25 September 2023

Getech Group plc

("Getech" or the "Company")

Interim Results

Getech (AIM: GTC), a world leading locator of subsurface resources, announces its unaudited interim results and report for the six months to 30 June 2023 ("H1 2023" or the "Period").

'Restructured and re-focused on core expertise of locating subsurface resources'

Operational and Strategic highlights

·    Strategic review of the business completed over the last 6 months, resulting in targeted objectives to:

o  re-focus the Company on the core business of locating subsurface resources;

o  extend Globe's capabilities to identify a wider range of assets e.g. Zinc, Lithium and Phosphates;

o  reduce cost base by £2 million and switch to developing H2 Green's assets in partnership;

o  generate future revenues from subscription sales and solutions coupled to asset participation in large scale projects where appropriate;

o  become cashflow positive in the near term and

o  increase and target marketing and sales activity towards the $1 trillion Energy Transition market.

·    Significant progress has already been made on all of the strategic priorities set out above.

·    Interim executive Chairman Richard Bennett, appointed in February 2023, has agreed to become Acting Chief Executive Officer of the Group with Michael Covington, currently Non-Executive Director, to be Chairman Designate. Both appointments expected to be confirmed as permanent in due course.

Financial highlights

·      H1 2023 revenues of £1.9 million (H1 2022: £2.7 million including a one-off £0.7 million transfer payment) reflects lower sales volumes in oil and gas.

·      Strong orderbook value of £4.4 million (30 June 2022: £4.8 million) with £1.4 million of the orderbook expected to convert in H2 2023, and a further £1.5 million due in FY 2024. This demonstrates multi-year commitment from our customers to use the Globe geoscience platform.

·      Annualised recurring revenue increased to £2.6 million with the addition of new Globe and software customers (December 2022: £2.4 million).

·      On an unchanged cost base, recorded a loss before tax and exceptional costs of £2.2 million (exceptional costs being £0.7 million)

·      Cash totalling £2.0 million at 30 June 2023 (31 December 2022: £4.3 million), with the proposed sale of Kitson House progressing

Outlook

·      Good pipeline of orders support the traditionally stronger second half of the year, boosted by the uplift in sales, marketing and PR activity across the business, although tempered by delays to spending decisions

Richard Bennett, Getech Executive Chairman commented: 

"Completing the strategic review of the business has enabled us to set out our plans for the Company's future. It was clear that the Group was likely to become financially and operationally over-extended. Accordingly, we have decided to focus on our core expertise of locating subsurface assets, transforming our predictive capabilities with the latest artificial intelligence techniques, and to significantly reduce our cost base, thereby creating a financially lighter and more focused business with which to target future growth.

The results for H1 show a reduction in sales over the comparative period in the prior year, when performance was boosted by a large one-off payment. However, our order book is stable and we are generating a good pipeline of future projects, the majority of which come from outside of the oil and gas market. There is no doubt that Getech's expertise is required to locate the resources needed to power the substantial Energy Transition market - clean energy and critical minerals - and we are positioning the business to do exactly that."

Investor Meet Company presentation

The Company will hold an investor call on Monday 25 September at 10.00am to discuss the interim results. Investors can sign up to Investor Meet Company for free and add to meet Getech via:  https://www.investormeetcompany.com/investor/company/getech-group-plc.

Mello presentation

Taking place on Wednesday, 27 September 2023 at 12.30pm UK time via Zoom. Investors can register for tickets via: https://www.tickettailor.com/events/melloeventslimited/970931

For further information, please contact:

Notes to editors:

Getech Group plc (AIM: GTC) applies its world-leading geoscience data and unique geospatial software products to accelerate the Energy Transition by locating geoenergy projects and critical minerals.

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

CEO Statement

Introduction

After several years of investing in diversifying our business from oil and gas (O&G), H1 2023 has seen us apply this experience to better focus our operations on the best opportunities - those that match our core expertise in subsurface understanding and geospatial analysis, with a near-term expectation of generating revenues.  Getech has genuinely unique data and a talented pool of highly knowledgeable staff - I am confident that the strategic changes we have made and are making, coupled with a transformational shift toward the use of machine learning and artificial intelligence (AI), stands us in good stead for significant future growth.

Financial Results

During the period the Company continued to win new business across all our subsurface product lines to generate revenues of £1.9m. This was lower than the same period in 2022, which was boosted by a £0.7m transfer payment. During the period, costs were higher than expected given a number of one-off costs including redundancy payments and the restructuring of H2 Green. The cash balance at the end of the period is £2.0m and, after the implemented cost reductions coupled with the sale of Kitson House there will be sufficient funds to operate the business.

Strategic Review

My key priorities for the past six months have been two-fold. First, to ensure business continuation, and second, to undertake a strategic review of the business and ensure that Getech successfully diversifies its services and customer-base, while growing profits from the wider Energy Transition. Today, it is my pleasure to outline my conclusions and explain how we intend to drive the business forward.

