TIDMGTC
RNS Number : 2883E
GETECH Group plc
03 November 2015
Getech Group plc
("Getech" or the "Company")
Final Results
for the 12 months ended 31 July 2015
GETECH, the oil services business specialising in the provision
of exploration data and petroleum systems studies and evaluations,
announces its Preliminary Results for the year ended 31 July
2015.
Operational highlights
-- Significant increase in income and profit
during a year in which the global oil and
gas market suffered badly
-- Acquisition of ERCL in April 2015
-- Largest ever contract with Sonangol for
$5m
-- Two other contracts with national oil companies,
one of which generated income in the year
Financial highlights
-- Revenue GBP8,639k (up 32% from GBP6,593k)
and profits GBP1,992k (up 99% from GBP1,001k)
-- Proposed final dividend for the year ended
July 2015 of 1.74p giving full year dividend
for the year ended July 2015 of 2.20p (2014:
2.20p)
-- Cash level GBP4,727k at 31 July 2015
Enquiries:
Getech Group plc Tel: 0113 322 2200
Raymond Wolfson,
Chief Executive
WH Ireland Limited Tel: 0161 832 2174
Katy Mitchell
Chairman's statement
I am pleased to make my fifth report as Chairman of the Company,
on the tenth full year results since its admission to AIM, of
Getech Group plc and its subsidiary companies ("Getech" or "the
Group"), for the year ended 31 July 2015. Getech is a geoscience
services business specialising in the provision of data, studies
and services to the oil, gas and mining exploration sectors.
Results
I report a Group profit before tax of GBP1,992,236 (2014:
GBP1,000,816) after interest receivable of GBP13,554 (2014:
GBP32,914) on revenue of GBP8,638,588 (2014: GBP6,592,798). The
post-tax profit was GBP1,812,996 (2014: GBP1,575,228) giving
earnings per share of 5.77p (2014: 5.21p). These are a strong set
of results and demonstrate the continued growth of the Company.
Dividends
Getech is proposing a final dividend of 1.74p per share in
respect of the year to 31 July 2015 (2014: 1.76p) in addition to
the interim dividend of 0.46p per share announced in March 2015.
The final dividend will be paid on 17 December to shareholders on
the register of members on 20 November.
Business review
For the exploration and production (E&P) sector, the
financial year 2014-15 has proved to be even more challenging than
the previous financial year. The reduction in exploration
expenditure we had observed in 2013-14 has been followed by a very
significant drop in the oil price in the last year. This oil price
drop has led to significant reductions in capital expenditure
across the whole E&P sector, and major redundancy rounds in
many companies. The reductions in capital expenditure affect
exploration spend most quickly and most dramatically. A wide range
of service companies have been severely impacted, both in terms of
income and profits, with a number going bankrupt and consolidation
taking place across the sector.
Against this very difficult backdrop, Getech has performed well
in the last financial year. The Company has doubled its profits and
increased revenue by 32%. Under the challenging circumstances
affecting the sector, these are extremely strong figures and stand
out relative to the rest of the sector.
The acquisition of ERCL in April 2015 contributed to our growth
in the year. This Henley-based consultancy provides services which
are very complementary to the existing Getech offering. In
particular, the expertise in seismic data and in planning and
delivering field developments, significantly broadens the services
we can provide. Further, the consideration paid, through a mixture
of cash which was partly funded through new bank debt, shares, and
contingent payments, reduced the up-front payment and aligns the
key ERCL staff to the success of the combined Group.
Outlook
There is clearly ongoing uncertainty in relation to the oil
price although most analysts are suggesting a 'lower for longer'
scenario with a key theme being that companies need to be 'fit for
$50'. The industry has already responded by reducing the cost
profile. For example, seismic and rig rates are substantially lower
than one year ago which should encourage companies to continue
exploration. In the medium term, as has happened in previous
cycles, the oil price will presumably increase due to supply
constraints caused by the reduced investment we have witnessed in
the last year. However, there remains considerable uncertainty
about the timescale for the recovery of the oil price.
