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GETECH Group plc (GTC)

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Friday 24 January, 2020

GETECH Group plc

Financial Update: 12 months to 31 December 2019

RNS Number : 7884A
GETECH Group plc
24 January 2020
 

Getech Group plc

("Getech" or the "Company" and with its subsidiaries the "Getech Group")

Financial update: 12 months to 31 December 2019

Getech (AIM; GTC) today issues a financial update ahead of the announcement of its results for the year ended 31 December 2019. The audited results for 2019 are expected to be released in April 2020.

Overview

Against what remains a volatile macroeconomic and commercial backdrop for oil and gas exploration spending, Getech increased its new forward sales by 41%, expanded its orderbook by 48% and the Group's cash balance closed the year at c£3.6 million (31 December 2018: £1.4 million).

By strategically driving orderbook growth, with a focus on annually recurring revenue, we are working to increase visibility and progressively lessen Getech's exposure to lumpy transactions.

Highlighting the importance of this, negotiations on several substantial transactions overran from December 2019. We remain in negotiation on these sales, the value of which had the potential to deliver material 2019 revenue growth. The fact that they did not complete in 2019 however is expected to result in a c£2 million year-on-year fall in revenue.

Getech's results for the period ended 31 December 2019 will therefore be below market expectations. Lower total costs and continued investment in the drivers of multi-year sales will however limit the year-on-year impact on profitability, and across H2 2019 cash balances rose by £0.6 million.

12 months to 31 December 2019 - expected revenue, sales, costs and EBITDA

Based on early unaudited management accounts, revenue for the 12 months to 31 December 2019 is expected to total c£6 million (2018: £8.0 million). In addition, Getech closed another c£2.4 million of new forward sales (2018: £1.7 million) - a significant portion of which will unwind to revenue in 2020.

·   Getech's orderbook grew to c£3.1 million at 31 December 2019 (31 December 2018: £2.1 million)

·   The total cost base[1] is expected to lie between £6.3 million to £6.5 million, at least 17% below 2018 (£7.8 million)

·   We anticipate having at least maintained Getech's gross profit margin (2018: 47%) and we expect EBITDA to lie between £0.6 million and £0.8 million (2018: £1.1 million)

Expected impairment of goodwill relating to the acquisition of ERCL

An important element of Getech's 2019 total cost base management were the steps taken to relocate and reshape our Geoscience Services team, which in 2018 made a significant loss. Bought through the acquisition of ERCL in April 2015, we anticipate impairing a portion of the goodwill relating to this acquisition in our 2019 accounts. The total carrying value of this goodwill is currently £3.1 million.

 

Jonathan Copus, Getech CEO, commented:

"Getech began December 2019 financially ahead year-on-year and with a high-value sales pipeline that was commercially well-advanced. The shortfall in 2019 revenue is therefore disappointing.

Alongside the growth delivered in 2018, this highlights how Getech's earnings remain exposed to lumpy transactions, the exact timings of which can be difficult to influence. We are however strategically driving significant growth in our orderbook to progressively lessen this exposure. We also work to protect Getech and its profitability from year-end risk through careful capital management.

We have begun 2020 with a full and diverse sales pipeline, this benefiting from 2019 sales campaigns in new regions, with new potential customers. Our focus is to realise the value of this pipeline and in January 2020 we have already added a new supermajor Globe customer.

We are committed to maintaining operational discipline, and we have a slate of initiatives through which we are targeting growth. Getech's balance sheet is strong and the Group's cash-leverage to growth remains substantial."

 

 

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

 

 

Getech Group plc                                                                                            Tel:  0113 322 2200

Jonathan Copus, Chief Executive

 

WH Ireland Limited                                                                                        Tel:  0161 832 2174

Katy Mitchell

 

Notes to editors:

Getech (AIM; GTC) provides geoscience and geospatial products and services to companies and governments who use them to de-risk exploration programmes and improve their management of natural resources. The Group's activities focus on a suite of data, knowledge and analytical products, the value of which are enhanced through services that leverage Getech's products and technical skills.



[1] Cost base is measured as: cost of sales, administrative costs, development costs capitalised and payment of lease liabilities, less depreciation and amortisation, and adjustments for movements in foreign exchange and non-cash provisions. These are Getech's cash operating costs.


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