Re-focus on the core business of locating subsurface resources

·     Our plan for Getech is to continue to sell products and services to the global O&G sector to allow customers to develop more sustainable future reserves; and to consolidate and focus hard on the areas where we have been winning business and are able to grow revenues, i.e. CCS, Geothermal and Critical Minerals. The intention is for the majority of our revenues to come from clean energy in due course.

Business Model

·     It is clear that there is a valuable commercial opportunity in front of Getech involving different markets and companies with very different capabilities compared to our historical client-base. Getech therefore needs to adapt its commercial model to support those companies and to participate fully in the upside of the global Energy Transition. We are extending our business to look at both revenue and project participation through carried equity and royalties. A portfolio approach, based on future asset participation and/or royalty revenue streams, is expected in time to become a central part of Getech's value.

Cost reduction programme

·     We have taken a very hard look at our cost-base and implemented a programme of cost reductions in staff and expenses that will result in a c.£2m saving going into 2024. This specifically includes removing the board and management overheads from H2 Green, and utilising Getech's existing management team for these functions. This will help us meet our objective of making Getech cash flow positive in the near term. Costs associated with H2 Green make up the majority of the reductions.  Looking ahead into 2024 and beyond with a lighter cost-base and as the business grows, we anticipate having the capital to recruit more appropriate skills into the Group, to support development where we are generating revenue and value traction, e.g. CCS, Geothermal, critical minerals, data science and AI.

In addition, it remains a priority to reduce our office costs and sell Kitson House so that we can move to more suitable accommodation. While the real estate market is challenging, we are confident of bringing this to a conclusion.

Globe Geoscience Platform and R&D

·     During the strategic review, we have identified opportunities to expand the commerciality of the Company's core assets. The focus of our work has been in utilising machine learning and AI technologies to streamline our internal workflows and develop advanced analytic capabilities within our products, and in particular our Globe geoscience platform. Our work to date has allowed us to significantly improve our predictive capabilities across a range of heat and mineral resources. We expect to be able to bring these capabilities to market and use them to develop new asset participation opportunities. We have already successfully used the Globe platform to support the exploration of copper with clients including Nittetsu, geothermal with Eavor and have added the capability for the exploration of natural hydrogen.

Routes to Market

The Company is now organised around selling solutions to Explorers and Decarbonisers:

·     Decarbonisers are a new type of customer for Getech and comprises global industrial companies that need to reduce carbon emissions from industrial processes. Getech can help these large organisations identify subsurface resources such as carbon storage that can be used to store hard-to-abate emissions, as well as geothermal potential that can be used as an alternative low-carbon heat source to fossil fuels. We expect this to become a substantial area of growth as companies seek to deliver their Net Zero commitments.

·    Explorers are the main customers and revenue generators for Getech and comprise exploration companies that are seeking to identify and develop subsurface projects. This includes O&G, minerals exploration and geothermal companies. Getech provides our Globe geoscience platform, geoscience data, software and expert services to accelerate and de-risk the exploration process. We expect this to continue to be a growth area as companies seek to develop the subsurface resources that are vital for the Energy Transition.

Review of Operations

Oil, Gas and CCS

In our core oil and gas sector, customer retention for our Globe platform has been strong, and we continue to see interest from potential new customers. Globe 2023 was released in July 2023 with new content and functionality, delivering even more value for customers with enhanced application to multiple geoscience resource sectors. In addition, we have added multiple new software subscribers across both our Operator and Investor software customer-base, driven in part by strong interest from the US shale sector. At the same time, our GIS Services team continues to deliver solid revenues across a range of geospatial energy sectors, including exploration, production and pipeline sectors. Unfortunately, our Gravity and Magnetic Solutions team has experienced lower than customary data sales due to adverse market conditions, as well as third-party delays to several large projects which has had the effect of delaying revenues - naturally, we are working hard to bring these projects on stream as soon as we can.

There has been a notable policy shift in the UK to continue to develop North Sea oil and gas fields and develop North Sea carbon storage projects to store carbon dioxide resulting from blue hydrogen projects, which offer to extend the lifespan for gas usage, and in turn may extend exploration budgets.

We have also noted an increase in interest in exploration for unconventional gas and natural hydrogen (or geologic hydrogen) projects. We have responded by releasing software updates in our Globe geoscience platform to facilitate the exploration of these resources. In the case of natural hydrogen, it offers a potential and substantial cost saving over green hydrogen production, and a potential low-carbon diversification opportunity for energy companies that have the necessary gas field development skills.

Geothermal

There is a renewed interest in geothermal projects around the globe as a source of heating for homes and industries, as well as to produce power.

Getech's subsurface expertise combined with advanced analytics enables the rapid and cost-effective identification of locations that are potentially prospective for geothermal energy. This is an excellent fit with our core expertise of understanding subsurface structure and heat flow. Continuing the trend of last year, in 2023 we have delivered multiple projects for new geothermal clients across several continents, demonstrating and highlighting the steady increase in demand and interest in this clean source of energy.

