TIDMGTC
RNS Number : 0427P
GETECH Group plc
05 June 2020
Getech Group plc
("Getech" or the "Company" and with its subsidiaries the
"Group")
Final Results for the 12 months ended 31 December 2019
The Getech Group (AIM; GTC) announces its Final Results for the
12 months ended 31 December 2019.
Covid-19 and oil price update
-- The move to home working has been smooth, with projects
continuing to be delivered on time and to cost
-- Actions have been taken to preserve capital, with monthly Group costs lowered by c26%
-- We retain further flexibility and have maintained the
capacity to both deliver our orderbook and the resources we need to
maximise the impact of our sales conversations and new business
activities.
-- The current business environment is challenging but Q1 2020
revenue, new sales and profitability were all ahead of Q1 2019, and
year-to-date there have been no negative orderbook revisions.
-- As might be expected, April and May have been quieter in
terms of new sales closed but we have remained busy across a wide
range of sales conversations.
2019 financial highlights
-- Revenue GBP6.1 million (2018: GBP8.0 million), with new
forward sales up 41% to cGBP2.4 million (2018: GBP1.7 million), a
significant portion of which will unwind to revenue in 2020
-- Orderbook increased by 48% to GBP3.1 million at 31 December
2019 (31 December 2018: GBP2.1 million)
-- Annualised Recurring Revenue GBP2.3 million at 31 December
2019 (31 December 2018: GBP2.3 million)
-- Total cost base 16% below 2018 (2019: GBP6.4 million; 2018: GBP7.6 million)
-- Adjusted* EBITDA GBP0.9 million (2018: GBP1.3 million),
before exceptional items totalling GBP2.8 million
-- Adjusted(*) earnings per share (0.75)p (2018: 1.88p)
-- Net cash GBP2.7 million at 31 December 2019 (31 December
2018: GBP0.5 million), with the Group generating free cash in
H2-19
(* Adjusted for exceptional items as detailed in the financial
review)
Operational highlights
-- Gravity & Magnetic Solutions - Continued demand for our
expertise and data, underlining our market leading position in this
domain
-- Geoinformation Products - Globe 2019 released on schedule and
to budget, providing innovative new analytic tools and content. New
super-major customers added in Q4 2019 and Q1 2020
-- GIS Software - Unconventionals Analyst software released on
ArcGIS Pro, high subscription renewal rates, product suite awarded
Esri's "Release Ready Specialty" designation
-- GIS Services - Super-major support contract wins, further
diversification into new markets, service team awarded Esri's
"ArcGIS Online Specialty" designation
-- Geoscience Services - Restructured, relocated, integrated
-- Innovation - New team established to lead cross-discipline
R&D, with early success in hydrocarbon micro-seep detection
service
Chairman and Chief Executive's review
Getech provides products and services that commercialise our
expertise in the development, application and deployment of the
earth sciences and geospatial technology. To date we have
principally used these skills to build and sell data, knowledge and
analytical products that address specific petroleum market
workflows and data management challenges. Our customers use these
products and services to de-risk exploration programmes and improve
the management of their assets and resources.
We have also been successful in diversifying into new markets.
Getech sells data products and geoscience services to mining
companies, and we have utilised our geospatial skills in the water,
transportation, nuclear, pipeline and electricity infrastructure
sectors. Whilst these end markets are not yet material in the
context of the Group, we have the expertise and technologies to
create significant value in these new markets.
Covid-19 - global economic disruption and Getech's response
Since 31 December 2019, the Covid-19 pandemic has led to
unprecedented restrictions on social and business activity. These
have deeply disrupted the global economy, and, in the face of sharp
falls in oil demand, a relatively short-lived but untimely
OPEC-Russia supply war added unwelcome complexity.
Oil prices have touched 20-year lows, and although production
cuts are growing and evidence builds that demand is now recovering,
significant uncertainty remains. In response, petroleum companies
have cut c$178bln from their budgets, including a c35% reduction in
2020 capex.
2020 will undoubtedly be a very challenging and uncertain year
but the combination of a strong balance sheet, a significantly
enhanced orderbook and sustained recurring revenues will help
Getech navigate this. Net cash at 31 December 2019 totalled GBP2.7
million. Our debt levels are low, and the repayment profile is
back-end-loaded with an October 2023 maturity. We own a property
asset with an 'in use' carrying value of GBP2.4 million. We have
continued to close new sales in the current year and there have
been no negative orderbook revisions. This has resulted in Q1 2020
revenue, forward sales and profitability all ahead of Q1 2019 and
in April an important global software license was renewed.
Operationally, the move to home working has been smooth, with
projects remaining on schedule - both in terms of time and cost.
