Getech Group plc
ANNUAL
REPORT
2018
d a t a
k n o w l e d g e
a n a l y s i s
Getech Group plc
Our customers work primarily in the petroleum
industry, but also other natural resource sectors.
Our data rich products, geographical information
systems (GIS) solutions and trusted advisory services
help our customers to achieve their business goals
of cost control, operational excellence, regulatory
compliance and environmental responsibility.
Financial Highlights
Revenue
£8.0m
2018
*2017
£8.0m
£7.2m
Adjusted EBITDA
£1.3m
2018
*2017
£1.3m
£1.0m
Earnings per Share
1.35p
2018
*2017
0.15p
1.35p
Net cash plus net current
receivables
£2.5m
2018
*2017
£2.5m
£1.9m
*Unaudited financial comparator for the 12 months to 31 December 2017
(see page 03 for more details).
Operational Highlights
Key Achievements in 2018
• Gravity & Magnetics data and services — continued demand for
• Our customers have responded positively to Globe’s
Gravity & Magnetics data and scientific expertise
• Globe — Globe 2018 released on schedule and within budget,
repositioning — the majority signing multi-year contracts
in H1 2018
providing new analytic tools and content to its customers
• Successful sales campaigns targeting multi-year subscriptions
• Software — Data Assistant and Exploration Analyst software
released on ArcGIS Pro
• GIS services — super-major support contract win and further
to our software products
• Gravity & Magnetics service line delivered strong profitability,
underlining our market leading position in this domain
diversification into new markets
• Reorganisation of our Geoscience services has put us on the
road to resetting profitability
Getech Group plc Annual Report and Accounts 2018 We supply the expertise, support and
knowledge that companies and governments
need to better discover, develop and manage
Natural Resources.
Getech Group plc Annual Report and Accounts 2018
01
IN THIS REPORT
About Getech
About Us
<<
Strategic Report
02
Chairman and Chief Executive’s Review
04 Operations Review
06
08
10
12
At a Glance
Products and Services
Principal Risks and Uncertainties
Financial Review
Governance
16
18
19
20
Corporate Governance
Directors
Advisors
Directors’ Report
22 QCA Code Principles
Financial Statements
27
32
33
34
35
36
63
64
65
Independent Auditor’s Report
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Cash Flows
Consolidated Statement
of Changes in Equity
Notes to the Consolidated
Financial Statements
Parent Company Balance Sheet
Parent Company Statement of
Changes in Equity
Notes to the Parent Company
Financial Statements
75
Notice of Annual General Meeting
Strategic ReportGovernanceFinancial Statements
02
STRATEGIC REPORT
Chairman and Chief Executive’s Review
By working closely with our customers and by
maintaining flexibility in our sales conversations,
year-on-year we delivered new customers, 11%
growth in revenue, 32% growth in EBITDA*, and
an increase in our baseline of forward sales.
“The Board and Senior
Management are focused
on ensuring that Getech’s
assets and capital work
hard for all shareholders.”
Dr Stuart Paton
Chairman
“Since 2016 we have
strengthened our business
operationally, commercially
and financially. We have
expanded investment in our
people and products but also
lowered like-for-like fixed costs
by 31%. This leaves Getech’s
cash profitability significantly
leveraged to growth.”
Dr Jonathan Copus
Chief Executive
Getech Group plc Annual Report and Accounts 2018 03
Overview
Getech provides geoscience and geospatial
products and services to companies and
governments who use them to de-risk
exploration programmes and improve
their management of natural resources.
The Group’s activities focus on a suite of
data, software and information products;
the value of which we enhance through
services that leverage these products and
our geoscience-geospatial skills.
Our product-led strategy targets recurring
revenue growth. Our investment
programme is shaped by a culture of
customer collaboration and a commitment
to continuous product and service
enhancement. This focus on products
and the customer reflects a repositioning
of Getech that began in 2016 with
the appointment of a new CEO and
management team.
Since 2016 we have strengthened our
business operationally, commercially and
financially. We have expanded investment
in our people and products but also
lowered like-for-like fixed costs by 31%.
This leaves Getech’s cash profitability
significantly leveraged to growth; fixed
costs accounting for c85% of the Group’s
total annual costs. We have also worked
to expand Getech’s activities beyond oil &
gas exploration; key to diversification have
been our geospatial software products
and services.
In 2018, crude prices strengthened year-
on-year, but price volatility left customer
exploration and new business budgets
constrained. We managed these budget
constraints by working closely with our
customers and by maintaining flexibility
in our sales conversations, which kept
them relevant to our customers’ changing
needs. Year-on-year this translated to new
customers, 11% growth in revenue, 32%
growth in Profit* , and an increase in our
baseline of forward sales.
Underpinning this performance is our
central ethos - to continuously enhance
the practical operational value of our
products and services.
We have entered 2019 with a busy
schedule of sales campaigns and we
consider Getech to be well positioned
to deliver diversified organic growth.
With industry costs at a cyclical low,
our customers’ attitude to capital
spending is balanced between spot
oil prices, which have rallied since the
start of 2019, and longer-dated crude
prices, which continue to trade above
$60 per barrel. As such, and against a
backcloth of falling reserve replacement,
we consider the conditions and need
for upstream investment to have
strengthened. Balancing this, and as
indicated in our Trading Update of 27
March, the lengthening of the sales cycle
that emerged in Q4 2018 has persisted
into 2019; the Directors believe that
customers remain cautious over the
early release of their exploration and
new business budgets. Getech’s 2019
sales campaigns and programme of
investment are positioned to unlock
these conversations.
The Board and Senior Management
are focused on ensuring that Getech’s
assets and capital work hard for all
shareholders. We believe volatile
macroeconomic conditions have delayed
the sale of our Leeds office and we have
assumed that this will not happen before
the next balance sheet date, however
we remain committed to its disposal. We
intend to build Getech through a mix of
organic and acquisitional growth, and as
the markets into which we sell stabilise,
we also see potential to reinstate
dividend payments.
On behalf of the Board and Executive we
would like to thank Getech’s staff for their
hard work, creativity and professionalism
throughout 2018.
Dr Stuart Paton
Chairman
Dr Jonathon Copus
Chief Executive
Highlights
Revenue Growth
11%
Profit Growth*
32%
Barrel Trade
$60+ (Per Barrel)
Reporting Basis
In this Annual Report we summarise and
discuss Getech’s audited financial results
for the 12-month accounting period ended
31 December 2018. Having moved our
financial year-end to 31 December (from
31 July) Getech’s prior audited accounts are
for the 17-month period to 31 December
2017 (referred to as AP-2017). To aid
analysis, we include unaudited financial
comparators for the 12 months ended 31
December 2017 (referred to as FY-2017).
The FY-2017 financial comparators have
been derived by deducting the five-month
period to 31 December 2016 unaudited
management accounts from the audited
17-month period to 31 December 2017.
*Adjusted earnings before interest, tax,
depreciation and amortisation, adjusted
for exceptional items as detailed in the
financial review (see page 13).