At the same time, the deep cuts to staffing in many companies,
including the international oil companies (IOCs) and large US
independents, mean that their capability to undertake exploration
is severely curtailed. This provides a real opportunity for Getech
to provide focused, high quality advice to these companies and the
last year has demonstrated that, even in challenging times for the
sector, we can continue to develop a robust business. Nevertheless,
in the short-term there remains considerable uncertainty about the
state of the market and its impact on our trading and accordingly
we believe the year ahead will be trading substantially below
current market expectations. In this context we will seek to
mitigate the immediate effects of the lower oil price while at the
same time pursuing attractive opportunities as and when they are
available to grow our business in the medium to long term.
There are four areas where we continue to believe we have a
strong foundation for maintaining profitability and growing our
business in the longer term.
Firstly, our Globe framework, which entered its second phase in
August 2014, has seen continued support from the larger E&P
companies. They clearly see the value of Getech's support in
improving their exploration performance. Globe continues to provide
an environment which encourages increased interaction with our
clients, which is essential to the longer-term benefits in terms of
focused consultancy work.
Secondly, we have seen continued demand for proprietary
projects, where we can leverage the ERCL acquisition to provide a
broader range of advice. The ERCL acquisition provides capability
in seismic interpretation, well planning, field development and
asset management, which mitigates to some extent the effect of low
oil price on large-scale exploration.
Thirdly, our relationships with a number of national oil
companies and governments, which are generally less susceptible to
oil price fluctuations, provide a degree of robustness. Our ongoing
relationship with Sonangol and ERCL's experience in managing
licence rounds demonstrate our strengths in these areas.
Fourthly, our strong knowledge base and financial robustness
allow us to look at new opportunities. We are in the process of
developing new business streams, which build on our core strengths
and which we hope will be major revenue generators in the medium
term. Following the successful completion of the ERCL acquisition,
we are also actively looking at further acquisition opportunities,
which will grow our core areas of expertise.
Finally, I would like to say how pleased I am to continue to be
involved with the Company and to thank the staff and my fellow
Directors for all their hard work and dedication. I am also very
pleased to welcome the ERCL staff based in Henley, who are a great
addition to the Getech team. The whole organisation has shown great
fortitude and delivered great results in challenging
circumstances.
Dr Stuart Paton
Non-executive Chairman
Operating review
I report that in our tenth year as a public quoted company,
Getech Group plc ("Getech" or "the Group") returned a pre-tax
profit of GBP1,992,236 (2014: GBP1,000,816) for the year ended 31
July 2015.
Business setting
We reported that the previous year to July 2014 was difficult
for the E&P sector. The year to July 2015 has seen a
significant drop in oil prices, and subsequent major job losses in
both oil companies and service companies. The high seismic and
drilling costs, and poor exploration success that had affected the
sector in the prior year were exacerbated by the oil price, which
fell from over $100 at the start of August 2014 to below $50 by
early January 2015. Although the oil price recovered slightly for a
brief period in the first quarter of 2015, it subsequently fell
again and has since remained close to or below $50. There remains
considerable uncertainty as to when the oil price will
significantly increase.
Business activities
The strategy to increase our resilience against market
volatility has underpinned the performance in the current year.
This comprised two main elements: significant longer-term contracts
to generate increased forward visibility of income; and a focus on
relationships with national oil companies, which tend to react less
to changes in the oil market.
In September we announced our largest ever contract, which was
$5m of consultancy work for Sonangol, the Angolan national oil
company. This involved generating structural and related
interpretation for all the Angolan basins. The project has been
completed to schedule, and as indicated in the announcement in
September 2014, the majority of the income was recognised within
the year to July 2015.
We also announced in November a further umbrella contract with a
major national oil company, and in December announced the first
order under this contract amounting to GBP400k.
In April 2015, we announced that we had successfully passed
through the tender process with a further major national oil
company, under which we are one of three qualified bidders for a
three year programme comprising several basin work packages per
year, each of which we believe would be significant.
(MORE TO FOLLOW) Dow Jones Newswires
November 03, 2015 02:00 ET (07:00 GMT)
We have continued the Globe development programme during the
year. While we continue to enhance the data content, our Globe
clients have been particularly pleased by the software that we have
developed to improve the user experience. Globe continues to be our
global exploration database and is actively used to add value to
new sub-global products and proprietary contracts. It is essential
that Globe is built with a balance between primary data (i.e. data
measurements) and interpreted data. Our staff continue to build the
interpretations but we have also added two significant third party
data-sets - a well data-set comprising more than a million North
American wells, and a seismic data-set which covers a number of
areas of interest across the world. These help to provide the
important assurance to Globe clients that our work is controlled by
independent data.