Having established solid remote communication practices early, we
have also enhanced our ability to deliver online trials of our
products. The uptake in product training from home working
customers across our customer and contact base has been strong, and
having expanded our programme of digital marketing, webinar
attendance has increased significantly. Together, this creates a
unique opportunity to both increase our profile and reach deeper
into our customers' organisations and we have reshaped our sales
and marketing activities to capture the benefit of this. We have
also accelerated new business activities, focusing on the value
that our transferable skills and technologies can deliver in new
energy and infrastructure settings.
Like all businesses however, we do not know how long Covid-19
disruption and oil price weakness will last, and so to preserve
capital we implemented a range of actions that have lowered Group
monthly costs by c26%. Getech retains additional cost flexibility,
but, importantly, we have also maintained our capacity to deliver
our contracted orderbook and to maximise the impact of our sales
and new business conversations.
We believe Getech is now well positioned to rapidly adjust to
any further deterioration, or improvement, in our core markets.
This flexibility, and our balance sheet strength, will underpin
Getech throughout 2020 and 2021.
12 months to 31 December 2019
In 2019 customer budgets remained constrained, a position that
has continued since the oil price slump of 2014. The steps that we
have taken in recent years to manage this longer-term environment
have made Getech more robust against the current market
uncertainty.
Key to this has been to strategically drive orderbook growth,
with a focus on annually recurring revenue. This has increased
Getech's earnings visibility, and it is progressively lessening our
exposure to 'lumpy' data transactions. We have also strengthened
our financial and operational controls, we are disciplined in our
capital spending, and our customers' needs are central to
everything we do.
The importance of these initiatives is highlighted in our 2019
financial results, where, against a volatile and uncertain
commercial environment, with oil prices and drilling activity down
year-on-year, Getech closed 41% more forward sales compared to the
prior year. These forward sales expanded our orderbook of committed
revenue, which grew by 48%, and most of the value of this orderbook
will unwind to revenue in 2020. Getech grew its cash balance across
2019; first half growth of GBP1.6 million driven by working
capital, second half growth of GBP0.6 million driven by operational
free cash flow. We closed 2019 with a net cash balance of GBP2.7
million (31 December 2018: GBP0.5 million). As previously
announced, negotiations on several substantial transactions did not
close by 31 December 2019, total revenue (GBP6.1 million) therefore
fell below our earlier expectations for the year (2018: GBP8.0
million).
Current market conditions mean these delayed transactions have
not since materialised, but in 2019 the profitability impact of
this revenue shortfall was mitigated by lower total cash costs. In
2019, the adjusted gross margin* of our activities increased; and
our service division, which made a loss in 2018, grew its revenue
contribution and returned to profit. Across the year, Getech
generated an adjusted EBITDA(*) of GBP0.9 million (2018: GBP1.3
million).
(*Adjusted for exceptional items as detailed in the financial
review.)
Redoubling our focus on diversified growth
Getech retains significant profit leverage to growth and we are
focused on continuing to diversify our revenue by growing the
materiality of the Group's activities further along the energy
value chain.
In 2019, we expanded our work in two focus areas - petroleum
production operations, and hydrocarbon and electricity
infrastructure. We also continue to explore new opportunities
relevant to the energy transition and the low carbon economy. What
drives our focus on these specific business sectors is that we see
clear customer needs in areas where we can use our existing skills
and technologies to add value. We also see potential to extend our
skills and add complementary technologies and services.
Each focus area is of a scale that would enable significant
growth and we see potential to accelerate our expansion into these
markets through M&A that would be accretive to both profit and
cash generation, either directly or via a quick path to shareholder
value creation (synergies, technology acceleration etc).
Conclusion and Outlook
The pace at which the Covid-19 pandemic has reshaped the global
business environment is unprecedented. In energy markets the speed
at which demand has fallen has triggered cuts to capital investment
and, in oil and gas specifically, these have been faster and deeper
than followed either the 2008 or 2014 oil price falls and our
customers have placed many regional 'project-based' investment
plans on hold. Although it remains too early to estimate how deep
or long the downturn in our core markets will be, our orderbook is
larger and our sales pipeline remains diverse and continues to
benefit from 2019 campaigns in new regions, with new potential
customers.
We expect May's sharp rebound in oil prices, which has continued
into June, to take time to filter through to our customer
conversations. Getech's revenue is normally weighted 40:60 between
H1 and H2 and there is the likelihood this weighting becomes
accentuated into H2 in 2020. In H1 2020 we have focused on the
replenishment of our orderbook and protecting annually recurring
revenue. Year-to-date, we are cautiously encouraged by the renewal
rate across our software products and we have won service
extensions that deliver monthly revenue to year-end. We are also
negotiating various licence renewals to our Globe knowledge
product. These discussions would normally conclude in June and
July. Globe contracts are an important part of our orderbook, and
they set the shape and scale of our H2 2020 investment. As we plan
this investment, we are confident that Getech's financial strength,
our flexibility and the transferable nature of our skills and
technologies give us the toolkit to successfully navigate what are
exceptional commercial conditions. We also see an opportunity to
accelerate our diversification and growth plans - both through
organic expansion and acquisition.
