Hello, everyone. We're just getting started. Just letting everybody join. We've got around 40 people joining this evening, and so I'm just waiting for all of them to join, and as soon as everybody's joined, I will start the presentation. I'll start the webinar. Just to let all the attendees know that people are joining still, and I'm gonna wait till all of them are able to join, and then I will start the webinar.
Thank you all. I think that all the attendees have joined. Thank you all for joining. Welcome to Kromek's Interim Results Call. My name is Harry Chathli, and I'll be your moderator for the duration of the presentation. Before we begin, I would like to state that all participants are on a listen-only mode throughout the presentation, thanks to a large number of you who have taken the trouble to send questions in advance. I will be putting these questions to Arnab, the CEO, and Paul, the CFO, after they've made their presentation.
If you have any questions arising from the presentation, then please do write them in the Q&A function, and I will read them out after the presentation. Please note that I will not be able to pick questions up if you input it into the chat function, so please do familiarize yourself with the Q&A button on your screens. I now have the pleasure of handing over to Arnab to start the presentation.
Thank you, Harry. And good evening, everybody. Thanks for joining. It's a pleasure presenting to you our results, so we'll get to the Slide 3. So this reporting half has been a continuation of the journey of both for the business itself, and the businesses have grown, continue to get traction from both sides of the segments that we serve, both in advanced imaging and in CBRN. And we'll be talking about those market segments in much more detail.
And as you have seen, we are focusing quite a lot on cost and profitability and gross margin, which Paul is going to talk to in a lot more detail. And we will be reporting an EBITDA positive for the year and a record revenue for the year, which ending 30th of April 2024. So I'll hand you over to Paul, who's going to take you through the numbers, and then I will be talking about the core markets and what we are doing, developments, and opportunities in those markets.
Thank you, Arnab. Good evening, everyone. I'll start off with the financial headlines, and I'll come back to a number of these points in the later slides in the deck. So revenue increased 5% to GBP 7.1 million from the last half year. And importantly, we continue to deliver a high percentage of that as product sales. If I take you back a few years, there was an element of R&D revenue, which is reducing now as a percentage of total sales. Gross margin improved from 40% to 54% in the period. And that, together with focused cost control, has significantly reduced our loss before tax by over GBP 2 million to GBP 3.5 million. And also, we were virtually EBITDA break-even from a GBP 2.7 million EBITDA loss in the prior six-month period.
We ended the period with cash of GBP 3.7 million, and we've got very good visibility of market-expected revenue for the current year. And I'll come back to each of those two points on later slides. So turning to the profit and loss account, and the focus is very much on improving bottom-line profitability, and starting with gross margin, and that increased from 40.4% to over 54% in the current period that we're looking at. A few reasons for the increase in gross margin, one of which is some revenue and product mix. We enjoy currently a higher margin in our CBRN business than our advanced imaging. And I'll come back and say a bit more about the segmentation of our business in a minute.
The high component costs that we saw in the last half year, and the non-availability of certain electronic components in the normal markets has eased significantly in the half year that we're reporting here. So that has contributed to part of that increase in margin. And also, we're seeing margin improvements from efficiency, which reflects the benefit of the investments that we've been making, particularly in advanced imaging in recent times.
Arnab mentioned briefly in his intro there about operating costs. We've driven quite a lot of cost out of our operating expense. You can see that there's been a reduction of GBP 1.8 million from GBP 8 million to GBP 6.2 million. And that will continue in the current half year and also into next fiscal year. So that type of cost control is an important part of our business. And just to address growth, we've got sufficient staff.
We've got the operating cost that we need in the business. So, in case there was any concern there, the reduction in cost won't have any impact on our planned growth going forward. Loss before tax significantly reduced because of that gross margin improvement and the tight cost control. Turning to the balance sheet, we continue to invest in tangible and intangible assets. For the latter, it's mainly capitalized development costs, and that was GBP 2.6 million in the period, and the largest part of that was GBP 1.6 million, represented by further investment in advanced imaging, and particularly in medical imaging, and that spend is to improve capacity and throughput through our facilities, both in the U.K., where we grow the CZT crystals, and in our fabrication plant in the U.S.
Just some reminders on cash and liquidity, we completed in the period a GBP 8 million fundraise, before expenses. We also refinanced our debt facility, which was with HSBC Bank, at the end of September, with a new GBP 5.5 million 18-month secured term loan. Just as a reminder that we have convertible loan notes that were issued in August 2022. There was some reduction of those loan notes in September 2023 in the period that we're looking at, by a 15% conversion to equity from three of those noteholders. Turning to cash, and just looking at the main movements in cash in the six-month period to October, and reading this chart from left to right, in time, we started off the period with GBP 1.1 million of cash. We issued the shares in May, which is GBP 7.8 million, gross before expenses.
