Last checked at 27 Oct 2009 07:00
27 October 2009
GETECH Group plc
("GETECH", the "Company" or the "Group")
Preliminary results
for the 12 months ended 31 July 2009
GETECH Group plc (AIM: GTC), a leading oil services business specialising in the provision of data, studies and interpretation services to the oil and mining exploration sectors, announces its Preliminary results for the twelve months ended 31 July 2009.
Financial Highlights
Revenue down 20% to £3.31m (2008: £4.12m)
Loss before tax of £627,901 (2008: £900,000 profit)
No final dividend (2008: 0.7p), 0.6p for the full year (2008: 1.3p)
Acquisition of data and related assets from Lisle Gravity Inc
Cash balance £580,331 (2008: 1.69m)
Net assets down 7% to £4.34m (2008: £4.65m)
Fall in oil price and oil company budgets had negative impact on revenue
Operational highlights
Strong first half followed by weak second half
Acquisition of assets of Lisle Gravity Inc. in Denver, USA
Five major new geological studies completed, sold well and now in profit
Continued strengthening of library of data and studies
New strategies for growth developed and initiated
Post year end highlights
Significant pre-commitments for geological studies due for completion during 2009/10
Completed £1m debt facility with National Westminster Bank that provides assurance of cash levels
Commenting on outlook, Peter Stephens, Non-Executive Chairman of GETECH Group plc, said:
"The low and volatile oil prices at the end of 2008 combined with the global economic crisis saw the major international oil companies react by cutting and/or freezing their budgets for 2009 resulting in poor trading for GETECH in the second half of our financial year leading to the reported loss.
I am pleased to say that since the end of the financial year interest levels from our clients justify our confidence for the current year and the future."
For further information:
| GETECH Group plc | |
| Raymond Wolfson, Chief Executive Officer | Tel: 0113 322 2211 |
| WH Ireland | |
| Katy Mitchell | Tel: 0161 819 8875 |
| Gary Marshall | Tel: 0113 394 6610 |
| Walbrook PR Ltd | |
| Ben Knowles | Tel: 020 7933 8788 or Mob: 07900 346 978 |
| ben.knowles@walbrookpr.com | |
| Paul McManus | Tel: 020 7933 8787 or Mob: 07980 541 893 |
| paul.mcmanus@walbrookpr.com |
GETECH GROUP PLC
CHAIRMAN'S STATEMENT
Highlights of the Chairman's Statement
| • Revenue for the year £3,305,883 generating a loss before tax of £627,901 |
| • No final dividend (2008: 0.7p), 0.6p for the full year (2008: 1.3p) |
| • Global economic crisis combined with volatile oil price affected client budgets in the second half of the year |
| • Acquisition of the assets of Lisle Gravity Inc. in Denver, Colorado, was completed in December 2008 |
| • Trading was strong in the first half year, but weak in the second half year due to lack of available budgets |
| • Debt funding arranged after the year end to provide assurance on cash levels - £1,000,000 from the National Westminster Bank |
I report the fourth full year results, since its admission to AIM, of GETECH Group plc and its subsidiary company ("GETECH" or "the Group") for the year ended 31 July 2009. 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 regret to report a Group loss before tax of £627,901 (2008: profit £900,000) after interest receivable of £27,749 (2008: £78,612) on revenue of £3,305,883 (2008: £4,125,981). The post-tax loss was £372,067 (2008: profit £601,571) giving a loss per share of 1.30p (2008: earnings per share of 2.17p).
The accounts have been prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union.
Dividends
In view of the trading in the second half of the year GETECH is not proposing a final dividend, giving a total dividend of 0.6p for the year.
Business review
The first half year was very successful with completion of the five geological studies anticipated in our last report. These studies sold well and were all profitable by the end of the half year. There also continued to be strong interest in our data. However, the end of the calendar year 2008 saw low and volatile oil prices combining with the global economic crisis. Our main clients, major international oil companies, reacted by cutting and/or freezing their budgets for the calendar year 2009 with the result that trading in the second half of our financial year was very weak, leading to the reported loss. Revenue in the second half year fell to £900,000 compared with £2,400,000 in the first half year.
The oil price fell from a peak of $147 per barrel in July 2008 to the mid $30s in December before recovering to its present levels in excess of $70. The combined impact of this price volatility and the lack of credit to fund major exploration programmes caused a steep reduction in available exploration budgets from January 2009. While the current oil price in excess of $70 per barrel is economically satisfactory for most exploration, and has been relatively stable at this level, a further limiting factor has been substantial restructuring in many companies. Together, these factors have, in the Directors' opinion, affected the availability of our clients' budgets to purchase our data and studies.
