ANNUAL
REPORT
AND ACCOUNTS
17-MONTH PERIOD
ENDED 31 DECEMBER
2017
INTERPRETATION:
GLOBE
CONTENT:
GRAVITY &
MAGNETIC
DATA
INSIGHT:
GEOSCIENCE
SERVICES
ABOUT
GETECH
GETECH 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 COST CONTROL, OPERATIONAL EXCELLENCE, REGULATORY
COMPLIANCE AND ENVIRONMENTAL RESPONSIBILITY.
SPATIAL
ANALYSIS:
EXPLORATION
ANALYST
COMPLIANCE:
UNCONVENTIONALS
ANALYST
ADVISORY:
GOVERNMENTS
& NOC'S
02
UNDERSTAND GEOLOGICAL RISK AND UNCERTAINTY BEFORE YOU INVEST.
BASIN EVOLUTION
Identify crustal types to understand
basin evolution and implications for heat
flow
HYDROCARBON MATURITY
Calculate sediment thickness to
assess the impact on hydrocarbon
maturity
STRUCTURAL ANALYSIS
Map structures that have a fundamental
influence on basin architecture and
sediment accumulation
PALAEO ENVIRONMENTS
Integrate climate, drainage, topography
and surface geology to determine
the amount and quality of sediment
deposited as potential reservoirs
through Earth’s history
INTEGRATED
INTERPRETATION
Integrate multiple geological
datasets to evaluate hydrocarbon
prospectivity for a basin or play
SOURCE TO SINK
Tracing the transportation pathway
of sands from their origin to the
hydrocarbon reservoir
STREAMLINE WORKFLOWS, MAXIMISE PRODUCTIVITY,
PROTECT THE ENVIRONMENT.
PRODUCTION WELL PLANNING
PLAY CHANCE MAPPING
Simplify complex reserve evaluation and well planning
projects for resource play developments
Investigate petroleum basin and play prospectivity and
identify sweet spots for exploration
PROSPECT PORTFOLIO
OIL SPILL RESPONSE
Summarise complex geological information using
interactive dashboards for management.
Build a Common Operating Picture to manage
emergencies and incident repsonses
03
FINANCIAL
HIGHLIGHTS
ADJUSTED
NET CASH FLOW
FROM OPERATIONS
£2.1
MILLION IN FLOW
FY 2016: £0.3 MILLION
OUT-FLOW*
CLOSING
CASH BALANCE:
£2.4
MILLION
FY 2016:
£2.8 million
04
04
REVENUES
£10.9
MILLION
FY 2016: £7.0 MILLION
ADJUSTED
PROFIT AFTER TAX:
£0.9
MILLION
FY 2016:
£0.3 million*
*SEE TABLE 1 – FINANCIAL REVIEW
STRATEGIC REPORT TABLE OF
CONTENTS
01 ABOUT GETECH
2
4
About Getech
Financial Highlights
02 STRATEGIC REPORT
6
Chairman’s & Chief Executive Review
13 Financial Review
19 Principal Risks and Uncertainties
03 CORPORATE GOVERNANCE
20 Directors
22 Corporate Governance Report
24 Directors Report
04 FINANCIAL STATEMENTS
27
Independent Auditor’s Report
34 Consolidated Statement of Comprehensive Income
35 Consolidated Statement of Financial Position
36 Consolidated Statement of Cash Flows
37 Consolidated Statement of Changes in Equity
38 Notes to the Consolidated Financial Statements
69 Parent Company’s Balance Sheet
70 Parent Company’s Statement of Changes in Equity
71 Notes to the Parent Company’s Financial Statements
05 ANNUAL GENERAL MEETING
83 Notice of Annual General Meeting
05
STRATEGIC REPORT
CHAIRMAN’S and
CHIEF EXECUTIVE’S
REVIEW
• Revenues of £10.9 million in the 17 months to 31 December 2017
• 32% reduction in Group cash costs (like-for-like)
• Net operating cash inflow pre-restructuring £2.1 million (FY 2016: 0.3 million outflow)
• Net cash increase pre-restructuring of £0.1 million (FY 2016: £2.0 million net cash decrease)
• Cash balance at 31 December 2017: £2.4 million (31 July 2016: £2.8 million); after £0.5 million
restructuring costs, £0.5 million of M&A payments and £0.3 million debt repayments
•
Investment environment strengthening with notable potential upside from an expanded portfolio of data
Getech provides geoscience and geospatial products and services that companies and governments use to
de-risk their exploration programmes and improve their management of natural resources.
Under the leadership of a new CEO and senior management team, in the 17-month accounting period to
31 December 2017 (referred to as AP 2017*) we integrated the acquisition of Exprodat, rebased costs,
strengthened our commercial offering, and repositioned Getech’s operational and financial strategy.
This strategy places our data, software and information products at the heart of our business. We target
high-margin, repeat revenue growth and we are reshaping our services to more clearly leverage our
products and geoscience-geospatial skills. This strategic formula has already helped us to cross-sell our
products and services, enter new sectors, and access rich seams of new data with significant 2018 revenue
potential.
A smaller cost base, which is largely fixed in nature, leaves our cash flow with significant leverage to growth.
We are also de-risking our profits through greater capital discipline, a focus on our customers’ needs and
improved operational delivery. With the cash that results, we are committed to invest in our operations,
reinstate dividend payments and explore acquisitions.
Whilst pursuing this growth agenda we need to ensure that our capital works hard for the benefit of
shareholders. To this end we are examining all options regarding our Kitson House office in Leeds.
DELIVERING A STRONGER GROUP
In AP 2017 Getech undertook a wide-ranging programme of commercial, operational and cultural change.
* In September 2017 we announced steps to align our reporting cycle with our customers’ budget cycle. This meant moving Getech’s
Accounting Reference Date to 31 December, the comparative audited accounting period to AP 2017 being the 12-months to 31 July 2016
(referred to as FY 2016).
06
Through cost control, customer engagement and refocusing how we reinvest our operating cash flow we
have enhanced the commercial positioning of our products and services and strengthened our finances.
This is most clearly expressed in our cash flows where, pre-restructuring costs, the Getech Group
generated a net operating cash inflow of £2.1 million (FY 2016: £0.3 million outflow) and a net cash increase
of £0.1 million (FY 2016: £2.0 million decrease).
Driving this step-change in cash profitability, product revenues grew 24% pro-rata, delivering a 65%
gross margin before impairments (Financial Review, table 2). This growth trajectory was enhanced by
the acquisition of Exprodat, and at the Group level was reinforced by a 32% reduction in costs (Financial
Review, table 3). These positives were partially offset by what remained a challenging market for geoscience
services.
Post capital investment, we used the balance of our operating cashflow to settle all remaining M&A cash
obligations and to reduce debt. We also invested in the Group’s sales and project management capabilities
– our focus being to grow revenue and de-risk profit.
Inclusive of restructuring costs, we ended AP 2017 in a net cash position of £1.8 million (31 July 2016: £1.9
million); cash and cash equivalents totalling £2.4 million (31 July 2016: £2.8 million).
Looking to 2018, with AP 2017 cash costs and revenue broadly in balance, the slate wiped clean of historic
M&A commitments, and a pipeline of exciting and potentially material product and service opportunities,
our cash flow has very significant leverage to growth.
With the Board focused on governance and strategy, it is key that it can access the skills necessary to
review Getech’s progress and positioning. To this end we are pleased to welcome to the Board Andrew
Darbyshire as Group Chief Financial Officer, and Chris Jepps as Group Chief Operating Officer. Andrew and
Chris will join the Board on 28 February 2018. At the same time, Huw Edwards steps down as a Director.
OPERATIONS
• New Senior Management Team, drawn from across the enlarged Group
• Product revenues up 24%, with gross margin (before impairments) of 65%
• Services a challenging market – margins reduced to 7%
In AP 2017 we repositioned our staff and their skills around more clearly
defined Product and Service divisions. We also refocused what they do
to more specifically address the technical challenges faced by our
customers in their exploration, production and management of
natural resources.
We view the successful re-alignment of products
and services to reflect the collaborative approach
that we have established with our customers,
which in AP 2017 was strengthened
through the application of new robust
project management practices.
PRODUCTS
AP 2017 saw an upswing
for our Products
07
CHAIRMAN’S and
CHIEF EXECUTIVE’S
REVIEW
CONT.
division. Our offering of essential data, software and information products are all used by our customers to
de-risk exploration programmes and improve the management of natural resources.
At the heart of our Products division lies our inventory of technical data assets. Central to this are our
holdings of Gravity & Magnetic data - the global coverage of which is multiple times larger than our closest
peer. We have also worked to refresh our data holdings and to expand them to include seismic, well and
other technical data.
We are particularly focused on doing this in regions where we can see clear commercial catalysts that will
drive buying interest from our customers.
In AP 2017 we were appointed as the Gravity and Magnetic data Release Agent by the Republics of Ireland
and South Africa, as well as the devolved government of the Faroe Islands. We accessed new Gravity &
Magnetic data in Papua New Guinea, Columbia and Bolivia, and we continued our rolling programme of
data reprocessing - through which we enhance the value of our data holdings. In parallel we extended the
footprint of our MultiSat data product to cover prospective areas that include East Africa’s lakes, and signed
data brokerage agreements with companies that include: Sander Geophysics (Gravity & Magnetic data),
Canesis (seismic and well data) and USLandGrid (well data). In Sierra Leone we assembled a high-value
suite of seismic and well data, which under a revenue-sharing agreement with the Government we are
offering for licence as a part of the country’s Fourth Offshore Licensing Round.
These data are an essential and cost-effective component of the integrated campaigns of our natural
resources customers - both in oil & gas and mining. In AP 2017, we grew the potential single-sale gross
value of our data holdings by $20 million - net revenue from data sales beginning to rise as a consequence.
Coupled with our advanced Gravity and Magnetic processing techniques and interpretation expertise, our
data holdings also continue to underpin the Globe and Regional Reports information products.
Globe is a geospatial information product that our customers
use to strengthen their understanding of the Earth’s
evolution and to help predict the location of its
natural resources. Globe does this by providing
paleogeographic, structural geology and
paleoclimate data through geologic time;
factors that combine to control the
formation and location of oil & gas.
The Globe userbase consists
of supermajors and large
independent oil and gas
companies. By using Globe,
they are better positioned
to understand
08
STRATEGIC REPORT petroleum systems and predict geological risk and uncertainty.
The team delivering this product is Getech’s largest and draws on a
diverse range of skills.
Globe is in its eighth year of development and in December 2016 the user-base expanded when another
prominent supermajor signed up. In July 2017 we completed Globe’s second three-year build-phase.
This was achieved within budget and on schedule, while customer feedback on new content and delivery
enhancements has been strongly positive. With the foundation-stone of Globe now complete we have
moved the commercial model to an annual release cycle. This allows us to deliver a more agile product with
content that evolves with the needs of our customers.
Work on Globe 2018 commenced in August 2017 and remains on track for release in July 2018. In line with
our refreshed product vision, the 2018 release will comprise the most diverse and innovative inventory of
new content and features undertaken to date. This has been shaped through dialogue with our customers,
and we are using our geospatial and software expertise to deliver improved usability and a broad
programme of training.
We build additional value in and around Globe through our Regional Reports. These information products
provide a more in-depth analysis of key exploration areas of interest, supported by project-ready geospatial
datasets. The sector downturn continues to provide a challenging market for these products, however we
retain a rich inventory of studies and we are exploring new ways for our customers to access their value.
Our geospatial software products are delivered through Esri’s ArcGISTM technology, the industry’s most
powerful mapping and analytics software. Our petroleum-focused solutions provide enriched visualisation,
geospatial analytics and powerful data integration for geoscientists that need to locate and extract new
resources, improve field management and ensure compliance.
In petroleum exploration our software products (Data Assistant and Exploration Analyst) enable customers
to easily integrate data from sub-surface interpretation applications and to perform complex play-based
exploration workflows.
We first developed our production software (Unconventionals Analyst) as a solution for increasing the
efficiency of well planning in coal bed methane projects. In collaboration with a major US player, the
product has been extended to support onshore shale-oil and shale-gas operations. We have since
broadened the userbase and our customers are utilising the software to reduce well development costs
and simplify reserves management.
During AP 2017, all three software products were enhanced to include a range of new customer-requested
functionality and upgraded to include support for Esri’s latest releases. With the re-subscription rate
exceeding 95% for the second year in a row, our install-base also grew – this driven by new customer wins
(our customer list expanding by 23%) and existing customers deploying the software more widely within
their organisations.
09
SERVICES
STRATEGIC REPORT
CHAIRMAN’S and
CHIEF EXECUTIVE’S
REVIEW
CONT.
SERVICES
In AP 2017 the staff of our services division deployed their skills in separate geoscience and geospatial
consulting groups. On a combined basis, the gross margin of this division was reduced to 7% (FY 2016:
24%). Underlying this figure is a more complex dynamic.
In geoscience consulting, the reduced oil price and oil company customer budget cuts have combined to
intensify competition. Our core technical expertise however and ability to leverage our underlying products
whilst delivering complex integrated geoscience-geospatial consultancy projects remain key differentiators
for Getech. When combined with careful cost control and enhanced project management, we see this as
the route by which we can improve the profitability of our services.
By way of example, we are using our technical expertise to broaden our activities into new sectors. In
Mozambique we signed an agreement with the Water Ministry to use our geoscience and geospatial skills
to unlock value in well data that Agencies can use to improve their success rate in locating sources of
drinking water. In AP 2017, a pilot study was successfully commercialised, and we are examining ways to
expand this work.
The power of this approach is also demonstrated by our history of assisting Governments and National
Oil Companies with License Rounds, Data Management, Capacity Building and Advisory services. In
AP 2017, we worked (through our wholly owned subsidiary, ERCL) for the Governments of Lebanon,
Mozambique, Namibia, Ras al Khaimah, Sao Tome and Sierra Leone.
In Sierra Leone we have worked in partnership with the Petroleum Directorate since 2016 - a project
initially funded by the World Bank. In AP 2017 this broadened into a multi-year contract to promote Sierra
Leone as a key area for exploration investment. This and other Government Advisory work enables us to
access a rich portfolio of technical data, which we then license on behalf of the Government.
Closer to home, we won a mandate to define and deliver a multi-faceted spatial data strategy for the
UK Oil and Gas Authority (the OGA), who then commissioned
Getech’s Gravity and Magnetics team to complete technical
service work over the South-Western Approaches
area of the UK Continental Shelf. In the period the
OGA also purchased our proprietary MultiSat
gravity product which is now being used to
encourage investment in under explored
areas of the North Sea.
Our Geospatial Services Group
was utilised on a broad range of
engagements to standardise
10
STRATEGIC REPORT and improve daily workflows, such
as site inspection and operational
surveillance. Our projects include work
for NCOC, the partnership operating
Kashagan – one of the world’s largest and
most logistically complex oil developments,
where we have created a web-based mapping
platform to assist in oil spill response, pipeline
integrity, vessel tracking and ice monitoring in and
around the Caspian Sea. The team were also engaged by
oil companies to help build their own geospatial capabilities
through the delivery of formal training courses in Europe, the US
and Australia.
Our geospatial skills continue to open doors to a range of new sectors. In
AP 2017 we worked in partnership with Esri UK on contracts in the water and
transportation industries. We also matured and expanded our geospatial software
services footprint in the nuclear space and won our first contract in energy infrastructure – NorthConnect,
a JV laying a cable to connect the power systems of Scotland and Norway, engaging us to design a portal for
map and app solutions that facilitate data and information sharing.
In each of these new sectors our investment of time and resource was rewarded in AP 2017 by winning
follow-on work.
STAFF AND BOARD CHANGES
Undertaking such a fundamental review of our operations has meant taking difficult but important
decisions. One of these has been the need to restructure our reporting lines and to reduce headcount –
which in AP 2017 we lowered by c27% to 84. During the period, Dr Paul Carey and Dr Paul Markwick both
left the Getech Board and Group.
We have moved into 2018 with a better balance of skills, stronger leadership in our product and service
teams, and an Executive Committee that is empowered to drive Getech’s next phase of growth. With the
Board focused on governance and strategy it is key that it can access the skills necessary to review our
progress and positioning. To this end we are pleased to welcome to the Board Andrew Darbyshire as
Group Chief Financial Officer, and Chris Jepps as Group Chief Operating Officer.
Andrew is a Chartered Accountant with a background in audit. He joined Getech in 2014 as the Group’s
Finance Manager. Since then he has worked tirelessly to strengthen the financial control environment and
enhance the quality of information on which the Executive Committee and Board bases their decisions.
Andrew also had a leading role in the acquisition of both ERCL and Exprodat. Chris joined Getech in 2016
at the time of the acquisition of Exprodat, where he led the development of geospatial software products.
As Getech’s Products Director Chris has been the driving force behind the operational repositioning of
our products division. With both service and product leadership now reporting to Chris, the new role of
Chief Operating Officer is positioned to drive further product growth and to enhance the profitability and
positioning of our services.
Huw Edwards, who joined Getech’s Board in 2015 following the acquisition of ERCL, is stepping down as a
Director. We extend Getech’s thanks to Huw, who, across his years on the board, has brought a valuable
and differentiated perspective on the industry.
11
STRATEGIC REPORT
CHAIRMAN’S and
CHIEF EXECUTIVE’S
REVIEW
CONT.
AP 2017 was a period of change for all within the Getech Group and we would like to thank all Getech’s staff
on behalf of the Board for their hard work and professionalism throughout AP 2017.
OUTLOOK
Our customers’ attitude to capital spending is currently balanced between spot oil prices, which have rallied
strongly since July, and longer-dated crude prices, which continue to trade in a relatively narrow $55 to $60
per barrel range. Alongside this, industry costs have fallen dramatically - making the environment for oil &
gas investment much more attractive today than it was 12 months ago.
The downturn has also challenged our customers to rethink the way that they access, manage and analyse
data. By strengthening Getech’s offering as an essential data, software and information provider, we are
positioning the Group for growth in this exciting new operational landscape.
We have begun 2018 by backing our growth ambitions with targeted operational, sales and marketing
investment. We do not however anticipate significant upward pressure on FY costs. Following on from our
2017 programme of R&D investment we also expect 2018 cash tax credits of a similar level (pro rata) to that
realised in AP 2017. By broadly maintaining this cost and tax structure, a similar pro rata sales performance
to AP 2017 (sales mix and divisional margin) would generate a cash inflow of approximately £0.5 million
(post-investment and debt repayments). With c85% of our cost base fixed, each 10% increase in revenue
would broadly translate to a £0.6 million increase in free cash flow.
It remains early in the year, but our sales pipeline has the potential to exceed 2017 levels. This reflects a
Q1 upturn in data sales for frontier regions, and continued growth in the userbase for our software and
information products. Further leverage comes from the growth in the breadth, quality and value of the data
that we can license. One route to market for this data is the Fourth Sierra Leone Licensing Round, where
we have worked with the Petroleum Directorate to assemble a technically-rich package of seismic, well and
‘value-add’ data to support potential investors in their assessment of the region’s prospectivity.
Net of our revenue sharing agreement with the Sierra Leone Government, a single licensing of this data set
has the potential to be a disclosable event for the Getech Group.
Whilst general geoscience consulting remains tough, we take encouragement from an increase in demand
for our specialisms – our Gravity & Magnetic team beginning 2018 with a full programme of billable work.