Navigating this extreme operational environment will require an
unwavering focus on customer needs, continued operational delivery,
and creativity in our thinking. In what are exceptionally
challenging times, we thank our staff for their dedication,
adaptability, and inspirational teamwork. We also thank our
shareholders for their time, advice and continued support.
Dr Stuart Paton Dr Jonathan Copus
Chairman Chief Executive
Getech Group plc Tel: 0113 322 2200
Jonathan Copus, Chief Executive
Cenkos Securities plc Tel: 0207 397 8900
Neil McDonald / Pete Lynch / Pearl Kellie
(Corporate Finance)
Michael Johnson / Julian Morse (Sales)
Operations review
The core skills at the heart of Getech's products and services
offerings are Earth Science and Geospatial in nature. To date, we
have principally combined these skills to develop solutions for the
oil and gas market, but we also operate in other energy and natural
resources sectors.
-- Our Earth Science staff are experts in geology, potential
fields geophysics, seismic geophysics, geochemistry, structural
geology, plate tectonics & geodynamics, palaeoclimate modelling
and remote sensing.
-- Our Geospatial staff are experts in designing, implementing,
and managing geographical interpretation systems (GIS) technology
that is used to spatially integrate and analyse business data in
order to derive unique insights.
In line with UK Government Covid-19 guidance, all Getech staff
moved to home working in early March. This move was completed
smoothly, and projects are operating to time and on cost.
Our Gravity and Magnetic Solutions team performed solidly in
2019, underscoring our market leading position in this domain
despite the challenges posed by the continuing tough exploration
market. Aside from the disappointment that several larger data
sales did not close by their expected date in December, the
underlying performance of the team was strong and their expertise
in the science of potential fields data and processing was once
again recognised by a steady-stream of bespoke Gravity and Magnetic
service contracts. In addition, key projects were undertaken to
research, update and enhance strategically important data products
in order to bring new products to market for 2020/21. Included in
these was Getech's unique Multi-Sat data product.
In 2019 we further enhanced our flagship Globe product,
developed by our Geoscience Information Products team. The "Globe
2019" release was delivered to customers on time and within budget,
and featured enhancements that leveraged skills from across the
Group - with Getech's geoscience, geospatial and software expertise
once again combining to deliver new information, analytic tools and
additional usability for Globe customers. Following its release, we
held two successful Globe User Group Meetings in the autumn - in
London and Houston. These scientific, workflow and demo focussed
sessions stimulated excellent customer feedback about product use,
features and opportunities for future product enhancements. Our
ongoing efforts around re-positioning of Globe for the current
exploration market were further rewarded in 2019 securing a new
super-major customer and high renewal rates for existing
subscribers and those on multi-year licence agreements.
The focus for our GIS Software team has been to migrate our
software products to ArcGIS Pro, Esri's new desktop GIS application
and ArcMap replacement. In June 2019, these migration efforts
completed with the full commercial release of the Unconventionals
Analyst extension for ArcGIS Pro, providing significant
enhancements to its onshore shale gas/oil well pad & lateral
planning capabilities. In April 2019, our software team was
commended by Esri by being awarded its "Release Ready Specialty"
designation in recognition of adopting and continually supporting
the latest versions of the ArcGIS product suite. As with Globe,
software renewal rates through 2019 remained high and we were able
to add several new customers through the year.
Our GIS Services team continues to be recognised as experts in
the use of Esri technology within the petroleum and natural
resources sectors, which in 2019 was further demonstrated by being
awarded the "ArcGIS Online Specialty" designation by Esri. This
award was in recognition of the team's expertise in designing,
delivering, and deploying web-based GIS technology and associated
components of the ArcGIS platform. Through the year our GIS
Services team remained highly utilised, and we renewed several
strategic long-term GIS support contracts, including agreeing a
three-year support contract renewal with an international joint
venture organisation focussed on a GIS managing above ground
operations. In addition, the team successfully delivered a wide
variety of GIS services and training projects, including our first
significant GIS implementation project in the pipeline sector.
The market for our Geoscience Services has remained challenging
throughout the industry downturn, and we have responded by
continuing to focus on profitability by managing our operational
costs and re-positioning our geoscience services. In parallel, our
work with governments also continued in 2019, and we worked in
partnership with the Sierra Leone government on its Fourth
Licensing Round.
