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Kromek demonstrates nifty footwork to land breathing ventilator deal

Kromek will manufacture the ventilators, which are using an established Metran design, at its facilities in the northeast

Kromek Group PLC -
The UK wants 30,000 ventilators

Companies are having to take a long hard look at how they operate as they batten down to weather the coronavirus storm.

But that is not always a bad thing.

Arnab Basu, chief executive of Kromek PLC (LON:KMK) says it was just such an exercise than enabled it to switch its manufacturing efforts to ventilators to the meet the NHS’s pressing need.

Traditionally, a supplier of radiation detectors for a wide range of sectors, Basu says the coronavirus crisis has forced it to identify its key strengths such as strong international links and a capability for manufacturing complex equipment.

 

 

The next step was to match them up and courtesy of the British embassy network, it was put in touch with Metran, a Japanese company that has been making ventilators for thirty years and crucially was looking for a partner.

Kromek will manufacture the ventilators, which are using an established Metran design, at its facilities in the northeast with the expectation to produce 2,000 by the end of twelve weeks.

Details on the financial impact will be released later but with a ventilator costing up to US$10,000 each, house broker Cenkos expects revenues to be significant though will fall into the current financial year rather than the one just ended.

Basu sees demand for ventilators growing even after the current phase of the coronavirus outbreak eases as countries need to build up their resilience to any future pandemic.

The UK alone is said to want 30,000 ventilators compared to its current stock of 8,000.

Having a design already approved in Japan is likely to be a boost to Kromek and the NHS, as so far only the Airbus/F1 consortium has had a new ventilator design accepted for use in the UK.

Basu said that work on the ventilators will help Kromek forward if other areas of the business slow down due to the impact of coronavirus.

He added the Metran partnership highlights how rapidly the business can adapt.

Five weeks ago everything things seemed normal and it was planning for three months ahead, he says, but now it is getting used to the new post-coronavirus norm.

“We have a business with assets that are valuable in the current climate and the switch to ventilators shows how the workforce can change and scale up to produce a complex device.”

Cenkos added that while the deal with Metran is only a production agreement, negotiations are likely to be ongoing with the NHS and other health bodies for them to procure ventilators from Kromek upon production.

The production licence with Metran is global and Kromek will be able to produce and sell these units worldwide at fair and reasonable terms, added the broker.

Adapting Kromek's existing production facilities is unlikely to be costly, though as the supply is not yet in place any meaningful revenue is likely to start next month, which is the start of the new financial year.

Shares jumped in the AIM-listed business jumped strongly on the deal and at 23p the company is now valued at £69mln or roughly where it was at the start of 2020, which in the current investment climate is not bad going.

Quick facts: Kromek Group PLC

Price: 21.5 GBX

AIM:KMK
Market: AIM
Market Cap: £74.1 m
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