In January 2023 Getech and Eavor - a global geothermal technology company - 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, and through this work Getech has generated revenue and demonstrated its geothermal expertise. 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 and/or mineral exploration solutions) and recently secured development financing, totalling up to €1bn, for the development of at least five geothermal projects in North America and Europe.

Critical Minerals

For the world to meet its decarbonisation goals, many industries from automotive to steel mills are turning to electrification. This requires enormous development of critical mineral assets such as copper, cobalt and lithium, all of which are in the scope of Globe geoscience platform.

In H1 2023, Getech has sold mineral exploration data and solutions to three new Mining company customers, demonstrating demand for our foundation geoscience data and interpretation in the critical minerals sector. Based on this work, some of these companies have licensed significant land positions for mineral exploration, demonstrating the value of our offering. In addition, we have continued to develop our R&D into predicting the location of lithium and natural ("white") hydrogen resources, the latter of which is receiving significant press attention. Getech is in the process of bringing these new solutions to market.

H2Green

The market for green hydrogen has faced substantial challenges, particularly for transportation which has been the primary focus of H2 Green. In the UK, government policy has not been as decisive as in Europe and the USA (e.g. through IRA incentives) and consequently many investment decisions have been delayed. Given the investment that Getech has made into H2 Green to date and the ongoing cost, it has been vital to make hard and pragmatic choices that protect the asset value but reduce the ongoing cost.

We have therefore decided to substantially reduce business development activity and to continue to develop our projects in-line with the market demand for green hydrogen. For the foreseeable future, it is our preferred model to develop projects with partners and contractors rather than to build a dedicated in-house engineering team. We believe this offers a sensible hedge that reduces costs now while enabling us to maintain our existing portfolio and commitments, yet be positioned to take advantage as and when market conditions improve.

Outlook

I am very optimistic about Getech's future as I believe the business is naturally well placed to seize opportunities within the rapidly evolving energy and climate tech landscape and support the decarbonisation of industry.

In the upcoming year, we will double-down on growing and diversifying our revenue streams. While remaining financially prudent, we will also continue to invest in research and development to ensure that our products and services remain at the forefront of the industry, allowing us to provide the best solutions for our clients as they navigate the Energy Transition.

The Company has implemented new sales, marketing and PR programs which are demonstrably generating news stories and sales leads. This is leading to a very healthy pipeline of prospective customers and projects. However, this is tempered by the current economic environment where companies are noticeably delaying spending decisions which risks leading to longer than usual sales cycles.

In conclusion, I would like to express my gratitude to our shareholders, partners and employees for their unwavering support and dedication and am confident that with your support we will continue to achieve great success in our pursuit of a sustainable and prosperous future.

Richard Bennett

Acting CEO

Financial Review

Revenue and sales

H1 2023 revenue totalled £1.9 million (H1 2022: £2.7 million), representing a 30% decrease. H1 2022 revenue benefitting from a £0.7m transfer payment.

Renewals from software and Globe customers during H1 2022 resulted in orderbook value being maintained at £4.4 million (December 2022: £4.6 million), £1.4 million is expected to convert to revenue before year end, with a further £1.5 million due in FY 2024.

In H1 Getech added a new Globe customer and five new software customers, whilst maintaining a high rate of renewals from existing customers. Annualised Recurring Revenue from subscriptions and service contracts increased to £2.6m (31 December 2022: £2.4m).

Cost management

Management has completed a six-month strategic review of the business and has commenced a substantial cost reduction exercise. On completion, this will remove c.£2m of cost from the business, the benefits of this exercise will be fully realised in FY2024.

The group cost base in H1 2023 increased by 3% from H1 2022. Cost savings made in H1 have been offset by cost inflation.

One-off costs relating to restructuring the business (£0.4m), and impairment of goodwill relating to the acquisition of H2 Green (£0.3m) have been expensed to the income statement.

Profitability

Excluding exceptional administrative costs detailed above Getech reports a post-tax loss of £2.0 million (H1 2022: £1.0 million). This increases to £2.8 million including exceptional costs.

Operating cash flow

Net cash outflow from operations totalled £1.6 million (H1 2022: £1.0 million). This includes restructuring costs of £0.4m (H1 2022: £nil) and costs relating to Getech's hydrogen asset development activities (H2 Green) of £1.0m (H1 2022: £1.1m)[1].

Liquidity

During H1 2023 there was overall net cash outflow of £2.3 million (H1 2022: £1.6 million outflow). Getech's cash balance at 30 June 2023 was £2.0m (£4.3 million at 31 December 2022).

Dividends

The Board has set a clear investment path that is focused on growth through Energy Transition diversification. Accordingly the Board has decided that it is not appropriate to pay a dividend at this time.

Group Statement of Comprehensive Income

for the six months ended 30 June 2023