The US domestic market has also been badly affected as this is, to a large extent, dependent on gas exploration, which has been hit by further factors including surplus supply and dumping of liquid natural gas (LNG). This is a result of increased production capacity and the global economic recession, which in turn led to the gas price being particularly volatile. Through 2009 to date it has remained at a historically weak level in relation to oil prices. There are signs that activity in the US domestic market is beginning to build up again, but this is expected to be slow.
Encouragingly, we have started working with a number of new international and US domestic clients and are now contracting successfully for new types of work. We also have advance orders for a number of the geological studies currently under development.
Acquisition
In December 2008 we acquired the assets of Lisle Gravity Inc. which was based in Denver, Colorado. The assets included the largest commercially available library of onshore US gravity data. We have taken over the vendor's premises and now have a GETECH office in Denver.
While sales in the US domestic market, in line with the rest of the business, have been very slow, we have established a number of complementary relationships and believe we are well positioned to take advantage of an upturn in activity in this market.
Post-period event
In September 2009 we completed a £1m debt facility with the National Westminster Bank, which will provide a substantial cushion in the event that the current depressed market continues for any length of time. This is repayable over four years with a repayment holiday for six months after drawdown. Interest on the loan is variable at the rate of 1.6% over the London Inter Bank Offered Rate (LIBOR). The loan is secured by a fixed and floating charge over the assets of the business.
Outlook
Despite trading in the second half of the year being very weak, we have continued to market ourselves actively. I am pleased to say that since the end of our financial year, strong interest levels from our clients appear to justify our confidence for the current year and the future.
In the course of the year we have also developed a suite of strategies for growth. These are built around our current strengths and will be implemented progressively over the coming years. Elements of these strategies are already beginning to produce results and we look forward to reporting positive developments in the future.
Appointment
I am pleased to announce that in October Derek Fairhead accepted the invitation from the Board to take on the role of President of GETECH, superseding his role as Executive Chairman. He remains an Executive Director of the Company. As founder of GETECH and the principal driving force behind its success, this new position will enable him to develop further his activities in building and strengthening our relationships with governments, oil companies and academic institutions.
Finally, I would like to thank the staff and my fellow directors for all their hard work during what has proved to be a difficult year.
Peter Stephens
Non-executive Chairman
GETECH GROUP PLC
OPERATING REVIEW
Highlights of the business year
| • A strong first half year was followed by a weak second half resulting from the global economic crisis and downturn in oil prices |
| • Acquisition of the assets of Lisle Gravity Inc. was completed in December 2008 |
| • New strategies for growth have been developed and some initiated |
| • All the five new geological studies referred to in the previous Operating Review were completed, marketed and moved into profit |
| • The libraries of studies and data continue to grow |
We report that in our fourth year as a public quoted company, GETECH Group plc ("GETECH" or "the Group") returned a pre-tax loss of £627,901 (2008: profit £900,000) for the year ended 31 July 2009.
Business setting
As reported in the Chairman's Statement the global economic crisis and the substantial fall in the oil price towards the end of 2008 together had a major impact on oil company budgets and expenditure plans for the year commencing January 2009. These factors led to a significant downturn in business.
At its current level in excess of $70 per barrel, the oil price is satisfactory in historic terms, and we believe that if it remains at or near this level it will not prove a barrier to oil company expenditure on exploration.
Company history
GETECH has its origins as a research group at the University of Leeds, Department of Earth Sciences (now part of the School of Earth and Environment). It started in 1986 by initiating the compilation of gravity data for the continent of Africa supported by a group of international oil and mining company sponsors.
In 1996, GETECH opened an office in Houston, Texas. In 2000, GETECH spun out from the University of Leeds as a private company (Geophysical Exploration Technology Limited) and subsequent business success and the formation of the Petroleum Systems Evaluation Group ("PSEG") in 2004 resulted in the flotation of the Company on AIM in September 2005, with a name change to GETECH Group plc. GETECH was the first spin out company from the University of Leeds to float on AIM.
Business activities
GETECH's business can be described as:
| • licensing global gravity and magnetic data to oil and mineral companies; |
| • undertaking proprietary geophysical and geological work; and |
| • the development and sale of studies evaluating the petroleum potential of hydrocarbon-bearing basins. |
Oil, gas and mining companies license our data and studies when they are evaluating new exploration areas and/or when they wish to expand their current exploration activities into neighbouring regions. One of our great strengths is the ability to provide integrated solutions across a broad range of disciplines, involving both geological and geophysical contributions.
GETECH has grown slightly over the year to just over 50 staff, with the recruitment of an internationally recognised geochemist and an experienced explorationist to manage our Denver, Colorado office.
As a priority we have continued to maintain and develop relationships with our key clients through regular marketing including many company visits worldwide and attendance at international shows. This has given us strong confidence that our studies and products are attractive to our clients.