Importantly, operating cash was positive in this period, at GBP 700,000. And there were some cash outflows for working capital, GBP 2.3 million. This is really reflective of the timing, of receivables and payables in the period. and moving over to the right, the investing piece of GBP 2.7 million, that's the investment in tangible assets, and particularly in advanced imaging, that we, I just spoke about. Financing costs were just under GBP 1 million. The largest part of that is, interest, on the term loan, and accrued interest for the convertible loan notes. So we ended the period, with GBP 3.7 million. And just as a point for the current half year, we anticipate cash being broadly neutral, as we lead up to our April 30th year-end, and we expect to report cash of around about GBP 3.5 million at the end, of the fiscal year.
Turning to revenue visibility, and as you can see, in this chart, and the bar to the left-hand side is, for the full business, and the two bars to the right-hand side are breaking that out between our two segments of advanced imaging and CBRN detection. First of all, looking at total revenue visibility, with three months to go, exactly starting tomorrow, we have good visibility over 84% of market-expected revenue of GBP 21 million for the current year. We segment our revenue visibility into four main buckets, the largest of which is contracted and shipped, and that is, as it suggests, it's revenue that we've already recognized, plus orders that we have in hand, which we are able to deliver in the period that we're looking at here, which is the year up to April 2024.
We have a category which we term awarded not contracted. This is where the customer has placed the order with us, perhaps verbally or informally, and we're just completing legal documentation, if that's the case, and dotting i's and crossing t's on terms and conditions. We have a small element of run rate, which is repeat good drumbeat business. And then we have a gap; in this case, it's 16% with three months to go. And we expect to fill that up with known opportunities from our opportunity funnel. Just seeing a little bit about the two segments of the business and looking at the two bars to the right-hand side, the chart here. Advanced imaging and CBRN detection are very different profiles. Advanced imaging comprises usually multi-year contracts.
As you would expect, we have a lot much higher visibility of revenue in the current year and going into next year as well with those contracts. There's only a small 5% gap to meet our expected GBP 10.5 million of revenue for advanced imaging this year. Looking at CBRN detection on the far right-hand side chart, CBRN detection is a very different sell. Many customers, it's a tender business. You know, the turnaround between receipt of order and shipping product and recognizing revenue is much shorter than in advanced imaging.
It also means that we generally have less visibility. In this case, we've got a gap of about GBP 2.5 million in order to make up the expected revenue in that segment. We've got a very good opportunity funnel, as I mentioned and in fact, we have one particular order of around GBP 2.5 million, which we anticipate receiving in the coming weeks, which would be able to ship between now and the end of April.
Thank you, Paul. I will take you through the two different business segments, what they are and what the opportunities are and what we are doing and the progress over the last six months. The advanced imaging, as many of you will know, you have seen the slide before. This is primarily medical imaging. We address this market through supplying OEM components, CZT-based detector modules or CZT detectors into medical OEMs who are involved in making SPECT and CT.
These are two diagnostic imaging modalities very well established in the market, but going through a generational change from black and white SPECT, analog SPECT into digital and color SPECT, and from normal CT into photon counting or spectroscopic CT. We have a unique position in this market as being the only remaining commercial supplier of CZT technology in this market. The customer concentration is very high.
There is only X number of customers who are involved in manufacturing CT and SPECT system, primarily dominated by four Tier 1 OEM companies, which are Philips, Siemens, GE, and Canon. The customer relationships in this market is very direct. It is pretty strategic in nature, both from our customer's point of view, but also from our side. Through this journey, we get designed into a system, we get qualified. At that point, we basically enter into a longer-term contract that could be anywhere between a three and a seven-year contract. In reality, once you're designed in, we're there in the supply chain for a much longer period of time.
If I look at the two markets that's in SPECT and CT, which are the big growth markets coming through, these markets in totality is about $8 billion of end-user products, and of which about 15% represents the detector components that we supply into that. And as you know, many of the OEMs have gone out and acquired and internalized their supply chain in SPECT. Canon and GE has internal supply of CZT. And similarly in CT, Canon, GE, and Siemens has got an internal supply of detector material in this market. Remainder of the players, as you see on the box on the left, are our potential customers, already our customers, in some cases named and in some cases not named, in various RNSs that you have seen.
