Getech Grp Regulatory News (GTC)

23 January 2023

Getech Group plc

("Getech" or the "Company" and with its subsidiaries "the Group")

Post-Close Trading Update

Consistent Year-on-Year Double-Digit Growth with Record Order Book and Strong Pipeline

Getech (AIM: GTC), a company that locates energy and minerals for the energy transition, is pleased to announce an update on trading for the year ended 31 December 2022 and current outlook.

Financial Highlights - Continued Growth

· Double-digit revenue growth, ahead of market expectations: £5.0 million (FY2021: £4.3 million) with a 66%/23% split between transitional petroleum and critical minerals

· Record orderbook: £4.6 million, a 39% increase (31 December 2021: £3.3 million, +25% on 2020)

· Strong cash position: £4.3 million at 31 December 2022, with cash held flat across H2 2022 by sales momentum and careful capital management (31 December 2021: £5.9 million)

Strategic Progress - Aligned to Global Energy Transition

· War in Ukraine led to renewed focus on energy security and underlined the role of oil and gas as transitional sources of primary energy. In 2022, Getech continued to benefit from high petroleum customer retention rates and, by aligning its offering with carbon storage solutions, Getech is futureproofing its role in a sector that is expected to remain a significant near-term engine of revenue.

· In the last two years, Getech has built new low carbon solutions for critical minerals, geothermal, green hydrogen and carbon storage by repurposing data and software that it developed for the petroleum industry.

o  Value proven - In 2022, customers have purchased Getech's solutions to locate copper, gold, cobalt, and helium, to manage carbon storage licensing rounds and to explore for geothermal energy. Getech is now expanding its offering to include lithium and natural hydrogen.

o  Significant potential to scale-up revenue from other sectors looking to decarbonise - In 2022 Getech secured its first fast moving consumer goods customer, delivering an integrated decarbonisation solution for their global portfolio of assets that helps them achieve their ESG objectives.

· When locating energy and minerals, Getech may selectively obtain a carried/low-cost interest at the early stages of an asset's life cycle, in lieu of revenue, thereby building an asset base to create long term shareholder value. Getech will retain multiple options to monetise such positions with the aim to maximise value and minimise capital risk.

o  Getech has formed a strategic partnership with Eavor, a global geothermal technology company, to jointly locate and appraise closed-loop geothermal projects in Latin America.

o  At Shoreham Port, Getech increased phase 1 hydrogen design capacity from 800 kg/day to 2.5 tonne/day due to bigger local demand and extended its commercial exclusivity to 2027.

o  In Inverness, progress was slowed by a reshuffle in the executive team of council officers and a focus on securing the Cromarty Firth Greenport. Discussions with the Highland Council about the Highland Hydrogen Network have now regained momentum.

o  To accelerate value creation and reduce Getech's direct costs in establishing green hydrogen transportation hubs, the Company is advancing discussions with strategic investment partners and progressing significant grant funding opportunities.

Strong Outlook

· Getech starts 2023 with a strong balance sheet, sales pipeline growth, plus good customer and partner momentum. Getech's Board has no current plans to raise capital from shareholders.

· Work to sell Kitson House is progressing, and the property is currently under offer. However, completion of this sale has been impacted and delayed by the ongoing volatility in the commercial lending market.

· The macro environment outlook remains strong for companies such as Getech that are focussed on the energy transition. Forecasts indicate that a $1 trillion per annum increase in energy investment is required to resolve the dual challenge of energy affordability and security, across both clean energy and hydrocarbons.

Dr Jonathan Copus, Getech CEO commented: 

"Our consistent year-on-year growth reflects the strength of our integrated solutions and the urgency of energy security and transition. Leveraging our unique digital twin of the Earth with 400 million years of data we are well-positioned to analyse the subsurface for the benefit of accelerating net zero achievement. We can locate sweet spots for geothermal energy, critical mineral deposits, hydrocarbon accumulations, zones for carbon storage, and the best places for green hydrogen mobility sites."

"While we are making good progress with our development projects at Shoreham and Inverness we also continue to generate revenue from our extensive data, cross-sector expertise and advanced analytics through licensing and solution sales."