Our geospatial services also continue to diversify our sources of revenue.
We have entered 2018 well positioned to drive diversified organic growth. Alongside reviewing all options
regarding our Kitson House office in Leeds, we are also focussed on the potential for acquisitions.
DR STUART PATON
Chairman
12
DR JONATHAN COPUS
Chief Executive
FINANCIAL
REVIEW
FINANCIAL SUMMARY
In the 17 months to 31 December 2017 (“AP 2017”)
Getech reshaped its cost base and commercial offering.
The net result has significantly strengthened Group finances
– Getech delivering a step-change in cashflow, which we used to
grow investment, clear all M&A cash liabilities and further repay debt.
The programme of change led to restructuring costs and, following a periodic
review of sales catalysts, we have written down inventories relating to a number of studies and reports.
These items obscure Getech’s underlying AP 2017 performance. The picture for the prior audited
accounting period (the 12 months to 31 July 2016: “FY 2016”) is also complicated by fair-value adjustments
taken at 31 July 2016.
To aid in the analysis of our underlying financial performance, the table below sets out key figures from the
financial statements and the equivalent figure adjusted for these events and accounting treatments.
17 months
12 months
Table 1 - Financial summary
17 months 2017
(audited)
£’000
2017 adjusted
(unaudited)
£’000
2016 reported
(audited)
£’000
2016 adjusted
(unaudited)
£’000
Revenue
EBITDA (1) (2) (3)
Operating (loss)/profit (1) (2) (3)
(Loss)/Profit after tax (1) (2) (3)
Earnings per share
Net cash inflow/(outflow) from
operations (1)
Development costs capitalised
Acquisition costs, net of cash received
Net (decrease)/increase in cash (1)
Cash and cash equivalents (1)
Borrowings
(1) Restructuring costs
10,946
523
(661)
(40)
(0.11)p
1,614
(1,154)
(500)
(392)
2,393
(634)
10,946
1,471
287
908
—
2,101
(1,154)
(500)
95
2,880
(634)
7,031
1,364
693
1,089
3.25p
(285)
(823)
(240)
(2,064)
2,788
(900)
7,031
545
(126)
270
—
(259)
(823)
(240)
(2,038)
2,814
(900)
During 2017, the Group launched a restructuring programme that resulted in one-off costs of £487,000
(2016: £26,000). The adjusted income statement and cash flow figures above remove these costs to show
the underlying business performance.
13
STRATEGIC REPORT
FINANCIAL
REVIEW
CONT.
(2) Fair value adjustment
During 2016, the fair value of the provision for earn-out payments relating to the acquisition of ERCL was
written down by £845,000 resulting in a one-off credit to administrative costs for the same amount. The
adjusted income statement figures above reverse the change to the fair value of the provision, which was
made in 2016 to reflect market conditions. This is an accounting adjustment and therefore does not affect
reported cash flow figures.
(3) Write-down of inventories
Following management’s review of inventories, it was considered appropriate to impair the carrying value of
a number of reports and studies, the cost of which was carried on the balance sheet. The total value of the
impairment is £461,000 (2016: £nil); this additional cost is included within cost of sales on the Consolidated
Statement of Comprehensive Income and has been adjusted for above.
OPERATING INCOME
Revenue for AP 2017 amounted to £10,946,000 (FY 2016: £7,031,000), an increase of 10% pro-rata from
the previous financial year. Within this figure, Products revenues grew by 24%, accounting for 69% of FY
2017 group revenue. The Services market remained challenging throughout the 17-month period under
review, revenues falling 16% pro-rata against FY 2016. However, project work in 2017 laid the foundations
for important service and sales opportunities in 2018, including the launch of the Fourth Sierra Leone
Licencing Round.
Gross margins
Gross margin, before inventory impairments of £461,000, for AP 2017 was 47%, compared to a 50%
gross margin in FY 2016. Underlying this slight reduction at Group level is the strong performance of our
products division, partially offset by the continued challenges of the Services market - the gross margin
(before impairments) on product sales equalling 65% for the period (FY 2016: 61%), the margin on Services
reduced to 7% (FY 2016: 24%).
17 months 2017
12 months 2016
Products
Services
Products
Services
7,570
(2,649 )
4,921
65%
(461)
4,460
59%
3,372
(3,152)
220
7%
—
220
7%
4,320
(1,692)
2,628
61%
—
2,628
61%
2,845
(2,164)
681
24%
—
681
24%
Table 2 - Gross margin
by reporting segment
Revenue
Cost of sales
Gross profit before impairments
Margin (before impairments)
Impairment of inventories
Gross profit
Gross margin
14
Administrative costs
During AP 2017 there were several changes to the business that affect administrative costs; the Group
incurred additional overhead through the acquisition of Exprodat, we completed a restructure process, and
we introduced a new senior management team.
To manage these changes, we took steps to consolidate and streamline overhead costs within the business,
which led to a 15% pro-rata reduction in cash administrative costs. This figure excludes restructuring
costs but includes the absorption of Exprodat’s administrative costs in AP 2017 (see table 3 below). Cash
administrative costs before restructuring in AP 2017 totalled £3,569,000 (FY 2016: £2,974,000).
Currency
Getech’s cost base is predominantly in pound sterling, but a significant proportion of its revenue is
denominated in US dollars. Although currency markets remained favourable to the Group in AP 2017
(£77,000 gain), the benefit was less than that in FY 2016 (£123,000 gain). Further details regarding
the Group’s foreign currency risk and mitigation are set out in Note 20 to the Consolidated Financial
Statements.
Depreciation and Amortisation
During AP 2017, depreciation and amortisation charges totalling £1,184,000 were allocated to
administrative costs on the income statement (FY 2016: £671,000). During the period amortisation
charges on development costs increased as we continue to develop Globe. During FY 2018, a significant
proportion of our Data Holdings will be fully amortised, which will somewhat offset the rate of increase in
amortisation of Development costs. A full breakdown of depreciation and amortisation is included in
notes 13 and 14 to the financial statements.
Operating profit
The Group reported an operating loss of £661,000 for AP 2017 (FY 2016: £693,000
profit). However, this included restructuring costs of £487,000 (FY 2016:
£26,000) and an impairment of inventories of £461,000 (FY 2016: £nil).
Prior year operating profits included a one-off fair value adjustment
£845,000, which was a credit to the income statement.
Taking account of these one-off adjustments, the Group
made an adjusted operating profit of £287,000 (FY 2016:
£126,000 operating loss).
Income tax
The Group has reported an income tax credit of
£653,000 (FY 2016: £418,000). To be able to help
our customers understand and resolve their
exploration and operational challenges requires us
undertaking pioneering research and development.
Against the cost of this work we obtained
corporation tax relief, and subsequently realised
a tax credit for the current year of £410,000 (FY
2016: £236,000). This figure also includes a prior
15
STRATEGIC REPORT
FINANCIAL
REVIEW
CONT.
year and foreign taxation adjustment of £123,000 credit (FY 2016: £126,000 credit) and deferred taxation
adjustments of £120,000 credit (FY 2016: £56,000 credit).
After taxation, Getech reported an AP 2017 loss of £40,000 (FY 2016: £1,089,000 profit). Adjusting AP 2017
for restructuring costs and write downs, and FY 2016 for fair value revisions, this translated to an underlying
net profit of £908,000 (FY 2016: net profit £270,000).
COST BASE ANALYSIS
Through a restructuring programme, in the first 12 months of the period Getech reduced its cost base by
32%. Inclusive of investments made in our sales and project management capabilities, costs were held flat
across the following 5 months to 31 December 2017 - the 17-month cost base before restructuring costs
totalling £10,590,000. The table below reconciles our cost base to the financial statements.
% variance
(pro-rata)
17 months
2017
£’000
Pro-rata
12 months 2017
£’000
12 months
2016
£’000
Table 3 - Cost base reconciliation
Cost of sales (including inventory impairments)
(Decrease)/increase in inventories
Development costs capitalised
Administrative costs
Fair value adjustments
Depreciation and amortisation charges
Exchange adjustments
Provisions
Cost base
Exprodat cost base for 2016 (an additional
10.5mths in full year figures)
Like-for-like cost base
Restructure costs
6,262
(395)
1,154
5,345
—
(1,184)
8
(118)
11,072
—
11,072
(487)
(3) %
(29) %
Like-for-like cost base, excluding one-off
redundancy costs
(32) %
10,585
4,420
(279)
815
3,773
—
(836)
6
(83)
7,816
—
7,816
(344)
7,472
3,503
775
823
2,835
845
(671)
77
(113)
8,074
2,873
10,947
(26)
10,921
Cost base is measured as: cost of sales, administrative costs and development costs capitalised, less depreciation and amortisation, and
adjusted for movement in work in progress, non-cash foreign exchange adjustments and fair value adjustments. To allow like-for-like
analysis, the cost base of Exprodat, that was not consolidated into the Group financial statements before its acquisition on 14 June 2016, has
been added to the Group cost base. Figures below the ‘cost base’ line are unaudited.
16
OPERATING CASH FLOWS
During 2017 Getech generated a £1,614,000 cash inflow from operating activities after tax (2016: £285,000
cash outflow). This includes £487,000 of one-off restructuring costs. When taking this into account, the
underlying cash generated from operations after tax was £2,101,000 (see table 1 above).
Changes in working capital
Inventory balances fell during the period resulting in a positive working capital adjustment of £395,000
(2016: £775,000 increase in inventories). Included in this balance movement is the impairment of reports
and studies totalling £461,000.
The reduction in the Group’s Trade and Other Receivables over the period reflects the combined benefit
of strengthening and streamlining of our revenue collection process, and the Group Accounting Reference
Date no longer being co-terminus with the Globe subscription billing cycle.
Overall, Trade and other receivables reduced by £1,250,000 (2016: £1,491,000 reduction). Through
improvements to the revenue collection process, we are achieving quicker collection of debtors and, we
have recovered £45,000 in debts that were previously provided for, however, we have made an additional
provision for debtors amounting to £163,000 during the period.
During AP 2017 Getech reshaped the Globe product to more closely align its evolution with our customers’
day-to-day needs. One step to achieving this was to move from a 3-year product cycle, to an annual
product cycle. Reflecting this new commercial formula, Deferred Income balances have reduced and this
is a contributing factor to the reduction of Trade and Other Payables by £1,092,000 (FY 2016: £1,165,000
reduction).
Cash taxation
A review of our corporate tax efficiency was completed in AP 2017. This identified
overpayments in US federal taxes that we were able to recover, and we improved the
tax credit position against our R&D expenditure. The net result was that Getech
received cash tax refunds and credits totalling £467,000 (2016: £326,000
payments).
We anticipate further cash tax receipts from R&D tax allowances in
2018; our current tax receivables balance for 31 December 2017
totalling £490,000 (based on our corporate tax provisions for
AP 2017).
INVESTMENT, CAPITAL EXPENDITURE AND FINANCING
Development expenditure on Globe and Software
totalled £1,154,000 (FY 2016: £823,000).
A review of the earn-out provision relating to the
acquisition of ERCL resulted in a fair value adjustment
credit of £845,000. This was taken at 31 July 2016,
triggered by a downward revision to the forecast of
cash M&A payments to be made in AP 2017.
17
STRATEGIC REPORT
FINANCIAL
REVIEW CONT.
M&A payments made in AP 2017 totalled £500,000 (FY 2016: £240,000). These were the final payments due
relating to the acquisitions of ERCL (acquired April 2015) and Exprodat (acquired June 2016).
At the period end Getech’s outstanding loan balance was £634,000 (FY 2016: £900,000), with debt
repayments totalling £266,000 during the period (FY 2016: £132,000). This facility is secured against our
Leeds office, which has a net book value of £2,424,000 (assessed against its in-use value).
Dividend
Having undergone significant organisational change in AP 2017, the Board decided that it was appropriate
to not pay a dividend. We began 2018 financially and operationally stronger, with a focus on growth and
opportunity. The Board is committed to reinstating a dividend.
LIQUIDITY AND GOING CONCERN
At the end of AP 2017, Getech held £2,393,000 in cash and cash equivalents (FY 2016: £2,788,000), with a
net cash position of £1,759,000 (FY 2016: £1,888,000).
Getech’s business activities and the factors likely to affect its future development, performance and
position are set out in the Chairman’s and Chief Executive’s Review. The financial position of the Group,
its cash flows and its liquidity position are described in the financial statements. In addition, notes 20
and 21 include details of Getech’s key financial risks and the Group’s policies and procedures for capital
management.
In making the going concern assessment, the Board of Directors has considered Group budgets and
detailed cash flow forecasts to 31 March 2019. Following this review, the Directors consider that the
Company and the Group are going concerns and the financial statements are prepared on that basis.
ANDREW DARBYSHIRE
Finance Director
18
PRINCIPAL
RISKS AND UNCERTAINTIES
INTERNAL CONTROL AND RISK MANAGEMENT
The Board has overall responsibility for the Group’s systems of internal control and for reviewing their
effectiveness. The Group maintains systems that are designed to provide reasonable but not absolute
assurance against material loss and to manage rather than eliminate risk.
The key features of the Group’s systems of internal control are as follows:
• A management structure with clearly identified responsibilities
• The production of timely and comprehensive historical management information
• Detailed budgeting and forecasting
• A monthly analysis of risks and threats is reviewed by the Board at each of its meetings
• Day-to-day hands-on involvement of the Executive Directors
The key financial indicators used by the Directors to monitor the performance of the Group are
operating cash flows, revenues and operating profit.
The principal risks facing the business are outlined below:
Risk
Description
Mitigation
Change
Liquidity risk
The risk that the Group may be
unable to meet short term financial
demands.
Cash flow forecasts and future income levels
are carefully monitored on a regular basis.
Financial risk
The most important components of
financial risk are market borrowing
interest rate risk, customer credit
risk and currency risk.
Staff engagement
and retention
Retention of specialist staff is crucial
to the success of the business.
These risks are mitigated by regular monitoring of
market rates, by assessment of the creditworthiness
of the customer base and by the policy of matching,
as far as possible, the timing of settling invoices where
sales and purchases are in currencies other than
pound sterling.
The Group aims to ensure that it provides stimulating
work in an attractive environment; together with its
employment policies, these features are designed to
attract and retain the high-quality staff that form the
basis for the Group’s success.
Systems and
infrastructure
Oil price
The Group is reliant on its IT
infrastructure in order to trade. A
failure in these systems could have a
significant impact on its business.
Controls are in place to maintain the integrity and
efficiency of the Group’s systems, which are regularly
backed up, updated and tested. During the year, an
internal audit of information management protocols
and procedures was conducted.
During the year, there has been
continued uncertainty over the
long-term price of oil.
The Directors and Executive team meet regularly to
monitor the impact on demand for our products and
services, and to refine our strategy to mitigate the
effects of a long-term reduction in the price of oil.
APPROVAL OF THE STRATEGIC REPORT
The Strategic Report on pages 3 to 19 was approved by the
Board on 27 February 2018.
DR STUART PATON
Chairman
19
CORPORATE GOVERNANCE
DIRECTORS
Stuart holds a number of advisory roles, including with
Berwicks Consulting Ltd and GLG. He has previously been
the Technical and Commercial Director and CEO of Dana
Petroleum, delivering a number of acquisitions for them.
Before joining Dana, he held a number of roles at Shell.
Stuart has a BA in Earth Sciences and a PhD in Geology from
Cambridge University.
Audit Committee, Remuneration Committee (Chair), Nomination Committee (Chair)
Peter is currently Chairman of ASX quoted Etherstack,
Boisdale Canary Wharf and True Luxury Travel. He is also
a Director of various private companies. He was Chairman
of Getech from its flotation on AIM in 2005 up until 2013.
Previously, Peter was the Chairman and founder of Tristel
plc, and was a Director during the company’s flotation on AIM
in 2005 up until 2013. He was also the Head of European
Equities Sales at Salomon Brothers and Crédit Lyonnais.
Peter has an MA in Jurisprudence from Oxford University
and he qualified as a barrister in 1978. He now runs his own
Venture Capital business.
DR STUART PATON
NON-EXECUTIVE CHAIRMAN
PETER STEPHENS
NON-EXECUTIVE DIRECTOR
Audit Committee, Nomination Committee
Alison is an experienced entrepreneur, creating, building and
investing in high-growth companies. Her career has spanned
scientific research at Zeneca plc, strategy consultancy at
McKinsey & Company and business building at IP Group plc.
She is a board member of Perachem Holdings plc, Nanoco
Group plc, the Royal Voluntary Service and the Carnegie Trust
for the Universities of Scotland. Alison holds an MBA from
Manchester Business School, a PhD in Organic Chemistry
and a First-Class degree in Chemistry from the University of
Glasgow.
Audit Committee (Chair), Remuneration Committee, Nomination Committee
DR ALISON FIELDING
NON-EXECUTIVE DIRECTOR
20
Chris holds a BSc in Geology and an MSc in Applied
Geophysics from the University of Birmingham. He started
his career in 1980 with BP in London, and has since worked
for a variety of small to large Independent Oil Companies in
various technical and managerial roles, as well as consulting
for 8 years. Chris’s last oil company role was General
Manager of Exploration for Tullow Oil when the company
grew rapidly following the discovery of major new oil
provinces in Ghana, Uganda and Kenya. Chris is the Managing
Director of Zinc Consultants.
Remuneration Committee
Jonathan has extensive industry, corporate finance and
capital markets experience, having worked as an Exploration
Geologist at Shell, as the top-rated Exploration & Production
Sell-side Equity Analyst at a number of City companies
(including Investec and Deutsche Bank) and most recently as
Chief Financial Officer at Salamander Energy plc, which was
acquired by Ophir plc in 2015. Jonathan has a PhD from the
University of Cambridge and a First-Class BSc in Geology
from the University of Durham.
Huw has a BSc in Geology from the University of Manchester
and an MSc in Geophysics from Imperial College. He started
his career at Amoco and went on to work for Superior Oil,
Exploration Consultants Limited as their Chief Geophysicist,
BG Group as their Manager of Geophysics and PGS as their
Project Director. He started up the original ERCL in 2010. In
January 2014, Huw merged the original ERCL with part of the
business of SAER Limited to form a new combined company
that Getech went on to acquire in April 2015.
CHRIS FLAVELL
NON-EXECUTIVE DIRECTOR
DR JONATHAN COPUS
CHIEF EXECUTIVE OFFICER
HUW EDWARDS
DIRECTOR
21
CORPORATE
GOVERNANCE
REPORT
Getech is committed to high standards of governance, so far is practicable and appropriate for a group
of its size and nature. As such, Getech has given careful consideration to the principles of the UK
Corporate Governance Code (‘the Code’). The Group does not comply with the Code; however, we have
reported on our corporate governance arrangements by drawing upon best practice, including those
aspects of the Code that we consider to be relevant.
THE BOARD
The Board currently comprises of four Non-Executive Directors and two Executive Directors. The roles
of the Chairman, who is non-executive and elected by the Board, and the Chief Executive, are separated.
All Directors are subject to retirement by rotation and re-election is a matter for the shareholders. The
Non-Executive Directors ensure a balance to the Board by constructively challenging the Executive
Directors.
A Directors’ Responsibilities statement in respect of the financial statements is set out in this Annual
Report on page 25.
