and and very recently with Siemens on their enablement contract. So we have made significant progress, and we have got a clear growth plan very aligned to what our customers' growth plan and customers' technology road map is. So the plan to grow within AI is very well defined, and we can we have got very, very good visibility, and we are on that journey. CBRN on the other hand, we we are we are also demonstrating by winning contracts, not only by having that very long, secure, strong relationship with key user groups, whether whether it's UK home office, whether it's UK MOD, whether it's US DOD, DARPA, DETRA, coast guards, and and and and and and so on and so forth. We have got we have built very key strong relationships, and our products are being used in critical areas in the world, protecting large cities such as New York City, in used in London, used in all major events in Brussels, used in in in and around every power plant in in Ukraine, giving first first line of information critical information

58:26 to the services emergency services in Ukraine to keep people and infrastructure safe. Again, there, we have got proven platforms in our products with customer relationship, and our commercial growth that we are driving is is going to be evident through those customer wins, through those increase in top line, increase in earnings, and ultimately together generating cash and getting to that midterm target we have set ourselves. What type of m and a opportunities would you look at? Are there adjacent technologies in detection?

59:16 Let me take that as well perhaps, and and Michael can add if he wants to on this. I think we have clearly said the m and a is going to be in the CBRN market. So that's that's absolutely focused. At the moment, our clear focus will be on on on radiation detection. We we we clearly have a presence in the market. We are growing that market. We have a portfolio of products. There are gaps in the product portfolio as again outlined in the CMB presentation. And and if either we feel a we see an opportunity to accelerate growth in certain markets to increase our footprint, sort of building on what Michael is Michael and his team is going to do, or where they see an opportunity to bring in and, you know, that fill the gaps in in our product portfolio.

1:00:07 That's what that m and a is going to be focused on rather than looking at a lot of adjacent markets to go into different ways. We want to serve the same customer base in a more comprehensive way. That really is probably how we how we see it. Michael, do you want to add anything on that? Or Yeah. I mean, just from a perspective of what I've currently seen today, you know, the CBRN community is, a small community, and there are good opportunities for partnerships, for collaborations, for working together. And it's a very open community for kind of, discussing those. So, you know, I'm sure opportunities will come come along. As as we touched on in the in the presentations earlier, we've identified where our gaps are in our product portfolio.

1:00:59 And, you know, we're aware of that, and we can actively go and and and look for opportunities in that area. But, as you've you've covered on up as well, it's any merger or an acquisition in that area will be well thought out and will be, you know, strategic for what the business needs and requires to to go forward, and, you know, also present enough of an opportunity to make it worthwhile in the first place. Thanks, Michael. If the medical, technology platform has a lifetime of decades, why did you transfer the technology technology to to Siemens for four years of payments and thereby undermine the competitive position of your ongoing customers?

1:01:51 Barry, do you want to lead on this and I can perhaps add some things? Thanks, Arnaud. This this is a I appreciate the question. It's it's a good question. It's a question that that was closely examined when when we entered into discussions with with Siemens Healthineers. The value proposition that this presents to us is is clearly it it brings in cash into the business. And at the same time, KROMEK to keep all its options open in terms of serving the the markets that we are focused on without any constraints, enabling us to continue to build on collaborations that that are in front of us the way we we think suits us best.

1:02:57 And we have a four year supply agreement with a leading manufacturer in in the spec space. I will say what what what comes after that is is less obvious to all of us, but we know that we will remain as a capable supplier of CCT detectors, for folks for OEMs that may or may not have a captive capability themselves. So we continue to be an option for supply chain moving moving forward into the future beyond it.

1:03:43 But for for this point, we are we we see the benefits to to our company to bring in the cash and the recognition, by the way, of having a tier one supplier, Siemens Healthineers, underscoring the fact that KROMEK CZT solutions, are are the ones that they want to deploy moving forward themselves for their own in house, capability. So we see this as a win win for the business. It's a it's a transition for profitable growth moving forward, and it doesn't cut off any options for the business that it sees as strategic either in the nuclear medicine space or in the CT space.

1:04:31 Just to add one point on that, you know, through in the Capital Markets Day, again, on the slide deck, it's and and even today, at the very beginning, Barry made the case very well, why, you know, CT is is is the larger of the two market, and that's where structurally the market is gonna transition and the value of that market is very big. And that is where we are gonna focus over the next decades really. And and and that's what is gonna deliver substantial value in in that business, really. So we have got a very large market to play with. Medical has previously been reported to to be a low margin business. How much are margins increasing for medical product sales to support 30% EBITDA?

1:05:26 I'll take that one. Obviously, when we're in when any business is introducing new technology, they generally start with lower margins because you're operating on a much, much smaller scale. But we've successfully developed this technology. And as we grow and as we scale, we get the economies of that scale, and that's where the the increase in margins come from. The CBRN business, on the other hand, continues to be a higher margin space, and that will will continue. So there will be a a significant portion of the debt and EBITDA. Here's the last question. We have run a little bit over time, so apologies. So the last question is, the plans presented are growth plans that normally require significant cash requirements.

1:06:17 What cash runway does KROMEK have as of today, and are you cash generative to avoid further equity dilutive raises? So I'll take that one as well. Yep. Significant cash requirements involved in in any business like ours. We've got visibility over our cash runway. The business is transforming with I mean, as we keep saying it, 2025 is really a transformational year. We're moving not only to be EBITDA positive, but to be to be p b t p b t positive, and that has a knock on effect to cash. The the contracts we're winning support the underlying business moving forward, and that cash generation will continue to grow.

1:07:05 We do not anticipate further equity dilutive raises. On that, Claire, Barry and Michael, thank you very much indeed for your time and for taking the questions from investors. Of course, we can make all the questions available to you should there be any other comments that you need to provide. On that, I do know that feedback is particularly important to you and to the rest of the team. I'll shortly redirect those on the call to give you their thoughts and their expectations. But before doing so, if I may, just come back to you for a couple of closing comments. And as I say, I'll redirect investors for their feedback. Thank you very much for everybody for listening. Thanks for your time. Thanks for you know, if you haven't seen the Capital Markets Day presentation, please take some time to look at it. There is quite a good lot of information in there. We are always available.

1:07:53 And, ultimately, the takeaway is $20.25 has been a transformational year. We have got a solid foundation to grow, and we have got two clear growth paths through the two growth pillars. And that's how we are going to build value over the next coming coming periods. And and we are confident of building shareholder value from here on. That's fine. Thank you. On it, thank you very much indeed. Can I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order the company can better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. Thank you very much indeed for your time this afternoon.