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 04
STRATEGIC REPORT
Operations Review
By leveraging skills from across the Group, Getech’s
geoscience, geospatial and software expertise have
been combined to deliver new information, analytics
tools and training options for Globe users.
“We continue to be
recognised as experts in the
use of Esri technology within
the petroleum and natural
resources sectors.”
Chris Jepps
Chief Operating Officer
Getech Group plc Annual Report and Accounts 2018 05
In Q3 2018 we began work on migrating
our Unconventionals Analyst software
product to ArcGIS Pro, targeting a release
in Q2 2019. As with Globe, our sales team’s
focus on delivering recurring revenue
enabled us to secure a number of multi-
year software contracts during the year.
Our GIS Services team continues to be
recognised as experts in the use of Esri
technology within the petroleum and
natural resources sectors. In 2018 we won
another long-term GIS support contract
with a super-major and diversified further
by securing geospatial implementation
projects with natural resources customers
outside of petroleum.
Our Geoscience Services team was
relocated to our new London office in
Q4 2018, having closed our Henley office.
While the market for geoscience services
has remained challenging following the
period of low and volatile oil prices, we
believe this re-organisation has put us
back on the road to profitability. It has
also enabled us to re-shape this team with
closer working relationships with the rest
of the Group — providing opportunities
to integrate Getech’s products, Gravity
& Magnetics services and geospatial
expertise into an evolving cross-disciplinary
geoscience services offering. Our work with
governments also continued in 2018, and
we continue to work in partnership with the
Government of Sierra Leone on its Fourth
Licensing Round and with the Lebanon
Petroleum Administration.
Chris Jepps
Chief Operating Officer
Overview
Our Gravity & Magnetics Solutions team
performed solidly in 2018, underscoring
our market leading position in this domain.
Data sales remained robust and our team’s
unique and leading expertise in potential
fields data processing, analysis and
interpretation was recognised by a busy
programme of Gravity & Magnetics service
contracts throughout the year.
Our flagship Globe product, developed by
our Geoscience Information Products team,
goes from strength-to-strength. In 2017
Globe was moved to an annual release
cycle. This was to provide more flexibility
in shaping the product’s development to
match our customers’ evolving needs. In
July 2018 the first of these annual releases,
“Globe 2018”, was delivered to customers
— on time and within budget. Globe 2018
features the most diverse and innovative
inventory of new capabilities to date. By
leveraging skills from across the Group,
Getech’s geoscience, geospatial and
software expertise have been combined
to deliver new information, analytics tools
and training options for Globe users.
Globe User Group Meetings, held in
London and Houston, produced a new
level of customer engagement and helped
stimulate discussion on product uses,
features and opportunities for future
product enhancements. Our work to
re-position Globe was rewarded in 2018
by many of Globe’s super-major customers
signing up to multi-year licence agreements.
The focus for our GIS Software division in
2018 was to migrate our software products
to ArcGIS Pro, Esri’s latest desktop GIS
application and ArcMap replacement. In the
autumn of 2018 both our Data Assistant
and Exploration Analyst extensions were
released on ArcGIS Pro, providing a
significant assistance to customers wishing
to upgrade their own environments.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 06 Getech Group plc Annual Report and Accounts 2018
STRATEGIC REPORT
At a Glance
Getech provides geoscience and geospatial products
and services to companies and governments, which
they use to de-risk exploration programmes and
improve their management of natural resources.
Our Mission
Help our customers to achieve their business goals of cost
control, operational excellence, regulatory compliance and
environmental responsibility.
Our Products
Our customers use our data, information and software
products to de-risk their exploration projects and more easily
locate, produce and manage natural resources. We enhance
our products through a combination of domain expertise,
customer collaboration and innovation. Our products are key
to our future growth, delivering recurring revenue and opening
margin upside.
Our Services
We position our services to showcase our technical skills and
the practical value of our products. We look to combine our
geoscience and geospatial expertise to provide solutions to
complex customer problems, which add value to their strategic
and day-to-day decision making. Through this formula, services
are an important access point into new sectors; the work of our
geospatial team in particular having expanded to projects in the
nuclear, water and energy infrastructure sectors.
Geophysical
Data
Globe
Geospatial
Software
Government
Advisory Services
Geoscience
Services
Geospatial
Services
Read more about our products on page 08
Read more about our services on page 08
07
Case Study: Globe
Earth’s evolution unlocked for better exploration
Globe is a geospatial information product that our customers use to
strengthen their understanding of the Earth’s evolution 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 user base consists of super-majors and large independent
oil & gas companies. By using Globe, they are better positioned to
understand petroleum systems and predict geological risk and uncertainty.
Globe goes from strength-to-strength
Globe is in its ninth year of development and in June 2018 the user-base
was consolidated by many of its super-major customers signing up to
multi-year licence agreements.
In 2017 Globe was moved to an annual release cycle. This was to provide
more flexibility in shaping the product’s development to match our
customers’ evolving needs. In July 2018 the first of these annual releases,
Globe 2018, was completed on time and within budget.
This release comprises the most diverse and innovative inventory of new
Globe content and usability features to date. This leveraged Getech’s
geoscience, geospatial and software expertise to deliver new content, new
analytics tools and a broad programme of training options for customers.
Work on the next release, Globe 2019, commenced in August 2018 and
contains further valuable enhancements to Globe’s capabilities.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 08
STRATEGIC REPORT
Products and Services
Our data rich products, GIS solutions and
trusted advisory services help our customers
to achieve their business goals of cost control,
operational excellence, regulatory compliance
and environmental responsibility.
Geophysical Data
Globe
Our Gravity & Magnetics data and analysis
are an essential component of integrated
geoscience interpretation projects,
providing crucial insights into areas of
interest in order to help our customers
minimise exploration risk.
We hold one of the world’s largest libraries
of data, the global coverage of which is
multiple times larger than our closest peer.
We continue to refresh and enhance our
data holdings; as well as expand them to
include seismic, well and other technical
geoscience data.
Our Gravity & Magnetics experts are
recognised world leaders in potential
field data QC and processing, collectively
having over 150 years of combined
experience, and deliver bespoke
processing services to customers
in the mining and petroleum sectors.
Globe is a geospatial information product
that helps its customers 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. These
data are presented across 58 consecutive
stratigraphic stages that cover the earth’s
history from 300 million years ago to the
present.
The Globe user base consists of super-
majors and large independent oil & gas
companies. By using Globe, they are better
positioned to understand petroleum systems
and predict geological risk and uncertainty.
We build additional value in and around
Globe through our Regional Report
information products.
Geospatial
Software
Our petroleum-focused software solutions
provide enriched visualisation, powerful
analytics and data integration tools for
companies that need to locate and extract
new hydrocarbon resources, improve
field management and ensure regulatory
compliance.
Our Data Assistant software makes data
integration simpler and easier across
a range of subsurface interpretation
applications, our Exploration Analyst
software allows users to perform complex
play-based exploration workflows, and
through our Unconventionals Analyst
software we have broadened our userbase
into the production environment; it
enabling users to reduce development
costs and simplify reserves evaluation.