The Board is responsible for approving overall strategic, financial and operational matters and for the
identification of risks faced by the Group. Board approval is required for certain matters, the most
significant of which are:
• Final approval of the Annual Report and Accounts
• The budget and major capital expenditure
• The dividend policy
• Acquisitions and alliances policies
The Board delegates certain matters regarding audit, remuneration and nomination to its principal
committees, each of which has written terms of reference.
Attendance by each Director at full meetings of the Board and Board committees of which they were a
formal member during the period is summarised below.
Director
Board
Audit
Committee
Renumeration
Committee
Nomination
Committee
Dr Stuart Paton
Dr Alison Fielding
Peter Stephens
Chris Flavell
Dr Jonathan Copus
Huw Edwards
Paul Markwick
Paul Carey
10/10
10/10
10/10
10/10
10/10
9/10
3/4
2/4
3/3
3/3
2/3
-
-
-
-
-
1/1
1/1
-
1/1
-
-
-
-
1/1
1/1
1/1
-
-
-
-
-
The effectiveness of the board is reviewed on an annual basis, and progress against the review
recommendations is monitored on a regular basis.
22
CORPORATE GOVERNANCE COMPANY SECRETARY
The Company Secretary is responsible for ensuring that Board procedures are followed, that the Company
complies with company law and the AIM rules, and that the Board receives the information it needs to fulfil
its duties effectively.
All Directors have access to the Company Secretary and their appointment (or termination of appointment)
is a matter for decision by the full Board.
AUDIT COMMITTEE
The Audit Committee consists of three non-executive members of the board and meet at least twice a year.
The principal duties and responsibilities of the Audit Committee include:
• Monitor the Group’s internal financial controls and assess their adequacy
• Review key estimates, judgements and assumptions applied by management in preparing published
financial statements
• Assess annually the auditor’s independence and objectivity
• Make recommendations in relation to the appointment, re-appointment and removal of the company’s
external auditor
• Review and consider for approval, significant new contracts
REMUNERATION COMMITTEE
The Remuneration Committee consists of three non-executive members of the board and meet at least
once a year. The principal duties and responsibilities of the Remuneration Committee include:
• Setting the remuneration policy for all Executive Directors and the Chairman
• Recommending and monitoring the level and structure of remuneration for senior management
• Approving the design of, and determining targets for, and performance-related pay schemes operated
by the company and approve the total annual payments made under such schemes
• Reviewing the design of all share incentive plans for approval by the board and shareholders
None of the Committee members have any personal financial interest (other than as shareholders),
conflicts of interest arising from cross-directorships or day-to-day involvement in the running of the
business. No director plays a part in any final decision about his or her own remuneration.
NOMINATION COMMITTEE
The Nomination Committee consists of three non-executive members of the board and meet at least once
a year. The principal duties and responsibilities of the Nomination Committee include:
• Regularly reviewing the structure, size and composition of the Board
• Giving consideration to succession planning for Directors and other senior Executives
Identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and
•
when they arise
• Membership of the Audit and Remuneration Committees
23
CORPORATE GOVERNANCE
DIRECTOR’S
REPORT
The Directors present their report and financial statements for the period ended 31 December 2017.
PRINCIPAL ACTIVITIES
The principal activity of the Group is to provide geoscience and geospatial products and services that
companies and governments use to de-risk their exploration programmes and improve their management
of natural resources.
FUTURE DEVELOPMENTS
The future developments of the Group are included in the Strategic Report.
DIRECTORS
The Directors of the Parent Company who served during the period were:
Dr Paul Carey (resigned 31 December 2016)
Dr Jonathan Copus (appointed 2 August 2016)
Huw Edwards Dr Alison Fielding
Chris Flavell
Dr Stuart Paton
RESULTS AND DIVIDENDS
Dr Paul Markwick (resigned 31 January 2017)
Peter Stephens
The results for the period are set out on page 34. The Directors do not recommend a dividend
(2016: no dividend).
DIRECTORS’ INDEMNITY
The Group maintains Directors’ and Officers’ liability insurance, which gives cover against legal action that
may be taken against them. Qualifying third-party indemnity provisions (as defined in Section 234 of the
Companies Act 2006) are in force for the benefit of Directors.
RISKS
The principal risks of the Group are included in the Strategic Report.
SUBSTANTIAL SHAREHOLDERS
The Parent Company was notified on 23 January 2018 of the following interests in excess of 10% of its
issued Ordinary Share capital. Please see the table below:
Number of Ordinary Shares
% of issued share capital
IP Group plc
Professor J. D. Fairhead
7,077,404
4,399,602
19
12
CORPORATE GOVERNANCE
See separate Corporate Governance Report.
24
CORPORATE GOVERNANCE
DIRECTOR’S
RESPONSBILITIES
The Directors are responsible for preparing the Strategic Report,
Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law, the Directors have elected to prepare
consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and to prepare
the Parent Company’s financial statements under United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice). Under
company law, the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs of the Company
and Group and of the profit or loss of the Company and Group for that period. In
preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently
• Make judgements and estimates that are reasonable and prudent
• State whether applicable IFRS have been followed in the consolidated financial
statements and whether UK Accounting Standards have been followed in the Parent
Company’s financial statements, subject to any material departures disclosed and explained
in the financial statements
• Prepare the financial statements on a going concern basis, unless it is inappropriate to presume that
the Company or Group will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position
of the Company and the Group and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group,
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that:
• So far as each Director is aware, there is no relevant audit information of which the Company’s external
auditor is unaware
• The Directors have taken all steps that they ought to have taken to make themselves aware of any
relevant audit information and to establish that the external auditor is aware of that information
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Group’s website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
25
CORPORATE GOVERNANCE
DIRECTOR’S
RESPONSBILITIES
CONT.
GOING CONCERN
The Directors have performed regular reviews of trading and cash flow forecasts and have considered the
sensitivity of these forecasts with regards to different assumptions about future income and costs. With the
existing cash levels and continued prospects for profitable trading, the Directors are fully satisfied that the
Group is a going concern and will be able to continue trading for the foreseeable future.
AUDITOR
Grant Thornton UK LLP has expressed its willingness to continue in office as external auditor. A resolution
to re-appoint Grant Thornton UK LLP will be proposed at the forthcoming Annual General Meeting.
By order of the Board
ANDREW DARBYSHIRE
Company Secretary
27 February 2018
26
CORPORATE GOVERNANCE INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF GETECH GROUP PLC
OPINION
Our opinion on the financial statements is unmodified
We have audited the financial statements of Getech Group Plc (the ‘parent company’) and
its subsidiaries (the ‘group’) for the period ended 31 December 2017 which comprise the
Consolidated statement of comprehensive income, the Consolidated statement of financial
position, the Consolidated statement of cash flows, the Consolidated statement of changes in
equity, the Company balance sheet, the Company statement of changes in equity and notes to
the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation of the group financial statements
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The financial reporting framework that has been applied in the preparation
of the parent company financial statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 ‘Reduced Disclosures Framework’ (United
Kingdom Generally Accepted Accounting Practice).
In our opinion:
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 31 December 2017 and of the group’s loss for the period then ended;
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with
•
United Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the
•
Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
group and the parent company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
WHO WE ARE REPORTING TO
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
27
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
INDEPENDENT
AUDITOR’S
REPORT
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us
to report to you where:
•
the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that
•
may cast significant doubt about the group’s or the parent company’s ability to continue to adopt
the going concern basis of accounting for a period of at least twelve months from the
date when the financial statements are authorised for issue.
OVERVIEW OF OUR AUDIT APPROACH
• Overall group materiality: £51,000, which represents 5% of the group's normalised
earnings before taxation assessed across three accounting periods;
• We have identified two key audit matters, which are revenue recognition and carrying value
of goodwill and other intangible assets; and
• We have assessed the components within the group by considering each as a percentage
of Group’s total assets, liabilities, revenues and profit before tax, and performed a
combination of comprehensive audits and targeted audit procedures.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the financial statements
of the current period and include the most significant
assessed risks of material misstatement (whether or
not due to fraud) that we identified. These matters
included those that had the greatest effect on:
the overall audit strategy; the allocation of
resources in the audit; and directing the
efforts of the engagement team. These
matters were addressed in the
context of our audit of the financial
statements as a whole, and in
forming our opinion thereon,
and we do not provide a
separate opinion on these
matters.
28
KEY AUDIT MATTER – GROUP AND PARENT
HOW THE MATTER WAS ADDRESSED
Risk 1 – Revenue recognition
IN THE AUDIT – GROUP AND PARENT
There is a risk that revenue may be misstated
due to the improper recognition of revenue.
Our audit work included, but was not restricted to:
• Walkthrough of the systems and controls in
This risk is heightened based on the level of
revenue which is accrued or deferred based
on underlying contracts. In respect of revenue
recognised for ongoing projects such as the
Globe project, there is a risk that revenue is
recognised before the risk and rewards of
ownership have transferred to the customer.
As there are contractual arrangements with
customers, there is a risk that revenue is
misstated as each contract’s outcome and
stage of completion requires professional
judgement.
We therefore identified revenue recognition
as a significant risk, which was one of the
most significant assessed risks of material
misstatement.
place around the recording of revenue.
• Evaluation of the revenue recognition policies
for appropriateness with IAS 18 ‘Revenue’,
as applicable and consistency with the prior
period.
• Testing a sample of revenue transactions in
respect of sale of data and consultancy
services provided and assessing them
against supporting documentation to
determine whether income has been
appropriately recognised in accordance
with IAS 18 ‘Revenue’ and the Group’s
accounting policy.
• Testing revenue to contracts, on a sample
basis to determine whether the revenue has
been recognised in accordance with the
terms of the contract.
• Comparison of revenue from the sale of data
and consultancy services with the revenue in
the prior period and obtaining and
corroborating the explanation for significant
and unusual variances.
The group's accounting policy on revenue
recognition including the key sources of estimation
uncertainty is shown in Notes 3.2 and 3.18 in the
Summary of Accounting policies section and related
disclosures are included in Note 4.
KEY OBSERVATIONS
Based on our audit work we have not found
any material misstatements in the recognition
of revenue in accordance with the Group’s
accounting policies and IAS 18 ‘Revenues’.
29
FINANCIAL STATEMENTS
INDEPENDENT
AUDITOR’S
REPORT
KEY AUDIT MATTER – GROUP
HOW THE MATTER WAS ADDRESSED
Risk 2 – Carrying value of goodwill and
other intangible assets
IN THE AUDIT – GROUP
Within the consolidated statement of financial
position are significant balances for goodwill
and other intangible assets arising from
previous acquisition activity.
These balances represent a significant
proportion of the total assets figure within the
consolidated statement of financial position
and, if the underlying subsidiaries are not
performing in line with forecast, are at risk of
being materially misstated.
We therefore identified carrying value of
goodwill and other intangible assets as
a significant risk, which was one of the
most significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
• Walkthrough of the systems and controls in
place around the assessment of carrying
value of goodwill and intangible assets.
• Determination of whether the assigned life
of each applicable intangible asset remains
appropriate.
• Testing on a sample basis, the additions to
intangible assets during the period to
supporting documentation.
• Development of an expectation of
amortisation expense for the period and
comparison against the expense recorded.
• Assessment and challenge of management
prepared reviews of the carrying value of
goodwill and intangible assets. Our challenge
focussed around the assumptions regarding
future revenues from the underlying cash
generating units relative to historic
performance, and assessed the commercial
prospects of ongoing projects relative to
similar past projects.
KEY OBSERVATIONS
Based on our audit work we have not identified
any material misstatements in the carrying
value of goodwill and intangible assets in the
consolidated statement of financial position.
OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the financial statements that makes it probable
that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We
use materiality in determining the nature, timing and extent of our audit work and in evaluating the results
of that work.
30
Materiality was determined as follows:
Materiality measure
Group
Parent
Financial statements as a whole
£51,000, which is 5% of normalised earnings
before tax assessed across three accounting
periods. Earnings before tax are considered
to be the most important figure to the users
of the financial statements. This has been
normalised because earnings have fluctuated
in recent years and also include exceptional
costs, related to restructuring. Therefore,
normalised earnings before tax was deemed
the most appropriate benchmark .
Materiality is based on 5% of normalised earnings
before tax assessed across three accounting periods,
capped to 90% of group materiality, which is £46,000.
This benchmark is considered the most appropriate
because the parent company is also the largest trading
company, therefore the normalised earnings before
tax basis ensures that materiality is based on the
most important figure to the users of the financial
statements, and takes into account the fluctuation of
earnings in recent years.
Materiality for the current period is consistent
with the level that we determined for the year
ended 31 July 2016.
Materiality for the current period is consistent with the
level that we determined for the year ended 31 July
2016.
Performance materiality used to
drive the extent of our testing
75% of financial statement materiality.
75% of financial statement materiality.
Specific materiality
Directors’ remuneration and related party
transactions were treated as material by
nature.
Directors’ remuneration and related party
transactions were treated as material by nature.
Communication of
misstatements to the audit
committee
£3,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£2,500 and misstatements below that threshold that,
in our view, warrant reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the
tolerance for potential uncorrected misstatements.
25%
25%
75%
75%
OVERALL MATERIALITY - GROUP
OVERALL MATERIALITY - PARENT
Tolerance for potential uncorrected misstatements
Performance materiality
COMPONENT MATERIALITY
Our audit work at a component level is executed at levels of materiality appropriate for such components.
For the subsidiary in the United States of America (US), which does not need a local opinion, we performed
targeted procedures using the materiality level assessed for Group.
31
FINANCIAL STATEMENTS
INDEPENDENT
AUDITOR’S
REPORT
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our audit approach was a risk-based approach founded on a thorough understanding of the Group's
business, its environment and risk profile and in particular included:
• Documenting and evaluating the processes and controls covering the Key Audit Matters.
• Evaluation by the group audit team of identified components to assess the significance of that
component and to determine the planned audit response based on a measure of materiality
considering each as a percentage of Group’s total assets, liabilities, revenues and profit before tax.
• For those components that were evaluated as significant components, a full scope audit approach was
determined based on their relative materiality to the Group and our assessment of the audit risk;
• We performed a full-scope audit of the financial information of the parent company, Getech Group plc
and of the Group’s operations throughout the United Kingdom. The Group’s component in the US was
subject to targeted procedures over the balance sheet and income statement with a focus on applicable
risks identified above and the significance to the Group’s balances.
• The components subject to a comprehensive audit approach cover 72% of the consolidated revenues,
92% of consolidated assets and 100% of total loss before tax, with the component subject to a targeted
approach representing 28% of the consolidated revenues and 8% of consolidated assets
• The accounting functions are performed centrally for all entities. All audit work has been undertaken by
the Group audit team.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information
included in the annual report and accounts set out on pages 1 to 82, other than the financial statements
and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of
the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
OUR OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 IS UNMODIFIED
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
and
•
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
32
MATTERS ON WHICH WE ARE REQUIRED TO REPORT UNDER THE COMPANIES ACT 2006
In the light of the knowledge and understanding of the group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or
the directors’ report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns;
or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL STATEMENTS
As explained more fully in the directors’ responsibilities statement set out on page 25 the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditor’s report.
VICTORIA MCLOUGHLIN BA FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
27 February 2018
33
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE 17-MONTH PERIOD ENDED 31 DECEMBER 2017
Note
17 months ended
31 Dec 2017
£’000
12 months ended 31
Jul 2016
£’000
Revenue
Cost of sales
Exceptional inventory impairments
Gross profit
Administrative expenses
Operating profit before exceptional administrative expenses
Exceptional administrative expenses:
Fair value adjustments
Restructure costs
Operating profit
Finance income
Finance costs
Profit before tax
Income tax credit/(expense)
Profit for the year attributable to owners of the Parent Company
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences on translation of foreign
operations
Total comprehensive income for the year attributable to owners
of the Parent Company
Earnings per share
Basic earnings per share
Diluted earnings per share
All activities relate to continuing operations.
The accompanying notes on pages 38 to 68 form an integral part
of these financial statements.
4
4
5
7
8
9
11
11
10,946
(5,801)
(461)
4,684
(4,858)
(174)
—
(487)
(661)
2
(34)
(693)
653
(40)
(10)
(50)
(0.11)p
(0.11)p
7,031
(3,503)
—
3,528
(3,654)
(126)
845
(26)
693
8
(30)
671
418
1,089
110
1,199
3.25p
3.17p
34
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 31 DECEMBER 2017
Company registration number: 02891368
Note
31 Dec 2017/ £’000
31 Jul 2016 / £’000
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Current liabilities
Borrowings
Trade and other payables
Current tax liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Total liabilities
Net assets
Equity attributable to owners of the Parent Company
Share capital
Share premium account
Merger relief reserve
Share option reserve
Currency translation reserve
Retained earnings
Total equity
DR STUART PATON
Non-executive Chairman
12
13
14
9
15
16
17
18
19
18
9
22
3,428
3,155
2,499
207
9,289
672
2,121
490
2,393
5,676
14,965
279
1,958
—
2,237
355
194
549
2,786
12,179
94
3,053
2,407
164
(11)
6,472
12,179
3,428
2,948
2,691
283
9,350
1,067
3,372
434
2,788
7,661
17,011
133
3,549
13
3,695
767
387
1,154
4,849
12,162
94
3,053
2,407
173
(1)
6,436
12,162
The financial statements on pages 34 to 68 were approved and authorised
for issue by the Board of Directors on 27 February 2018.
The accompanying notes on pages 38 to 68 form an integral part of these financial statements.
35
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE 17-MONTH PERIOD ENDED 31 DECEMBER 2017
Note
17 months ended
31 Dec 2017
£’000
12 months ended
31 July 2016
£’000
Cash flows from operating activities
Loss/(profit) before tax
Share-based payment charge
Depreciation and amortisation charges
13/14
Loss/(profit) on disposal of fixed assets
Fair value adjustments
Finance income
Finance costs
Exchange adjustments
Decrease/(Increase) in inventories
Decrease in trade and other receivables
(Decrease)/Increase in trade and other payables
Cash generated from operations
Income taxes (paid)/refunded
Net cash (used in)/generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of fixed assets
Development costs capitalised
Acquisition costs, net of cash received
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Repayment of long-term borrowings
Equity dividends paid
Interest paid
15
16
19
14
13
10
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Exchange adjustments to cash and cash equivalents at
beginning of period
Cash and cash equivalents at end of period
17
(693)
67
1,184
11
—
(2)
34
(8)
395
1,251
(1,092)
1,147
467
1,614
(54 )
—
(1,154)
(500)
2
(1,706)
—
(266)
—
(34)
(300)
(392)
2,788
(3)
2,393
The accompanying notes on pages 38 to 68 form an integral part of these financial statements.
36
671
52
671
(4)
(845)
(8)
30
(77)
(775)
1,491
(1,165)
41
(326)
(285)
(32)
27
(824)
(240)
8
(1,061)
16
(132)
(572)
(30)
(718)
(2,064)
4,727
125
2,788
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE 17-MONTH PERIOD ENDED 31 DECEMBER 2017
Share
capital
£’000
Share
premium
account
£’000
Merger
relief
reserve
£’000
Share
option
reserve
£’000
Currency
translation
reserve
£’000
Retained
earnings
£’000
At 1 August 2015
Dividends
Issue of capital under share-based
payment options
Share-based payment charge
Issue of share capital
Transactions with owners
Profit for the year
Other comprehensive income
Currency translation differences
Total comprehensive income
for the year
At 31 July 2016
Transfer of reserves
Share-based payment charge
Transactions with owners
Profit for the period
Other comprehensive income
Currency translation differences
Total comprehensive income
for the period
At 31 December 2017
82
—
—
—
12
12
—
—
—
94
—
—
—
—
—
—
94
3,037
1,159
—
16
—
—
16
—
—
—
—
—
—
1,248
1,248
—
—
—
3,053
2,407
—
—
—
—
—
—
—
—
—
—
—
—
155
—
(34)
52
—
18
—
—
—
173
(76)
67
(9)
—
—
—
3,053
2,407
164
(111)
—
—
—
—
—
—
110
110
(1)
—
—
—
—
(10)
(10)
(11)
The accompanying notes on pages 38 to 68 form an integral part of these financial statements.