In March 2015, we announced the agreement to acquire ERCL, which
is a consultancy company based in Henley-on-Thames. ERCL is highly
complementary to Getech both in terms of its skill-sets and in
terms of its position in client exploration workflows. Getech has
historically been known for gravity and magnetic data, and for
geological work at global and regional scale. ERCL has a range of
geoscientists of various disciplines, but has a particularly strong
seismic interpretation team, which had previously been a gap in
Getech's resources. ERCL typically operates at a smaller
geographical scale and at stages in client workflows which are
later than the Getech focus. With some clients, they also directly
plan the drilling programmes. This means that Getech is now able to
offer a significantly broader coverage of client workflows. In
addition, ERCL works closely with governments and national oil
companies providing, amongst other things, strategic and advisory
services.
ERCL was formed in January 2014 by merger of the businesses of
two existing companies, and in its first year of trading it
delivered income of GBP3.8m with profit before tax of approximately
GBP1.2m. The reaction from our clients to this acquisition has been
very positive, particularly as regards the strategic synergies.
The ERCL acquisition also fits with our strategy of long-term
relationships with national governments, with ERCL recognised for
its experience in licence round management.
In prior years one of our main constraints was the inability to
recruit experienced staff. However, with the market conditions
during the year we have been able to recruit a number of key staff.
This, combined with the resources in ERCL, has enabled us to
significantly extend our capabilities and credibility into new
areas of working.
The future
While the previous two years have been very difficult for the
oil and gas market in general, we enter the new year with increased
net assets and with increased cash. This gives us a firm foundation
from which we can continue to execute a long-term growth
strategy.
We have continued to enhance Globe as an exploration data-set
and to increasingly realise the value from it in a number ways. We
anticipate that the work in the current three year development
period will continue to add to its intrinsic value as well as
increasingly enabling us to realise value directly through its use
at a variety of scales and in a range of product types.
In line with the existing strategy, we aim to increase the level
of business with national oil companies (NOCs). We recently
recruited an extremely experienced International Business
Development Manager whose role is renewing and establishing
relationships with a range of NOCs and governments, as well as
seeking new government data-sets that may become available for use
in Globe. The acquisition of ERCL further strengthened this
strategy through their existing links and reputation with a number
of governments and NOCs.
We acquired ERCL as part of our growth strategy. It not only
adds new skills and income streams, but also a number of synergies.
We can now offer a more comprehensive service to our current
clients, extending into later stages of the exploration workflow.
There are real opportunities to cross-sell to existing clients, and
to provide more efficient overall marketing and sales for both
companies. ERCL is based in Henley-on-Thames, which is very close
to London and many companies working in the oil and gas sector.
While Leeds has been a very successful location, it is outside the
mainstream areas of the industry and ERCL brings an established
base in proximity to large parts of the UK oil and gas
industry.
Finally, while the market is at best uncertain, we are still
regularly engaged with our clients and have a number of significant
sales proposals awaiting approval. Client budgets are clearly under
significant pressure, but even where there is little current money
there has still been a willingness to consider proposals for
inclusion in 2016 budgets. While there remains significant
uncertainty about the short term and we cannot predict how the
market will develop during 2016, we remain convinced that our
products and staff are well regarded and satisfy a clear industry
need. As such, whilst we anticipate a slow start to 2016, we remain
confident about the long-term prospects for the extended Getech
Group.
Raymond Wolfson
Chief Executive Officer
Consolidated statement of comprehensive income
For the year ended 31 July 2015
2015 2014
GBP GBP
----------------------------------- ------------ ------------
Revenue 8,638,588 6,592,798
Cost of sales (3,001,898) (2,126,433)
----------------------------------- ------------ ------------
Gross profit 5,636,690 4,466,365
Administrative costs (3,649,666) (3,497,841)
----------------------------------- ------------ ------------
Operating profit 1,987,024 968,524
Finance income 13,554 32,914
Finance costs (8,342) (622)
----------------------------------- ------------ ------------
Profit before tax 1,992,236 1,000,816
Income tax (expense)/credit (179,240) 574,412
----------------------------------- ------------ ------------
Profit for the year attributable
to owners of the Parent 1,812,996 1,575,228
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Currency translation differences
on translation of foreign
operations 19,807 (95,030)
----------------------------------- ------------ ------------
Total comprehensive income
for the year attributable
to owners of the Parent 1,832,803 1,480,198
----------------------------------- ------------ ------------
Earnings per share
Basic earnings per
share 5.77p 5.21p
----------------------------------- ------------ ------------
Diluted earnings per
share 5.61p 4.95p
----------------------------------- ------------ ------------
All activities relate to continuing operations.