In our last report we referred to five major new geological studies that were due for completion in the current year (South Atlantic, Circum-Arctic, Taoudenni Basin, East Africa and South East China). These were all completed and have sold well in the first half year, each of them moving into profit. We now have a new generation of studies in progress, including several within our "Global" programmes and these are already attracting strong interest.
During the year we developed a high resolution global satellite-derived gravity model covering the oceans. We also commenced a major magnetic compilation of Europe and Mediterranean regions which is now sufficiently well advanced to enable us to offer it as a sponsored study during the coming year.
Acquisition
In December 2008 we acquired the assets of Lisle Gravity Inc. based in Denver, Colorado. The purchase has resulted in GETECH acquiring the largest commercially available onshore US gravity database as well as establishing a strong foothold in the US domestic oil and gas exploration market. In common with international markets, the US domestic market experienced a significant downturn in the first half of the calendar year 2009.
During the period of acquisition, we invited a very experienced US domestic explorationist to manage our Denver office, and have begun to promote the GETECH name to US domestic companies. The Denver office is ideally located in an area where there are many oil and gas exploration companies within walking distance. We have expanded the activities of the US office to include value-added data interpretation which leverages the value of the data to our clients. In addition we have established a number of working relationships with complementary companies and consultants, enabling us to integrate their datasets with ours, so we are well positioned to take advantage when the market recovers. One initiative is a major new collaborative and integrated study (the Haynesville study) on which work commenced during the year, and marketing started after the year end.
The future
While there was a significant slow-down in the market in the first half of 2009, the recovery in the oil price to satisfactory levels and a stronger global economic environment provide us with optimism that the coming year will show a significant improvement.
In the second half year we focused on our growth strategies and have begun to develop a number of new business streams built around our current strengths. Quality control of new ground and airborne gravity and magnetic acquisition surveys has been the first of the new elements of the strategy to generate income during the year. This type of work naturally opens the prospect of follow-on interpretation projects and, after the year end, work commenced on the first such project.
We continue to strengthen our library of commercially available data and studies and we will shortly be finalising the upgrade of our digital database archiving system. We already have significant pre-commitments to the geological studies we are due to complete this year and remain optimistic about sales of these and the existing studies.
Finally we would like to thank all our staff and Board colleagues for their unstinting efforts on behalf of GETECH. We have made it a company that people want to work for and our team look forward to the new challenges that the future years will bring.
Professor Derek Fairhead
President
Raymond Wolfson
Chief Executive Officer
GETECH GROUP PLC
CONSOLIDATED INCOME STATEMENT
for the year ended 31 July 2009
| 2009 | 2008 | |
| £ | £ | |
| Revenue | 3,305,883 | 4,125,981 |
| Cost of sales | (510,900) | (940,420) |
| Gross profit | 2,794,983 | 3,185,561 |
| Administrative costs | (3,440,629) | (2,363,929) |
| Operating (loss)/profit | (645,646) | 821,632 |
| Finance income | 27,749 | 78,612 |
| Finance costs | (10,004) | (244) |
| (Loss)/profit before tax | (627,901) | 900,000 |
| Income tax income/(expense) | 255,834 | (298,429) |
| (Loss)/profit for the year attributable | ||
| to equity holders of the parent | (372,067) | 601,571 |
| (Loss)/earnings per share | ||
| Basic (loss)/earnings per share | (1.30)p | 2.17p |
| Diluted (loss)/earnings per share | (1.30)p | 2.17p |
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 31 July 2009
| 2009 | 2008 | |
| £ | £ | |
| (Loss)/profit for the year | (372,067) | 601,571 |
| Currency translation differences | (19,081) | 28,156 |
| Tax on items taken directly to equity | - | (6,963) |
| Net expense recognised directly in equity | (19,081) | 21,193 |
| Total recognised income and expense for the year | ||
| attributable to equity holders of the parent | (391,148) | 622,764 |
All activities relate to continuing operations.
The accompanying notes form an integral part of these financial statements.
GETECH GROUP PLC
CONSOLIDATED BALANCE SHEET
as at 31 July 2009
Company registration number 2891368
| 2009 | 2008 | |
| £ | £ | |
| Assets | ||
| Non-current assets | ||
| Property, plant and equipment | 2,747,849 | 2,791,331 |
| Intangible assets | 1,098,478 | - |
| Deferred tax assets | 167,678 | 37,000 |
| 4,014,005 | 2,828,331 | |
| Current assets | ||
| Inventories | 292,994 | 440,978 |
| Trade and other receivables | 654,856 | 1,601,525 |
| Current tax assets | 190,437 | - |
| Cash and cash equivalents | 580,331 | 1,687,632 |
| 1,718,618 | 3,730,135 | |
| Total assets | 5,732,623 | 6,558,466 |
| Liabilities | ||
| Current liabilities | ||
| Trade and other payables | 1,269,732 | 1,766,834 |
| Current tax liabilities | - | 98,673 |
| 1,269,732 | 1,865,507 | |
| Non-current liabilities | ||
| Trade and other payables | 98,834 | - |
| Deferred tax liabilities | 27,629 | 40,986 |
| 126,463 | 40,986 | |
| Total liabilities | 1,396,195 | 1,906,493 |
| Net assets | 4,336,428 | 4,651,973 |
| Equity | ||
| Equity attributable to shareholders of the parent | ||
| Share capital | 73,093 | 69,231 |
| Share premium account | 2,841,538 | 2,460,927 |
| Capital redemption reserve | 6 | 6 |
| Share option reserve | 193,174 | 132,775 |
| Currency translation reserve | (19,659) | (578) |
| Retained earnings | 1,248,276 | 1,989,612 |
| Total equity | 4,336,428 | 4,651,973 |
The financial statements were approved by the Board of Directors on 26 October 2009.