Total
£’000
10,207
(572)
16
52
1,260
756
1,089
5,885
(572)
34
—
—
(538)
1,089
—
110
1,089
1,199
6,436
12,162
76
—
76
—
67
67
(40)
(40)
—
(40)
(10)
(50)
6,472
12,179
37
FINANCIAL STATEMENTS
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE 17-MONTH PERIOD ENDED 31 DECEMBER 2017
1
CORPORATE INFORMATION
Getech Group plc (the ‘Company’ and ultimate Parent of the Group) is a public limited company domiciled
and incorporated in England and Wales. The Company’s registered office and principal place of business is
Kitson House, Elmete Hall, Elmete Lane, Leeds, LS8 2LJ.
The principal activity of the Group is to provide geoscience and geospatial products and services that
companies and governments use to de-risk their exploration programmes and improve their management
of natural resources.
2
BASIS OF PREPARATION
The financial statements of the Group have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Body and adopted by
the European Union (EU), interpretations issued by the International Financial Reporting Interpretations
Committee (IFRIC), and the Companies Act 2006 which is applicable to companies reporting under IFRS.
The financial statements are prepared on a going concern basis under the historical cost convention with
the exception of certain items measured at fair value and are presented to the nearest thousand pounds
(£’000) except as otherwise stated.
The Directors have instituted regular reviews of trading and cash flow forecasts and have considered the
sensitivity of these forecasts with regards to different assumptions about future income and costs. With
continued prospects for profitable trading, the Directors are fully satisfied that the Group is a going concern
and will be able to continue trading for the foreseeable future.
The accounting period has been extended to 31 December 2017 to cover 17 months. The prior audited
period is for the 12 months to 31 July 2016.
2.1 Standards, Amendments and Interpretations Not Yet Applied by Getech
The following standards, amendments and interpretations have been adopted in the year and have not had
a material impact on the Group and Company’s financial statements:
• Amendments to IAS 1 ‘Presentation of Financial Statements’, clarifying disclosures;
• Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 38 ‘Intangible Assets’, clarifying
acceptable methods of depreciation and amortisation;
• Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 41 ‘Agriculture’ in respect of bearer plants;
38
• Amendments to IAS 19 ‘Employee Benefits’ for employee contributions to defined benefit pension schemes;
• Amendments to IAS 27 ‘Separate Financial Statements’ to revise the equity method in separate financial
statements;
• Amendments to IFRS 10 ‘Consolidated Financial Statements’, IFRS 12 ‘Disclosure of Interest in Other
Entities’, and IAS 28 ‘Investments in Associates and Joint Ventures’ around application of the
consolidation exemption;
• Amendments to IFRS 11 ‘Joint Arrangements’ on accounting for acquisitions of interests in joint
operations;
• Amendments to IFRS 14 ‘Regulator Deferral Accounts’;
• Annual improvements to IFRS’s (2010 – 2012);
• Annual improvements to IFRS’s (2012 – 2014).
2.2 Standards, Amendments and Interpretations Not Yet Applied by Getech
The following standards and interpretations, which are yet to become mandatory and are expected to be
relevant to the financial statements, have not been applied in the 2017 financial statements:
Standard or interpretation
EU Effective for reporting periods
starting on or after
Amendments to IAS 12 ‘Income Taxes’ for the recognition of deferred tax assets for
unrealised losses
Amendments to IAS 7 ‘Statement of Cash Flows’ for disclosures
1 January 20171
1 January 2017
Amendments to IAS 40 ‘Investment Property’ for transfers of investment property
1 January 2018 *
Amendments to IAS 28 ‘Long-term Interests in Associates and Joint Ventures’ around the
application of the equity method Methods of Depreciation and Amortisation’
IFRS 9 ‘Financial Instruments’
Amendments to IFRS 9 ‘Financial Instruments’ for termination rights
IFRS 16 ‘Leases’
Annual improvements to IFRS’s (2014 – 2016)
Annual improvements to IFRS’s (2015 – 2017)
IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’
Amendments to IFRS 4 ‘Insurance Contracts’ around interaction with IFRS 9
IFRIC 23 ‘Uncertainty over Income Tax Treatments’
Amendments to IFRS 2 ‘Share-based Payment’ for classification and measurement of
share-based payment transactions Presentation of Financial Statements’
1 January 2016
1 January 2019 *
1 January 2018
1 January 2019 *
1 January 2019
1 January 2017 *
1 January 2019 *
1 January 2018
1 January 2018
1 January 2018 *
IFRS 17 ‘Insurance Contracts’ and subsequent withdrawal of IFRS 4 ‘Insurance Contracts’
1 January 2021 *
IFRS 15 ‘Revenue from Contracts with Customers’,
including clarifications made to the standard since initial release
1 January 2018*
* These standards have not yet been endorsed for use in the EU, but the date stated is the anticipated date of application.
1 Not yet adopted by the EU
A preliminary impact assessment of the implementation of IFRS 15 ‘Revenue from Contracts with Customers’ has been performed, it
is anticipated that the effect of the new accounting standard on the financial statements will be minimal.
It is anticipated that the adoption of these standards will not have a significant impact on the financial statements of the Group,
except for additional disclosure and presentational requirements; the impact of all other standards and interpretations not yet
adopted is not expected to be material.
39
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
3
SUMMARY OF ACCOUNTING POLICIES
3.1 Basis of Consolidation
The Group’s financial statements consolidate those of the Parent Company and of its subsidiary
undertakings drawn up to 31 December 2017. A subsidiary is an entity controlled by the Group. Control is
achieved where the Group has the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation. Amounts
reported in the financial statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
3.2 Revenue
Revenue is measured by reference to the fair value of consideration received or receivable by the Group
for products and services provided, excluding VAT and comparable overseas taxes. Revenue from products
and services falls into the three categories below:
Proprietary projects
In respect of contracts that are long term in nature and contracts for proprietary projects, revenue is
recognised according to the value of work done in the period. Revenue in respect of such contracts is
calculated on the basis of time spent on the project and estimated work to completion. Where the outcome
of contracts cannot be estimated reliably, or anticipated revenue is less than the anticipated costs, revenue
is recognised only to the extent of the expenses recognised that are recoverable.
Multiclient products
For sales of data and completed products, revenue is recognised when the transfer of risk and reward is
made to the customer, which is on dispatch unless otherwise agreed.
Multiple element contracts
Where contracts for multiple element products with staged deliverables, such as Globe and the Multi-
Satellite Altimeter Gravity Programme (Multi-Sat), involve delivery of several different elements which are
not fully delivered or performed by the year end, revenue is recognised based on the proportion of the fair
value of the elements delivered to the fair value of the respective overall contracts. Where the outcome of
contracts that are long term in nature and contracts for ongoing deliverables cannot be estimated reliably,
revenue is recognised only to the extent of the expenses recognised that are recoverable.
Revenue from multiple element contracts is recognised after separating the contract income as follows:
• Completed project elements and specific reports that are immediately deliverable – revenue is
recognised when the transfer of risk and reward is made to the customer, which is on dispatch unless
otherwise agreed
• Specific products that are to be completed in the future – revenue is recognised in line with the
accounting treatment for proprietary projects
40
FINANCIAL STATEMENTS
• Project elements that are to be delivered from development
work that is yet to be completed – revenue is recognised when
the transfer of risk and reward is made to the customer, which
is on dispatch unless otherwise agreed
Software licences
For revenue from software, a sale is recognised across the
period of the software license, which is usually twelve months.
This is applied each month across the life of the license on
a straight-line basis. The Company does not presently utilise
electronic delivery methods for its retail software sales, and all
such software is licensed for immediate use by the customer
following installation.
3.3
Inventories
Costs associated with projects that are long term in nature are included
in inventories to the extent that they cannot be matched with project work
accounted for as revenue. Amounts included in work in progress are stated at
cost, including absorption of relevant overheads, after provision has been made
for any foreseeable losses and the deduction of applicable payments on account.
Full provision is made for losses on all projects in the year in which the loss is first
foreseen.
In assessing the costs associated with deliverables that are long term in nature, the following
assumptions and estimates are made:
• At the commencement of each deliverable, an assumption is made concerning the likely revenue
from potential sales of that project. Regular impairment reviews reconsider whether that revenue
remains achievable
• Costs are carried forward only to the extent that they do not exceed estimates of the recoverable
amounts
There is no inventory other than in relation to projects that are long term in nature.
3.4 Foreign Currency Translation
The Group’s financial statements are presented in pound sterling, which is also the functional currency of
the Parent Company.
Where supplies are obtained, or sales are made on terms denominated in foreign currency, such
transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at
the rate of exchange ruling at the end of the reporting period. Exchange gains or losses arising on the
settlement or translation of monetary items are included in profit or loss from operations.
The assets and liabilities of the Group’s overseas subsidiary undertaking are translated into the
presentation currency using exchange rates prevailing at the end of the reporting period. Translation
differences in respect of the assets and liabilities of the foreign subsidiary are accounted for in the Group’s
currency translation reserve within equity. Income and expenses of this undertaking are translated at
the average exchange rates for the period that approximates to the actual rates on transaction dates.
Exchange differences arising, if any, are recognised in other comprehensive income and the Group’s
currency translation reserve.
41
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
3.5 Employee Benefits
Pension schemes
The Group operates defined contribution pension schemes. The assets of the schemes are held separately
from the Group in an independently administered fund. The pension charge represents contributions
payable by the Group to the schemes.
Share options
Where share options are granted, a charge is made to profit or loss and a reserve is created to record
the fair value of the awards in accordance with IFRS 2 ‘Share-based Payment’. A charge is recognised in
profit or loss in relation to share options granted based on the fair value (the economic value) of the grant,
measured at the grant date. The charge is spread over the vesting period. The valuation methodology
takes into account assumptions and estimates of share price volatility, the future risk-free interest rate and
exercise behaviour, and is based on the Black Scholes method. When share options are exercised, there is
a transfer from the share option reserve to retained earnings.
At the end of each reporting period, the Group revises its estimate of the number of share options that are
expected to vest, taking into account those that have lapsed or been cancelled. It recognises the impact
of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to the share
option reserve. If the terms and conditions of share options are modified before they vest, the change in
the fair value of the share options, measured immediately before and after the modification, is charged to
profit or loss over the remaining vesting period.
3.6 Research
Research expenditure is charged to profit or loss in the period in which it is incurred.
3.7 Lease Contracts
Operating leases exist where the lessee of a leased asset does not substantially bear all the risks and
rewards relating to the ownership of the asset. Economic ownership of the leased asset is not transferred
to the lessee. Payments made under operating leases are charged to profit or loss on a straight-line basis
over the lease term.
3.8 Property, Plant and Equipment
Property, plant and equipment are carried at acquisition cost, net of depreciation and any provision for
impairment.
Depreciation is calculated to write down the cost less estimated residual value of all property, plant and
equipment by equal instalments over their estimated useful economic lives at the following rates:
Freehold property
Plant and equipment
–
–
2% per annum on cost
33.3% and 25% per annum on cost
42
FINANCIAL STATEMENTS
Material residual value and useful life estimates are updated as required,
but at least annually. Freehold land is carried at acquisition cost. As no
finite useful life for land can be determined, related carrying amounts
are not depreciated.
3.9 Intangible Assets
Expenditure on development activities is capitalised if
the product or process meets the recognition criteria for
development expenditure as set out in IAS 38 ‘Intangible
Assets’. The expenditure capitalised includes all directly
attributable costs, from the date that the intangible asset
meets the recognition criteria, necessary to create, produce
and prepare the asset to be capable of operating in the manner
intended by management.
Development expenditure is identified as being capital in nature
if the costs can be measured reliably, the product is technically
and commercially feasible, future economic benefits are probable
and the Group intends to and has sufficient resources to complete
development and to use or sell the asset. Other development
expenditure not meeting these criteria is recognised in profit or loss
as incurred. Once the asset is ready for use, the capitalised development
expenditure is stated at cost less accumulated amortisation (see below) and
impairment losses. Intangible assets not yet ready for use are tested for impairment
annually.
Other intangible assets include acquired data holdings that qualify for recognition as
intangible assets in a business combination. As these assets have finite useful economic lives,
they are accounted for using the cost model whereby capitalised costs are amortised on a straight-
line basis over their estimated useful lives.
Residual values and useful lives are reviewed at each reporting date. In addition, intangible assets are
subject to annual impairment reviews or a review whenever there is an indication of impairment.
The following useful lives are applied:
Customer relationships
Software development
Development costs
Data holdings
Goodwill on consolidation
–
–
–
–
–
fifteen years
five years
five to ten years
ten years
indefinite, annual impairment review
Amortisation is included within ‘Administrative costs’.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made
to those cash-generating units or groups of cash-generating units that are expected to benefit from the
business combination in which the goodwill arose. The units or groups of units are identified at the lowest
level at which goodwill is monitored for internal management purposes, being the operating segments.
43
FINANCIAL STATEMENTS
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
3.10 Financial Assets
CONT.
Financial assets are assigned to different categories by management on initial recognition, depending on
the purpose for which they were acquired. All financial assets are recognised when the Group becomes a
party to the contractual provisions of the instrument.
Financial assets comprise the following:
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Trade and other receivables, cash and cash equivalents, and other financial
assets are classified as loans and receivables. Loans and receivables are measured initially at fair value
plus transaction costs, and subsequently at amortised cost using the effective interest rate method less
provision for impairment. Any change in their value through impairment or reversal of impairment is
recognised in profit or loss.
Provision against trade receivables is made when there is objective evidence that the Group will not be able
to collect all amounts due under the original terms of those receivables. The amount of the write down is
determined as the difference between the asset’s carrying value and the present value of estimated future
cash flows.
3.11 Income Taxes
Current tax is the tax currently payable or receivable based on the taxable profit or loss for the year.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax
is generally provided on the difference between the carrying amounts of assets and liabilities and their
tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a business combination or affects tax
or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not
provided if the reversal of these temporary differences can be controlled by the Group and it is probable
that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward
as well as other income tax credits are assessed for recognition as deferred tax assets.
Deferred tax assets and liabilities are calculated in full, with no discounting. Deferred tax assets are
recognised to the extent that it is probable that the underlying deductible temporary differences will be
able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or
substantively enacted at the end of the reporting period.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or
loss, except where they relate to items that are charged or credited directly to equity (in which case, the
related deferred tax is also charged or credited directly to equity), or where they relate to items of other
comprehensive income (in which case, they are recognised in other comprehensive income).
3.12 Cash and Cash Equivalents
Cash and cash equivalents comprise cash-in-hand and demand deposits.
44
FINANCIAL STATEMENTS 3.13 Equity
Equity comprises the following:
•
•
•
•
•
•
‘Share capital’ represents the nominal
value of equity shares
‘Share premium account’ represents the
excess over nominal value of the fair value of
consideration received for equity shares, net of
expenses of the share issue
‘Merger relief reserve’ represents the premium
on shares issued to acquire ERCL Limited and Exprodat Consulting Limited;
‘Capital redemption reserve’ represents the nominal value of equity shares redeemed
‘Share option reserve’ represents the fair value of share options in accordance with
IFRS 2 ‘Share-based Payment’
‘Currency translation reserve’ represents the value of exchange differences in
translating the assets and liabilities of the foreign subsidiary
•
‘Retained earnings’ represents retained profits
3.14 Dividends
Dividend distributions payable to equity shareholders are included in ‘Other short-term financial liabilities’
when dividends are approved in general meetings prior to the end of the reporting period.
3.15 Financial Liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group
becomes a party to the contractual provisions of the instrument. Financial liabilities categorised as at fair
value through profit or loss are recorded initially at fair value and all transaction costs are recognised
immediately in profit or loss. All other financial liabilities are recorded initially at fair value, net of direct issue
costs.
Financial liabilities categorised as at fair value through profit or loss are re-measured at each reporting date
at fair value, with changes in fair value being recognised in profit or loss. All other financial liabilities are
recorded at amortised cost using the effective interest method, with interest-related charges recognised as
an expense in finance costs in profit or loss. Finance charges, including premiums payable on settlement
or redemption and direct issue costs, are charged to profit or loss on an accruals basis using the effective
interest method and are added to the carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.
Financial liabilities are categorised as at fair value through profit or loss where they are designated as at
fair value through profit or loss on initial recognition. Deferred consideration on acquisitions of assets,
which is contingent on subsequent sales of such assets, is treated as financial liability at fair value through
profit or loss, and the value is allocated between current and non-current liabilities in accordance with best
estimates of the timing and amounts expected to fall due.
A financial liability is derecognised only when the obligation is extinguished; that is, when the obligation is
discharged or cancelled or it expires.
45
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
3.16 Business Combinations
Business combinations are accounted for using the acquisition method of accounting. The acquired
identifiable tangible and intangible assets are measured at their fair values at the date of the acquisition.
Acquisition costs incurred are expensed under administrative expenses.
Goodwill is initially measured at the excess of the aggregate of the consideration transferred over the fair
value of the identifiable assets acquired and liabilities assumed at the acquisition date.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
3.17 EXCEPTIONAL ITEMS
Items which are material either because of their size or their nature, and which are non-recurring, are
presented within their relevant consolidated income statement category, but highlighted through separate
disclosure. The separate reporting of exceptional items helps provide a better picture of the Company’s
underlying performance. Items which are included within the exceptional category include:
•
•
•
spend on the integration of significant acquisitions and other major restructuring programmes;
significant goodwill or other asset impairments; and
other particularly significant or unusual items.
3.18 Significant Areas of Judgement and Estimation Uncertainty
In applying the above accounting policies, management has made appropriate
estimates in key areas, and the actual outcomes may differ from those calculated.
Significant areas of judgement
The key sources of judgement at the end of the reporting period are as follows:
Recognition of revenue from multiple element contracts
When an element of a contract is reliant on core development work, such as the work being carried out to
complete the Globe project, it is judged that revenue from ongoing core development work is generated in
line with the stage of completion of the separately identifiable intangible assets to which they relate.
Capitalisation of development costs
The capitalisation of development expenditure is dependent on the costs meeting the recognition criteria
in accordance with IAS 38 ‘Intangible Assets’. In assessing the criteria, management make judgements
on the level of future economic benefits of the asset flowing to the Company. Management is assisted in
making these judgements through the monitoring both of sales forecasts and of the level of future cost
benefits arising.
Deferred taxation
Management judgement is required in determining provisions for deferred tax liabilities and assets. The
process involves estimating the actual current tax exposure together with assessing temporary differences
resulting from the different valuations of certain assets and liabilities in the financial statements and the tax
46
returns. Management must assess the probability that the deferred tax assets will be recovered from future
taxable income.
Significant areas of estimation uncertainty
The key sources of estimation uncertainty at the end of the reporting period are as follows:
Contracts that are long term in nature and contracts for ongoing services
The value of revenue recognised during the year is dependent on estimates of work to completion. This
method requires the Group to estimate the stage of completion to date as a proportion of the total work to
be performed.
