Getech Group plc
At today's Annual General Meeting, Jonathan Copus, the Chief Executive Officer of the Getech Group (AIM; GTC), will give the following statement:
"Getech provides geoscience and geospatial products and services to companies and governments that they use to de-risk exploration programmes and improve their management of natural resources. In the 17-month accounting period to 31 December 2017 (referred to as AP 2017) we integrated the acquisition of Exprodat, rebased costs, strengthened our commercial offering, and repositioned Getech's operational and financial strategy. This strategy places our data, software and information products at the heart of our business. By doing this we target high-margin, repeat revenue growth and we are reshaping our services to more clearly leverage our products and geoscience-geospatial skills.
These steps have significantly strengthened Getech's finances, they have helped us to cross-sell our products and services, we have entered new sectors, and accessed rich seams of new data with significant 2018 revenue potential. We view the progress made to successfully re-align our business to reflect the collaborative approach that we have established with our customers.
In AP 2017 we refreshed and expanded our gravity and magnetic data inventory and accessed more seismic and well data. This allows Getech to provide a richer and broader suite of essential data to our customers, focused in regions where we see clear commercial catalysts to drive buying interest. One example is Sierra Leone where in 2017 we assembled a suite of seismic and well data for the Government, which in 2018 we are using to promote the country's Fourth Offshore Licensing Round.
Our data holdings also underpin Getech's Information Products. In AP 2017, Globe entered its eighth year of development, we added another supermajor customer, and we completed Globe's second three-year build-phase on budget and schedule. With the foundation-stone now complete we have moved the commercial model to an annual release cycle, which allows us to deliver a more agile product with content that evolves with the needs of our customers. Lower budgets continue to provide a challenging environment for our Regional Reports, however an uptick in interest offers encouragement.
We enhanced our software products (Data Assistant, Exploration Analyst, Unconventionals Analyst) to include a range of new customer requested functionality and upgraded them to support Esri's latest releases. With the resubscription rate exceeding 95% for the second year in a row, our install-base also grew, and our software customer list expanding by 23%.
In contrast to our product activities, our service teams continued to face a much tougher trading environment - the division in AP 2017 delivering a gross margin of 7% (FY 2016: 24%). Underlying this figure is a very difficult geoscience services market, where despite headcount reductions a lack of billable work eroded the division's profitability. Trading in our geospatial services group was much stronger, the team's skills continuing to win new work and open doors to opportunities within oil and gas and across a range of new sectors. By wrapping our services more tightly around our products and combined geoscience-geospatial skills, and through a focus on cost control and enhanced project management, we target stronger service returns.
AP 2017 delivered a step-change in the cash profitability of Getech - pre-restructuring costs, the Group generating a net operating cash inflow of £2.1 million (FY 2016: £0.3 million outflow) and a free cash inflow of £0.1 million (FY 2016: £2.0 million outflow). Driving this, product revenues grew 24% pro-rata, delivering a 65% gross margin before impairments. This trajectory was enhanced by the acquisition of Exprodat, and at the Group level was reinforced by a 32% reduction in costs. These positives were partially offset by what remained a challenging market for geoscience services.
Post capital investment, we used the balance of our operating cashflow to settle all remaining M&A cash obligations and to pay down one third of our debt. We also invested in the Group's sales and project management capabilities - our focus being to grow revenue and de-risk profit.
Inclusive of restructuring costs, Getech ended AP 2017 in a net cash position of £1.8 million (31 July 2016: £1.9 million); cash and cash equivalents totalling £2.4 million (31 July 2016: £2.8 million).
Our customers have worked hard to lower their cash flow breakeven and we see no evidence that they will reverse the capital discipline that this has required. However, the downturn in oil prices has also challenged our customers to rethink the way that they access, manage and analyse data. By strengthening Getech's offering as an essential data, software and information provider, we are positioning the Group for growth in this exciting new operational landscape.
By moving our year-end to 31 December (from 31 July) we have placed our reporting cycle in line with our customers' budget cycle. This also introduces more seasonality into our financial results - based on history the H1:H2 revenue split moving to a 40:60 ratio (from an average of approximately 50:50).
The January to March Q1 period is at the start of our customers' annual spending cycle and is a time when we are focused on establishing a strong marketing and sales schedule for the balance of the year. Q1 2018 revenues were in line with Q1 2017, but within the mix we have seen an increase in sales of data and information products for frontier areas, increased demand for product training and we have a strong list of new customers trialling our software. The market for geoscience services remains challenging, however our geospatial, gravity and magnetics service teams have built a healthy programme of billable work. We remain focused on capital discipline and have taken steps to rationalise the Group's footprint - our Henley and London service operations to combine in Q3 2018.
Our sales pipeline for 2018 is larger and more diverse than in 2017 and we are engaged on a series of exciting and potentially material data, information product and software campaigns. These have the potential to deliver revenue above 2017 levels. By combining this with significantly lower cash costs, that are largely fixed and broadly in balance with AP 2017 revenue, our cash flow has significant leverage to growth - a similar pro rata sales performance to AP 2017 (sales mix and divisional margin) generating a cash inflow of approximately £0.5 million (post-investment and debt repayments) and each 10% increase in revenue broadly translating to a £0.6 million increase in free cash flow.
With the cash that results, we are committed to invest in our operations, reinstate dividend payments and explore acquisitions. We must also ensure that our capital works hard for the benefit of shareholders and we continue to examine all options regarding our Kitson House office in Leeds."
Stuart Paton, Chairman of Getech Group plc, said:
"The last year has seen continued strong leadership under Jonathan. Under his direction, we have made significant changes to the culture, organisation and strategic positioning of the business which have already started to impact on the bottom line. I am very pleased at the recent appointments of Andrew Darbyshire and Chris Jepps to the Board. This with the establishment of a new Executive Committee greatly strengthens the capability and breadth of our senior leadership team. I would like to take this opportunity to thank all of Getech's staff for their continued hard work and dedication. I am confident that our strong team, strategy and positioning will lead to the future growth of the business."
Getech Group plc Tel: 0113 322 2200
Stuart Paton, Chairman
Jonathan Copus, Chief Executive
WH Ireland Limited Tel: 0161 832 2174
Notes to Editors:
The Getech Group provides the expertise, support and knowledge that companies and governments need to better discover, develop and manage natural resources. Our data-rich products, geospatial solutions and government advisory services help our customers to achieve their business goals of risk-management, cost control, operational excellence, regulatory compliance and environmental responsibility.
For more information, please visit our website at www.getech.com.
 In September 2017 we announced steps to align our reporting cycle with our customers' budget cycle. This meant moving Getech's Accounting Reference
Date to 31 December, the comparative audited accounting period to AP 2017 being the 12 months to 31 July 2016.
This information is provided by RNS