"Looking ahead, we are confident that our solutions will gain even more momentum as every company is now facing the challenge to decarbonize their activities. We have a strong pipeline for this year and beyond, which will fuel the company's continued growth - unlocking value for all stakeholders."

Business Overview

Getech's strategy is to deliver near term revenue growth through energy and minerals solutions sales and build longer term shareholder value through select asset participation.

Getech generates revenue by locating new energy and mineral resources. The Group does this with its proprietary digital twin model of the Earth ("Globe") that combines significant amounts of data with a software interface which allows users to make sense of this data. Developed across twenty years, and built originally for the petroleum industry, Getech has repurposed Globe to also locate critical minerals, geothermal energy, hydrogen, and carbon storage sites.

Globe uniquely models the Earth's evolution over the last 400 million years, and its integrated geologic, climatic, and oceanographic data provides valuable insight to locate natural resources in the subsurface. Value is further enhanced through advanced analytics that integrate above-ground socio-economic energy-demand data and allow users to filter potential locations for the most cost-effective solutions. The resulting solutions are provided in an easy-to-use digital map.

By operating across multiple sectors, Getech is uniquely positioned to collaborate with companies and governments at each step of their energy transition journey, delivering diversified yet integrated, low-carbon solutions to accelerate their path to net zero.

For longer term value creation, Getech is also monetising its unique data, software and expertise through early-stage asset opportunities. Shoreham and Inverness are the prime examples of creating long term shareholder value. As its asset operations mature, Getech's Board envisages a path to spinning entities out - establishing their own boards, capital structures and strategic pathways.

In order not to overextend its resources and to retain an efficient capital structure, the Company seeks to build strategic partnerships where in exchange for locating assets Getech receives a carried/low-cost interest at the early stages of an asset's life cycle.  

Getech is advancing partnerships with various Development Expenditure investors. These provide asset-level investment to advance projects to the point where they are ready for construction and capital financing. At that point, the project may be sold for a Developers' Fee, or the parties can remain invested with a minority or carried interest. In late 2022, Getech signed a Heads of Terms on the first of these partnerships, which focuses on its hydrogen operations.

Financial Update

In 2022, Getech signed over 100 new contracts with a total value of £6.5 million. This lifted revenue by 16% to £5.0 million (FY2021: £4.3 million) and marked the second consecutive year of double-digit revenue growth since Getech completed its £6.25 million equity raise in 2021. 66% of revenue came from transitional petroleum while 23% - from critical minerals. The Company aims to further diversify its revenue streams.

A key component of this growth has been license-based and recurring in nature. In 2022, the number of software licences sold rose by 42% and Getech secured two new customers for Globe.

This growth expanded Getech's orderbook by 39%, to £4.6 million, a record year-end position (31 December 2021: £3.3 million). Annualised recurring revenue increased 14% to £2.4 million (31 December 2021: £2.1 million).

Getech finished 2022 with a strong cash position of £4.3 million (31 December 2021: £5.9 million). The Group held its cash balances flat across H2 2023 through sales growth and careful cost management in its hydrogen asset development operations.

Work to sell Kitson House (Getech's office in Leeds) is also progressing, and the property is currently under offer. However, completion of this sale has been impacted and delayed by the ongoing volatility in the commercial lending market.

Whilst being marketed for sale, Kitson House's general and rateable costs have been minimised by moving out of the building's listed portion. To maintain its condition for sale, £50k was spent in 2022 on general maintenance and roof repairs - the majority of which was funded from insurance.

Having begun 2023 with balance sheet strength, sales pipeline growth and good customer and partner momentum, Getech's Board has no current plans to raise capital from shareholders.

Operational Update

In 2022, Getech focused its resources on energy transition challenges where it could test the commercial value of its data and software. The success of this work is clear.

Transitional Petroleum - High Retention Rates, Continued Growth

The road to reducing greenhouse gas emissions to zero by 2050 has never been more urgent, but geopolitical tensions, supply chain disruptions and rising inflation have led to renewed focus on energy security.