Were the proportion of work completed to total work to be performed to differ by 5% from management’s
estimates, the amount of revenue recognised would increase/decrease
by £27,000.
Multiple element contracts
Management uses estimates in determining the fair value of individual elements of the multiple element
contracts in order to appropriately recognise the revenue attributable to each element. A value is
assigned to each element of the contract, based on an estimate of the value of that element if it were sold
individually; the ratio of these values is then used to calculate a fair value for each element. The value of
revenue recognised during the year is also dependent on estimates of work to completion, as with long-
term contracts.
Carrying amount of non-current assets
Where there is an indication of impairment, a review of the carrying values of non-current assets is
undertaken as follows:
•
Intangible non-current assets are estimated on the basis of value in use
The value is calculated from the present value of future cash flows expected to be derived from the asset
under review. The key elements of estimation are the calculations of future cash flows. For freehold land
and buildings, future cash flows are the estimated cost to rent an equivalent building on the open market.
For intangible assets, future cash flows are forecast revenues from the associated cash-generating unit.
Further estimation is made in determining an appropriate discount rate that reflects the specific risks
associated with the asset or cash-generating unit.
Share options
Share-based payments are dependent on estimates as to the number of shares that are expected to vest,
and, by using the Black Scholes valuation model, estimates are made in expected volatility, the risk-free rate
and the expected time to exercise. Where appropriate, management uses historical market data as a basis
for estimating the fair value of share options on grant.
4
SEGMENTAL REPORTING
4.1 Products and Services from which reportable segments derive their revenues
Information reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance focusses on the types of goods and services delivered or provided.
The Directors of the Company have chosen to organise the Group around differences in products and
services. Operating segments with similar characteristics, and where segments are similar in respect of
the nature of the products and services, the nature of the production processes, the type of customer and
where they have similar methods of distribution, have been aggregated into a single operating segment.
47
FINANCIAL STATEMENTS
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
Specifically, the Group’s reportable segments under IFRS 8 are as follows:
•
•
Products (previously referred to as Multi-client products)
Services (previously referred to as Proprietary reports)
The sources of revenue included in ‘all other segments’ are other miscellaneous income.
4.2 Segment Revenues and Results
The following is an analysis of the Group’s revenue and results from continuing operations by reportable
segment.
Products
Services
All other segments
Exceptional inventory impairments1
Central administrative costs
Fair value adjustments
Restructuring costs
Finance costs
Finance income
Profit before tax
17 months ended
31 Dec 2017
12 months ended
31 Jul 2016
Revenue
£’000
7,570
3,372
4
—
10,946
Profit
£’000
4,921
220
4
(461)
4,684
(4,858)
—
(487)
(34)
2
(693)
Revenue
£’000
4,320
2,628
83
—
7,031
Profit
£’000
2,845
681
2
—
3,528
(3,654)
845
(26)
(30)
8
671
1 Products segment profit for the 17 months ended 31 December 2017 includes impairment of work in progress of £461,000 (2016: £nil).
The segment revenue reported above represents revenue generated from external customers. There were
no inter-segment sales in the current year (2016: £nil).
The accounting policies of the reportable segments are the same as in the Group’s accounting policies
described in Note 3. Segment profit represents the profit before tax earned by each segment without
allocation of central administration costs and Directors’ salaries, finance costs and currency translation
differences on foreign operations. This is the measure reported to the chief operating decision maker for
the purposes of resource allocation and assessment of segment performance.
Assets and liabilities are not reported to the chief operating decision maker by segment.
48
4.3 GEOGRAPHICAL INFORMATION
The Group’s revenue from continuing operations from external customers by location of
operations and information about its non-current assets by location of assets is detailed below.
North America
United Kingdom
Africa
Rest of Europe
Asia
Australasia
South and Central America
17 months ended
31 Dec 2017
12 months ended
31 Jul 2016
Revenue
£’000
Non-current
assets
£’000
Revenue
£’000
Non-current
assets
£’000
3,509
2,336
668
2,095
1,562
219
557
165
9,124
—
—
—
—
—
2,449
814
1,722
1,094
787
143
22
350
9,000
—
—
—
—
—
10,946
9,289
7,031
9,350
Within revenue, no sales to customers exceeded 10% of turnover (2016: no sales to customers exceeded
10% of turnover).
5
OPERATING (LOSS)/PROFIT
The operating (loss)/profit for the year has been arrived at after charging/(crediting):
Cost of inventories recognised as an expense
Depreciation of property, plant and equipment
Amortisation of intangible assets
Exceptional impairment of inventories
Exceptional fair value adjustments
Exceptional restructure costs
Remuneration receivable by the Group’s auditor for audit services:
– the auditing of the accounts
– non-audit services
Operating leases:
– rental costs of land and building
Foreign exchange movement
Share-based payments charge
Research and development costs expensed as incurred
17 months ended
31 Dec 2017
£’000
12 months
ended
31 Jul 2016
£’000
718
235
949
461
—
487
42
12
418
(77)
67
916
476
194
479
—
(845)
26
40
6
141
(123)
52
1,034
The above are included in ‘Cost of sales’ and ‘Administrative costs’ in the consolidated statement of
comprehensive income.
49
FINANCIAL STATEMENTS
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
6
DIRECTORS AND EMPLOYEES
The employee benefit expenses during the year were as follows:
Short-term employee benefits
Social security costs
Pension costs
Share-based payment charge
17 months ended
31 Dec 2017
£’000
12 months ended
31 Jul 2016
£’000
6,421
702
367
68
7,558
4,642
474
208
52
5,376
The average number employed by the Group, including Executive Directors, was as follows:
Directors
Administration
Technical
17 Months ended
31 Dec 2017
Number
12 months ended
31 Jul 2016
Number
3
18
74
95
4
22
92
118
The total number employed by the Group, including executive directors as at 31 December 2017 was 84 (31
July 2016: 115)
The table below details the annual contractual fees and full time equivalent salaries paid to the
Group Directors:
Executive Directors
Dr Jonathan Copus
Huw Edwards
Dr Paul Carey
Dr Paul Markwick
Non-executive Directors
Dr Alison Fielding
Dr Stuart Paton
Peter Stephens
Chris Flavell
50
As at
31 Dec 2017
£’000
As at
31 Jul 2016
£’000
250
219
115
125
20
40
20
20
—
219
98
109
18
60
18
18
Between 1 January 2016 and 31 August 2017 staff and Executive Director salaries were temporarily lowered
by an average of 10%. This step was taken to manage the Group’s near-term costs, during a period of
customer budget cuts and Group redundancies. Between 1 January 2016 and 31 December 2016, Non-
executive Directors waived 100% of their fees. The exception to this was Dr Stuart Paton, who the Board
agreed should be compensated for taking on Executive Chairman duties whilst a new CEO was recruited.
From 1 September 2017 all staff were returned to full pay, the impact of which was offset by a continuing
programme of cost management.
Directors’ remuneration for the 17 months ended 31 December 2017 was as follows:
17 months ended 31 Dec 2017
Fees/salary
£’000
Pension
contributions
£’000
Benefits
in kind
£’000
Total before
share options
£’000
Share-based
payment charge
£’000
Executive
Dr Jonathan Copus
Huw Edwards1
Dr Paul Carey2
Dr Paul Markwick3
Non-executive
Dr Alison Fielding4
Dr Stuart Paton
Peter Stephens5
Chris Flavell6
Executive
Dr Paul Carey
Dr Paul Markwick
Raymond Wolfson7
Huw Edwards
Non-executive
Dr Alison Fielding4
Colin Glass8
Dr Stuart Paton
Peter Stephens5
323
196
54
119
19
55
19
19
804
15
—
—
5
—
—
—
—
20
—
1
—
—
—
—
—
—
1
338
197
54
124
19
55
19
19
825
39
—
—
—
—
—
—
—
39
12 months ended 31 Jul 2016
Fees/salary
£’000
Pension
contributions
£’000
Benefits
in kind
£’000
Total before
share options
£’000
Share-based
payment charge
£’000
100
107
140
148
10
8
49
8
570
5
5
6
—
—
—
2
—
18
—
—
1
—
—
—
—
—
1
105
112
147
148
10
8
51
8
589
14
14
14
—
—
—
—
7
—
49
1 Huw Edwards took a sabbatical during the 17 months ended 31 December 2017 and worked a four-day week
2 Dr Paul Carey left office on 31 December 2016
3 Dr Paul Markwick left office on 31 January 2017, included in 2017 salary is £63,000 compensation for loss of office
4 Director’s fees for Dr Alison Fielding were paid to IP Group plc, a company of which she is an employee
5 Director’s fees for Peter Stephens were paid to Noon and Co. Limited, a company of which he is a Director
6 Director’s fees for Chris Flavell were paid to TantlonGeo Limited, a company of which he is a Director
7 Raymond Wolfson left office on 31 July 2016, included in 2016 salary is £25,000 compensation for loss of office
8 Director’s fees for Colin Glass were paid to Winburn Glass & Norfolk, Chartered Accountants, a firm of which he is a Partner
Pension contributions represent payments made to defined contribution schemes. Non-executive Directors are not
entitled to retirement benefits.
Remuneration of the Non-Executive Directors is determined by the Board.
51
FINANCIAL STATEMENTS
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
6.1 DIRECTORS’ SHARE OPTIONS
Details of the share options held by Directors are:
Date granted
Exercise period
Option
price
31 Jul 2016
Granted
Lapsed
31 Dec 2017
Number of shares
Dr Jonathan Copus
2 Aug 2016
2 Aug 2016
2 Aug 2016
Dr Paul Carey
13 Dec 2012
23 Jul 2014
Dr Paul Markwick
13 Dec 2012
23 Jul 2014
Dr Stuart Paton
27 Apr 2011
27 Apr 2011
27 Apr 2011
27 Apr 2011
Peter Stephens
2 Aug 2017 – 2 Aug 2026
24.50p
2 Aug 2018 – 2 Aug 2026
24.50p
2 Aug 2019 – 2 Aug 2026
24.50p
—
—
—
500,000
500,000
400,000
—
—
—
500,000
500,000
400,000
13 Dec 2014–12 Dec 2022
21.30p
23 Jul 2016–22 Jul 2024
48.00p
13 Dec 2014–12 Dec 2022
21.30p
23 Jul 2016–22 Jul 2024
48.00p
27 Apr 2011–27 Apr 2021
17.50p
27 Apr 2012–27 Apr 2021
17.50p
27 Apr 2013–27 Apr 2021
17.50p
27 Apr 2014–27 Apr 2021
17.50p
200,000
200,000
200,000
200,000
300,000
200,000
200,000
200,000
—
—
—
—
—
—
—
—
—
200,000
200,000
200,000
200,000
—
—
—
—
—
—
—
—
—
300,000
200,000
200,000
200,000
41,490
24 Dec 2010
24 Dec 2012–24 Dec 2021
15.00p
41,490
The market price of the shares at the end of the financial year was 24.25p and the range of market prices
during the year was between 43.5p and 20.5p.
In addition to the share options held as disclosed above, Dr Jonathan Copus is due to receive 100,000
additional share options in respect of his appointment as Chief Executive on 2 August 2016.
Full share-based payment disclosures are provided in Note 23.
7
FINANCE INCOME
Interest on bank deposits
2
8
17 months ended
31 Dec 2017
£’000
12 months ended
31 Jul 2016
£’000
52
8
FINANCE COSTS
Interest on bank borrowings
34
30
17 months ended 31 Dec 2017
£’000
12 months ended 31 Jul 2016
£’000
9
INCOME TAX
The income tax credit comprises:
Current income tax
Current year
Prior year
Foreign taxation
Total current tax
Deferred tax
Current year
Prior year
Adjustments for change in tax rate
Total deferred tax
Tax expense/(credit) on profit
17 months ended 31 Dec 2017
£’000
12 months ended 31 Jul 2016
£’000
(410)
(159)
36
(533)
(222)
—
102
(120)
(653)
(236)
(126)
—
(362)
(49)
(7)
—
(56)
(418)
Factors affecting the tax credit for the year
The taxation assessed for the year differs from the standard rate of corporation tax in the UK of 19.47%
(2016: 20%).
The tax (credit)/expense for the year can be reconciled to profit per the consolidated statement of
comprehensive income at the standard rate of corporation tax in the UK of 19.47% (2016: 20%) as follows:
17 months ended
31 Dec 2017
£’000
12 months ended
31 Jul 2016
£’000
(Loss)/profit on ordinary activities before tax
Tax at UK corporation tax rate of 19.47% (2016: 20%)
Effects of:
Fixed asset differences
Expenses not deductible for tax purposes
Income deductible for tax purposes
Research and development enhanced expenditure
Surrender of tax losses for R&D tax credit refund
R&D expenditure credits
Foreign tax credits
Adjustment for tax computation in foreign jurisdictions
Other differences
Adjustment to tax charge in respect of prior years
Total tax (credit)/expense reported in the consolidated
statement of comprehensive income
(693)
(135)
8
13
(37)
(517)
140
11
36
(19)
6
(159)
(653)
671
134
29
34
(203)
(284)
70
11
63
(126)
(15)
(131)
(418)
53
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
DEFERRED TAXATION
The net movement on the deferred tax asset and deferred tax liability accounts is as follows:
Deferred tax assets
Balance brought forward
Share-based payments
Intangible assets of foreign subsidiary company
Tax losses
Post-employment benefits
Balance carried forward
Deferred tax liabilities
Balance brought forward
Accelerated capital allowances
Intangible assets of foreign subsidiary company
Intangible assets acquired in business combinations
Foreign tax jurisdictions
Balance carried forward
17 months ended
31 Dec 2017
£’000
12 months ended
31 Jul 2016
£’000
283
(31)
23
(70)
2
207
(387)
47
70
41
35
(194)
159
3
(174)
296
(1)
283
(319)
(3)
—
(64)
(1)
(387)
The deferred taxation recognised in the financial statements, at 17% (2016: 18%) for UK taxation and 21%
(2016: 35%) for USA taxation, is set out below:
Share-based payments
Accelerated capital allowances
Foreign tax jurisdictions
Intangible assets of foreign subsidiary company
Tax losses
Intangible assets acquired in business combinations
Post-employment benefits
Net deferred tax asset/(liability)
17 months ended
31 Dec 2017
£’000
12 months ended
31 Jul 2016
£’000
—
(86)
(56)
(22)
261
(134)
4
(13)
31
(133)
(91)
(48)
311
(176)
2
(104)
The most appropriate tax rate for the Group is considered to be 19.47% (2016: 20%), the standard average
rate of profits tax in the UK, which is the primary source of profit for the Group.
54
FINANCIAL STATEMENTS The deferred tax asset in respect of the UK
company is calculated at 17% (2016: 18%)
in light of the future tax rates announced. The
deferred tax asset in respect of the intangible
assets of the foreign subsidiary company arises as a
result of future capital allowances available following the
part-payment of the deferred consideration for the acquisition
of assets from Lisle Gravity Inc. in an earlier period. These will be relieved
against profits of the foreign subsidiary.
10 DIVIDENDS
There is no final dividend proposed for the period ended 31 December 2017.
Paid during the year
No final dividend in respect of the year ended 31 July 2016 (2015: 1.74p per share)
17 months
ended
31 Dec 2017
£’000
12 months
ended
31 Jul 2016
£’000
—
—
572
572
11 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group
by the weighted average number of the Ordinary Shares in issue in the year.
(Loss)/Profit attributable to equity holders of the Group
Weighted average number of Ordinary Shares in issue
Basic earnings per share
Diluted earnings per share
17 months
ended
31 Dec 2017
£(40,000)
37,562,454
(0.11)p
(0.11)p
12 months
ended
31 Jul 2016
£1,089,000
33,490,000
3.25p
3.17p
Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Group
by the weighted average number of the Ordinary Shares which would be in issue if all the options granted,
other than those which are anti-dilutive, were exercised. The addition to the weighted number of the
Ordinary Shares used in the calculation of diluted earnings per share for the year ended 31 December
2017 is 629,707 (2016: 884,259).
55
FINANCIAL STATEMENTS NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
12 GOODWILL
The carrying amounts of goodwill for the years presented in the consolidated financial statements are
reconciled as follows:
Gross carrying amount
At 1 August 2015
Acquired through business combination
At 31 July 2016
Acquired through business combination
At 31 December 2017
Accumulated impairment
At 1 August 2014 and 31 July 2015
Impairment loss recognised
At 31 December 2017
Carrying amount
At 31 December 2017
At 31 July 2016
At 1 August 2015
Goodwill
£’000
3,132
296
3,428
—
3,428
—
—
—
3,428
3,428
3,132
For the purpose of annual impairment testing, goodwill is allocated to the Services operating segment.
The recoverable amount was determined based on value in use calculations, covering a detailed five-
year forecast, followed by an extrapolation of expected cash flows for the remaining useful lives. The
recoverable amount of the Services operating segment is set out below:
Operating segment
Services
31 Dec 2017
£’000
31 Jul 2016
£’000
9,847
9,847
11,781
11,781
The present value of the expected cash flows of Services is determined by applying a suitable discount rate
that reflects both the current market assessments of the time value of money and the risks specific to the
segment. The discount rate applied of 12% takes into consideration the industry-wide risks as well as those
specific to the Group’s Services operating segment.
The calculations use cash flow projections based on financial budgets approval by management covering
a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated industry
growth rate of 2%.
Sales volumes over the five-year period are based on past performance and management’s expectations
of market development. Sensitivity analysis is carried out on all budgets, strategic plans and discount rates
used in the calculations.
56
FINANCIAL STATEMENTS 13
INTANGIBLE ASSETS
The carrying amounts of intangible assets for the
years presented in the consolidated financial statements
are reconciled as follows:
Customer
relationships
£’000
Software
development
£’000
Development
costs
£’000
Data
holdings
£’000
Software
£’000
Trade and
domain
names
£’000
Total
£’000
Cost
At 1 August 2015
Additions
Exchange differences
At 31 July 2016
Additions
Transferred
Disposals
Exchange differences
877
—
—
877
—
—
—
—
At 31 December 2017
877
Amortisation and
impairment
At 1 August 2015
Amortisation charge
Exchange differences
At 31 July 2016
Amortisation charge
Exchange differences
At 31 December 2017
Carrying amount
At 31 December 2017
At 31 July 2016
At 1 August 2015
317
38
—
355
54
—
409
468
522
560
—
462
—
462
—
—
—
—
462
—
12
—
12
131
—
143
319
450
—
1,060
823
—
1,883
1,154
—
—
—
3,037
20
266
—
286
494
—
780
2,257
1,597
1,040
1,414
—
249
1,663
—
—
—
(29)
1,634
966
163
185
1,314
251
(34)
1,531
103
349
448
—
—
—
—
30
(3)
—
27
—
—
—
—
19
—
19
8
—
—
2
—
—
2
—
—
—
—
2
2
—
—
2
—
—
2
—
—
—
3,353
1,285
249
4,887
1,154
30
(3)
(29)
6,039
1,305
479
185
1,969
949
(34)
2,884
3,155
2,918
2,047
Amortisation charges are included in ‘Administrative costs’ in the consolidated statement of
comprehensive income.
