Final Results

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 £6.1 million (2018: £8.0 million), with new forward sales up 41% to c£2.4 million (2018: £1.7 million), a significant portion of which will unwind to revenue in 2020

· Orderbook increased by 48% to £3.1 million at 31 December 2019 (31 December 2018: £2.1 million)

· Annualised Recurring Revenue £2.3 million at 31 December 2019 (31 December 2018: £2.3 million)

· Total cost base 16% below 2018 (2019: £6.4 million; 2018: £7.6 million)

· Adjusted* EBITDA £0.9 million (2018: £1.3 million), before exceptional items totalling £2.8 million

· Adjusted* earnings per share (0.75)p (2018: 1.88p)

· Net cash £2.7 million at 31 December 2019 (31 December 2018: £0.5 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 £2.7 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 £2.4 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 £1.6 million driven by working capital, second half growth of £0.6 million driven by operational free cash flow. We closed 2019 with a net cash balance of £2.7 million (31 December 2018: £0.5 million). As previously announced, negotiations on several substantial transactions did not close by 31 December 2019, total revenue (£6.1 million) therefore fell below our earlier expectations for the year (2018: £8.0 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 £0.9 million (2018: £1.3 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

Chairman

Dr Jonathan Copus

Chief Executive

 

Getech Group plc

Tel:  0113 322 2200

Cenkos Securities plc

Tel:  0207 397 8900

 

 

 

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 £6.0 million (2018: £8.0 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 £3.6 million (31 December 2018: £1.4 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
(audited)
£'000

Adjusted (1) (2)(unaudited)
£'000

Reported
(audited)
£'000

Adjusted (1) (2)(unaudited)
£'000

Revenue

6,058

6,058

8,019

8,019

EBITDA

(1,935)

872

1,071

1,268

(3,091)

(284)

250

447

(3,088)

(281)

508

705

(8.22)p

(0.75)p

1.35p

1.88p






Cash inflow from operations (before W/C adjustments)

935

935

1,073

1,270

(1,108)

(1,108)

(861)

(861)

2,154

2,154

(1,040)

(843)






3,554


1,400


2,700


468


 

(1) Exceptional cost of sales

 

Exceptional cost of sales total a £325,000 credit (2018: £nil). This adjustment is the net impact of an impairment of Getech's library of Reports (£621,000 debit), together with a reduction to direct cost accruals (£946,000 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 £3,132,000 (2018: £197,000). In 2019, this is a write down of £3,132,000 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 £197,000 during 2018.

 

Operating results

 

Revenue

Revenue for 2019 totalled £6,058,000, a decrease of £1,961,000 from £8,019,000 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 £2.4 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 £3.1 million (2018: £2.1 million).

 

The Group's Annualised Recurring Revenue from product subscriptions and recurring services was maintained at £2.3 million (2018: £2.3 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

4,324

1,636

6,434

1,585

(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 £1,124,000 of depreciation and amortisation charges. Excluding these charges and exceptional items, administrative expenses totalled £2,684,000; a 5% increase (2018: £2,553,000). 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 £6,362,000 (2018: £7,607,000).

 

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


2,532

4,231


1,108

861


-

13


3,809

3,341


71

-


(1,156)

(821)


(2)

16


-

(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 £872,000 (2018: £1,268,000).

 

Depreciation and Amortisation

Depreciation of non-current assets amounted to £216,000 and were allocated to administrative costs in the income statement (2018: £131,000). The increase relates to the IFRS 16 accounting treatment of the London office lease, which commenced in Q4 2018.

 

Amortisation of intangible assets totalled £940,000 (2018: £689,000). 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 £621,000 and is allocated to exceptional cost of sales in the income statement.

 

Impairment of goodwill relating to the acquisition of ERCL totalling £3,132,000 is allocated to exceptional administrative costs on the income statement.

 

Operating profit

The Group reported an operating loss of £287,000 excluding exceptional items (2018: £447,000 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 £38,000 (2018: £57,000).