A new group-wide Innovation team was established in Q1 2019 with
the remit to research and develop cross-discipline opportunities
for new capabilities, partnerships, products, and services. An
early success for the team in 2019 resulted in delivering
revenue-generating services projects for onshore hydrocarbon
micro-seep detection.
Chris Jepps
Chief Operating Officer
Financial review
Since 31 December 2019, the Covid-19 pandemic has cast a shadow
over the global economy and Getech's response is detailed in the
Chairman and Chief Executive's Review in this Annual Report.
These events build on an already challenging business
environment, which in 2019 saw a continuation of the macroeconomic
and investment themes that led to volatility and uncertainty in
both oil prices and the levels of exploration spending by our
petroleum customers. The impact of climate change also moved up the
social agenda, and this placed the Energy Transition firmly on the
strategic roadmap of Getech and our customers.
Brent averaged $64/bbl (2018: $71/bbl) and long-dated crude
prices traded around the mid-$50/bbl, down from above $60/bbl in
2018. In step with lower prices, exploration spending fell, and the
number of exploration wells drilled fell faster. However, the
resource replacement ratio was the highest since 2015 - driven by a
small number of high-volume, high-value conventional deep-water
discoveries.
More encouragingly for Getech, a stronger focus on capital
discipline and economic returns drove a rotation out of onshore
'unconventional' settings (principally US shale) and back into
'conventional' offshore opportunities. This rebalancing plays to
the strengths of Getech's products and services.
We remained close to our customers, focusing on their most
pressing needs and targeting product and service renewals that
increase revenue visibility and lower the Group's reliance on
'lumpy' transactions. The importance of this strategy was
highlighted in Q4 2019, when several substantial data transactions
failed to close, and revenue fell year-on-year to GBP6.0 million
(2018: GBP8.0 million). In the same period, Getech grew its
orderbook by 48% and held annualised recurring revenue flat on
2018. In addition, profitability was protected by lower total
costs. Getech closed 2019 with a cash balance of GBP3.6 million (31
December 2018: GBP1.4 million).
In accordance with our accounting policies we perform periodic
reviews of Getech's assets and liabilities. This includes, but is
not limited to, identifying potential indicators of impairment of
assets, annual impairment reviews of intangible assets, and regular
review of significant accounting judgements and estimates. 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, the Board now considers it
prudent to fully impair the goodwill relating to this acquisition.
In addition, with there being reduced interest in Regional Reports
during 2019, the Board also believes it is prudent to fully impair
the value previously attributed to the Group's library of Reports.
Whilst we may make further Report sales in the future, the
near-term path to market is unclear. Getech reports three
exceptional items: in Cost of Sales, an impairment of the carrying
value of Regional Reports, offset by a one-off adjustment to direct
cost accruals and in Administrative expenses, an impairment to
goodwill.
To aid in the analysis of Getech's underlying financial
performance, the table below sets out key reported figures from the
financial statements and the equivalent figure adjusted for these
exceptional items, detailed in footnotes 1 and 2.
Table 1 - Financial summary 2019 2018
==============================
Reported Adjusted (1) (2) (unaudited) Reported Adjusted (1) (2) (unaudited)
(audited) GBP'000 (audited) GBP'000
GBP'000 GBP'000
============================== =========== ============================= =========== =============================
Revenue 6,058 6,058 8,019 8,019
EBITDA (1,935) 872 1,071 1,268
Operating (loss)/profit (3,091) (284) 250 447
(Loss)/profit after tax (3,088) (281) 508 705
Earnings per share (8.22)p (0.75)p 1.35p 1.88p
Cash inflow from operations
(before W/C adjustments) 935 935 1,073 1,270
Development costs (1,108) (1,108) (861) (861)
Net increase/(decrease) in
cash 2,154 2,154 (1,040) (843)
Cash and cash equivalents 3,554 1,400
Net cash 2,700 468
============================== =========== ============================= =========== =============================
(1) Exceptional cost of sales
Exceptional cost of sales total a GBP325,000 credit (2018:
GBPnil). This adjustment is the net impact of an impairment of
Getech's library of Reports (GBP621,000 debit), together with a
reduction to direct cost accruals (GBP946,000 credit). The direct
cost accruals credit results from updated information that became
available during 2019 around the contractual liability position
relating to previously accrued balances. On the Statement of
Financial Position, the impairment of Reports impacts intangible
assets and the reduction to direct cost accruals impacts trade and
other payables. These accounting adjustments are non-cash in nature
and so there are no corresponding adjustments to cash flows.
(2) Exceptional administrative expenses
Exceptional administrative expenses total GBP3,132,000 (2018:
GBP197,000). In 2019, this is a write down of GBP3,132,000 to the
carrying value of Goodwill relating to the acquisition of ERCL.
