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LONDON (Alliance News) - Radiation detection technology company Kromek Group PLC saw its shares rise strongly Friday after it said it had signed a long-term contract with an established manufacturer of x-ray diagnostics and analysis equipment in China, giving the Chinese firm preferential rights for the supply of Kromek's CZT-based detection modules in the country.
In a statement, Kromek said it had been working on the deal for nine months and it will only remain exclusive if minimum annual revenue targets are met. The overall value of the deal is up to USD159 million over the next seven years as long as the Chinese company meets its contractual revenue targets, including USD14 million in the next financial year and USD10.2 million in fiscal 2015-2016.
"Advanced cash payments totalling USD260,000 are expected from the customer in the current financial year, part of which has already been received. The first supply commences in October 2014," it said.
The rights to the supply of the CZT-based detection modules are for "an existing medical diagnostic application with a large market potential", Kromek said.
The new contract is good news for Kromek, which issued a profit warning late last month. It had warned that revenues for its current financial year, which runs until the end of April, are expected to come in well below expectations due to delays for a large number of contracts, and therefore it no longer expects to be profitable this year.
The supplier of radiation technology to the medical, security and nuclear markets said it had been hit by delayed orders from UK and US government programmes, from the Japanese nuclear detection products market, and delays to large orders in the medical and security markets.
The company, which listed on AIM last October, said it had taken longer than expected to set up distribution channels for nuclear radiation products. It said the channels are now in place in many of its important markets, and it is expanding its commercial teams.
It shares fell sharply on the profit warning. However, Kromek shares were up 22% at 49.4 pence early Friday, one of the biggest gains on AIM, thanks to news of the China deal. The stock was trading at 68 pence before the profit warning.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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