Experts argue the energy industry has been under-investing since the peak of 2014 while the overall growth of the investments in renewables was not sufficient to compensate for that. In the coming years, focus will be on balancing climate goals with energy security.

As a result, 2022 saw a strong recovery in Getech's petroleum market activities, alongside an expansion into the emerging carbon storage sector. Getech's work in exploration, development optimisation and operational spatial management has been particularly strong.

These new market conditions led to Getech adding two new Globe customers, one of which is a global supermajor energy company, and a 42% year-on-year increase in the number of software subscriptions sold. Alongside new software sales in the petroleum exploration market, including a strategic national oil company customer in the middle East, Getech added further customers in the US onshore shale gas operations and investment banking sectors. A key strategic contract with a major energy company joint venture was renewed for multiple years, providing critical visibility of strong future revenues. 

By aligning its petroleum offerings with carbon storage, Getech is future-proofing its role in a sector that is expected to remain a significant near-term engine of revenue. Along with new software customers in the carbon storage sector, Getech's solutions were used by the North Sea Transition Authority to support the UK's first carbon storage licensing round.

Critical Minerals - Identifying New Copper Deposits, Other Critical Minerals Are Underway

Getech's first critical minerals solution is focused on copper, the supply gap of which is expected to reach 7.8 million tonnes by 2030. Getech has the technology to discover new sediment-hosted copper deposits in unexplored areas. Sediment-hosted copper accounts for just c.20% of total copper production today, but it is more widely distributed than other sources of copper and can also be processed with lower carbon footprint. In addition, 80% of cobalt, a key component of batteries which plays a critical role in the energy transition, comes from sediment-hosted copper mines.

In 2022, Getech sold its sediment-hosted copper solution to three critical minerals companies. Using its unique data and advanced analytics, Getech produced high confidence targeting maps for areas in Australia, North America, and Canada, and based on this work a significant land position has already been licenced. The value-add for these companies is demonstrated by them now being repeat customers.

Getech also secured its largest ever critical minerals contract (a $900,000 data and software deal with a multi-mineral global mining company) and expanded its copper solutions into iron oxide-copper-gold and epithermal gold deposits. Getech delivered data and analytics to Helium One, a native helium explorer, and advanced R&D work on solutions to predict the location of lithium and natural ('white') hydrogen resources. Getech looks forward to bringing these new solutions to market in early 2023. The World Bank projects that the production of critical minerals, such as graphite, lithium and cobalt, should increase by nearly 500% by 2050 to achieve a below 2°C future.

Getech is in discussion with mining companies to form strategic partnerships to jointly locate new deposits, with the option for Getech to retain a low-cost equity stake or net smelter royalty.

Green Hydrogen - Assets Progress and Expanded Offering

In 2022, Getech continued to invest in green hydrogen assets. The Group's most advanced projects are in Shoreham Port and Inverness, where H2 Green - Getech's wholly owned hydrogen development company - is working to establish green hydrogen production and supply hubs.

In Shoreham, following the completion of engineering and commercial feasibility work, the Port extended H2 Green's exclusivity on all hydrogen, ammonia and renewable energy activities to August 2027. Evidence of demand for hydrogen has grown faster than expected - supported by offtake pledges, letters of intent and MoUs. As a result, H2 Green has expanded the phase 1 design capacity from 800 kg/day to 2.5 tonne/day and has kicked off Pre-FEED (Front End Engineering Design) studies on this basis.

In Inverness, H2 Green's partner, SGN, successfully completed the deconstruction of the city's former gas holder. This work paves the way to convert a legacy natural gas holder site into a future green hydrogen storage and distribution facility, which is an encouraging step in the process to develop a multi-hub green hydrogen network, with Inverness at its core. Commercial negotiations with the Highland Council to advance the hydrogen network across the Highlands progressed more slowly than hoped. This was due to a reshuffle in the Council's executive team and their focus on successfully securing the Cromarty Firth Greenport. With both now completed, the Council's focus has returned to Getech's Highland Hydrogen Network and an agreement is expected to progress in a timely manner.