This is a non-cash adjustment and so there is no corresponding
adjustment to cash flows. In Q4 2018, the Group combined its
activities in London and Henley into one new London office, and
restructured the Geoscience Services team (previously based in
Henley) to address its declining revenues and profitability. This
resulted in one-off costs of GBP197,000 during 2018.
Operating results
Revenue
Revenue for 2019 totalled GBP6,058,000, a decrease of
GBP1,961,000 from GBP8,019,000 in 2018. The drop in revenue
resulted when several substantial transactions did not close as
expected at the year-end. For the same reasons, Products revenue
fell by 33%. Whilst the Services market remained challenging,
revenue grew by 3% - growth from Gravity & Magnetic Services
and Geospatial Services, more than offsetting a contraction in
Geoscience Service income.
During 2019 Getech also closed GBP2.4 million in new forward
sales; relating to projects, services and subscriptions for which
revenue will be recognised in 2020 and beyond. As a result, at 31
December 2019, Getech's orderbook had grown to GBP3.1 million
(2018: GBP2.1 million).
The Group's Annualised Recurring Revenue from product
subscriptions and recurring services was maintained at GBP2.3
million (2018: GBP2.3 million).
Gross margins before exceptional items
Gross margin before exceptional items was 58%, an increase from
47% in 2018. This reflects improved margins in both Products and
Services divisions. The products margin improved from 62% in 2018
to 76% in 2019, this reflected a movement in Product sales mix
between 2019 and 2018 and increased product investment.
Following restructuring of our Geoscience Service offering in
late 2018, and an expansion in the activity in our Gravity &
Magnetic and Geospatial Services teams in 2019, Getech's Services
division returned to profit with a gross margin of 8% (2018: 14%
negative margin). Getech continues to target a return to a 25%
margin for the Services division in the mid-term.
Table 2 - Gross margin by reporting segment (before exceptional items) 2019 2018
Products Services Products Services
Revenue 4,324 1,636 6,434 1,585
Cost of sales (1,025) (1,506) (2,421) (1,810)
======================================================================== ========= ========= ========= =========
Gross profit 3,299 130 4,013 (225)
======================================================================== ========= ========= ========= =========
Gross margin 76% 8% 62% (14)%
======================================================================== ========= ========= ========= =========
Administrative costs
Administrative expenses include GBP1,124,000 of depreciation and
amortisation charges. Excluding these charges and exceptional
items, administrative expenses totalled GBP2,684,000; a 5% increase
(2018: GBP2,553,000). This reflects the Group returning all staff
to a progressive rate of pay, whilst also strengthening our project
management, marketing and sales teams, and expanding our innovation
programme. Such steps reflect Getech's strategic repositioning,
which has also reshaped the structure of our cost base.
Cost base analysis
As a result of merging the London and Henley offices and
reducing headcount in the Geoscience Services team in Q4 2018,
Getech benefited from a lower fixed cost base in 2019, in addition
to lower variable costs due to differing products sales mix. The
Group cost base, excluding exceptional items, for 2019 was 16%
lower than the prior year at GBP6,362,000 (2018: GBP7,607,000).
In 2019 we also began to apportion for the environmental cost of
our activities. Getech has contributed to the funding of a Verified
Carbon Standard UK tree planting initiative that fully offsets
carbon dioxide emissions from heating and lighting its offices, and
international travel.
The table below reconciles our cost base to the financial
statements.
Table 3 - Cost base reconciliation % variance 2019 2018
Cost of sales 2,532 4,231
Development costs capitalised 1,108 861
Capitalised cost of building Reports - 13
Administrative costs 3,809 3,341
Payment of lease liabilities 71 -
Depreciation and amortisation charges (1,156) (821)
Exchange adjustments (2) 16
Movement on provisions - (34)
======================================== =========== ======== ======
Cost base, excluding exceptional items (16)% 6,362 7,607
======================================== =========== ======== ======
Cost base is measured as: cost of sales, administrative costs,
development costs capitalised and payment of lease liabilities,
less depreciation and amortisation, and adjusted for movement in
work in progress, non-cash foreign exchange adjustments.
EBITDA
A lower cost base and continued investment in the drivers of
recurring revenue has limited the impact of lower revenue on
EBITDA. EBITDA excluding exceptional items totalled GBP872,000
(2018: GBP1,268,000).
Depreciation and Amortisation
Depreciation of non-current assets amounted to GBP216,000 and
were allocated to administrative costs in the income statement
(2018: GBP131,000). The increase relates to the IFRS 16 accounting
treatment of the London office lease, which commenced in Q4
2018.