Consolidated statement of financial position
As at 31 July 2015
Company registration number 2891368
2015 2014
GBP GBP
------------------------------- ----------- ------------
Assets
Non-current assets
Property, plant and
equipment 2,852,508 2,747,916
Goodwill 3,131,538 -
Intangible assets 2,046,499 513,476
Deferred tax assets 159,127 311,644
----------------------------- ----------- ------------
8,189,672 3,573,036
------------------------------- ----------- ------------
Current assets
Inventories 292,005 180,092
Trade and other receivables 4,235,047 2,850,538
Current tax assets 117,522 812,767
Cash and cash equivalents 4,726,734 3,422,594
----------------------------- ----------- ------------
9,371,308 7,265,991
-------------------------------------------- ------------
Total assets 17,560,980 10,839,027
------------------------------- ----------- ------------
Liabilities
Current liabilities
Borrowings 266,132 -
Trade and other payables 4,628,221 2,707,710
Current tax liabilities 395,155 -
----------------------------- ----------- ------------
5,289,508 2,707,710
-------------------------------------------- ------------
Non-current liabilities
Borrowings 765,665 -
Trade and other payables 979,785 -
Deferred tax liabilities 319,062 321,452
----------------------------- ----------- ------------
2,064,512 321,452
-------------------------------------------- ------------
Total liabilities 7,354,020 3,029,162
------------------------------- ----------- ------------
Net assets 10,206,960 7,809,865
------------------------------- ----------- ------------
Equity
Equity attributable to owners of the Parent
Share capital 81,824 75,790
Share premium account 4,195,918 3,012,960
Capital redemption reserve 6 6
Share option reserve 155,492 125,948
Currency translation reserve (110,950) (130,757)
(MORE TO FOLLOW) Dow Jones Newswires
November 03, 2015 02:00 ET (07:00 GMT)
Retained earnings 5,884,670 4,725,918
------------------------------- ----------- ------------
Total equity 10,206,960 7,809,865
------------------------------- ----------- ------------
The financial statements were approved by the Board of Directors
on 3 November 2015.
Dr Stuart Paton
Director
Consolidated statement of cash flows
For the year ended 31 July 2015
2015 2014
GBP GBP
------------------------------------- ------------ -----------
Cash flows from operating activities
Profit before tax 1,992,236 1,000,816
Share-based payment charge 58,912 21,186
Depreciation and amortisation
charges 366,268 239,704
Impairment of intangible assets 298,110 -
Fair value adjustments (303,887) -
Finance income (13,554) (32,914)
Finance costs 8,342 622
Exchange adjustments (59,058) 44,686
Increase in inventories (111,913) (14,092)
Decrease/(increase) in trade
and other receivables 202,006 (727,154)
Increase/(decrease) in trade
and other payables 483,349 (833,048)
------------------------------------- ------------ -----------
Cash generated/(used in) from
operations 2,920,811 (300,194)
Income taxes paid 456,650 (180,226)
------------------------------------- ------------ -----------
Net cash generated/(used in)
from operating activities 3,377,461 (480,420)
------------------------------------- ------------ -----------
Cash flows from investing activities
Purchase of property,
plant and equipment (258,856) (106,897)
Purchase of intangible assets (128,090) -
Development costs capitalised (976,831) (82,867)
Acquisition costs, net of (1,130,619) -
cash received
Funds transferred into fixed-term
deposits - 500,000
Interest received 13,554 32,914
------------------------------------- ------------ -----------
Net cash (used in)/generated
from investing activities (2,480,842) 343,150
------------------------------------- ------------ -----------
Cash flows from financing activities
Proceeds from issue of share
capital 24,495 20,339
New term loan 1,100,000 -
Repayment of long-term borrowings (68,203) (119,048)
Equity dividends paid (683,610) (616,538)
Interest paid (8,342) (622)
------------------------------------- ------------ -----------
Net cash generated from/(used
in) financing activities 364,340 (715,869)
------------------------------------- ------------ -----------
Net increase/(decrease) in
cash and cash equivalents 1,260,959 (853,139)
Cash and cash equivalents
at beginning of year 3,422,594 4,357,927
Exchange adjustments to cash