Government
Advisory Services
Geoscience
Services
Geospatial
Solutions
We assist Governments and National
Oil Companies with Licencing Rounds,
Data Management, Capacity Building and
Advisory services.
In 2018, we worked for the Governments
of Sierra Leone, Lebanon and Ras al
Khaimah. In Sierra Leone we have worked
in partnership with the Petroleum
Directorate since 2016 and we continue to
assist them in running the ongoing Fourth
Licensing Round.
Our Government Advisory work enables
us to access a rich portfolio of technical
data, which we are then able to license on
behalf of the Government.
Our team delivers a combination of
specialist upstream oil & gas expertise,
a breadth of industry-specific knowledge
and an in-depth understanding of modern
exploration workflows.
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 Group products whilst delivering
complex integrated geoscience and
geospatial consultancy projects, remain
key differentiators.
Following careful cost control and
enhanced project management through
2018 we are working to return this service
line to profitability.
We support organisations across the world
with a unique blend of petroleum industry,
geoscience, geospatial, data management
and IT expertise. Our petroleum-focused
solutions provide enriched visualisation,
geospatial analytics and powerful data
integration for businesses that need to
locate and extract new resources, improve
field management and ensure compliance.
The transferable nature of our geospatial
skills has also proved very effective in
opening doors to new sectors; the team
having completed recent projects in
sectors that include nuclear monitoring,
water management and energy
infrastructure.
Getech Group plc Annual Report and Accounts 2018 09
Case Study: Unconventionals Analyst
Well planning made easy
Unconventionals Analyst is an extension to Esri’s ArcGIS
platform for use in “unconventional” resource projects such
as shale gas, shale oil, coal bed methane (CBM) or coal seam
gas (CSG).
It enables land, drilling and subsurface teams to holistically plan
field developments in order to streamline operations; and to
evaluate reserve areas and forecast volumes during production.
The software also enables operators to create a holistic model
of well pads and multilaterals across an area of land that it
wishes to develop for petroleum extraction. Using proprietary
geospatial algorithms Unconventionals Analyst quickly
identifies the most efficient mixture of lateral lengths and
pads to optimally develop the field - minimising costly surface
footprint and environmental impacts, while maximising lateral
lengths for increased production.
Using the software, its customers can dramatically cut
complex, time-consuming and resource intensive operational
workflows, and make significant cost savings during
operational planning.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 10
STRATEGIC REPORT
Principal Risks and Uncertainties
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:
Risk Status Key
• A management structure with clearly identified responsibilities
• The production of timely and comprehensive management
information
• Detailed budgeting and forecasting
• An analysis of risks and opportunities 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 EBITDA.
Risk increased
Risk decreased
Risk unchanged
Risk reduced
h
g
H
i
t
c
a
p
m
I
w
o
L
Low
5
1
2
Risk Scale
Liquidity and cash flow risk
Oil investment cycle
Financial risk
People
Systems and infrastructure
The withdrawal of the
UK from the EU
1
2
3
4
5
6
4
3
6
Likelihood
High
Getech Group plc Annual Report and Accounts 2018
11
The principal risks facing the business are outlined below (impact and likelihood ranked from 1 to 5):
Risk
Description
Mitigation
Impact
Likelihood
Change in
risk
1
Liquidity and
cash flow risk
The risk that the Group may
be unable to meet short-
term financial demands as
a result of a volatile working
capital cycle.
2
Oil investment
cycle
The risk that Getech’s
customers permanently
reduce their spending on
hydrocarbon exploration.
3
Financial risk
The key elements of financial
risk for Getech are market
borrowing interest rate risk,
customer credit risk and
currency risk. Price risk is
not considered material.
4
People
Retention of specialist staff
is crucial to the success of
the business.
5
Systems and
infrastructure
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.
6
The withdrawal
of the UK from
the EU
The risk that the UK’s
withdrawal from the EU will
affect the Group’s ability to
trade with EU customers.
Cash flow forecasts and future income
levels are carefully monitored on a
regular basis to pre-empt liquidity
issues before they occur. Careful
budgeting and close control over
expenditure have also contributed
to a decreased risk.
Diversification of Getech’s product and
service offerings to areas outside of
hydrocarbon exploration. Activity in these
areas already includes hydrocarbon
Production as well as broader fields of
Natural Resource Management that are
not hydrocarbon based.
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, where sales and
purchases are in currencies other than
pound sterling. Uncertainty in currency
markets has increased risk.
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.
Controls are in place to maintain the
integrity and efficiency of the Group’s
systems, which are regularly backed
up, updated and tested. Getech
continually invests in its network
and storage hardware to ensure the
IT infrastructure keeps pace with
developments in the Group’s product
and service offerings.
If trading restrictions are to be
applied to UK companies by the
EU directly, then the Group has the
flexibility to trade through its US entity.
Furthermore, the majority of our EU
customer base have trading entities
in the US and beyond that would be
unrestricted.
4
2
4
3
2
4
2
3
4
1
2
4
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 12
STRATEGIC REPORT
Financial Review
Getech’s current customers operate principally in the oil & gas
exploration sector. Their budgets and programmes of activity
are shaped by both spot and forward crude prices but also the
general cost structure of the industry and the opportunity sets
in and around their asset portfolios.
“Getech is committed to making
our capital work hard for the
benefit of all shareholders.
We do this through organic
investment and in 2018 we
focused on rationalising our
office locations.”
Andrew Darbyshire
Chief Financial Officer
Highlights
Revenue
£8,019,000
EBITDA (Adjusted)
£1,268,000
Earnings per Share
1.35p
With 2018 Brent averaging $71/bbl, 42%
higher than its prior three-year average,
and long-dated crude prices consistently
in excess of $60/bbl, our sales discussions
for most of the year had a more forward-
looking tone. In H1 2018 we extended
our pipeline of multi-year product
subscriptions, which expanded the Group’s
foundation of recurring revenue. In Q4
2018 however, a sharp fall in crude prices
highlighted the fragility of global growth,
Brent tumbling from a high of $86/bbl
to a low of $50/bbl. This fall lengthened
and complicated the sales cycle but by
repositioning our customer conversations
Getech ended 2018 with a significant sale
of data and products, which also added
a new Globe customer.
In the year to 31 December 2018, from
a significantly leaner and more focused
operational base, Getech delivered 11%
year-on-year revenue growth against
FY-2017, which drove a 32% expansion
in adjusted EBITDA. The Group ended
2018 with net cash plus net current
receivables of £2,503,000 (31 December
2017: £1,922,000). Having refinanced our
borrowings in H2 2018, net of long-term
debt this figure totalled £3,322,000
(31 December 2017: £2,277,000).