Amortisation of intangible assets totalled GBP940,000 (2018:
GBP689,000). This charge is allocated to administrative costs in
the income statement, except for 'Reports' where the charge is
allocated to cost of sales. Following an annual impairment review
Reports were impaired by GBP621,000 and is allocated to exceptional
cost of sales in the income statement.
Impairment of goodwill relating to the acquisition of ERCL
totalling GBP3,132,000 is allocated to exceptional administrative
costs on the income statement.
Operating profit
The Group reported an operating loss of GBP287,000 excluding
exceptional items (2018: GBP447,000 profit). As noted above, the
impact of a fall in revenue on profitability was limited through a
lower cost base and continued investment in our Products.
Income tax
To help our customers understand and resolve their exploration
and operational challenges requires Getech undertaking pioneering
research and development. Against the cost of this work we obtained
corporation tax relief, and subsequently realised a tax credit
relating to the current year for 2019 of GBP38,000 (2018:
GBP57,000).
Getech reported a loss after tax, adjusted for exceptional items
of GBP281,000 (2018: GBP705,000 profit).
Operating cash flows
In 2018 Getech refinanced its loan, continued to invest in its
products, benefited from significant cash tax receipts and had a
large negative movement in working capital due to significant
outstanding receivables at the year end. This year Getech continued
to repay its loan, increase investment in its products, grew its
orderbook, benefited from smaller tax receipts (partially offset by
foreign taxation payments) and had a large positive movement in
working capital due to collection of the significant prior year
receivables.
Before working capital adjustments Getech generated GBP935,000
in cash from operations (2018: GBP1,073,000). In 2018 this included
restructuring costs of GBP197,000.
Changes in working capital
During the past two years there were significant movements in
working capital (2019: GBP2,612,000 positive movement, 2018:
GBP1,919,000 negative movement). A large proportion of this
movement was due to the timing of a high value sale of data and
products towards the end of 2018, for which cash was received in
early 2019.
Cash taxation
Getech received net cash tax credits totalling GBP37,000 (2018:
GBP514,000). Tax credits were significantly lower in 2019 due to
foreign taxation payments made in the year and the Group's
increased profitability in 2018. Getech's current tax asset
provision at 31 December 2019 is GBP136,000 (31 December 2018:
GBP104,000).
Investment and Capital Expenditure
In line with the Group's strategy to invest and enhance its
product offering, development expenditure on Globe and Software
increased to GBP1,108,000 (2018: GBP861,000). Getech expects to
continue with this level of investment in its products throughout
2020.
Financing
During the year Getech made repayments against a loan facility
of GBP78,000. In 2018 Getech refinanced its borrowings by repaying
the balance of its outstanding loan (GBP652,000) and drawing down
on a new loan facility (GBP950,000).
Repayment of lease liabilities totalled GBP71,000 (2018:
GBP29,000) and relate to the new London office to which Getech
relocated in Q4 2018.
Post balance sheet events
We do not know how long Covid-19 disruption and oil price
weakness will last but there is certainty that when the world
emerges from lockdown it will be in a deep recession. To manage the
risk that is associated with this Getech has taken steps that
deliver a c26% reduction in monthly Group costs.
This has been achieved through overhead cost management, a loan
capital repayment holiday, use of the UK Government Job Retention
Scheme, US Government Paycheck Protection Program, and group-wide
salary reductions. Reductions to staff pay have been led by the
Board and Getech's senior management, and range from 20% for
Getech's Board, 15% to 12% for senior staff and c8% for most other
employees.
Whilst revenue uncertainty exists, Getech retains additional
cost flexibility, and the benefits of the actions already taken
combine with our strong balance sheet and orderbook to provide
significant financial capacity. This will underpin Getech
throughout 2020 and 2021.
Liquidity and Going Concern
At the end of 2019, Getech held GBP3,554,000 in cash and cash
equivalents (2018: GBP1,400,000). Net of borrowings, Getech's cash
balance was GBP2,700,000 (2018: GBP468,000).
Getech's business activities and the factors likely to affect
its future development, performance and position are set out in the
Chairman's and Chief Executive's Review. The financial position of
the Group, its cash flows and its liquidity position are described
in the financial statements.
In making the going concern assessment, the Board of Directors
has considered Group budgets and detailed cash flow forecasts to 31
December 2021. The Board has considered the sensitivity of these
forecasts with regards to different assumptions about future income
and costs, and various scenarios have been run on the potential
impact of Covid-19.
These cash flow projections, when considered in conjunction with
Getech's existing cash balances, and the cost saving measures
implemented, demonstrate that the Group has sufficient working
capital for the foreseeable future. Consequently, the Directors are
fully satisfied that Getech is a going concern.