P F H Stephens
Director
The accompanying notes form an integral part of these financial statements.
GETECH GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 July 2009
| 2009 | 2008 | |
| £ | £ | |
| Cash flows from operating activities | ||
| (Loss)/profit before tax | (627,901) | 900,000 |
| Share-based payments | 60,399 | 53,775 |
| Depreciation and amortisation charges | 209,138 | 73,536 |
| Impairment loss recognised | 463,223 | 1,068 |
| Finance income | (27,749) | (78,612) |
| Finance costs | 10,004 | 244 |
| Exchange adjustments | 188,343 | 28,040 |
| Decrease/(increase) in inventories | 147,984 | (248,386) |
| Decrease in debtors | 946,669 | 496,599 |
| (Decrease)/increase in creditors | (497,102) | 344,981 |
| Cash generated from operations | 873,008 | 1,571,245 |
| Income taxes paid | (180,261) | (452,733) |
| Net cash generated from operating activities | 692,747 | 1,118,512 |
| Cash flows from investing activities | ||
| Purchase of property, plant and equipment | (38,627) | (64,178) |
| Purchase of data holdings, trade | ||
| and domain name | (1,893,204) | - |
| Interest received | 27,749 | 78,612 |
| Net cash (used in)/generated from | ||
| investing activities | (1,904,082) | 14,434 |
| Cash flows from financing activities | ||
| Proceeds from issue of share capital | 384,473 | - |
| Proceeds from long-term borrowings | 98,834 | - |
| Dividends paid | (369,269) | (387,692) |
| Interest paid | (10,004) | (244) |
| Net cash generated from/(used in) | ||
| financing activities | 104,034 | (387,936) |
| Net (decrease)/increase in cash and cash equivalents | (1,107,301) | 745,010 |
| Cash and cash equivalents at beginning of year | 1,687,632 | 942,622 |
| Cash and cash equivalents at end of year | 580,331 | 1,687,632 |
The accompanying notes form an integral part of these financial statements.
GETECH GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 July 2009
Nature of operations
The principal activity of GETECH Group plc and its subsidiary company Geophysical Exploration Technology Inc. (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, a limited liability company, 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 (EU) and as issued by the International Accounting Standards Board (IASB).
These consolidated financial statements have been prepared under the historical cost convention except in relation to financial instruments held at fair value through profit or loss or held at amortised cost.
The accounting policies set out below have been applied consistently throughout the Group for the purpose of preparation of these consolidated financial statements.
The Parent Company financial statements have been prepared using United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Dividends
| 2009 | 2008 | |
| £ | £ | |
| Paid during the year | ||
| Final dividend in respect of the year ended 31 July 2008 | ||
| at 0.7p per share (2007: 0.8p) | 193,846 | 221,538 |
| Interim dividend at 0.6p per share (2008: 0.6p) | 175,423 | 166,154 |
| 369,269 | 387,692 | |
| Proposed after the year end (not recognised as a liability) | ||
| Final dividend in respect of the year ended 31 July 2009 | ||
| not proposed (2008: 0.7p) | - | 193,846 |
(Loss)/earnings per share
Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the Group by the weighted average number of the Ordinary Shares in issue in the year.
| 2009 | 2008 | |
| (Loss)/profit attributable to equity holders of the Group | £(372,067) | £601,571 |
| Weighted average number of Ordinary Shares in issue | 28,651,166 | 27,692,307 |
| Basic (loss)/earnings per share | (1.30)p | 2.17p |
All options in issue at 31 July 2009 and 31 July 2008 were anti-dilutive.
Annual Report and Accounts:
The Annual Report and Accounts will be despatched to shareholders and available from the company's website (www.getech.com) on Monday 9 November 2009.
Annual General Meeting:
The Annual General Meeting of GETECH Group plc will be held at 12.00pm on 3 December 2009 at Kitson House, Elmete Hall, Elmete Lane, Leeds, LS8 2LJ.