Operating Results
Revenue
Revenue for FY-2018 totalled £8,019,000,
an increase of 11% from the previous 12
months (AP-2017: £10,946,000, FY-2017:
£7,215,000). Within this figure, Products
revenue grew by 24%, compounding
growth of 19% in FY-2017, and in FY-2018
Products accounted for 80% of Group
revenue. In contrast, the Services market
remained challenging and despite our
Geospatial and Gravity & Magnetics Service
teams both delivering revenue and profit
growth, a contraction in Geoscience Service
income led to a 22% fall in service division
revenue. We restructured our Geoscience
Service activities in Q4 2018 and we are
seeing signs of improvement.
Getech Group plc Annual Report and Accounts 2018 13
Financial Summary (1)
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 exceptional items.
12 months
to 31 Dec 2018)
(FY-2018
Reported
(audited)
£’000
Adjusted
(unaudited)
£’000
8,019
1,071
250
508
1.35p
8,019
1,268
447
705
1.88p
17 months
to 31 Dec 2018
(FY-2017)
12 months
to 31 Dec 2018
(FY-2017)
Adjusted
(unaudited)
£’000
Reported
(unaudited)
£’000
Adjusted
(unaudited)
£’000
10,946
1,593
287
908
2.42p
7,215
7,215
384
(429)
58
0.15p
958
145
632
1.68p
Reported
(audited)
£’000
10,946
645
(661)
(40)
(0.11)p
1,073
1,270
1,416
1,903
1,108
1,221
(861)
(861)
(1,154)
(1,154)
13
—
(429)
(500)
95
13
—
(843)
(429)
(500)
(392)
2,393
1,759
1,922
(804)
(427)
(400)
193
(804)
(427)
(400)
80
2,393
1,759
1,922
Table 1 (1)
Revenue
EBITDA (2) (3)
Operating profit (2) (3)
Profit after tax (2) (3)
EPS
Cash inflow from operations (before
W/C adjustments) (2)
Development costs
Report Building costs
Acquisition costs
Net (decrease)/increase in cash (2)
(1,040)
Cash and cash equivalents
Net cash
Net cash plus net current
receivables
1,400
468
2,503
(1) Change in accounting treatment and prior year adjustments
The introduction of IFRS 15 has led to a general reappraisal of the accounting treatment for inventory costs. For Getech this has impacted the way we account
for costs associated with the building of Reports. The 2017 accounts have been restated to reflect this change in treatment.
Inventory assets held previously on the Balance Sheet have been reviewed and reclassified as Intangible assets. This has minimal effect on the Income Statement.
More significantly, the cost of building Reports, previously classified as an operational cost in the Cash Flow statement, are now reclassified as an investment cost.
Reflective of the lower level of investment in Reports in 2018 versus 2017, this reclassification has resulted in a minor increase in FY-2018 cash inflow from
operating activities before working capital adjustments of £47,000 but the reported cash inflow from operating activities before working capital adjustments
in AP-2017 has increased by £823,000 versus the previously reported figure (FY-2017: a £659,000 increase).
(2) Restructuring Costs
In Q4 2018, the Group combined its activities in London and Henley into one new London office, and restructured the Geoscience Services team (previously
based in Henley) to address its declining revenues and profitability. This resulted in one-off costs of £197,000 during FY-2018 and followed a larger Group-wide
restructuring programme, which was completed in late 2016/early 2017 (AP-2017: £487,000, FY-2017: £113,000).
(3) Write-down of intangible assets
In the 2017 comparative periods, following management’s review of intangible assets, it was considered prudent to impair the carrying value of several reports and studies;
the cost of which were carried on the balance sheet. No asset impairments have been taken in 2018 (AP-2017 and FY-2017: £461,000). In the comparative periods, the
impairment has been charged to cost of sales on the Consolidated Statement of Comprehensive Income and has been adjusted for in the comparative periods above.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
14
STRATEGIC REPORT
Financial Review cont.
Operating Results cont.
Gross Margin
Getech’s Group gross margin in FY-2018
equalled 47% (AP-2017: 47%, FY-2017:
51% before exceptional intangible asset
impairments of £461,000). Underlying
this is the continued 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
62% for the year (AP-2017: 65%, FY-2017:
70%), the margin on Services moving to
a loss (FY-2018: negative 14% AP-2017:
positive 7%, FY-2017: positive 3%). Getech
continues to target a return to a 25% margin
for the Services division in the mid-term.
Product margin fell between FY-2017 and
FY-2018 due to a rise in third-party costs,
which reflects a year-on-year shift in the
sales mix. This reduced the product margin
despite growth in revenues and a reduction
in fixed costs. This does not point to any
specific long-term cost trend.
Administrative costs
During FY-2018 we maintained fiscal
discipline when managing our administrative
costs, which for the year totalled £3,341,000;
5% lower than FY-2017 (AP-2017:
£4,858,000, FY-2017: £3,514,000).
Currency
Getech’s cost base is predominantly in
pound sterling, but a significant proportion
of its revenue is denominated in US Dollars.
During the year sterling weakness was
favourable to the Group, but the timing of
some larger US Dollar transactions resulted
in the Group recording a loss on foreign
exchange of £39,000 (AP-2017: £77,000
gain, FY-2017: £18,000 gain). Further details
regarding Getech’s foreign currency risk
and mitigation are set out in Note 19 to the
Consolidated Financial Statements.
EBITDA
Having delivered revenue growth from
an operational base that has been
strengthened by a multi-year programme
of capital discipline, Getech expanded its
EBITDA to £1,071,000 (AP-2017: £645,000;
FY-2017: £384,000). This however includes
restructuring costs of £197,000 (AP-2017:
£487,000, FY-2017: £113,000) and in 2017,
an impairment of intangibles of £461,000.
Taking account of these one-off
adjustments, the Group made an adjusted
EBITDA of £1,268,000. Year-on-year this
is 32% growth (AP-2017: £1,593,000;
FY-2017: £958,000).
Depreciation and Amortisation
Depreciation and amortisation charges
totalled £821,000 in 2018 and were
allocated to administrative costs in the
income statement (AP-2017: £1,306,000,
FY-2017: £813,000). Whilst amortisation
charges on Globe and software
development costs have increased, a
significant proportion of our Data Holdings
were fully amortised, accounting for the
overall decrease in amortisation charge.
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 profit of
£250,000 for the year (AP-2017: £661,000
loss, FY-2017: £429,000 loss). Adjusted for
restructuring costs and intangible asset
impairments (discussed above), Getech
delivered an adjusted operating profit
of £447,000 (AP-2017: £287,000 profit,
FY-2017: £145,000 profit).
Income tax
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 current tax credit for FY-2018
of £137,000 (AP-2017: £533,000). The
year-on-year reduction in the tax credit
is a function of the Group’s increased
profitability in 2018. After taxation, Getech
reported a profit of £508,000 (AP-2017:
£40,000 loss, FY-2017: £58,000 profit).
Cost base analysis
In Q4 2018 Getech merged its London
and Henley offices and reduced headcount
in the Geoscience Services team. This,
combined with capital discipline, meant
that the Group again reduced its fixed cost
base. A change in the mix of sales however
resulted in higher costs to third parties,
which has obscured the savings made.