and cash equivalents at beginning
of year 43,181 (82,194)
------------------------------------- ------------ -----------
Cash and cash equivalents
at end of year 4,726,734 3,422,594
------------------------------------- ------------ -----------
Consolidated statement of changes in equity
For the year ended 31 July 2015
Share Merger Capital Share Currency
Share premium relief redemption option translation Retained
capital account reserve reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP GBP
------------------------- ---------- ---------- ----------- --------- ------------ ---------- -----------
At 1
August
2013 75,319 2,993,092 - 6 122,717 (35,727) 3,749,273 6,904,680
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Dividends - - - - - - (616,538) (616,538)
Issue
of capital
under
share--based
payment
options 471 19,868 - - (17,955) - 17,955 20,339
Share-based
payment
charge - - - - 21,186 - - 21,186
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Transactions
with
owners 471 19,868 - - 3,231 - (598,583) (575,013)
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Profit
for the
year - - - - - - 1,575,228 1,575,228
Other comprehensive income
Currency
translation
differences - - - - - (95,030) - (95,030)
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Total
comprehensive
income
for the
year - - - - - (95,030) 1,575,228 1,480,198
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
At 31
July
2014 75,790 3,012,960 - 6 125,948 (130,757) 4,725,918 7,809,865
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Dividends - - - - - - (683,612) (683,612)
Issue
of capital
under
share--based
payment
options 592 23,903 - - (29,368) - 29,368 24,495
Share-based
payment
charge - - - - 58,912 - - 58,912
Issue
of share
capital 5,442 - 1,159,055 - - - - 1,164,497
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Transactions
with
owners 6,034 23,903 1,159,055 - 29,544 - (654,244) 564,294
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Profit
for the
year - - - - - - 1,812,996 1,812,996
Other comprehensive income
Currency
translation
differences - - - - - 19,807 - 19,807
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Total
comprehensive
income
for the
year - - - - - 19,807 1,812,996 1,846,506
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
At 31
July
2015 81,824 3,036,863 1,159,055 6 155,492 (110,950) 5,884,670 10,206,960
---------------- ------- ---------- ---------- ----------- --------- ------------ ---------- -----------
Notes to the consolidated financial statements
For the year ended 31 July 2015
Nature of operations
The principal activity of Getech Group plc and its subsidiary
companies Geophysical Exploration Technology Inc. and ERCL Limited
(collectively "Getech" or "the Group") is the provision of gravity
and magnetic data, services and geological studies to the petroleum
and mining industries to assist in their exploration
activities.
General information
Getech Group plc is the Group's ultimate Parent Company ("the
Parent Company"). It is incorporated in England and Wales and
domiciled in England (CRN: 2891368). The address of its registered
office is Convention House, St Mary's Street, Leeds LS9 7DP. Its
principal place of business is Kitson House, Elmete Hall, Elmete
Lane, Leeds LS8 2LJ. Getech Group plc shares are admitted to
trading on the London Stock Exchange's AIM.
Basis of preparation
These consolidated financial statements ("the financial
statements") have been prepared in accordance with International
Financial Reporting Standards (IFRS) in issue as adopted by the
European Union. IFRS include interpretations issued by the
International Financial Reporting Interpretations Committee
(IFRIC).
The financial statements have been prepared under the historical
cost convention.
The Directors have instituted regular reviews of trading and
cash flow forecasts and have considered the sensitivity of these
forecasts to different assumptions about future income and costs.
With the sound cash levels and continued prospects for profitable
trading, the Directors are fully satisfied that the Group is a
going concern and will be able to continue trading for the
foreseeable future.
Financial information
(MORE TO FOLLOW) Dow Jones Newswires
November 03, 2015 02:00 ET (07:00 GMT)
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