57
FINANCIAL STATEMENTS NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
14 PROPERTY, PLANT AND EQUIPMENT
The carrying amounts of property, plant and equipment for the years presented in the consolidated
financial statements are reconciled as follows:
Freehold land and buildings
£’000
Plant and equipment
£’000
Total
£’000
Cost
At 1 August 2015
Additions
Disposals
Exchange differences
At 31 July 2016
Additions
Transferred
Disposals
At 31 December 2017
Depreciation
At 1 August 2015
Charge for the period
Disposals
Exchange differences
At 31 July 2016
Charge for the period
Disposals
At 31 December 2017
Carrying amount
At 31 December 2017
At 31 July 2016
At 1 August 2015
2,798
—
—
—
2,798
—
—
2,798
287
36
—
—
323
51
—
374
2,424
2,475
2,511
1,161
85
(193)
15
1,068
54
(30)
(12)
1,080
820
158
(171)
15
822
184
(1)
1,005
75
246
341
3,959
85
(193)
15
3,866
54
(30)
(12)
3,878
1,107
194
(171)
15
1,145
235
(1)
1,379
2,499
2,721
2,852
The carrying amount of freehold land not subject to depreciation amounted to £1,000,000
(2016: £1,000,000).
Depreciation charges are included in ‘Administrative costs’ in the consolidated statement of
comprehensive income.
15
INVENTORIES
Work in progress
31 Dec 2017
£’000
672
31 Jul 2016
£’000
1,067
There is a charge included in profit or loss for the period of £461,000 (2016: £nil) as an expense arising
from an impairment review of inventories.
58
FINANCIAL STATEMENTS 16 TRADE AND OTHER RECEIVABLES
Trade receivables
Social security and other taxes
Other receivables
Prepayments and accrued income
31 Dec 2017
£’000
31 Jul 2016
£’000
1,424
—
99
598
2,121
2,371
76
136
789
3,372
All amounts are short term. The carrying amounts of trade and other receivables are considered to be
reasonable approximations to fair value.
The Group’s trade receivables have been reviewed for indicators of impairment. Provisions have been
made amounting to £249,000 (2016: £131,000). Movement on provisions for doubtful debts on trade
receivables are as follows:
Brought forward
New doubtful debt provisions
Provisions released
Carried forward
31 Dec 2017
£’000
31 Jul 2016
£’000
131
163
(45)
249
18
113
—
131
In addition, some of the unimpaired trade receivables are past due as at the reporting date. The age of
financial assets past due but not impaired is as follows:
Not more than three months
More than three months but not more than six months
More than six months but not more than one year
17 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
18 BORROWINGS
31 Dec 2017
£’000
31 Jul 2016
£’000
609
14
10
633
858
189
36
1,083
31 Dec 2017
£’000
2,393
31 Jul 2016
£’000
2,788
The bank loan carries a variable interest rate of 2.04% above bank base rate and is repayable in equal
monthly instalments. The loan is secured by land and buildings owned by the Parent Company, with a
current carrying value of £2,424,000 (2016: £2,475,000).
Borrowings are presented as £279,000 due in less than one year, and £355,000 due in more than one year.
59
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
19 TRADE AND OTHER PAYABLES
Trade payables
Social security and other taxes
Other payables
Accruals and deferred income
31 Dec 2017
£’000
31 Jul 2016
£’000
1,072
205
28
653
1,958
1,146
166
636
1,601
3,549
The carrying amounts of trade and other payables are considered to be reasonable approximations to fair
value.
20 FINANCIAL INSTRUMENTS
The Group is exposed to financial risks. The Group’s risk management is co-ordinated by its Directors who
focus actively on securing the Group’s short to medium-term cash flows through regular reviews of the
operating activity of the business.
The Group does not actively engage in the trading of financial assets for speculative purposes, nor does it
write options. The most significant financial risks to which the Group is exposed are described below.
Foreign currency risk
Exposure to currency exchange rates arises from the Group’s overseas sales and purchases, most of
which are denominated in US dollars and some of which are denominated in euros. Assets and liabilities
denominated in US dollars and euros give rise to foreign exchange exposures at the end of the reporting
period.
To mitigate the Group’s exposure to foreign currency risk, exchange rates are monitored and the timing of
settling invoices, where sales and purchases are made in currencies other than pound sterling, is matched
as far as possible. Furthermore, there is no systematic exposure to exchange rates because selling prices
are not fixed in currencies other than sterling.
The Group has a US-based subsidiary whose net assets are exposed to foreign currency translation risk.
With no matching borrowings denominated in US dollars, it is the Group’s policy not to hedge against this
translation exposure.
The Group had short-term exposure to the US dollar and the euro at 31 December 2017. The following
table illustrates the sensitivity of the net result for the year with regard to the Group’s financial assets
and financial liabilities. It assumes a +/-10% change of the US dollar and the euro exchange rates for the
period ended 31 December 2017. Sensitivity analysis is based on the Group’s foreign currency financial
instruments held at the end of each reporting period.
If pound sterling had strengthened or weakened against the US dollar and the euro by 10%, this would
have had the following impact:
60
FINANCIAL STATEMENTS Reported (Loss)/Profit before tax
Sensitivity to movement in currency exchange rates:
US dollar
Euro
(Loss)/Profit before tax
31 Dec 2017
31 Jul 2016
+10%
£’000
(693)
(63)
–
(756)
-10%
£’000
(693)
69
1
(623)
+10%
£’000
671
(154)
(24)
493
-10%
£’000
671
189
26
886
Exposures to foreign exchange rates vary during the year depending on the value of overseas transactions.
Nonetheless, the analysis above is considered to be representative of Getech’s exposure to currency risk.
There is no effect on equity in respect of currency exchange rate sensitivity.
The Group’s actual currency exposures at the end of the reporting period were as follows:
Denominated in US dollars
Financial assets
Financial liabilities
Exposure
Denominated in euros
Financial assets
Financial liabilities
Exposure
Credit risk analysis
31 Dec 2017
£’000
31 Jul 2016
£’000
2,307
(777)
1,530
15
(10)
5
1,718
(691)
1,027
272
(8)
264
The Group’s exposure to credit risk is limited to the carrying amount of its financial assets at the end of the
reporting period, as summarised below:
Classes of financial assets – carrying amounts
Trade and other receivables
Cash and cash equivalents
31 Dec 2017
£’000
31 Jul 2016
£’000
1,891
2,393
4,284
2,863
2,788
5,651
In respect of trade and other receivables that are not impaired, the Group is not exposed to any significant
credit risk exposure to any single counterparty or group of counterparties having similar characteristics. The
Group’s customers are generally major natural resource companies with whom the Group has strong trading
relationships with no recent history of default. The Group continually monitors its trade receivables and
incorporates this information into its credit risk controls.
Trade receivables are stated on the basis of factors such as historical trends, age of debts and debt specific
information. Details of amounts past due but not impaired are set out in Note 16. The credit risk for liquid
funds is considered negligible since counterparties are reputable banks with high-quality external credit
ratings.
The Group does not hold any collateral as security.
61
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
Interest rate risk
At 31 December 2017 the Group had cash subject to variable rates of £861,000 (2016: £1,684,000) and
borrowings subject to variable rates of £634,000 (2016: £900,000). There is no other material interest rate
risk.
To mitigate the Group’s exposure to interest rate risk, market rates are monitored.
The following table illustrates the sensitivity of the profit before tax for the year to a reasonably possible
change in interest rates of +/-1% with effect from the beginning of the year. These changes are considered
to be reasonably possible based on observation of current market conditions. The calculations are based
on the Group’s financial instruments held at the end of each reporting period. All other variables are held
constant.
Reported (Loss)/Profit before tax
Sensitivity to changes in interest rates:
(Loss)/Profit before tax
Capital and liquidity risk
31 December 2017
31 July 2016
+1%
£’000
(693)
5
(688)
-1%
£’000
(693)
(5)
(698)
+1%
£’000
-1%
£’000
671
15
686
671
(15)
656
The Group manages its liquidity needs by carefully monitoring scheduled cash outflows and anticipated
cash inflows. Having regard to modest visibility of sales, the cash forecasts are regularly reviewed and cover
alternative income scenarios.
The contractual maturity of the Group’s financial liabilities at the end of the reporting period was as follows:
Trade and other payables – held at amortised cost
Borrowings – held at amortised cost
Trade and other payables – held at amortised cost
Borrowings – held at amortised cost
Within
one year
£’000
In one to
two years
£’000
In two to
five years
£’000
31 Dec
2017
£’000
1,229
279
1,508
—
355
355
—
—
—
Within
one year
£’000
In one to
two years
£’000
In two to
five years
£’000
2,264
133
2,397
—
266
266
—
501
501
1,229
634
1,863
31 July
2016
£’000
2,264
900
3,164
62
FINANCIAL STATEMENTS Summary of the Group’s financial assets and liabilities as defined in IAS 39
‘Financial Instruments: Recognition and Measurement’
Current assets – loans and receivables
Trade and other receivables
Cash and cash equivalents
Current liabilities
Borrowings – held at amortised cost
Trade and other payables – held at amortised cost
Non-current liabilities
Borrowings – held at amortised cost
Net financial assets and liabilities
31 December2017
£’000
31 July 2016
£’000
1,891
2,393
4,284
(279)
(1,229)
(1,508)
(365)
(365)
2,411
3,187
2,788
5,975
(133)
(2,264)
(2,397)
(767)
(767)
2,811
The Directors consider that the fair value of financial assets and liabilities equates to the carrying value for
both 2017 and 2016. Items carried at fair value through profit or loss are valued in accordance with Level 3
as defined in IFRS 13 ‘Financial Instruments’, i.e. inputs other than quoted prices that are observable for the
asset or liability, either directly or indirectly.
21 CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Group’s capital management objectives are as follows:
•
•
To ensure the Group’s ability to continue as a going concern
To provide an adequate return to shareholders
These objectives are maintained by pricing products and services commensurately with the level of risk and
by exercising a policy of progressive dividends as appropriate.
The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as
presented on the face of the consolidated statement of financial position. Capital for the reporting period
under review is set out below:
Total equity
Less: cash and cash equivalents
31 December2017
£’000
31 July 2016
£’000
12,179
(2,393)
9,786
12,162
(2,788)
9,374
In order to achieve the Group’s objectives in capital management, the goal is to maintain adequate capital
with the minimum amount of appropriate borrowing. The Group has met its stated objectives for the year.
63
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
22 SHARE CAPITAL
Authorised
90,000,000 Ordinary Shares of 0.25p each (2015: 90,000,000)
Issued, called up and fully paid
37,562,415 Ordinary Shares of 0.25p each (2015: 32,729,790)
Shares issued, called up and fully paid
Balance brought forward
Acquisition of subsidiary
Shares issued under share-based payments
Balance carried forward
31 December2017
£’000
31 July 2016
£’000
225
94
225
94
31 December2017
£’000
31 July 2016
£’000
37,562,415
—
1,200
37,563,615
32,729,790
4,666,667
165,958
37,562,415
The following additional Ordinary Shares of 0.25p each, relating to share-based payments, were issued
during the year:
Date
8 December 2017
Number of shares
15.0p/share
31 Dec 2017
1,200
1,200
Each share issued has the same right to receive dividends and the repayment of capital and represents
one vote at the shareholders’ meeting of the Group.
23 SHARE-BASED PAYMENTS
At 31 December 2017, the Group operated an approved Enterprise Management Incentive (EMI) share
scheme and an Unapproved Options scheme. Under the share options plans, the Directors can grant
options over shares in the Company to employees, subject to approval from the Remuneration Committee.
Options are granted with a fixed exercise price and the contractual life of an option of 10 years. Options
will become exercisable on the second anniversary of the date of grant. Exercise of an option is subject to
continued employment.
At 31 December 2017, rights to options over Ordinary Shares of the Parent Company were outstanding as
follows:
64
FINANCIAL STATEMENTS EMI share scheme
Exercise period
Granted 24 December 2010, exercise price: 15p per share
24 December 2012–24 December 2020
Granted 13 December 2012, exercise price: 21.3p per share
13 December 2014–12 December 2022
Granted 22 July 2014, exercise price: 48.0p per share
22 July 2016–21 July 2024
Granted 2 August 2016, exercise price: 24.5p per share
2 August 2017 – 1 August 2026
2 August 2018 – 1 August 2026
31 Jul
2016
28,749
600,000
680,000
Number of shares
Granted
Exercised
Lapsed
31 Dec
2017
(1,200)
—
27,549
—
—
—
—
—
(400,000)
200,000
(400,000)
280,000
—
—
—
500,000
500,000
1,000,000
—
—
—
500,000
500,000
1,000,000
Total EMI share scheme options
1,308,749
1,000,000
(1,200)
(800,000)
1,507,549
Unapproved options scheme
Exercise period
Granted 24 December 2010, exercise price: 15p per share
24 December 2012–24 December 2020
Granted 27 April 2011, exercise price: 17.5p per share
27 April 2011–27 April 2021
27 April 2012–27 April 2021
27 April 2012–27 April 2021
27 April 2012–27 April 2021
31 Jul
2016
41,490
300,000
200,000
200,000
200,000
900,000
Granted 2 August 2016, exercise price: 24.5p per share
2 August 2019 – 1 August 2026
Total unapproved options
—
400,000
941,490
400,000
Number of shares
Granted
Exercised
Lapsed
31 Dec
2017
41,490
300,000
200,000
200,000
200,000
900,000
400,000
1,341,490
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total EMI share scheme and unapproved options
2,250,239
1,400,000
(1,200)
(800,000)
2,849,039
Options outstanding at 31 December 2017
Options exercisable at 31 December 2017
Weighted average
exercise price
24.5p
24.7p
Number
900,000
1,949,039
2,849,039
65
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
The following share options were exercised during the year:
Date of grant
24 December 2010
Share
scheme
Number
exercised
Exercise
date
Shareprice at
exercise date
EMI
1,200
8 December
2017
26.00p
At 31 July 2016, rights to options over Ordinary Shares of the Parent Company were outstanding as follows:
EMI share scheme
Exercise period
Granted 26 August 2005, exercise price: 9.87p per share
31 July 2008–26 August 2015
31 July 2010–26 August 2015
31 July 2011–26 August 2015
31 July 2012–26 August 2015
Granted 24 December 2010, exercise price: 15p per share
24 December 2012–24 December 2020
Granted 13 December 2012, exercise price: 21.3p per share
31 Jul
2015
25,532
19,149
19,149
27,128
90,958
47,898
13 December 2014–12 December 2022
600,000
Granted 22 July 2014, exercise price: 48.0p per share
22 July 2016–21 July 2024
Total EMI share scheme options
700,000
1,438,856
Number of shares
Granted
Exercised
Lapsed
31 Jul
2016
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(25,532)
(19,149)
(19,149)
(27,128)
(90,958)
—
—
—
—
—
(19,149)
28,749
—
600,000
(20,000)
680,000
(130,107)
1,308,749
FINANCIAL STATEMENTS
Unapproved options scheme
Exercise period
Number of shares
Granted 26 August 2005, exercise price: 9.87p per share
31 July 2008–26 August 2015
31 July 2010–26 August 2015
31 July 2011–26 August 2015
31 July 2012–26 August 2015
Granted 24 December 2010, exercise price: 15.0p per share
24 December 2012–24 December 2020
Granted 27 April 2011, exercise price: 17.5p per share
27 April 2011–27 April 2021
27 April 2012–27 April 2021
27 April 2012–27 April 2021
27 April 2012–27 April 2021
Total unapproved options
Total EMI share scheme and unapproved options
31 Jul
2015
51,064
38,298
38,298
38,298
165,958
41,490
300,000
200,000
200,000
200,000
900,000
1,107,448
2,546,304
Options outstanding at 31 July 2016
Options exercisable at 31 July 2016
24 FINANCIAL COMMITMENTS
Operating leases
Granted
Exercised
Lapsed
(51,064)
(38,298)
(38,298)
(38,298)
(165,958)
—
—
—
—
—
—
(165,958)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31 Jul
2016
—
—
—
—
—
41,490
300,000
200,000
200,000
200,000
900,000
941,490
(165,958)
(130,107)
2,250,239
Weighted average
exercise price
—
27.7p
Number
—
2,250,239
2,250,239
At 31 December 2017, the Group had outstanding commitments for future minimum lease payments
under non-cancellable operating leases which fall due as follows:
In less than one year
In one to two years
In two to five years
31 Dec 2017
Land and buildings
£’000
31 Jul 2016
Land and buildings
£’000
146
—
—
146
87
65
—
152
67
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
CONT.
Capital commitments
There were no capital commitments at 31 December 2017 (2016: £nil).
Guarantees
No guarantees have been given, or have been received, by the Group.
25 RELATED PARTY TRANSACTIONS
During the year, members of key management as defined by IAS 24 ‘Related Party Disclosures (revised
2009)’ included non-Directors and their compensation was as follows:
Short-term employee benefits
Post-employment benefits
Share-based payments
31 December2017
£’000
31 July 2016
£’000
1,270
62
39
1,371
873
39
41
953
The remuneration of the Directors, who are all Directors of the Parent Company, is set out in Note 6.
The Directors received dividends amounting to £nil during the year (2016: £47,000).
During the period Getech made payments to Zinc Consultants Limited amounting to £59,000 (2016:
£nil) for recruitment services, a company of which Chris Flavell is a director. All transactions were
conducted under standard commercial terms.
26 PENSIONS
The Group currently operates a Group personal pension plan for the benefit of employees. The amount
recognised as an expense is £367,000 (2016: £208,000).
68
FINANCIAL STATEMENTS PARENT COMPANY’S
BALANCE SHEET
AS AT 31 JULY 2016
Company registration number: 02891368
Note
31 December2017
£’000
31 July 2016
£’000
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Current liabilities
Borrowings
Trade and other payables
Non-current liabilities
Borrowings
Deferred tax liabilities
Total liabilities
Net assets
Equity
Equity attributable to owners of the Parent Company
Share capital
Share premium account
Merger relief reserve
Share option reserve
Retained earnings
Total equity
4
5
6
7
8
9
10
11
12
11
7
13
2,257
2,475
7,228
—
11,960
399
1,262
358
1,032
3,051
15,011
279
1,676
1,955
355
60
415
2,370
12,641
94
3,053
2,407
164
6,923
12,641
1,597
2,643
7,228
24
11,492
485
1,325
226
1,626
3,662
15,154
133
2,502
2,635
767
109
876
3,511
11,643
94
3,053
2,407
173
5,916
11,643
As permitted by s408 Companies Act 2006, the Company has not presented its own Statement of Comprehensive
Income and related notes. The Company’s profit for the year was £930,000 (2016 - £1,096,000).
The financial statements on pages 69 to 81 were approved and authorised for issue by the Board on
27 February 2018.
DR STUART PATON
Non-executive Chairman
The accompanying notes on pages 71 to 81 form an integral part of these financial statements.