Closure of Henley and the restructuring
of Geoscience Services had an associated
cost of £197,000 but these steps are
expected to deliver annualised fixed cost
savings of £500,000. (See Table 3).
Operating cash flow
Before working capital adjustments
Getech generated £1,073,000 in cash from
operations (AP-2017: £1,416,000, FY-2017:
£1,108,000). This includes restructuring
costs of £197,000 (AP-2017: £487,000, FY-
2017: £113,000). Adjusted for restructuring
costs, cash from operations would have
been £1,270,000 (AP-2017: £1,903,000,
FY-2017: £1,221,000).
Note however, that as highlighted in
Note 1 to Table 1, the reclassification of
expenditure on Reports from operational
costs to investment costs has led to a
significant upward restatement in operating
cash inflow in AP-2017 and FY-2017. Net
of the Group’s expenditure on producing
Reports, adjusted cash flows generated
from operations totalled £1,257,000 (AP-
2017: £1,474,000, FY-2017: £794,000).
Gross Margin by Reporting Segment
Table 2
Revenue
Cost of sales
Gross profit (before impairments)
Gross margin (before impairments)
Impairment of intangible assets
Gross profit
Gross margin
12 months to 31 Dec
2018 (audited)
17 months to 31 Dec
2018 (audited)
12 months to 31 Dec
2018 (unaudited)
Products
Services
Products
Services
Products
Services
6,434
(2,421)
4,013
62%
—
4,013
62%
1,585
(1,810)
(225)
(14)%
—
(225)
(14)%
7,570
(2,649)
4,921
65%
(461)
4,460
59%
3,372
(3,152)
220
7%
—
220
7%
5,155
(1,564)
3,591
70%
(461)
3,130
61%
2,060
(1,992)
68
3%
—
68
3%
In AP-2017 there was Revenue attributed to other segments totalling £4,000 with no costs associated.
Getech Group plc Annual Report and Accounts 2018 15
Changes in working capital
During the year there was significant
movement in working capital (FY-2018:
£1,919,000 negative movement, AP-2017:
£160,000 positive movement, FY-2017:
£472,000 positive movement). A large
proportion of this movement was due to
the timing of a high value sale of data and
products towards the end of 2018, which
is included in the receivables balance at
the year-end.
Cash taxation
Getech received cash tax credits
totalling £514,000 during 2018 (AP-2017:
£467,000, FY-2017: £437,000) as a result
of Getech’s continued investment into
research and development. Getech
expects cash tax credits to be lower
in 2019 due to the Group’s increased
profitability in 2018; Getech’s current tax
asset provision at 31 December 2018 is
£104,000 (31 December 2017: £490,000).
Investment and Capital Expenditure
In line with the Group’s strategy to
invest and enhance its product offering,
development expenditure on Globe and
Software increased to £861,000 (AP-2017:
£1,154,000, FY-2017: £804,000). Getech
expects to continue with this level of
investment in its products throughout 2019.
A repositioning of the work of the
Geoscience Information Products team
meant that in 2018 expenditure on
Report building fell to £13,000 (AP-2017:
£429,000, FY-2017: £427,000).
Financing
During the year Getech refinanced its
long-term loan that was reaching maturity.
This involved repaying the outstanding
amounts on the expiring loan, which
totalled £634,000 and drawing down a new
loan facility of £950,000. At the year-end,
Getech had made repayments of the new
loan totalling £19,000. In 2019, £113,000
of the loan capital falls due. The new loan
facility is repayable over 5 years and accrues
interest at 2.75% above base rate. The loan
is secured against the Leeds office, which
has a net book value of £2,388,000.
Liquidity and Going Concern
At the end of 2018, Getech held £1,400,000
in cash and cash equivalents (AP-2017/
FY-2017: £2,393,000). A fall in cash
balances toward the year-end was due to
the timing of sales and at 31 December
2018 Getech held a material net current
receivables balance (current receivables,
less current payables) totalling £2,035,000
(31 December 2017: £163,000).
At year-end, net cash plus net current
receivables (cash, less borrowings, plus net
current receivables) totalled £2,503,000 (31
December 2017: £1,922,000). Excluding
long-term debt, the total rose to £3,322,000
(31 December 2017: £2,277,000).
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
19 and 20 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 December 2020. 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
Chief Financial Officer
3 May 2019
The Strategic Report on pages 1 to
15 was approved by the Board on 3
May 2019.
Dr Stuart Paton
Chairman
Cost Base Reconciliation
The table below reconciles our cost base to the financial statements.
Table 3
Cost of sales
Development costs capitalised
Capitalised cost of building Reports
Impairment of intangibles
Administrative costs
Restructuring costs
Depreciation and amortisation charges
Exchange adjustments
Movement on provisions
Cost base
Deduct restructuring costs
Cost base, excluding one-off
restructuring costs
12 months
to 31 Dec 2018
(audited)
£’000
17 months
to 31 Dec 2018
(audited)
£’000
12 months
to 31 Dec 2018
(unaudited)
£’000
% Variance
4,231
861
13
—
3,341
197
(821)
16
(34)
7,804
(197)
7,607
6,262
1,154
429
(700)
4,858
487
(1,306)
7
(118)
11,073
(487)
10,586
4,017
804
427
(661)
3,514
113
(813)
(18)
(117)
7,266
(113)
7,153
7%
6%
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.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
16
GOVERNANCE
Corporate Governance
“The Board is responsible
for approving overall strategic,
financial and operational
matters and for the
identification of risks
faced by the Group.”
Dr Stuart Paton
Chairman
Getech is committed to high standards
of corporate governance. As such, the
Board has chosen to adopt the principles
of the Quoted Companies Alliance (‘QCA’)
Corporate Governance Code for Small and
Mid-Size Quoted Companies 2018 (‘the
Code’). Details of how Getech complies with
the Code, and the reasons for any non-
compliance, are set out on pages 22 to 26
of this report.
Prior to formal adoption of the Code, the
Group has operated in compliance with
recommendations of the QCA, in so far
as the size of the Group and its Board
permitted. For that reason, no significant
changes in governance-related matters
have been needed. No key governance
matters have arisen since the publication
of the last Annual Report.
The Board considers that the structure of
the Board provides a cost-effective and
practical method of directing and managing
the Group. As the Group’s activities
develop in size, nature and scope, the size
of the Board and the implementation of
additional corporate governance policies
and structures will be reviewed.
The Board
The Board currently comprises of four
Non-Executive Directors and three
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.
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 year is summarised
on page 17.
A Directors’ Responsibilities statement
in respect of the financial statements
is set out in this Annual Report on pages
20 and 21.
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 effectiveness of the Board is reviewed
on an annual basis, and progress against
the review recommendations is monitored
on a regular basis.
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.
Getech Group plc Annual Report and Accounts 2018 17
Audit Committee
The Audit Committee consists of three
non-executive members of the Board and
meets at least twice a year. The principal
duties and responsibilities of the Audit
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
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:
determining targets for, 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.