The total market that is available for detectors from the customers on the left is between $400 million-$600 million once the conversion into the new generation of detection technology is complete within that group. And that commercialization, that adoption is well and truly on its, is maturing in the market. And this is the reason why, what the external pointers are why, why this is happening now. So if you look at the SPECT journey, you look at GE acquiring Orbotech in Israel back in 2008, and then finally launching their first product, the Discovery 670 product in 2018, followed very shortly by Spectrum Dynamics, our customer, launching VERITON-CT in 2019. Of course, we win the $58 million contract in the same year.
Then post the COVID period, which was really nothing happened in the COVID period, end of 2021, 2022, 2023, three further product launches happen from GE and two from Spectrum Dynamics. So the market is active. The adoption of CZT is truly happening at scale at this point, and we expect to win further customers beyond Spectrum Dynamics in here and grow substantially in this business, going forward in the coming periods.
CT, a couple of steps behind, but the journey is exactly the same. Siemens acquires Acrorad, the Japanese company making CdTe in 2011, and finally launches NAEOTOM Alpha in 2022, post-COVID again, and then announces a major scale-up in detector manufacturing in Pforzheim of EUR 80 million investment in 2023. Of course, in 2021, as we all are aware, Canon acquires Redlen in excess of $300 million.
In 2023, last year, we, of course, announced two major contracts in this segment from a T ier 1 OEM and also from Analogic as a named customer. Both in terms of M&A activity, investments in this market, but also new product introduction is happening rapidly and at scale at the moment. We are strategically positioned very well to benefit from this adoption and scale up in CZT. What happens in the market, in this segment over the last reporting period? We, of course, our customer engagement has remained very, very robust and strong. We ended the last fiscal year with two announcements, one with the Tier 1 OEM and the other with Analogic. Then we followed that up with another engagement with a CT OEM during the period and announced a number of other contracts.
But our delivery on contracts is on track. So we are delivering to Spectrum Dynamics. We're delivering on our other sort of contracts that are in place in this market, which is in BMD, in breast imaging, in gamma probes, which are the other niche segments we serve in this market. And the business is moving and the supply capability is improving on a day-to-day basis. The contracts that are in place, we indicated at the time that of winning the contracts, particularly with the Tier 1 OEM, our Mark Brewer, the analyst from Cavendish, indicated that there are two phases to this contract. One is a development phase and then goes into the supply phase.
They estimated that it's about 18-24 months of that development phase, beyond which it gets into the commercial phase of that contract. We are pretty much online in that term. The Spectrum contract is expanding. We still have just over GBP 30 million to deliver over the next four and a half years. We will be scaling this contract up on a month-by-month basis as we are moving forward. Of course, Spectrum also launched the VERITON-CT system, which is again a very important milestone within Spectrum's own journey.
The SPECT modality is being adopted not only for fastest patient scan, better patient scan, but also for use in modalities like theranostics, whereby you can provide radio-guided therapy at the same time while you're imaging with drugs like lutetium for prostate cancer, which has just been approved last year, both in Europe and in America by FDA. CZT is really the way to make theranostics happen. That is where GE is driving. That is where Spectrum is driving. The next product launch plans from other customers are getting really solid and defined. In this market, we feel very good for growth, and the growth is substantial, and the growth is very close, getting closer on a monthly basis.
And so we feel very good on building a sustainable, profitable large business in the advanced imaging segment, as Paul points out. And the results of investment over the last few years are going to reap the benefit over the next two decades or so. CBRN detection, of course, is a completely different business. This is where we provide handheld radiation detectors for the security, homeland security, defense, and civil nuclear markets. This market is. The drivers are reasonably easy to understand. It's really security concerns and nations' perspective of risks of a nuclear accident event to happen so that they need to be prepared to have early warning or deal with the mitigation strategies post-event or prevent an event such as dirty bombs from a terrorist.
So we have a strong customer base in here, but of course, the customer base is very completely distributed around the world. Unlike the advanced imaging business, where the customer base is highly concentrated, this customer base is much more distributed. So we do business here through distributors, partners, in many, many different countries, some on global partnership basis. So we have got a branding deal, a dual branding deal with Mirion, for example. We announced a distribution partnership with Smiths Detection. And those all are really routes to address this distributed market around the globe. And the revenue is, you know, that is an element of recurring revenue. But also this is, as Paul rightly points out, this is a tender business.
