Getech Grp Regulatory News (GTC)

Getech Group plc

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

Trading Update: 6 months to 30 June 2018

The Getech Group (AIM; GTC) provides geoscience and geospatial products and services to companies and governments, which they use to de-risk exploration programmes and improve their management of natural resources. In 2017, through a programme of commercial, operational and cultural change, we refocused Getech's activities around a suite of data, software and information products; the value of which we enhance through services that leverage our products and geoscience-geospatial skills.

This product-led strategy targets growth in high-margin recurring-revenue opportunities and the evolution of our business is evident in the scale and structure of the sales closed in H1 2018.

Maiden January to June H1 interim results

Having recently moved our Accounting Reference Date to 31 December, this is Getech's first Trading Update for the 1 January to 30 June period. As previously noted, the new Reference Date introduces seasonality to our financial results, H1:H2 revenue historically being split in a 40:60 ratio. Interim results for the Getech Group will be published on or around the end of September 2018.

Operational summary

In repositioning Getech we have placed the customer at the heart of our business. We do this through customer collaboration, a focus on how we add value, the provision of training and a commitment to product and service enhancement.

In H1 2018 we expanded the content and functionality of Globe to include innovative new heat flow and palaeo-surface geology modules, which draw on our geoscience expertise and graphical analysis tools, which leverage our software skills. Having moved Globe to an annual release-cycle, the first of these was completed on time/on budget in H1 2018 and delivered to customers in July 2018. We upgraded our geospatial software products to include a range of new customer-focused functionality, and we promoted our data offering through licensing rounds and integrated product sales. We are using these products and our geoscience-geospatial skills to reshape and differentiate our services. In H1 2018 our Gravity & Magnetic team worked to full capacity and the Geospatial team won an additional long-term support contract with a super-major. We also diversified our revenues with contracts in the environmental, utilities and maritime sectors. As a part of the roadmap to improving the profitability of our Geoscience Services, in H1 2018 we strengthened our tendering process and took steps to consolidate our Henley and London activities into a single London location.

H1 Revenue and Sales

Having aligned our Information Products with the programme of continuous improvement already established in Software, in H1 2018 we launched a sales campaign to target new customers and multi-year subscriptions for both. Early success in this campaign lifted the total value of sales closed in H1 2018 to £4.3 million, a 39% increase on the total sales closed in H1 2017 (£3.1 million).

Given the multi-year nature of many of these sales, revenue recognition splits them between products and services delivered in H1 2018 and those that will be delivered in future periods. H1 2018 revenues totalled c. £2.9 million (H1 2017: £3.1 million) with the £1.4 million balance (H1 2018 total sales closed, less H1 2018 revenue recognised) being the increase in sales of products and services that will be delivered in future periods. The majority of these forward sales will be delivered in H2 2018 and FY 2019 and at 30 June 2018 we had invoiced for c. 50% of the total forward sales value.

In addition, echoing the lumpy sales pattern that we are working to dilute through recurring revenue growth, a $0.9 million data sale negotiated in H1 2018 frustratingly missed the 30 June period-end. This sale is now closed. With it H1 revenue would have risen 16% year-on-year and total H1 sales would have risen 69%.

Cost base*

Having lowered our cost base by 32% between 2016 and 2017, in H1 2018 we focused on balancing capital discipline with a continued programme of product investment. We also strengthened our sales and project management capabilities. Inclusive of these investments, our cost base totalled £3.5 million (H1 2017: £3.7 million) a c. 4% year-on-year reduction.

Net Cash and Receivables

Net Cash balances at 30 June 2018 totalled £1.4 million. This was higher than at 30 June 2017 (£0.8 million). Reflecting the seasonal H2-weighting of Getech's revenue, Net Cash was lower than at 31 December 2017 (£1.8 million). However, with the rate of sales ramping up through H1 2018 and c. 50% of forward sales yet to be invoiced at 30 June 2018, receivables grew to £2.5 million (31 December 2017: £2.1 million). As such, net cash plus receivables was flat across the period.

Jonathan Copus, Getech CEO, commented:

"We continue to work in a volatile investment environment, targeting customer budgets set 12 months or more previous. It is therefore encouraging to have expanded H1 sales, particularly since this has been driven by a significant and growing number of our customers signing-up to multi-year sales agreements. These commitments speak to the practical value that our customers find in our product and service offering, which in turn strengthens Getech's pipeline of recurring revenue."

* Cost base is measured as: cost of sales, administrative costs and development costs capitalised, less depreciation and amortisation, and adjusted for movement in inventories, foreign exchange and non-cash provisions. These are Getech's cash costs.

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Notes to Editors:

The Getech Group provides the expertise, support and knowledge that companies and governments need to better discover, develop and manage natural resources. Our data-rich products, geospatial solutions and government advisory services help our customers to achieve their business goals of risk-management, cost control, operational excellence, regulatory compliance and environmental responsibility.

For more information, please visit our website at www.getech.com.