Kromek shares jump 11% after first-ever profit

Kromek Group PLC shares rose 11% after the company reported its maiden annual pre-tax profit of £3.1 million, reversing a prior-year loss, on a 37% revenue increase to £26.5 million. This strong performance, driven by a significant Siemens Healthineers contract and robust CBRN detection sales, also saw debt reduced by over £11 million, positioning the firm for expected further revenue and profit growth in 2026 and prompting broker Cavendish to reiterate its 26p price target.

Analysis

Kromek Group PLC (AIM:KMK) has reported a pivotal financial year, achieving its maiden annual pre-tax profit of £3.1 million, a stark reversal from the prior year's £3.5 million loss. This turnaround was underpinned by a 37% increase in revenue to £26.5 million and a more than threefold rise in adjusted operating earnings to £10.3 million, beating market expectations. The primary catalyst for this performance was a $37.5 million contract with Siemens Healthineers, which more than doubled sales in the Advanced Imaging division. Concurrently, the CBRN detection segment demonstrated a strong second-half rebound, securing key contracts with the Ministry of Defence. The company has also significantly strengthened its balance sheet, reducing debt by over £11 million. While the stock rose 11% to 5.38p on the news, this remains substantially below the 26p price target reiterated by broker Cavendish, highlighting a significant valuation gap based on the broker's positive outlook for continued revenue and profit growth in 2026.

Key Decisions for Investors

• Investors should evaluate the significant disparity between the current share price of 5.38p and the reiterated broker target of 26p, as this suggests the market may not have fully priced in the company's shift to profitability and its growth outlook.
• It is critical to monitor the execution and revenue visibility from the Siemens Healthineers contract and the order momentum in the CBRN detection division, as these are the core drivers underpinning the company's confident 2026 forecast.
• The successful deleveraging, with debt cut by over £11 million, fundamentally de-risks the company's financial profile, warranting a reassessment of its risk-reward proposition for investors considering a long-term position.