The pipeline is looking very good, but it is a tender business, which we deliver very, very sharply once we win a tender. And that is, that will remain the case. So if we look at the market over the last year, the market is driven by the world we live in, the conflicts that we are seeing, in Europe, in the Middle East, in other parts of the world, developments on a daily basis where you know where the rhetoric is getting worse and worse, and the risk of a nuclear event is probably at the highest in our lifetime. So the spend plans, the actual spend is increasing in this market.
We have announced some contracts in this market over the reporting period and beyond, and including one we did last week, which is a GBP 1.4 million delivery contract to rescEU, which is a stockpiling effort going on in Europe. We are going to see further contracts coming through in and around that conflict zone and in Europe as well. Our products are quite widely used in the market today. You know, it's used in America quite extensively. We have got major customers both in the government agencies, but also in ports. We have got customers in the U.K. We are looking. A lot of the critical events use our products in for security.
We have got, you know, in Brussels, in the European Commission, there's lots of use of our products and it's quite extensively used in Ukraine. Every power plant is surrounded by our products and where we provide second by second data to the security, state emergency services, to monitor the situation here. The usage of these products are expanding. And if we look at the spend plans of nations, those are getting solidified and actually expanding. So we talked about, if you may remember from previous conversations, that there was a major spend plan in the U.K., that was planned over the last two years that is now in tender. So currently we are in active tenders or about to tender to about GBP 100 million worth of business.
We are not going to probably win all of that, but we are going to certainly win a fair part of that. In some cases, we are incumbents in some of these tenders, which are expanding the use and application of our detectors. When we look ahead for the next four years, the known opportunity in our key markets like U.K., U.S., some European markets, and one or two Asian markets, we are looking at a tender opportunity of about GBP 300 million in addition to the GBP 100 million that we are doing right now. We, of course, have sold our products in many countries, as a country metric shows, but a lot of them are early sales.
These are not big sales, but a lot of them are early sales through our distributors, through our partners, and all of them are actually aimed towards seeding the usage of our product within those countries, working with the end users and ultimately leading into procurement in some of those countries, which will ultimately scale and increase the scope of the business, so again we have got a solid base to grow from. This business is expanding, and as Paul points out, within the group, this is a profitable business. We know this is a high, you know, high gross margin business, and we are going to continue to grow in this business in the coming periods and years. The biosecurity, this is a third piece of technology, which forms part of the CBRN segment. This is pre-products.
This is a program-driven business, and we have got two active programs. This of course started through a DARPA program back in end of 2018, early 2019. We developed this desktop lab in a box technology, which was delivered to DARPA in early 2023 when the program finished, and that has led on to two contracts, really. One is follow-on contract from CWMD, which was the $5.9 million contract where the CWMD, you know, DARPA program transitioned into the CWMD program, which is aimed at delivering a field deployable system for use by the U.S. government. So CWMD is a procurement and deployment agency of DHS, and they only fund products or development of products that they aim to deploy in the United States.
The other program is a GBP 4.9 million program that we announced in back end of 2022, and that is from a U.K. government agency. And this is again aimed at a development and then delivery of products to a particular group of users in the U.K., which will have a much wider user group, once a product is there. So both of these programs are now aimed at very product-focused approach in these programs because they both are driven by end users rather than innovation agencies. And so we are going to start to see commercialization happening in this segment over the next 18 - 24 months in a serious manner. But just to reiterate the fact that this part of the business is a cash self-sufficient business from a cash point of view, running two programs at the same time.
And so it is not in the drain towards our working capital in any shape or form. Just a quick touch on ESG. So we do quite a bit within the business. These are all business-driven. So we have a net zero commitment by 2050. I'd like to touch on one particular program that we are running, whereby we run 150 furnaces in our U.K. factory. We use electricity to heat the furnaces that creates heat, which then we use electricity to cool. So we are working with Durham University and Durham County Council to implement a technology whereby we can effectively capture that heat, store that heat in a manner that we can transport and reuse that heat in a different place. In this case, it'll be in swimming pools.
This is a good thing to do from an environmental point of view, but also it directly affects the gross margin of our product because it reduces the energy cost of the crystal manufacturing, crystal growth process within the advanced imaging business. So it is a win-win in every respect. But also important is that as we go into government procurement programs, carbon reduction plans are becoming important and also the ESG piece is becoming important as a measurement of companies that are applying for tenders and so on. So we're doing this work and we'll be reporting on that basis as well. Just to conclude, we had a good first half. We are on track to report record revenue and EBITDA positive for the current fiscal year.
