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GETECH Group

  • BY: Andrew Hore |
  • POSTED: 24/03/2015 |

Oil and gas data and consultancy services provider GETECH Group has managed to continue to grow despite the tough oil and gas sector and the purchase of consultancy ERCL could help to smooth future earnings. 

The record $5m contract signed with Sonengol last September made a contribution in the six months to January 2015 and it will continue to until the end of 2015. Interim revenues improved from £3.11m to £3.62m, while the pre-tax profit jumped from £233,000 to £707,000. During the period GETECH capitalised £482,000 of development costs of its Globe subscription-based data and information publications. The interim dividend was increased from 0.44p a share to 0.46p a share. Net cash was £4.73m at the end of January 2015.

The weak oil price has put pressure on capital investment in the sector which is negative for GETECH. The Sonengol contract will help to offset this.

GETECH is expected to pay up to £4.3m for ERCL, which includes 2.18 million shares and £1.75m in cash, partly funded by a loan of £1.1m. The rest is deferred and based on performance over three years.  ERCL was formed via a merger at the beginning of 2014 and in its first full year it made a profit of £1.2m on revenues of £3.8m. There was a significant contribution from work in Africa during that period.

ERCL (www.ercl.com) is an upstream oil and gas consultancy and it has a different customer base to GETECH, including national oil companies that are less susceptible to the cycles in the sector. There will be a full year’s contribution in 2015-16 and revenues have been upgraded from £9.5m to £12m, while profit has been increased from £2.3m to £3m. The use of debt in the purchase of ERCL means that earnings per share have been raised by one-fifth to 6.9p. 

At 47.5p a share, up 4p, GETECH is valued at £16.4m. The shares are trading on seven times prospective 2015-16 earnings. The low valuation is due to the past volatility of the business but it should be less volatile in the future. A 2.4p a share dividend means that the forecast yield is nearly 5%.

AIM Journal March 2015 available.

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