• 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
•
• Deciding membership of the Audit
and Remuneration Committees
Dr Stuart Paton
Chairman
• 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 meets at least once a year.
The principal duties and responsibilities
of the Remuneration Committee include:
42.84%
Director
Tenure %
28.58%
28.58%
Chairman
Executive Directors
Non-Executive Directors
0-1 years
2-3 years
4+ Years
Board of Directors’ Attendance
Director
Dr Stuart Paton
Peter Stephens
Dr Alison Fielding
Chris Flavell
Dr Jonathan Copus
Huw Edwards
Andrew Darbyshire
Chris Jepps
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
7/7
6/7
7/7
7/7
7/7
0/1
6/6
6/6
3/3
3/3
3/3
—
—
—
—
—
2/2
—
2/2
2/2
—
—
—
—
1/1
1/1
1/1
1/1
—
—
—
—
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 18
Directors
Getech 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.
1
5
2
6
3
7
4
Committee Membership
Audit Committee
Nomination Committee
Remuneration Committee
1
2
3
Dr Stuart Paton
Non-Executive Chairman
Dr Jonathan Copus
Chief Executive Officer
Andrew Darbyshire
Chief Financial Officer
Appointed
April 2011
Appointed
August 2016
Appointed
February 2018
Key strengths and experience
Key strengths and experience
Key strengths and experience
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.
Jonathan joined Getech as CEO in
August 2016. Jonathan has extensive
industry, corporate finance and capital
markets experience, having worked as
an Exploration Geologist at Shell, as a
number one rated E&P Equity Analyst at
a number of City institutions (including
Investec and Deutsche Bank) and most
recently as CFO 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.
Andrew started his accounting and
finance career at Garbutt & Elliott and
went on to work in audit for Grant
Thornton. Andrew joined Getech in 2014,
to establish their new finance team. He
was formally appointed to the Board in
February 2018. Andrew has a master’s
degree in Mathematics from the University
of York and is a member of the Institute
of Chartered Accountants in England and
Wales, he is also the treasurer for
a charity, Live Music Now North East.
Getech Group plc Annual Report and Accounts 2018GOVERNANCE
19
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
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
4
5
Chris Jepps
Chief Operating Officer
Dr Alison Fielding
Non-Executive Director
Appointed
February 2018
Appointed
October 2010
Key strengths and experience
Key strengths and experience
Chris has extensive petroleum industry,
GIS and entrepreneurial experience, having
worked within integrated exploration
teams at Shell, as a professional services
consultant at Landmark Graphics and most
recently as Technical Director at Exprodat;
where Chris established the Company’s
technical strategy and led its software
design and development. Following
Exprodat’s acquisition by Getech Group plc
in 2016, Chris initially joined as Products
Director, becoming Getech Group plc
COO in February 2018. Chris has a BSc in
Geology from Imperial College, London,
and is a current member of Esri’s Partner
Advisory Council.
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 Maven Income and Growth VCT 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.
6
7
Peter Stephens
Non-Executive Director
Chris Flavell
Non-Executive Director
Appointed
September 2005
Appointed
November 2015
Key strengths and experience
Key strengths and experience
Peter is currently Chairman of ASX quoted
Etherstack, Boisdale Canary Wharf and
True Luxury Travel having been an original
investor in Scott Dunn in 1988, sold in
2014. He was Chairman of Getech from
its flotation on AIM in 2005 up until 2013
and remains a Director. Previously, Peter
was an early investor in Tristel plc, and was
a Director during the company’s flotation
on AIM in 2005 up until 2013. He was
the Head of European Equities Sales at
Salomon Brothers 1986-2000 and Crédit
Lyonnais 2000-2004. He was Chairman
of Cavendish Ware, Wealth Manager
from 2008 until 2018 and remains a
significant shareholder. 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.
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 eight years. Chris’ 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.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 20
GOVERNANCE
Directors’ Report
“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 enhance management of
natural resources.”
Andrew Darbyshire
Chief Financial Officer
The Directors present their report and
financial statements for the year ended
31 December 2018.
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 year were:
Dr Jonathan Copus
Andrew Darbyshire
(appointed 28 February 2018)
Huw Edwards (resigned 28 February 2018)
Dr Alison Fielding
Chris Flavell
Chris Jepps (appointed 28 February 2018)
Dr Stuart Paton
Peter Stephens
Results and Dividends
The results for the year are set out on page
32. The Directors do not recommend a
dividend (2017: no dividend).
Corporate Governance
See separate Corporate Governance
Report.
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 including
around financial risk management are
included in the Strategic Report (see
page 10).
Substantial Shareholders
The Parent Company was notified on
20 February 2019 of the following interests
in excess of 3% of its issued Ordinary Share
capital. Please see the table on page 21.
Directors’ responsibilities
The Directors are responsible for preparing
the 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 year.
Getech Group plc Annual Report and Accounts 2018 21
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
3 May 2019
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.
Substantial Shareholders
The Directors confirm that:
• So far as each Director is aware,
there is no relevant audit information
of which the Group’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.
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.
IP Group plc
Alto Invest
BGF Group
JD Fairhead
Peter Stephens
Chris Green
Hargreaves Lansdown
Hargreave Hale
Number of
Ordinary Shares
% of issued
share capital
4,132,054
3,776,088
3,805,350
3,072,474
1,876,500
1,797,080
1,357,230
1,322,131
11.0
10.2
10.1
8.2
5.0
4.8
3.6
3.5
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 22
QCA Code Principles
Getech is committed to achieve and maintain high standards of
governance. As such, the Board has chosen to adopt the Quoted
Companies Alliance Corporate Governance Code for Small and Mid-Size
Quoted Companies 2018 (‘the QCA Code’). Detailed below is how the
Board applies the 10 principles of Corporate Governance, which form
part of the QCA code.
Principle
Application
Compliance
Establish a
strategy and
business model
which promote
long-term value
for shareholders
The Board must be able to express a shared
view of the Company’s purpose, business model
and strategy. It should go beyond the simple
description of products and corporate structures
and set out how the Company intends to deliver
shareholder value in the medium to long-term.
It should demonstrate that the delivery of long-
term growth is underpinned by a clear set of
values aimed at protecting the Company from
unnecessary risk and securing its long-term future.
Seek to
understand and
meet shareholder
needs and
expectations
Directors must develop a good understanding of
the needs and expectations of all elements of the
Company’s shareholder base.
The Board must manage shareholders’
expectations and should seek to understand the
motivations behind shareholder voting decisions.
The Company’s vision is to invest in and develop its
operating business to deliver long-term, sustainable
growth in shareholder value.
It seeks to share this vision and details of the
implementation of its strategy through internal dialogue
with employees as well as external communications
by way of public announcements and dissemination
of information through the Company website
(www.getech.com) and the Annual Report.
The Group’s strategy places our data, software and
information products at the heart of our business. We
target 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 revenue potential.
The Board is committed to maintaining an open dialogue
with shareholders. Communication with shareholders is
co-ordinated by the Chairman, and the Chief Executive
Officer and Group Finance Director.