And that growth is underpinned by key growth drivers in the market, early detection of diseases, which leads to better patient outcome and reduction of overall cost of care, keeping people safe against them, against sort of nuclear incident, accident, or an event in a world where the threat of a nuclear event is probably at the highest in the living memory, really in our lifetime. So we have got two businesses which are underpinned by those growth drivers where we are highly aligned to what the market needs. And that is what is going to drive growth. And we are particularly in the advanced imaging business. We are at that inflection point of very large scale growth in known opportunities with known customers.
And that is what is going to drive the business forward on a sustainable basis, not only from the top line, but as Paul again reiterated, a tight cost control will mean that we are going to accelerate profitability in the business as we go forward. Thank you very much.
Thank you very much, Arnab. Just a reminder to all participants that if you wish to submit questions, then please do so through the Q&A function. I won't be able to pick anything up from the chat function. Arnab, I'm going to move to the questions. Quite a few people have submitted questions, so I've grouped them up and I'm going to take them through operational, financials, and miscellaneous, too, so. And I've combined a couple of questions. If people have questioned on several topics, I've chosen the best one of those.
The first question comes from Robin Grimston on operational. He asks, in October, Kromek was awarded a $5.9 million contract from the U.S. Department of Homeland Security for research and development of technologies focusing on agent agnostic biodetection systems. How significant is this contract in terms of leading to substantial market opportunities and sales in the bio field in the U.S. and across the world?
I touched upon that piece in my presentation, but let's go back in how this technology came into Kromek. This was a DARPA funded program where we started a complete ground up sort of development of a fully automated DNA RNA sequencing technology. From sampling to uploading fully sequenced data onto a sort of web-based cloud-based server to provide early warning capability.
DARPA is an innovation agency, as many of you will know, and they fund really groundbreaking innovation. Now, CWMD, which is the agency which funded this program, is an agency of the Department of Homeland Security. CWMD stands for Countering Weapons of Mass Destruction, focused on security and safety of citizens inside the United States. They are a deployment and procurements and implementation agency. So they fund programs which U.S. governments want to deploy. Generally, CWMD program outputs are procured and they become what in the U.S. they call program of records. So that once you become a program of record, then there is a contracting vehicle that comes out automatically for procurement.
We are very encouraged that the DARPA program transitioned over to the CWMD part, which means the innovation part was taken up by but an implementation sort of agency. Yes, absolutely, there will be a market and commercially viable product that is going to come out of this and that will have usage way beyond the United States shores. We are already working with biosecurity policymakers in the U.K. and in the U.S. The Cabinet Office led biosecurity strategy development that happened in the U.K.
We were an important part of that strategy development piece, together with the Cabinet Office and DNA sequencing based surveillance system features very highly within those strategy documents. So the technology we are developing is absolutely right and sits central to policies that are getting developed in terms of biosecurity, both in the U.K. and the U.S. and WHO actually.
Thank you, Arnab. Moving on to the in medical imaging, Kromek appears to have four contracts running: Spectrum Dynamics, the Tier 1 customer signed in April 2023, Analogic, and on the 7th of November, we announced the Blue Chip Partner. So Robin asked, is this correct? How much turnover is Spectrum Dynamics generating for current financial year? When will the other contracts enter commercial sales? And he also asked, will additional contracts need to be won to fully address the addressable market of $400 million for medical imaging?
You're absolutely correct. Those are the four contracts that we announced over the last year or so. And of course, Spectrum Dynamics was announced in 2019. That was a $58 million contract. We have just over GBP 30 million to deliver in that contract. We are very confident of that, recognizing that revenue and delivery within the specified period. To address the point of whether we have won all the customers in this segment, no, we haven't won OEM customers or announced contractual relationships with all customers. We are working with all customers that do not have an internal supply chain of CZT in this business of SPECT/ CT. We are working with all of them, and we have stated many times, some of them, you know, we have announced these three in the last eight or nine months, and we will continue to win new customers. The total addressable market that I referred to, there are more customer wins to come.
We are getting designed into their system, some of them at very advanced stages, and with very firm product launch plans, which I can't really share, but, you know, these are, these are serious, sort of large opportunities and large supply chain that we are getting embedded into. So.
Thanks, Arnab. I'm moving on to a question from Lance Johnson. Can you provide any detail on the sales pipeline and process? It seems that there is a trickle of smaller contract announcements from time to time. I wondered if there was anything larger in the pipeline.
Good question. I mean, we, you know, we, we do announce contracts as and when we win. Let me take the two questions, two segments slightly differently. So in medical imaging, as I, as I, sort of, alluded, there are, it's a highly concentrated market. So we have one, you know, there are two or three Tier 1 contracts to be won in the SPECT/ CT. We have already announced one, and we will continue to, you know, work, you know, we are working towards getting to a point of finalizing supply contracts with others.