69
PARENT COMPANY’S STATEMENT OF
CHANGES IN EQUITY
FOR THE 17-MONTH PERIOD ENDED 31 DECEMBER 2017
Share
option
reserve
£’000
Retained
earnings
£’000
Share
premium
account
£’000
Merger
relief
reserve
£’000
3,037
1,159
—
16
—
—
16
—
—
—
—
—
1,248
1,248
—
—
3,053
2,407
—
—
—
—
—
—
—
—
—
—
155
—
(34)
52
—
18
—
—
173
(77)
68
(9)
—
—
Total
£’000
9,470
(572)
16
52
1,260
756
1,417
1,417
5,037
(572)
34
—
—
(538)
1,417
1,417
5,916
11,643
77
—
77
930
930
—
68
68
930
930
3,053
2,407
164
6,923
12,641
At 1 August 2015
Dividends
Issue of capital under share-based
payment options
Share-based payment charge
Issue of share capital
Transactions with owners
Profit for the year
Total comprehensive income
for the year
At 31 July 2016
Transfer of reserves
Share-based payment charge
Transactions with owners
Profit for the period
Total comprehensive income for the
period
At 31 December 2017
Share
capital
£’000
82
—
—
—
12
12
—
—
94
—
—
—
—
—
94
70
FINANCIAL STATEMENTS NOTES TO THE PARENT’S COMPANY
FINANCIAL STATEMENTS
FOR THE 17-MONTH PERIOD ENDED 31 DECEMBER 2017
1
COMPANY INFORMATION
The financial statements of the Company for the period ended 31 December2017 were approved by the
Board and authorised for issue on 27 February 2018, and the Balance Sheet was signed on the Board’s
behalf by Dr Stuart M Paton.
The principal activity of Getech is to provide geoscience and geospatial products and services
that companies and governments use to de-risk their exploration programmes and improve their
management of natural resources.
The Company is incorporated and domiciled in England and Wales and its registered office address is
Kitson House, Elmete Hall, Elmete Lane, Leeds, LS8 2LJ.
The Company’s financial statements are presented in pound sterling and all values are rounded to the
nearest thousand pounds (£’000) except when otherwise indicated.
The principal accounting policies adopted by the Company, judgements and key areas of estimation
uncertainty are set out in Notes 2.2 and 2.11.
2
ACCOUNTING POLICIES
2.1 Statement of Compliance
The Company’s financial statements have been prepared on a historical cost basis, in accordance
with applicable accounting standards and in accordance with Financial Reporting Standard 101 – ‘The
Reduced Disclosure Framework’ (FRS 101). The principal accounting policies adopted in the preparation
of these financial statements are set out below. These policies have all been applied consistently
throughout the period unless otherwise stated.
Disclosure Exemptions
The company has taken advantage of the following disclosure exemptions under FRS 101:
• A statement of cash flows and related notes
• The requirement to produce a balance sheet at the beginning of the earliest comparative period
• The requirements of IAS 24 related party disclosures to disclose related party transactions entered
into between two or more members of the Group as they are wholly owned within the Group
• Presentation of comparative reconciliations for property, plant and equipment and intangible assets
• Disclosure of key management personnel compensation
• Capital management disclosures
• Presentation of comparative reconciliation of the number of shares outstanding at the beginning and
end of the period
• The effect of future accounting standards not adopted
• Disclosures in relation to impairment of assets
• Disclosures in respect of financial instruments (other than disclosures required as a result of
recording financial instruments at fair value)
• Fair value measurement disclosures (other than disclosures required as a result of recording
financial instruments at fair value)
71
NOTES TO THE PARENT’S COMPANY
FINANCIAL STATEMENTS
CONT.
2.2 Tangible Fixed Assets and Depreciation
For all tangible fixed assets, depreciation is calculated to write down their cost to estimated residual value
by equal instalments over their estimated economic lives at the following rates:
Freehold property
Plant and equipment
–
–
2% per annum on cost
33.3% and 25% per annum on cost
Material residual value and useful life estimates are updated as required but at least annually. Freehold
land is carried at acquisition cost. As no finite useful life for land can be determined, related carrying
amounts are not depreciated.
No depreciation is provided on freehold land.
2.3
Investments
Fixed asset investments are stated at cost less provisions for diminution in value.
2.4
Intangible Assets and Amortisation
Expenditure on development activities is capitalised if the product or process meets the recognition criteria
for development expenditure. The expenditure capitalised includes all directly attributable costs, from the
date that the intangible asset meets the recognition criteria necessary to create, produce and prepare
the asset to be capable of operating in the manner intended by management. Capitalised development
expenditure is stated at cost less accumulated amortisation and impairment losses. Amortisation is
calculated to write down their cost by equal instalments over their estimated economic lives at the following
rate:
Capitalised development costs –
five to ten years on a straight-line basis
2.5 Revenue
Revenue is measured by reference to the fair value of consideration received or receivable by the Company
for goods and services provided, excluding VAT and comparable overseas taxes.
Proprietary projects
In respect of contracts that are long term in nature and contracts for proprietary projects and other
commissions, revenue is recognised according to the value of work done in the period. Revenue in respect
of such contracts is calculated on the basis of time spent on the project and estimated work to completion.
Where the outcome of contracts cannot be estimated or anticipated revenue is less than the anticipated
costs, revenue is recognised only to the extent of the expenses recognised that are recoverable.
Multiclient products
For sales of data and completed products, revenue is recognised when the transfer of risk and reward is
made to the customer, which is on dispatch unless otherwise agreed.
72
FINANCIAL STATEMENTS Multiple element contracts
Where contracts for multiple element
products with staged deliverables, such
as Globe and the Multi-Satellite Altimeter
Gravity Programme (Multi-Sat), involve delivery
of several different elements which are not fully
delivered or performed by the year end, revenue is
recognised based on the proportion of the fair value of
the elements delivered to the fair value of the respective
overall contracts. Where the outcome of contracts that are
long term in nature and contracts for ongoing deliverables cannot
be estimated reliably, revenue is recognised only to the extent of the
expenses recognised that are recoverable.
• Revenue from multiple element contracts is recognised after separating the contract income as follows:
• Completed project elements and specific products that are immediately deliverable – revenue is
recognised when the transfer of risk and reward is made to the customer, which is on dispatch unless
otherwise agreed Specific products that are to be completed in the future – revenue is recognised in
line with the accounting treatment for proprietary projects
• Project elements that are to be delivered from development work that is yet to be completed – revenue
is recognised when the transfer of risk and reward is made to the customer, which is on dispatch unless
otherwise agreed
2.6 Long-term Contracts and Work in Progress
Costs associated with contracts that are long term in nature are included in inventories to the extent
that they cannot be matched with contract work accounted for as revenue. Amounts included in work in
progress are stated at cost, including absorption of relevant overheads, after provision has been made for
any foreseeable losses and the deduction of applicable payments on account.
Full provision is made for losses on all contracts in the year in which the loss is first foreseen.
In assessing the costs associated with projects that are long term in nature, the following assumptions and
estimates are made:
• At the commencement of each project, an assumption is made concerning the likely revenue from
potential sales of that project. Regular impairment reviews reconsider whether that revenue remains
achievable
• Costs are carried forward only to the extent that they do not exceed estimates of the recoverable
amounts
There is no inventory other than in relation to contracts that are long term in nature.
2.7 Foreign Currency Translation
Where supplies are obtained, or sales made on terms denominated in foreign currency, such transactions
are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of
73
FINANCIAL STATEMENTS
NOTES TO THE PARENT’S COMPANY
FINANCIAL STATEMENTS
CONT.
exchange ruling at the end of the reporting period. Exchange gains or losses arising on the settlement or
translation of monetary items are included in profit or loss from operations.
2.8 Equity
Equity comprises the following:
•
•
‘Share capital’ represents the nominal value of equity shares
‘Share premium account’ represents the excess over nominal value of the fair value of consideration
received for equity shares, net of expenses of the share issue
‘Merger relief reserve’ represents the premium on shares issued to acquire ERCL and Exprodat
•
Consulting Limited;
•
•
•
‘Capital redemption reserve’ represents the nominal value of equity shares redeemed
‘Share option reserve’ represents the fair value of share options in accordance with IFRS 2 ‘Share-based
Payment’
‘Currency translation reserve’ represents the value of exchange differences in translating
the assets and liabilities of the foreign subsidiary
•
‘Retained earnings’ represents retained profits
2.9
Share Options
When share options are granted, a charge is made to the Parent Company’s profit and loss account and a
reserve is created to record the fair value of the awards in accordance with IFRS 2 ‘Share-based payment’.
A charge is recognised in the profit and loss account in relation to share options granted based on the fair
value (the economic value) of the grant, measured at the grant date. The charge is spread over the vesting
period. The valuation methodology takes into account assumptions and estimates of share price volatility,
the future risk-free interest rate and exercise behaviour, and is based on the Black Scholes method. When
share options are exercised, there is a transfer from the share option reserve to retained earnings.
At each balance sheet date, the Parent Company revises its estimate of the number of share options that
are expected to vest, taking into account those that have lapsed or been cancelled. It recognises the impact
of the revision to original estimates, if any, in the profit and loss account, with a corresponding adjustment
to the share option reserve. If the terms and conditions of share options are modified before they vest, the
change in the fair value of the share options, measured immediately before and after the modification, is
also charged to profit or loss over the remaining vesting period.
2.10 Taxation
Current UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates
and laws that have been enacted, or substantively enacted, by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the
balance sheet date where transactions or events that result in an obligation to pay more tax in the future
or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are
differences between the Company’s taxable profits and its results as stated in the financial statements that
arise from the inclusion of gains and losses in tax assessments in periods different from those in which they
are recognised in the financial statements.
74
FINANCIAL STATEMENTS
A net deferred tax asset is regarded as recoverable and it is therefore
recognised only to the extent that, on the basis of all available evidence, it can
be regarded as more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying timing differences can be
deducted.
Deferred tax is measured at the average tax rates that are expected
to apply in the periods in which the timing differences are expected
to reverse, based on tax rates and laws that have been enacted or
substantively enacted by the balance sheet date. Deferred tax is
measured on a non-discounted basis.
2.11 Significant Areas of Judgement and Estimation Uncertainty
In applying the above accounting policies, management has made
appropriate estimates in key areas, and the actual outcomes may differ
from those calculated.
Significant areas of judgement
The key sources of judgement at the end of the reporting period are as follows:
Recognition of revenue from multiple element contracts
When an element of a contract is reliant on core development work, such as the work
being carried out to complete the Globe project, it is judged that revenue from ongoing core
development work is generated in line with the stage of completion of the separately identifiable
intangible assets to which they relate.
Capitalisation of development costs
The capitalisation of development expenditure is dependent on the costs meeting the recognition criteria
in accordance with IAS 38 ‘Intangible Assets’. In assessing the criteria, management makes judgements
on the level of future economic benefits of the asset flowing to the Company. Management is assisted in
making these judgements through the monitoring both of sales forecasts and of the level of future cost
benefits arising.
Deferred taxation
Management judgement is required in determining provisions for deferred tax liabilities and assets. The
process involves estimating the actual current tax exposure together with assessing temporary differences
resulting from the different valuation of certain assets and liabilities in the financial statements and the
tax returns. Management must assess the probability that the deferred tax assets will be recovered from
future taxable income.
Significant areas of estimation uncertainty
The key sources of estimation uncertainty at the end of the reporting period are as follows:
Contracts that are long term in nature and contracts for ongoing services
The value of revenue recognised during the year is dependent on estimates of work to completion. This
method requires the Group to estimate the stage of completion to date as a proportion of the total work to
be performed. Were the proportion of work completed to total work to be performed to differ by 5% from
management’s estimates, the amount of revenue recognised would increase/decrease by £27,000.
75
FINANCIAL STATEMENTS NOTES TO THE PARENT’S COMPANY
FINANCIAL STATEMENTS
CONT.
Multiple element contracts
Management uses estimates in determining the fair value of individual elements of the multiple element
contracts in order to appropriately recognise the revenue attributable to each element. A value is
assigned to each element of the contract, based on an estimate of the value of that element if it were sold
individually; the ratio of these values is then used to calculate a fair value for each element. The value of
revenue recognised during the year is also dependent on estimates of work to completion, as with long-
term contracts.
Carrying amount of non-current assets
Where there is an indication of impairment, a review of the carrying values of non-current assets is
undertaken as follows:
•
Intangible non-current assets are estimated on the basis of value in use
The value is calculated from the present value of future cash flows expected to be derived from the asset
under review. The key elements of estimation are the calculation of future cash flows. For freehold land and
buildings, future cash flows are the estimated cost to rent an equivalent building on the open market. For
intangible assets, future cash flows are forecast revenues from the associated cash-generating unit. Further
estimation is made in determining an appropriate discount rate that reflects the specific risks associated
with the asset or cash-generating unit.
Share options
Share-based payments are dependent on estimates as to the number of shares that are expected to vest,
and, by using the Black Scholes valuation model, estimates are made in expected volatility, the risk-free rate
and the expected time to exercise. Where appropriate, management uses historical market data as a basis
for estimating the fair value of share options on grant.
3
EMPLOYEES
The employee benefit expenses during the year were as follows:
Short-term employee benefits
Social security costs
Pension costs
Share-based payment charge
76
17 months ended
31 Dec 2017
£’000
12 months ended
31 Jul 2016
£’000
3,490
353
197
68
4,108
3,159
316
157
52
3,684
FINANCIAL STATEMENTS The average number employed by the company, including Executive Directors, was as follows:
Directors
Administration
Technical
4
INTANGIBLE ASSETS
Cost
At 1 August 2016
Additions
At 31 December 2017
Depreciation
At 1 August 2016
Charge for the period
At 31 December 2017
Net book value
At 31 December 2017
At 31 July 2016
5
PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 August 2016
Additions
Disposals
At 31 December 2017
Depreciation
At 1 August 2016
Charge for the period
On disposals
At 31 December 2017
Net book value
At 31 December 2017
At 31 July 2016
17 months ended
31 Dec 2017
£’000
12 months ended
31 Jul 2016
£’000
2
12
46
60
3
14
68
85
Development
costs
£’000
1,883
1,154
3,037
286
494
780
2,257
1,597
Freehold
property
£’000
Plant and
equipment
£’000
2,798
—
—
2,798
323
50
—
373
2,425
2,475
953
33
—
986
786
150
—
936
50
167
Total
£’000
1,883
1,154
3,037
286
494
780
2,257
1,597
Total
£’000
3,751
33
—
3,784
1,109
200
—
1,309
2,475
2,642
The net book value of freehold land in the Parent Company, not subject to depreciation, amounted to
£1,000,000 (2016: £1,000,000).
77
NOTES TO THE PARENT’S COMPANY
FINANCIAL STATEMENTS
CONT.
6
INVESTMENTS
Shares in group undertakings
31 Dec 2017
£’000
7,228
31 Jul 2016
£’000
7,228
The Parent Company owns 100% equity interest in Geophysical Exploration Technology Inc., a company
incorporated in the USA. The principal activity of Geophysical Exploration Technology Inc. is the marketing
of gravity and magnetic data, services and geological evaluations. The cost of US$10 capital stock was £1
and this has been written off in an earlier period. The results of Geophysical Exploration Technology Inc.
are included in the consolidated figures for the year.
The Parent Company owns 100% of the Ordinary Share capital in ERCL, a company incorporated in England
and Wales. The principal activity of ERCL is specialist international upstream oil and gas consultancy.
On 14 June 2016, the Parent Company acquired 100% of the Ordinary Share capital in Exprodat Consulting
Limited, a company incorporated in England and Wales. The principal activity of Exprodat Consulting
Limited is providing Geospatial and information management solutions to the upstream oil and gas industry.
In the opinion of the Directors, the aggregate value of the Company’s investment in subsidiary undertakings
is not less than the amount included in the balance sheet.
7
DEFERRED TAX
Deferred tax assets
Balance brought forward
Post-employment benefits
Movement from asset to liability
Tax losses
Balance carried forward
Deferred tax liabilities
Balance brought forward
Movement from asset to liability
Accelerated capital allowances
Balance carried forward
31 December 2017
£’000
31 July 2016
£’000
24
2
(25)
(1)
—
(109)
25
24
(60)
18
(1)
—
7
24
(126)
—
17
(109)
The deferred taxation recognised in the financial statements at 17% (2016: 18%) for UK taxation is set
out below:
Accelerated capital allowances
Tax losses
Share options
Post-employment benefits
Net deferred tax asset/(liability)
78
31 December 2017
£’000
31 July 2016
£’000
(85)
21
28
4
(60)
(109)
22
—
2
(85)
FINANCIAL STATEMENTS The most appropriate tax rate for the Getech is considered to be 19.47% (2016: 20%), the standard rate of
profits tax in the UK, which is the primary source of profit for Getech.
The deferred tax asset in respect of the UK Company is calculated at 17% (2016: 18%) in light of the future
tax rates announced.
8
INVENTORIES
Work in progress
31 Dec 2017
£’000
399
31 Jul 2016
£’000
485
There is a charge included in profit or loss for the year of £nil (2016: £nil) as an expense arising from an
impairment review of inventories.
9
TRADE AND OTHER RECEIVABLES
Trade receivables
Amounts owed by Group
Social security and other taxes
Other receivables
Prepayments and accrued income
31 Dec 2017
£’000
31 Jul 2016
£’000
912
120
—
66
164
1,262
691
316
76
5
237
1,325
All amounts are short term. The carrying amounts of trade and other receivables are considered to be reasonable
approximations to fair value.
All of the Company’s trade and other receivables have been reviewed for indicators of impairment. No trade
receivables were found to be impaired. In addition, some of the unimpaired trade receivables are past due as at the
reporting date. The age of financial assets past due but not impaired is as follows:
Not more than three months
More than three months but not more than six months
More than six months but not more than one year
10 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
31 Dec 2017
£’000
31 Jul 2016
£’000
500
—
—
500
736
—
5
741
31 Dec 2017
£’000
1,032
31 Jul 2016
£’000
1,626
79
NOTES TO THE PARENT’S COMPANY
FINANCIAL STATEMENTS
CONT.
11 BORROWINGS
The bank loan carries a variable interest rate of 2.04% above bank base rate and is repayable in equal
monthly instalments. The loan is secured by land and buildings owned by the Parent Company, with a
current carrying value of £2,424,000 (2016: £2,475,000).
Borrowings – held at amortised cost
279
355
—
634
Within one year
£’000
In one to two years
£’000
In two to five years
£’000
31 Dec 2017
£’000
12 TRADE AND OTHER PAYABLES
Trade payables
Amounts owed to Group undertakings
Social security and other taxes
Other payables
Accruals and deferred income
31 Dec 2017
£’000
31 Jul 2016
£’000
995
359
150
26
146
1,676
917
404
84
544
553
2,502
The carrying amounts of trade and other payables are considered to be reasonable approximations to
fair value.
13 SHARE CAPITAL
Authorised
90,000,000 Ordinary Shares of 0.25p each (2016: 90,000,000)
Issued, called up and fully paid
37,563,615 Ordinary Shares of 0.25p each (2016: 37,562,415)
Shares issued, called up and fully paid
Balance brought forward
Acquisition of subsidiary
Shares issued under share-based payments
Balance carried forward
80
31 Dec 2017
£’000
31 Jul 2016
£’000
225
94
225
94
31 Dec 2017
Number
31 Jul 2016
Number
37,562,415
—
1,200
37,563,615
32,729,790
4,666,667
165,958
37,562,415
FINANCIAL STATEMENTS 14 RELATED PARTY TRANSACTIONS
The remuneration of the Directors of the Parent Company
is set out in Note 6 to the consolidated financial statements.
Transactions with Directors of the Parent Company during the period and outstanding amounts at the
balance sheet date were as follows:
Other related parties
IP Group Limited
Noon and Co. Limited
TantlonGeo Limited
Zinc Consultants Limited*
Dividends
paid
£’000
Amounts
charged to the
Group £’000
Amounts
payable at
31 Dec 2017
£’000
—
—
—
—
19
19
19
59
—
—
—
—
* Amounts charged to the Group by Zinc Consultants Limited for recruitment services, a company of which
Chris Flavell is a Director. All transactions were on standard commercial terms.