Throughout the year, the Board maintains a regular
dialogue with institutional investors, providing them
with such information on the Company’s progress as is
permitted within the guidelines of the AIM rules, Market
Abuse Regulation (MAR) and requirements of the relevant
legislation.
Twice yearly, at the time of announcing the Group’s interim
and full-year results, the Company does a round of visits to
its major shareholders to update them on developments
and to receive feedback and suggestions from them. The
Board believes that the Annual Report and Accounts,
and the Interim Report published at the half-year, play
an important part in presenting all shareholders with an
assessment of the Group’s position and prospects. All
reports and press releases are published in the Investor
section of the Group’s website.
The Board is aware of the need to protect the interests
of minority shareholders and balancing these interests with
those of any more substantial shareholders. The Annual
General Meeting (‘AGM’) is the principal opportunity for
private shareholders to meet and discuss the Group’s
business with the Directors. There is an open question
and answer session during which shareholders may ask
questions both about the resolutions being proposed
and the business in general. The Directors are also
available after the meeting for an informal discussion
with shareholders.
Getech Group plc Annual Report and Accounts 2018GOVERNANCE 23
Principle
Application
Compliance
Take into account
wider stakeholder
and social
responsibilities
and their
implications for
long-term success
Long-term success relies upon good relations
with a range of different stakeholder groups
both internal (workforce) and external (suppliers,
customers, regulators and others). The Board
needs to identify the Company’s stakeholders
and understand their needs, interests and
expectations.
Where matters that relate to the Company’s
impact on society, the communities within
which it operates, or the environment have the
potential to affect the Company’s ability to deliver
shareholder value over the medium to long-
term, then those matters must be integrated
into the Company’s strategy and business model.
Feedback is an essential part of all control
mechanisms. Systems need to be in place to
solicit, consider and act on feedback from all
stakeholder groups.
The Board recognises that the Group’s long-term
success is reliant on the efforts of its employees,
contractors, customers and suppliers. As part of the staff
appraisal process, employees are invited into an open
dialogue and agreement on goals targets, aspirations
and personal development opportunities.
We engage annually with our Globe and potential Globe
customers at the Getech Globe user-group meeting,
which provides valuable insight into our customers’
needs. In addition, we request feedback on our products
and services from our customers.
Feedback is an essential part of all control mechanisms.
Systems need to be in place to solicit, consider and
act on feedback from all stakeholder groups. All new
suppliers and contractors must complete our KYC
process and all contractors must agree to the terms
of our anti-bribery policies. Key relationships with
customers, suppliers, contractors and regulators are
closely managed by the Executive Directors and the
Executive Committee.
The Board are appraised of any issues arising. The Board
also understands that it has a responsibility to consider,
where practicable, the social, environmental and
economic impact of its corporate strategy.
As part of our social responsibility and to safeguard our
employees and contractors, we follow the UK foreign
office advice on travelling and working abroad in high
risk countries and territories. As a Group we aim to
minimise our carbon footprint; initiatives include the
introduction of low energy LED lighting in our offices,
waste recycling and the use of video-conferencing in
place of international travel where practical.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 24
QCA Code Principles cont.
Principle
Application
Compliance
Embed effective
risk management,
considering both
opportunities
and threats,
throughout the
organisation
The Board needs to ensure that the Company’s
risk management framework identifies and
addresses all relevant risks in order to execute
and deliver strategy; companies need to consider
their extended business, including the Company’s
supply chain, from key suppliers to end-customer.
Setting strategy includes determining the extent
of exposure to the identified risks that the
Company is able to bear and willing to take
(risk tolerance and risk appetite).
The Board has an established Audit Committee, a
summary of which is set out above. Included in the remit
of the Audit Committee is approval of significant new
contracts, whereby the committee takes into consideration
the balance of risk and return, opportunity and threat.
The Company receives regular feedback from its external
auditors on the state of its internal controls. The Board
maintains a register of risks and publishes an annual
summary of the significant risks and uncertainties
in the Annual Report.
Maintain the
Board as a
well-functioning,
balanced team led
by the chair
The Board members have a collective responsibility
and legal obligation to promote the interests of
the Company and are collectively responsible for
defining corporate governance arrangements.
Ultimate responsibility for the quality of, and
approach to, corporate governance lies with the
chair of the Board. The Board (and any committees)
should be provided with high quality information in
a timely manner to facilitate proper assessment of
the matters requiring a decision or insight.
The Board should have an appropriate balance
between executive and Non-Executive Directors
and should have at least two independent Non-
Executive Directors. Independence is a Board
judgement. The Board should be supported by
committees (eg audit, remuneration, nomination)
that have the necessary skills and knowledge
to discharge their duties and responsibilities
effectively. Directors must commit the time
necessary to fulfil their roles.
The Board is comprised of a Chairman, three Executive
Directors, and three additional Non-Executive Directors.
The roles of the Chairman and Chief Executive Officer are
clearly separated.
The Chief Executive is responsible for the operational
management of the business of the Group and for the
implementation of strategy and policies as agreed by the
Board. The Chairman is responsible for the leadership
and effective working of the Board, for setting the Board
agenda, and ensuring that Directors receive accurate,
timely and clear information.
The Non-Executive Directors are considered by the Board
to be independent of management and free to exercise
independence of judgement. A description of the roles
of the Directors is included on pages 18 and 19.
Ensure that
between them the
Directors have
the necessary
up-to-date
experience, skills
and capabilities
The Board must have an appropriate balance
of sector, financial and public markets skills
and experience, as well as an appropriate
balance of personal qualities and capabilities.
The Board should understand and challenge its
own diversity, including gender balance, as part
of its composition.
The Board should not be dominated by one
person or a group of people. Strong personal
bonds can be important but can also divide a
board. As companies evolve, the mix of skills
and experience required on the Board will change,
and Board composition will need to evolve to
reflect this change.
Directors who have been appointed to the Company have
been chosen because of the skills and experience they
offer. Full biographical details of all Directors are included
on pages 18 and 19.
As noted above, the Company has put in place an Audit
Committee as well as Remuneration and Nomination
Committees. The responsibilities of each of these
committees have been summarised on pages 16 and 17.
Getech Group plc Annual Report and Accounts 2018GOVERNANCE 25
Principle
Application
Compliance
Evaluate Board
performance
based on clear
and relevant
objectives, seeking
continuous
improvement
The Board should regularly review the
effectiveness of its performance as a unit, as
well as that of its committees and the individual
Directors. The Board performance review may
be carried out internally or, ideally, externally
facilitated from time to time.
The review should identify development or
mentoring needs of individual Directors or the
wider senior management team. It is healthy
for membership of the Board to be periodically
refreshed. Succession planning is a vital task for
Boards. No member of the Board should become
indispensable.
The Company undertakes regular monitoring of
personal and corporate performance using agreed Key
Performance Indicators and detailed financial reports.
Responsibility for assessing and monitoring the
performance of the Executive Directors lies with the
Chairman and the Non-Executive Directors.