And as they come through, we will come back and announce, of course, but we are, you know, we are at various stages with all of the remainder of the players in the market in order to be embedded within their supply chain. We wouldn't be, we wouldn't.
Go ahead, Arnab.
We wouldn't be, you know, the market. I don't think there should be an expectation that there will be many contracts coming out in medical imaging. These take time, but these are also long-term contracts that happen. But there is a very substantial pipeline of deals that are coming through that pipeline at various stages. We truly believe we will win all of the customers in those boxes and we will do business with all of them given our relationship and the stage of work we are doing. Yes, there are some substantial stuff in the pipeline in the advanced imaging, which are going to come out.
Thanks. Indeed. I'll move on to the question from Kevin Gregory Davis. Will there be an opportunity to incorporate the new AI advancement into the development of new or existing products?
Just to add to the previous questions answered on CBRN, you know, we have announced a number of smaller contracts and we will continue to announce a number of smaller contracts as they come through. But as I mentioned in my presentation, the pipeline looks good. We are tendering in very large opportunities at the moment, and as and when they mature, we are going to come back.
Coming back to AI, look, Kromek has had an AI and ML group working actively on products since 2016, particularly in security products. So we have implemented AI- and ML-based technologies in a couple of our security products, which has gone through certification in certain markets, and they are embedded within third-party OEM systems. We also are implementing AI in a number of other areas, including biosecurity and also relatively recently in our medical imaging in conjunction with CZT. And so AI is going to play a big role.
We will have some role to play within AI and, but our customers are going to bring a lot of innovation in AI, which leveraging the CZT technology and the output that, you know, we provide from our detection system. But we do have an active AI group within Kromek.
Brilliant. Thank you, Arnab. A question submitted just now by Gavin Bradley. What is Kromek's competitor positioning in each of the product categories? Could you please summarize any key strengths and potential threats?
Two parts, in advanced imaging, as we have pointed out a few times that, you know, there were two independent players in providing CZT in the markets. At the moment, after Canon's acquisition of Redlen, we remain the only independent player who is able to supply without any constraints to the entire market, which is available to us to companies which are not have an embedded supply chain through acquisition. And the slide showed the number, the companies that we have got access to in that supply chain.
In terms of competition, it's quite a unique position we are in in the advanced imaging segment. In the CBRN segment, it's slightly different. Of course, we play in a competitive field. Let me start off with our competitive advantage. In terms of our competitive advantage, our products were all developed under U.S. government DOD and DHS funding through 2014 to 2018. They were all funded by DARPA, Defense Threat Reduction Agency, CWMD, DNDO, and so on.
So we have our unique, sort of value proposition is in terms of usability, size and form factor, functionality, and pricing, where the design philosophy is meant that we are able, we were able to design wearable detectors, which are replacing detectors the size of shoe boxes. And that is DARPA's own words rather than my words. I'm just quoting DARPA there. So the cost we, you know, because of the design philosophy that DARPA pushed us into, we are able to have a very healthy margin within that market. So, and of course, networkability. And why does size matter in this?
Because if you're looking at a first responder, particularly a defense personnel, they're already carrying all sorts of equipment with them, when they are having to make a decision whether to carry a wearable detector or something that is weighing 2 kg , can't really belt carry, the decision becomes quite easy. But of course, our performance, we are the fastest radiation detector in the world, in the categories of RID and PRD. So we have some unique capability as well within the product.
So we actually in CBRN address two particular segments, in the handheld and one particular segment in statics and large form factor detectors. In the two categories of handheld, the competitors are Thermo, FLIR, Symmetrica, and a few other companies, Polymaster, and Mirion in certain cases. They don't do all of that, but they do parts of it.
So for example, Thermo and FLIR, Thermo does compete in the D3M, which is a PRD category, whereas Symmetrica competes in the RID category, which is our D5 product. So it is an established field. It's not. Our position is not like what we have in AI in advanced imaging, but we have a unique value proposition that we bring to the market and to our customers. And that is why, although we are relatively newcomers in this handheld market, launching our products back in 2018, early to mid 2018, we have got a really good blue chip customer base and a very strong brand recognition within key user groups in U.K. and U.S.
We will continue to grow, but we take a realistic view in terms of the proportion of the business we are going to win. And that's why when I said we are tendering for GBP 100 million worth of business, we will win part of it. We don't expect to win all of it.
