22nd Aug 2019 11:52
(Alliance News) - Geological services company Getech Group PLC on Thursday said it expects first half revenue and costs to fall year-on-year following restructuring of a unit.
For the six months ended June 30, the company predicts to report a revenue of GBP2.5 million, down 14% from GBP2.9 million from the first half of 2018.
More positively however, Getech closed the interim period with forward sales of GBP1.6 million, up 14% from GBP1.4 million, a significant portion of this, the company says, "will unwind in revenue in the second half of the year".
It also reported a higher order book of GBP3.0 million for first half compared with GBP2.0 million a year ago and a 53% increase in the level of annualised recurring revenue, to GBP2.3 million compared with GBP1.5 million.
The company said it is performing in line with market expectations.
The lower interim revenue estimate was attributed by the company to the restructuring of the loss making Geoscience Services division.
In the second half of 2018, the company merged the unit's Henley, Berkshire, office with its London office. The total cost of this restructuring was GBP200,000, and it is expected to deliver a forward annualised fixed cost saving of GBP500,000 per year, Getech said in March.
Total cost base is now GBP3.2 million, trimmed by 10% from GBP3.5 million in the first half of 2018. The reduced revenue will be offset by the lower cost base, causing a neutral impact on the group's interim profit, Getech explained.
Looking ahead, the company said it intends to grow its recurring revenue by broadening its customer base and geographic reach. Its new focus regions include south east Asia, Japan and UAE.
Chief Executive Jonathan Copus said: "We have reshaped Getech around a suite of high-value products and skills. This is changing the mix and timing of our sales and revenues. In the first half of 2018 and the first half of 2019 a large proportion of new sales that we closed relate to forward contracts that secure revenue for future periods. Most of this revenue is also recurring in nature.
"Superimposed on this are steps that we are taking to strengthen our service offering, which in the near-term prioritise profitability over top-line growth. As a result, although 2019 first half revenue was lower than in 2018, new sales have strengthened Getech's forward earnings path. By covering an ever-larger portion of our costs with forward and recurring revenue, this means that event-driven 'spot' sales, such as high-value data, can be used to maximise profitability."
Shares in Getech were broadly flat at 26.00 pence each in London on Thursday morning.
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