Andrew Darbyshire
Chief Financial Officer
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
2019 2018
GBP'000 GBP'000
Sales revenue 6,058 8,019
Cost of sales (2,533) (4,231)
Gross profit before exceptional items 3,525 3,788
Exceptional cost of sales 325 -
====================================================================================== ========= =========
Gross profit 3,850 3,788
Administrative expenses (3,809) (3,341)
======================================================================================= ========= =========
Operating profit before exceptional administrative costs 41 447
Exceptional administrative expenses (3,132) (197)
Operating (loss)/profit (3,091) 250
Finance revenue 14 -
Finance costs (64) (25)
======================================================================================= ========= =========
(Loss)/profit before tax (3,141) 225
Tax credit 53 283
======================================================================================= ========= =========
(Loss)/profit for the year (3,088) 508
Other comprehensive income
Currency translation differences on translation of foreign operations 6 36
======================================================================================= ========= =========
Total comprehensive income for the year attributable to owners of the Parent Company (3,082) 544
======================================================================================= ========= =========
Earnings per ordinary share (EPS)
Basic EPS (8.22)p 1.35p
Diluted EPS (8.22)p 1.33p
======================================================================================= ========= =========
All activities relate to continuing operations.
Consolidated Statement of Financial Position
as at 31 December 2019
2019 2018
GBP'000 GBP'000
Non-current assets
Goodwill 296 3,428
Intangible assets 3,568 4,018
Property, plant and equipment 2,906 3,086
Deferred tax asset 346 305
==================================== ========= =========
7,116 10,837
=================================== ========= =========
Current assets
Trade and other receivables 1,994 4,941
Tax receivable 136 104
Cash and cash equivalents 3,554 1,400
==================================== ========= =========
5,684 6,445
=================================== ========= =========
Total assets 12,800 17,282
==================================== ========= =========
Current liabilities
Short-term borrowings 78 113
Trade and other payables 1,697 2,906
==================================== ========= =========
1,775 3,019
=================================== ========= =========
Net current assets 3,909 3,426
==================================== ========= =========
Non-current liabilities
Long-term borrowings 776 819
Trade and other payables 421 565
Deferred tax liabilities 109 137
==================================== ========= =========
1,306 1,521
=================================== ========= =========
Total liabilities 3,081 4,540
==================================== ========= =========
Net assets 9,719 12,742
==================================== ========= =========
Share capital 94 94
Share premium 3,053 3,053
Merger reserve 2,407 2,407
Share-based payment (SBP) reserve 242 183
Currency translation reserve 31 25
Retained earnings 3,892 6,980
==================================== ========= =========
Total equity 9,719 12,742
==================================== ========= =========
The financial statements of Getech Group plc (company number:
02891368) were approved by the Board of Directors and authorised
for issue on 4 June 2020.
Andrew Darbyshire
Chief Financial Officer
Consolidated Statement of Changes in Equity
for the year ended 31 December 2019
Currency
Share Share Merger translation Retained
capital premium reserve SBP reserve reserve earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1 January 2018 94 3,053 2,407 164 (11) 6,472 12,179
Profit for the
year - - - - - 508 508
Other
comprehensive
income - - - - 36 - 36
=============== ============= ============= ============= ============ ============ ============= =============
Total
comprehensive
income - - - - 36 508 544
Transactions
with owners:
Share based
payment
charge - - - 19 - - 19
=============== ============= ============= ============= ============ ============ ============= =============
31 December
2018 94 3,053 2,407 183 25 6,980 12,742
=============== ============= ============= ============= ============ ============ ============= =============
Loss for the
year - - - - - (3,088) (3,088)
Other
comprehensive
income - - - - 6 - 6
=============== ============= ============= ============= ============ ============ ============= =============
Total
comprehensive
income - - - - 6 (3,088) (3,082)
Transactions
with owners:
Share based
payment
charge - - - 59 - - 59
=============== ============= ============= ============= ============ ============ ============= =============
31 December
2019 94 3,053 2,407 242 31 3,892 9,719
=============== ============= ============= ============= ============ ============ ============= =============
Consolidated Statement of Cash Flows
for the year ended 31 December 2019
2019 2018
GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit before tax (3,141) 225
Finance income (14) -
Finance costs 64 25
Depreciation charge 216 131
Amortisation of intangible assets 940 689
Impairment of goodwill 3,132 -
Impairment of intangible assets 621 -
Adjustment to direct cost accruals (946) -
Share-based payment charge 59 19
Foreign exchange adjustments 3 (16)
============================================================ ========= =========
Cash inflow from operating activities 934 1,073
Movements in working capital:
(Increase)/decrease in trade and other receivables 2,861 (2,820)
Increase/(decrease) in trade and other payables (336) 901
============================================================ ========= =========
Cash generated from operations 3,459 (846)
Tax (paid)/received 37 514
============================================================ ========= =========