Thank you, Arnab. Paul, just bringing you in on two or three financial questions that have been put to us. James Connolly asks, in 2016, there were 153 million shares. There are now over 600 million as at 14 September 2023 RNS. When will the company be cash profitable, generative so that there are not further huge dilutions of existing shareholders?
I'm sorry. Let me take the second half of that question first regarding the potential future dilution of existing shareholders. We have no plans for the foreseeable future to raise further equity for working capital or to fund any losses that might come through. Second half of this, first half of the question, when will the company be cash profitable or cash generative? Of course, that depends on a number of factors, but just to give you a guide, you've seen that our gross margins are 50% or more in the last two reporting periods or operating costs around about GBP 15 million.
We expect it to be about that for the current year, including finance costs, so with that ratio, we would expect to be cash generative at round about GBP 30 million of revenue. But of course, a caveat that we're saying it depends on the mix of revenue between CBRN business and advanced imaging because they have two different gross margin profiles. But as a guide, I would say around about that figure that I've given.
Thank you. Just going to a question that Robin Grimston sent in. Kromek has about 1.4 million convertible loan notes maturing on 31st of January today and 1.4 million on 22nd February 2024. How are these loans to be repaid?
Thank you. There are three options open at the moment. One is that the noteholders can elect to convert their loan to equity. The second is that Kromek has the option to extend the period of the current loan notes from 18 months for a further three months. And the third one is that we can repay those loan notes in cash. So when a decision is made either by the loan, the loan note holder or by the company as appropriate, we will make an announcement via an RNS, and shareholders will be made aware.
Thanks, Paul. Arnab, I'm going to pull you in for one question, but before I do that, I see that Gary Moynihan has submitted a question on the Q&A board. He said he asked, in the financial review section of your H1 results release, you state that overall revenues grew 5%. Within that, R&D revenues grew strongly, but product revenues fell from GBP 6.5 million to GBP 5.9 million. Can you please explain the fall in product revenues?
Yes, I'll take that one, Harry. I think the simple answer to this, it was just timing. There's nothing untoward in that relatively small reduction in product revenues from GBP 6.5 million to GBP 5.9 million. Yes, Gary's quite right. R&D revenues grew strongly, which reflects the two contracts that Arnab spoke to in biotechnology. We expect that small reduction in product revenues to reverse in the second half of the year. And we are confident that we will report increased product revenues in the full year numbers.
Thank you, Paul . Arnab, this financial question might be more appropriate for you, but Paul, do jump in. Could you please give an update on the progress for selling the Acrorad stock? Whether you reasonably anticipate being able to sell the stock to fully recover the GBP 13 million write-down, what timescales are you working to to sell the stock and whether you are reliant on selling to the original customer or whether realistically alternative replacement customers exist and are being approached?
So I think we touched on this a couple of times before. We are working with a couple of companies. This is the stock is basically aimed towards SPECT detectors, modules, and so on and so forth, and cameras. We're working with two customers at the moment where that is in the process of getting designed into systems. We are on a journey on that and we believe we are going to, as a result, win some customers in the Far East, actually.
We will recover at least part of the money and the Acrorad. But also this will be long-term customer wins as well as a result. They, to give you an estimate of timescale, that journey started, you know, in the middle of last year, where we, you know, started to engage and find real traction on that. It takes a period of time for the design process and everything to happen. So we believe over the next 12 - 24 months, we are going to see significant movement of that.
Thanks, Arnab. Moving on to some questions with regards to share price, value of the company, et cetera. So the first one I want to ask is from Charles Williams-Stuart. He asked, Kromek is an outstanding example of value destruction since the company's listing many years ago. Management has wisely steered clear of exposure to the shares in any meaningful way as Jam Tomorrow philosophy has existed. It appears that this could still be the case. And if so, should existing managers step gracefully to one side and let new brooms attempt for some value creation?
Look, value creation is a function of the business performance. And as you're seeing, you know, the business poised to grow. It is growing. So we are on the growth journey, with a keen eye on profitability, with very strong cost control under Paul. And we will continue to do so. We have got a plan and we have got a strategy in growing in both advanced imaging and in CBRN. And as I've said a couple of times in my presentation, what we are doing in these two segments, our offering is very well aligned to what the market needs. Our focus has remained exactly the same. We, you know, the business started on the basis of serving the CT and SPECT market. That market is here.
It's, you know, the traction is, you know, visible and we'll continue to deliver on those business plans and as the analyst forecasts and we'll, we are on the way to build a sustainable growth, growing and profitable business. So we believe the share price will reflect as we execute on the business plan.