Amounts for the year ended 31 July 2016 were as follows:
Executive Directors
Dr Paul Markwick
Raymond Wolfson
Huw Edwards
Non-executive Directors
Peter Stephens
Other related parties
IP Group Limited
Noon and Co. Limited
Winburn Glass Norfolk
Dividends
paid
£’000
Amounts
charged to the
Group £’000
Amounts
payable at 3
1 July 2016
£’000
3
8
17
19
—
—
—
—
—
—
—
10
8
34
—
—
—
—
—
—
—
81
FINANCIAL STATEMENTS
NOTES TO THE PARENT’S COMPANY
FINANCIAL STATEMENTS
CONT.
15 ULTIMATE CONTROLLING PARTY
The Directors consider that there is no ultimate controlling party
16 SUBSIDIARIES
Details of the Company’s subsidiaries as at 31 December 2017 are as follows:
Name of undertaking and country
of incorporation or residency
Nature of
business
Class of
shareholding
% held
directly
% held
indirectly
Exprodat Consulting Limited 1
England & Wales
ERCL Limited 2
England & Wales
Consultancy
Consultancy
Geophysical Exploration Technology
Inc 3
United States of
America
Sales & Marketing
agency
Ordinary
Ordinary
Ordinary
100
100
100
—
—
—
The registered offices of the subsidiaries listed above are as follows:
1 as the Company
2 Dragon Court, 15 Station Road, Henley-On-Thames, Oxfordshire, RG9 1AT
3 3000 Wilcrest Drive, Suite 155, Houston, TX 77042, USA
82
FINANCIAL STATEMENTS ANNUAL GENERAL MEETING
NOTICE OF ANNUAL
GENERAL MEETING
Notice is given that the twenty-fourth Annual General Meeting of Getech Group plc (hereafter referred to
as the Company) will be held at Kitson House, Elmete Hall, Elmete Lane, Leeds LS8 2LJ on 10 April 2018
at 12.00 noon to consider and, if thought fit, pass the resolutions below. Resolutions 10 and 11 will be
proposed as special resolutions; all other resolutions will be proposed as ordinary resolutions.
ORDINARY BUSINESS
To consider and, if thought fit, pass resolutions 1 to 8 as ordinary resolutions.
1
2
3
4
5
6
7
8
To receive the Report of the Directors, the Strategic Report and the audited accounts of the
Company for the period ended 31 December 2017.
To re-elect Alison Fielding as a Director of the Company, in accordance with article 35 of the
Company’s Articles of Association, who offers herself for re-election as a Director of the Company.
To re-elect Stuart Paton as a Director of the Company, in accordance with article 35 of the Company’s
Articles of Association, who offers himself for re-election as a Director of the Company.
To re-elect Chris Flavell as a Director of the Company, in accordance with article 35 of the Company’s
Articles of Association, who offers himself for re-election as a Director of the Company.
To re-appoint Chris Jepps, who was appointed since the last annual general meeting, in accordance
with article 30 of the Company’s Articles of Association, as a Director of the Company.
To re-appoint Andrew Darbyshire, who was appointed since the last annual general meeting, in
accordance with article 30 of the Company’s Articles of Association, as a Director of the Company.
To re-appoint Grant Thornton UK LLP as auditor of the Company to hold office until the conclusion of
the next general meeting at which accounts are laid before the Company.
To authorise the Directors to determine the auditor’s remuneration.
SPECIAL BUSINESS
To consider and, if thought fit, pass the following resolutions which in the case of resolution 9 will be
proposed as an ordinary resolution and in the case of resolutions 10 and 11 will be proposed as special
resolutions.
In the subsequent resolutions, the following words and expressions shall have the following meanings:
‘Act’
‘Latest Practicable Date’
‘Ordinary Shares”’
‘Rights’
–
–
–
–
the Companies Act 2006 (as amended)
close of business on 27 February 2018
Ordinary Shares of 0.25p each in the capital of the Company
rights to subscribe for or to convert any security into shares in the
Company
9
To authorise the Board generally and unconditionally pursuant to Section 551 of the Act to exercise
all powers of the Company to allot shares in the Company and to grant Rights:
9.1
9.2
up to an aggregate nominal amount of £31,303.01 (being one-third of the issued share
capital of the Company as at the Latest Practicable Date); and
comprising equity securities (within the meaning of Section 560 of the Act) up to an
aggregate nominal amount of £62,606.03 (after deducting from such amount any shares
allotted under the authority conferred by virtue of resolution 9.1) in connection with or
pursuant to a Rights Issue (as defined below),
83
NOTICE OF ANNUAL
GENERAL MEETING
CONT.
provided that:
a)
such authorities shall expire on the earlier of either midnight on 10 July 2019 or the date of the
next annual general meeting of the Company after the passing of this resolution unless varied,
revoked or renewed by the Company in a general meeting (save that the Board may, before the expiry
of the authorities granted by this resolution, make a further offer or agreement that would or might require
shares to be allotted or Rights to be granted after such expiry and the Board may allot shares and grant
Rights in pursuance of such an offer or agreement as if the authorities conferred by this resolution had not
expired); and
b)
the authorities granted by this resolution are in substitution for all previous authorities granted to the
Directors to allot shares and grant Rights which (to the extent that they remain in force and
unexercised) are revoked but without prejudice to any allotment or grant of Rights made or entered
into prior to the date of resolution 9.
For the purposes of resolution 9, ‘Rights Issue’ means an offer or invitation to: i) holders of Ordinary Shares
in proportion (as nearly as may be practicable) to the respective numbers of Ordinary Shares held by them
on the record date for such allotment, and ii) holders of other classes of equity securities if this is required
by the rights of such securities (if any) or, if the Directors of the Company consider necessary, as permitted
by the rights of those securities, to subscribe for further securities, but subject in both cases to such
exclusions or other arrangements as the Directors of the Company may deem necessary or expedient in
relation to fractional entitlements, treasury shares, record dates or legal, regulatory or practical difficulties
that may arise under the laws of, or the requirements of, any recognised regulatory body or any stock
exchange in any territory or any other matter whatever.
SPECIAL RESOLUTIONS
10
To empower the Board (subject to the passing of resolution 9) pursuant to Sections 570 and 573 of
the Act to allot equity securities (within the meaning of Section 560 of the Act) for cash pursuant to
the authority conferred upon them by resolution 9 or where the allotment constitutes an allotment of
equity securities by virtue of Section 560(3) of the Act as if Section 561(1) and sub-sections (1)–(6) of
Section 562 of the Act did not apply to any such allotment, provided that this power shall be limited to:
10.1
10.2
the allotment of equity securities in connection with or pursuant to a Rights Issue (as
defined in resolution 9); and
the allotment (otherwise than pursuant to sub-paragraph 10.1 above) of equity securities
up to an aggregate nominal value of £14,085.91 (being 15% of the issued share capital of
the Company as at the Latest Practicable Date); and
the authorities given by resolution 10 shall expire on the earlier of either midnight on 10 July 2019
or the date of the next annual general meeting after the passing of this resolution, unless renewed
or extended prior to such expiry, save that the Company may, before the expiry of any power
contained in this resolution, make a further offer or agreement that would or might require equity
securities to be allotted after such expiry and the Board may allot equity securities in pursuance of
such offer or agreement as if the powers conferred by this resolution had not expired.
11
To authorise the Company generally and unconditionally for the purpose of Section 701 of the Act to
84
ANNUAL GENERAL MEETING
make one or more market purchases (within the meaning of Section 693(4) of the Act) of Ordinary
Shares provided that:
11.1
11.2
11.3
11.4
the maximum aggregate number of Ordinary Shares authorised by this resolution to be
purchased is 3,756,361 (representing approximately 10% of the Company’s issued share
capital as at the Latest Practicable Date);
the minimum price that may be paid for such Ordinary Shares is 0.25p per share (exclusive
of expenses);
the maximum price (exclusive of expenses) that may be paid for an Ordinary Share is the
higher of a) 5% above the average of the middle market quotations for an Ordinary Share
as derived from the London Stock Exchange Daily Official List for the 5 business days
immediately preceding the day on which the Ordinary Share is purchased or b) the
higher of the price quoted for i) the last independent trade of or ii) the highest current
independent bid for any number of Ordinary Shares on the trading venue where the
purchase is carried out; and
unless previously revoked or varied, the authority conferred by this resolution shall expire
on the earlier of either midnight on 10 July 2019 or the date of the next annual general
meeting of the Company after the passing of this resolution, save that the Company may,
before such expiry, make a contract or contracts to purchase Ordinary Shares after such
expiry as if the power conferred by this resolution had not expired.
By order of the Board
ANDREW DARBYSHIRE
Company Secretary
27 February 2018
NOTES
1
2
3
4
5
This notice is the formal notification to shareholders of the Company’s Annual General Meeting: its
date, time and place, and the matters to be considered. If you are in doubt as to what action to take,
you should consult an independent advisor.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), only those
shareholders registered in the register of members of the Company as at close of business on 6 April
2018 or, if the meeting is adjourned, at close of business 2 working days prior to the adjourned
meeting (the ‘Cut-off Date’) as holders of Ordinary Shares shall be entitled to attend or vote at the
meeting in respect of the number of shares registered in their name at that time. Changes to entries
in the register of members after close of business on the Cut-off Date shall be disregarded in
determining the rights of any person to attend or vote at the meeting.
A member of the Company entitled to attend, speak and vote is entitled to appoint a proxy to
attend, speak and vote instead of him or her. A member may appoint more than one proxy in relation
to the meeting, provided that each proxy is appointed to exercise the rights attached to a different
share or shares held by him or her. A proxy need not be a member of the Company. Proxy forms
must be in the hands of the registrars by no later than 12.00 noon on 6 April 2018 or, if the
meeting is adjourned, 2 working days before the meeting. Further details of how to appoint a proxy
are set out in the notes to the proxy form, which is enclosed with this document.
The return of a proxy form will not prevent a member attending the Annual General Meeting and
voting in person if he/she so wishes.
If a member appoints a proxy or proxies and then decides to attend the Annual General Meeting in
person and vote using his/her poll card, then the vote in person will override the proxy vote(s). If the
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6
7
vote in person is in respect of the member’s entire holding, then all proxy votes will be disregarded.
If, however, the member votes at the meeting in respect of less than the member’s entire holding,
then if the member indicates on his/her polling card that all proxies are to be disregarded, that shall
be the case; but if the member does not specifically revoke proxies, then the vote in person will be
treated in the same way as if it were the last received proxy and earlier proxies will only be
disregarded to the extent that to count them would result in the number of votes being cast
exceeding the member’s entire holding. If you do not have a proxy form and/or believe that you
should have one or if you require additional forms, please contact the Company at its registered
office.
To change your proxy instructions, simply submit a new proxy appointment using the methods set
out above. Note that the cut-off time for receipt of proxy appointments (see Note 3) also applies in
relation to amended instructions; any amended proxy appointment received after the relevant cut-off
time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the
instructions using another hard-copy proxy form, please contact Link Asset Services at PXS 1, 34
Beckenham Road, BECKENHAM, BR3 4TU.
If you submit more than one valid proxy appointment, the appointment received last before the latest
time for the receipt of proxies will take precedence.
In order to revoke a proxy instruction, you will need to inform the Company by sending a signed
hard-copy notice clearly stating your intention to revoke your proxy appointment to Link Asset
Services. In the case of a member that is a company, the revocation notice must be executed under
its common seal or signed on its behalf by an officer of the company or an attorney for the company.
Any power of attorney or any other authority under which the revocation notice is signed (or a duly
certified copy of such power or authority) must be included with the revocation notice.
The revocation notice must be received by Link Asset Services at PXS 1, 34 Beckenham Road,
BECKENHAM, BR3 4TU no later than 12.00 noon on 6 April 2018. If you attempt to revoke your
proxy appointment but the revocation is received after the time specified, then, subject to Note 5
above, your appointment will remain valid.
8
CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy
appointment service may do so for the meeting convened by this notice and any adjournment(s
thereof by utilising the procedures described in the CREST Manual (available from https://www.
euroclear.com/site/public/EUI). CREST personal members or other CREST sponsored members, and
those CREST members who have appointed a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST
message (‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK
& Ireland Limited’s (EUI) specifications and must contain the information required for such
instructions, as described in the CREST Manual. The message must be transmitted so as to be
received by the issuer’s agent (ID RAI0) by the latest time for receipt of proxy appointments specified
in Note 3. For this purpose, the time of receipt will be taken to be the time (as determined by the time
stamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able
to retrieve the message by enquiry to CREST in the manner prescribed by CREST. CREST members
and, where applicable, their CREST sponsors or voting service providers should note that
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ANNUAL GENERAL MEETING
EUI does not make available special procedures in CREST for any particular messages. Normal
system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions.
It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST
personal member or sponsored member or has appointed a voting service provider(s), to procure
that their CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system by any particular time). In this
connection, CREST members and, where applicable, their CREST sponsors or voting service providers
are referred, in particular, to those sections of the CREST Manual concerning the practical limitations
of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
9
If a corporation is a member of the Company, it may by resolution of its Directors or other governing
body authorise one or more persons to act as its representative or representatives at the Annual
General Meeting and any such representative or representatives shall be entitled to exercise on
behalf of the corporation all the powers that the corporation could exercise if it were an individual
member of the Company.
Corporate representatives should bring with them either an original or certified copy of the
appropriate Board resolution or an original letter confirming the appointment, provided it is on the
corporation’s letterhead and is signed by an authorised signatory and accompanied by evidence of
the signatory’s authority.
10 Copies of Directors’ service contracts with the Company and with any of its subsidiary undertakings
and letters of appointment of Non-executive Directors will be available for at least 15 minutes prior to
the Annual General Meeting and during the meeting.
11 As at 27 February 2018 (being the last business day prior to the publication of this notice), the
Company’s issued share capital consists of 37,563,615 Ordinary Shares, carrying one vote each.
Therefore, the total voting rights in the Company as at 27 February 2018 is 37,563,615.
EXPLANATION OF RESOLUTIONS
Resolution number 1 – accounts
The Directors of the Company are obliged to present to shareholders the report of the Directors and the
accounts for the Company for the period ended 31 December 2017. That report and those accounts, and
the report of the Company’s auditor on those accounts, are set out on pages 24 to 81 of this document.
Resolution numbers 2, 3, 4, 5 and 6 – re-election and re-appointment of Directors
At each general meeting, one-third of the Directors for the time being (other than those appointed since
the latest annual general meeting) are required to retire. If the number of relevant Directors is not a
multiple of three, the number nearest to but not less than one-third of the Directors should be obliged
to retire. Directors due to retire by rotation are those who have been longest in office since their last re-
election and as between persons who become or were last re-elected on the same day, those due to retire
shall (unless they otherwise agree among themselves) be determined by lot. A retiring Director is eligible
for re-election. Alison Fielding, Stuart Paton and Chris Flavell retire by rotation and are offering themselves
for re-election. The Directors have agreed to appoint Chris Jepps and Andrew Darbyshire to the board with
effect from 28 February 2018. In accordance with the articles of association they therefore offer themselves
for re-appointment by the shareholders at the general meeting.
Resolution number 7 – re-appointment of auditor and approving its remuneration
At each general meeting at which accounts are laid, the Company is required to appoint an auditor to hold
office until the next general meeting. The present auditor, Grant Thornton UK LLP, is willing to continue in
office for a further year, and this resolution proposes its re-appointment.
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NOTICE OF ANNUAL
GENERAL MEETING
CONT.
Resolution number 8 – authority to determine auditor’s remuneration
In accordance with standard practice, this resolution will authorise the Directors to determine the level of
the auditor’s remuneration.
Resolution number 9 – authority to allot shares
The resolution grants the Directors authority to allot relevant securities up to an aggregate nominal amount
of £31,303.01, being one-third of the Company’s Ordinary Share capital in issue at 26 February 2018.
In line with guidance issued by the Association of British Insurers, resolution 9 also grants the Directors of
the Company authority to allot unissued share capital in connection with a Rights Issue in favour of ordinary
shareholders up to an aggregate nominal amount of £62,606.03 (representing two-thirds of the Company’s
Ordinary Share capital in issue at 26 February 2018) as reduced by the nominal amount of any shares
issued under resolution 9.1.
It is not the Directors’ current intention to allot relevant securities pursuant to this resolution. This authority
replaces the existing authority to allot relevant securities but does not affect the ability to allot shares under
the Company’s share option schemes.
Resolution number 10 – disapplication of statutory pre-emption rights
This resolution disapplies the statutory pre-emption rights that would otherwise apply on an issue of shares
for cash and is limited to allotments in connection with Rights Issues or other pre-emptive offers and,
otherwise, authorises the Directors to allot securities on a non-pre-emptive basis for cash up to a nominal
value of £14,086.36, being 15% of the Company’s Ordinary Share capital in issue at 27 February 2018. This
replaces the existing authority to disapply pre-emption rights and expires at the conclusion of the next
annual general meeting of the Company after the passing of this resolution or 15 months after the date of
the annual general meeting, whichever is the earlier.
Resolution number 11 – purchase of own shares
In certain circumstances, it may be advantageous for the Company to purchase its own shares, and this
resolution seeks authority to do this. The Directors would only consider making purchases if they believed that
such purchases would be in the best interests of shareholders generally, having regard to the effect on earnings
per share and the Company’s overall financial position.
The resolution gives general authority for the Company to make purchases of up to 3,756,361 Ordinary Shares
(being approximately 10% of the Company’s Ordinary Share capital in issue at 27 February 2018) at a minimum
price of 0.25p and a maximum price being the higher of a) 105% of the average of the middle market quotations
for Ordinary Shares for the 5 business days prior to the purchase or b) the higher of the price of the last
independent trade and the highest current independent bid on the trading venue where the purchase is carried
out.
Companies are permitted to retain any of their own shares that they have purchased as treasury stock with a
view to possible re-issue at a future date, rather than cancelling them. The Company will consider holding any
of its own shares that it purchases pursuant to the authority conferred by this resolution as treasury stock. This
would give the Company the ability to re-issue treasury shares quickly and cost effectively, and would provide
the Company with additional flexibility in the management of its capital base.
88
ANNUAL GENERAL MEETING ADVISORS
REGISTERED OFFICE FOR THE
PARENT COMPANY
Kitson House
Elmete Hall
Elmete Lane
Leeds
LS8 2LJ
NOMINATED ADVISOR AND BROKER
WH Ireland Limited
Third Floor
Royal House
28 Sovereign Street
Leeds
LS1 4BJ
AUDITOR
Grant Thornton UK LLP
No. 1 Whitehall Riverside
Whitehall Road
Leeds
LS1 4BN
SOLICITORS
Womble Bond Dickinson
1 Whitehall Riverside
Leeds
LS1 4BN
PRINCIPAL BANKERS
National Westminster Bank Plc
PO Box 183
8 Park Row
Leeds
LS1 1QT
REGISTRARS
Link Asset Services
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0GA
89
ANNUAL GENERAL MEETING GETECH GROUP PLC
Kitson House
Elmete Hall
Elmete Lane
Leeds
LS8 2LJ
0113 322 2200
0113 2735236
info@getech.com
www.getech.com