Net cash inflow/(outflow) from operating activities 3,496 (332)
============================================================ ========= =========
Cash flows from investing activities
Purchase of property, plant and equipment (30) (78)
Purchase of intangible assets (5) -
Development costs capitalised (1,108) (861)
Capitalised cost of reports - (13)
Interest received 14 -
=========================================================== ========= =========
Net cash outflow from investing activities (1,129) (952)
============================================================ ========= =========
Cash flows from financing activities
Drawdown of loan - 950
Repayment of loan (78) (652)
Repayment of lease liabilities (71) (29)
Interest paid (64) (25)
============================================================ ========= =========
Net cash (outflow)/inflow from financing activities (213) 244
============================================================ ========= =========
(Decrease)/increase in net cash and cash equivalents 2,154 (1,040)
Cash and cash equivalents at the beginning of the year 1,400 2,393
Foreign exchange adjustments to cash and cash equivalents - 47
Cash and cash equivalents at the end of the year 3,554 1,400
============================================================ ========= =========
Notes to the Consolidated Financial Statements
for the year ended 31 December 2019
Basis of preparation
The financial statements set out in this preliminary
announcement do not constitute statutory accounts as defined by
section 434 of the Companies Act 2006. It has been prepared in
accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS) adopted for use
in the European Union, including IFRIC interpretations issued by
the International Accounting Standards Board, and in accordance
with the AIM rules and is not therefore in full compliance with
IFRS. The principal accounting policies of the Group have remained
unchanged from those set out in the Group's 2018 annual report. The
financial statements have been prepared under the historical cost
convention and are presented in sterling.
Statutory accounts for the years ended 31 December 2019 and 31
December 2018 have been reported on by the Independent Auditor. The
Independent Auditor's Reports on the Annual Report and Financial
Statements for the periods ended 31 December 2019 and 31 December
2018 were unqualified, did not draw attention to any matters by way
of emphasis, and did not contain a statement under 498(2) or 498(3)
of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2019 were
approved by the board on 4 June 2020 and the information included
in this preliminary announcement was extracted therefrom.
The Directors have performed regular reviews of trading and cash
flow forecasts and have considered the sensitivity of these
forecasts with regards to different assumptions about future income
and costs. Various scenarios have been run on the potential impact
of Covid-19. These include an assessment of the orderbook -
customer contractual commitments and Getech's ability to deliver
this work; the drivers of license renewals; and the modelling of
extreme and hypothetical 'zero new revenue' downside scenarios,
these extending across multiple years. Additional cost actions have
also been modelled, including a bottom up restructuring of the
Group's overhead, offices, technical staff and commercial
activities.
In addition to the sensitivity models of future income and
costs, we have made various assumptions to model cash flow
forecasts: It has been assumed that the UK Government Job Retention
Scheme will continue to be available until the end of September
2019 and that current social distancing measures, which impact our
ability to meet clients in person, will also be in place until the
end of September. We have also not relied on the availability of
additional sources of cash in our forecast assumptions.
These cash flow projections, when considered in conjunction with
Getech's existing cash balances, and the cost saving measures
implemented, demonstrate that the Group has sufficient working
capital for the foreseeable future. Consequently, the Directors are
fully satisfied that Getech is a going concern.
Earnings per share (EPS)
Basic EPS is calculated by dividing the profit attributable to
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to
equity holders of the parent by the weighted average number of
ordinary shares outstanding plus the weighted average number of
shares that would be issued on conversion of all the dilutive share
options into ordinary shares.
2019 2018
GBP'000 GBP'000
(Loss)/profit attributable to equity holders of the parent (3,088) 508
(Loss)/profit attributable to equity holders of the parent adjusted for dilution (3,088) 508
================================================================================== ========= =========
2019 2018
Thousands Thousands
Weighted average number of ordinary shares for basic EPS 37,564 37,564
Effects of dilution from share options 979 739
Weighted average number of ordinary shares adjusted for dilution 38,543 38,303
================================================================== =========== ===========
2019 2018
pence pence
Basic EPS (8.22) 1.35
Diluted EPS (8.22) 1.33
============= ======= =======
There have been no other transactions involving ordinary shares
or share options between the reporting date and the date of
authorisation of these financial statements.
Notice of Annual General Meeting
The Annual Report and Accounts, and notice convening the Annual
General Meeting of the Company will be posted to shareholders on 23
June 2020 and will be available from the Company's website
www.getech.com, from that date. The Annual General Meeting of
Getech Group plc will be held on 23 July 2020 at 12 noon.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAFKLEALEEAA
(END) Dow Jones Newswires
June 05, 2020 02:00 ET (06:00 GMT)
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