Thanks, Arnab. The next question in similar vein from Barney Stevens. How do you see the share value over the next 24 months compared to the last 24 months?
Look, again, going back to our job is really execution and winning customers and growing the business and getting towards that profitability and cash generation. That is where we are focused. And as we go through that journey, I'm sure the share price will reflect that plan. So.
Thank you, Arnab. Moving on to the next question from Nikolai Angelov. He asks the question, do you have any plans to put the company up for sale and unlock some value for the long-suffering shareholders?
Look, as we clearly say, there are two parts of the business, which is one is advanced imaging and the other is CBRN. And again, Paul alluded to the financials of the two businesses, how they look like. In terms of segmentation, we have got a profitable business in the CBRN segment at the moment, which is certainly a bit positive, by quite a bit and almost pre-tax profitable even last year when that business is growing.
We have got a substantial strategic value-based, CZT business where trade players have already recognized the value of this technology through M&A activity and investments in this sector. So look, there are many strategic options and the directors are always keen to unlock value and we'll be keeping everything under review as we go forward.
Thank you. Richard Lester had asked a similar question saying Kromek is one of the few producers of CZT and just he submitted that just now. Also, there are a number of substantial contracts in the pipeline. Why is Kromek not a takeover opportunity?
Kromek is, you know, this market has been extremely, sort of, particularly the advanced imaging market have shown it's an M&A rich environment. We are critical, part of critical supply chains into very big product lines and revenue lines of very large corporations. So, you know, we are always subject to discussions in terms of how best to secure supply chains and that'll continue and we will see how that, you know, how that'll play out over the next months and years as these goes into full commercial supply modes. So.
Okay. We have two more questions to go through. One is from Jonathan Bean. He's asked a question: Am I misaligned in my expectations regarding what this company wants to achieve? Does Kromek want to be a great company or is it focused on just being a good company? If it wants to be a great company, I assume, what is the plan to realize full value of the company? I know you've touched on it already, but Jonathan has asked that question.
Look, taking a step back, what we do at Kromek, our mission is to save lives and keep people safe through use of detection technologies. So, and that is on a global basis. If you look at our customer base, if you look at the drivers of the markets, we, on one hand, we are enabling early detection of cancer, early detection of critical diseases, thereby, you know, the patient outcome is better or, or the overall cost of healthcare systems are reduced, which are real big challenges in Western economies and also in, in developing countries.
On the other hand, in a world that we live in with where conflicts are increasing, the risks of conflicts are increasing on a daily basis, particularly nuclear rhetoric is, you know, always in the press. Last week, the Doomsday Clock was reset and we are 90 seconds supposedly from midnight. So there are some Kromek's products and are addressing some of the big challenges globally. And so what we are building here are, and we have built over the last 20 years is a solid foundation for growth in two markets, which are big, growing, and our products are well positioned within these markets.
And our customer base speaks for itself in terms of the quality of that product, U.K. government, U.S. government, U.S. DOD, U.K. MOD. We have got a huge number of good quality customers both on the CBRN side and also on the advanced imaging side. We are on the way to build a substantial business on a sustainable basis.
Thank you, Arnab. Jonathan, I'm not going to ask the question you put into the Q&A, but I'll read it out. But Arnab and Paul are not your financial advisors. You need to ask your brokers of that. You, Arnab here and Paul here had asked, is the best way to get value for shareholders to exit to one of the larger players, perhaps Spectrum? I'm not going to ask you to answer that one. Moving on to next question from David Peters.
I want to say he's asked several questions, but I know we are on our time of one hour, but I will put this as the last question to you. One of the questions he's asked, why won't you buy shares in the company and how can you expect investors to buy shares when you won't?
Look, the management team's commitment to the company has been unwavering. So I've been in the company from day one, the first employee of the business, founded the business. I have participated in every round of financing, never sold a single share and neither has any of our management members of the management team. So our interests are absolutely aligned to the shareholders' interests and on a daily basis. So we're working hard to create value and we will be creating value for shareholders all round.
Thank you very much. That ends the Q&A session. Arnab, would you like to say a few words in conclusion?
No, there's, I think we have covered a wide variety of topics. Thank you for the opportunity to present Kromek and the challenges and the opportunities we face in the coming months and years. As you have seen, the opportunities are substantial and your support is greatly appreciated. And we will together build value in this business and recognize the inherent strategic value that we have created over the last 20 years and its IP, products, technology, and the customers that we already have.
Thank you very much, Arnab, for your time and call. This now ends the webinar. You may now disconnect.