 

Getech reported a loss after tax, adjusted for exceptional items of £281,000 (2018: £705,000 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 £935,000 in cash from operations (2018: £1,073,000). In 2018 this included restructuring costs of £197,000.

 

Changes in working capital

During the past two years there were significant movements in working capital (2019: £2,612,000 positive movement, 2018: £1,919,000 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 £37,000 (2018: £514,000). 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 £136,000 (31 December 2018: £104,000).

 

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 £1,108,000 (2018: £861,000). 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 £78,000. In 2018 Getech refinanced its borrowings by repaying the balance of its outstanding loan (£652,000) and drawing down on a new loan facility (£950,000).

 

Repayment of lease liabilities totalled £71,000 (2018: £29,000) 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 £3,554,000 in cash and cash equivalents (2018: £1,400,000). Net of borrowings, Getech's cash balance was £2,700,000 (2018: £468,000).

 

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
£'000

2018
£'000


6,058

8,019


(2,533)

(4,231)

Gross profit before exceptional items


3,525

3,788


325

−

Gross profit


3,850

3,788


(3,809)

(3,341)

Operating profit before exceptional administrative costs


41

447

Exceptional administrative expenses


(3,132)

(197)

Operating (loss)/profit


(3,091)

250


14

−


(64)

(25)

(Loss)/profit before tax


(3,141)

225


53

283

(Loss)/profit for the year


(3,088)

508





Other comprehensive income





6

36

Total comprehensive income for the year attributable to owners of the Parent Company


(3,082)

544





Earnings per ordinary share (EPS)





(8.22)p

1.35p


(8.22)p

1.33p

 

All activities relate to continuing operations.

 

Consolidated Statement of Financial Position

as at 31 December 2019

 


2019
£'000

2018
£'000

Non-current assets





296

3,428


3,568

4,018


2,906

3,086


346

305



7,116

10,837

Current assets





1,994

4,941


136

104


3,554

1,400



5,684

6,445

Total assets


12,800

17,282

Current liabilities





78

113


1,697

2,906



1,775

3,019

Net current assets


3,909

3,426

Non-current liabilities





776

819


421

565


109

137



1,306

1,521

Total liabilities


3,081

4,540

Net assets


9,719

12,742






94

94


3,053

3,053


2,407

2,407


242

183


31

25


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

 


Share capital
£'000

Share premium
£'000

Merger reserve
£'000

SBP reserve
£'000

Currency translation reserve
£'000

Retained earnings
£'000

Total equity
£'000

94

3,053

2,407

164

(11)

6,472

12,179

−

−

−

−

−

508

508

−

−

−

−

36

−

36

−

−

−

−

36

508

544








−

−

−

19

−

−

19

94

3,053

2,407

183

25

6,980

12,742

−

−

−

−

−

(3,088)

(3,088)

−

−

−

−

6

−

6

−

−

−

−

6

(3,088)

(3,082)








−

−

−

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
£'000

2018
£'000

Cash flows from operating activities





(3,141)

225


(14)

-


64

25


216

131


940

689


3,132

-


621

-


(946)

-


59

19


3

(16)

Cash inflow from operating activities


934

1,073





2,861

(2,820)


(336)

901


3,459

(846)


37

514

Net cash inflow/(outflow) from operating activities


3,496

(332)

Cash flows from investing activities





(30)

(78)


(5)

-


(1,108)

(861)


-

(13)


14

-

Net cash outflow from investing activities


(1,129)

(952)

Cash flows from financing activities





-

950


(78)

(652)


(71)

(29)


(64)

(25)

Net cash (outflow)/inflow from financing activities


(213)

244

(Decrease)/increase in net cash and cash equivalents


2,154

(1,040)


1,400

2,393


-

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
£'000

2018
£'000

(3,088)

508

(3,088)

508

 


2019
Thousands

2018
Thousands

37,564

37,564

979

739

Weighted average number of ordinary shares adjusted for dilution

38,543

38,303

 


2019
pence

2018
pence

(8.22)

1.35

(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
 
 
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