Through this project work, Getech and H2 Green have built extensive expertise in locating and developing green hydrogen sites - skills which in 2022 generated £100K of revenue from regional hydrogen network planning for the Scottish Highlands. Having encountered demand for these skills from other potential customers, Getech plans to launch a hydrogen advisory service in 2023 which will broaden its exposure to business development and manage direct costs.

The macro environment continues to be supportive for hydrogen development, with the UK hydrogen strategy targeting 10GW of low carbon hydrogen production capacity by 2030. Green hydrogen is forecasted to reach 15% of Europe's final energy mix long term.

Geothermal - Building Partnerships

Getech supports the geothermal sector through its Heat Seeker® solution, which combines advanced geospatial analytics with commercial, geoscience and social data. This enables the rapid and cost-effective identification of sites that are highly prospective for geothermal energy. In 2022 Getech successfully completed projects for clients on multiple continents, and the Group expects continued expansion of its geothermal offering - given the projected double-digit annual growth rate towards 2030 in geothermal energy investments.

Getech and Eavor, a global geothermal technology company, have signed a strategic partnership to jointly locate and appraise a portfolio of geothermal projects in Latin America. Eavor was already a customer of Getech's data and services. Through this work Getech has generated revenue, demonstrated its geothermal expertise, and built mutual trust. This has now translated to an asset-based partnership that is broader, more strategic and more valuable for both parties.

Eavor has attracted venture capital funding from BP, Chevron and BHP (all customers of Getech petroleum solutions) and recently secured development financing, totalling up to €1bn, from Deep Energy Capital, for the development of at least five geothermal projects in North America and Europe.

Using its proprietary Heat Seeker® solution, Getech is also evaluating very early-stage geothermal asset investment opportunities in locations outside Latin America.

Integrated Decarbonisation Solutions - Potential to Open a New Global Customer Market

By leveraging the breadth of its low carbon activities, Getech has recently secured a contract with a global FMCG company. Getech will deliver to this customer an integrated decarbonisation solution across its global portfolio of assets to achieve its ESG objectives. With companies across multiple sectors now looking to turn decarbonisation planning into practice, this win opens an exciting door to a potentially vast universe of new customers with significant potential to scale-up revenue.

Marco Environment and Outlook

Goldman Sachs forecasts a $1 trillion pa increase in energy investment is required to resolve the dual challenge of energy affordability and security, across both clean energy and hydrocarbons.

At the same time, the incremental cost of net zero carbon continues to improve making it more financially attractive. The US Inflation Reduction Act is potentially the most transformational policy in clean tech making green hydrogen, carbon capture and geothermal some of the more cost-effective paths for energy transition in the US. Across the globe many governments are moving in a similar direction with various economic stimulus, including tax credits and subsidies.

Getech's corporate strategy reflects this underlying trend and focuses on monetising the Company's core capabilities in most efficient and valuable ways.

The Group is growing its order book and pipeline and the Board is confident in the outlook for the business.

Financial Calendar

Getech will present at Cenkos and Proactive Growth & Innovation Forum on 7 February and Proactive One2One Investor Forum on 28 February. The Company will host an investor site visit to Shoreham in March 2023 and intends to publish its Final Results for the 12 months ended 31 December 2022 in May 2023.

The Company will hold an investor call to discuss the business update later this week. Details will be communicated separately.

This update is provided in advance of the financial statements for the year ended 31 December 2022. The information and commentary provided is based on unaudited management accounts and other internal performance measures and is subject to concluding the routine annual accounting adjustments as well as any adjustments that arise as a result of the external audit process. Certain statements made in this trading update are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements.

For further information, please contact:

Notes to editors:

Getech Group plc (AIM: GTC) generates revenue by locating new energy and mineral resources using its proprietary Earth digital twin. The Group works for governments and companies who seek to decarbonise their operations. Getech expanded the use of data and technologies built for petroleum industry to critical minerals, geothermal, hydrogen, carbon storage. Getech's work builds strategic partnerships that open early-stage asset opportunities. In exchange for locating assets Getech may seek a carried interest during the development phase and option to monetise the position.

For further information, please visit www.getech.com.