The Board undertakes an annual Company health-
check, where the Board performs an appraisal of its
effectiveness as a whole.
Where areas for improvement are identified, specific
actions are set, to be completed in a suitable timescale.
Progress of these actions are monitored on a regular
basis. The Board considers the need for the periodic
refreshing of its membership, this involves ensuring the
skillsets provided by the Board members continues to
be aligned with corporate strategy and risk.
Promote a
corporate culture
that is based on
ethical values and
behaviours
The Board should embody and promote a
corporate culture that is based on sound ethical
values and behaviours and use it as an asset and
a source of competitive advantage.
Getech has a strong ethical culture, which is promoted
by the actions of the Board and executive team. The
Group has an anti-bribery policy and has implemented
adequate procedures described by the Bribery Act 2010.
The policy set by the Board should be visible in
the actions and decisions of the chief executive
and the rest of the management team. Corporate
values should guide the objectives and strategy
of the Company.
The Group reports on its compliance to the Board on
an annual basis. The Group has undertaken a review
of its requirements under the General Data Protection
Regulation, implementing appropriate policies,
procedures and training to ensure it is compliant.
The culture should be visible in every aspect of
the business, including recruitment, nominations,
training and engagement. The performance
and reward system should endorse the desired
ethical behaviours across all levels of the
Company. The corporate culture should be
recognisable throughout the disclosures in the
Annual Report, website and any other statements
issued by the Company.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 26
QCA Code Principles cont.
Principle
Application
Compliance
Maintain
governance
structures and
processes that
are fit for purpose
and support good
decision-making
by the Board
Communicate
how the Company
is governed and
is performing
by maintaining
a dialogue with
shareholders and
other relevant
stakeholders
The Company should maintain governance
structures and processes in line with its corporate
culture and appropriate to its:
• size and complexity; and
• capacity, appetite and tolerance for risk.
Details of the Company’s corporate governance
arrangements are provided above and include; the
Board structure and Board member biographies, and
summaries and terms of reference for the Board sub-
committees: Audit Committee, remuneration committee,
and nomination committee.
The governance structures should evolve over time
in parallel with its objectives, strategy and business
model to reflect the development of the Company.
A healthy dialogue should exist between the
Board and all of its stakeholders, including
shareholders, to enable all interested parties to
come to informed decisions about the Company.
In particular, appropriate communication and
reporting structures should exist between the
Board and all constituent parts of its shareholder
base. This will assist:
•
•
the communication of shareholders’ views to
the Board; and
the shareholders’ understanding of the unique
circumstances and constraints faced by the
Company.
It should be clear where these communication
practices are described (Annual Report or website).
The Board believes that an appropriate governance
structure is in place based on the size, complexity and risk
tolerance of the Group.
This is monitored by the Board as the Company evolves
over time to ensure alignment with Group objectives,
strategy, size and complexity, and changes to risk appetite.
See also Rule 26 disclosures on the Getech website
(www.getech.com).
The Company encourages two-way communication with
both its institutional and private investors and responds
quickly to all queries received.
The Chairman and the Chief Executive talk regularly with
the Group’s major shareholders and ensures that their
views are communicated fully to the Board.
The Board recognises the AGM as an important
opportunity to meet private shareholders. The Directors
are available to listen to the views of shareholders
informally immediately following the AGM.
The Board produces a series of updates throughout
the year relating to Company performance, these are
distributed by RNS and RNS reach.
Copies of all RNS announcements can also be found on
the investor section of the website, here.
The resolutions passed following the most recent AGM
can be found on the Getech website (www.getech.com).
Getech Group plc Annual Report and Accounts 2018GOVERNANCE 27
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 year
ended 31 December 2018, 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 Parent company
balance sheet, the Parent 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 2018 and of the group’s profit for the year 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.
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 materiality: £41,125, which represents 0.5% of the group’s total revenues;
• Key audit matters were identified as revenue recognition and the 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 full scope financial statement audits and specific scope
audit procedures.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 28
Independent Auditor’s Report cont.
to the members of Getech Group Plc
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current year 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.
Key Audit Matter — Group
How the matter was addressed in the audit — Group
Risk 1 — Revenue recognition
There is a risk that revenue from sales of products
and services may be misstated due to the improper
recognition of revenue.
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, and
performance obligations have been met.
As there are contractual arrangements with customers,
there is a risk that revenue is misstated as each
contract’s outcome and stage of completion, and hence
revenue recognition, requires professional judgement.
We therefore identified revenue recognition 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 recording
of revenue, and testing of the operational effectiveness of the controls
where the documentation of these could be evidenced.
• Evaluation of the revenue recognition policies for appropriateness with
IFRS 15, which was adopted in the year, and of the accounts disclosures
relating to the adoption of the standard.
• Testing a sample of revenue transactions in respect of sale of products
and provision of services and assessing them against supporting
documentation to determine whether revenue has been appropriately
recognised in accordance with the Group’s accounting policy.
• Testing of transactions around the year end to determine the
application of correct cut-off procedures, including assessment
of appropriate deferral of revenue.
• Comparison of current year revenue with that from the prior period,
and obtaining and corroborating the explanations received for
significant and unusual variances.
The group’s accounting policy on revenue recognition and the key sources
of estimation uncertainty are shown in Notes 3.2 and 3.17 in the Summary
of Accounting policies section of the consolidated financial statements
and related disclosures are included in Note 4 to the consolidated
financial statements.
Key observations
Based on our work performed, we have not identified any material
misstatements with respect to revenue recognition.
Risk 2 — Carrying value of goodwill and
other intangible assets
Within the consolidated statement of financial position
are significant balances for goodwill and other intangible
assets arising from both previous acquisition activity and
internal development work.
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, the consolidated
financial statements are at risk of being materially
misstated due to unrecorded impairment. Further, the
forward forecasts for the group include a degree of
estimation as to future projects to be delivered and the
results to be derived therefrom.
We therefore identified the 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 internal
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, of additions to intangible assets during the year
to supporting documentation, including work records and timesheets.
• Development of an expectation of amortisation expense
for the year 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 and
cash flows from the underlying cash generating units relative to historic
performance, prospects of future commercial projects, and assessment
of the growth rates and discount rates applied.
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.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 29
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.
Materiality was determined as follows:
Materiality
measure
Group
Parent
Financial statements
as a whole
Performance materiality
used to drive the extent
of our testing
£41,125 which is 0.5% of total revenues. This
benchmark is considered the most appropriate
because it is the most consistent balance in the
financial statements over recent years and is
a key focus of the Group.
Materiality for the current year is lower than the
level that we determined for the period ended
31 December 2017 due to the prior period being
based on normalised profit before tax over the
prior 3 years. Given the inconsistency of this
balance over recent years within the Group,
the use of revenues for the current year was
considered to be more appropriate.
£37,000 which is based on the Parent company
profit before tax, capped at 90% of Group
materiality. This benchmark was considered to
be most appropriate because the Parent
company is also the largest trading company,
therefore the profit before tax basis ensures that
materiality is based on the most important figure
to the users of the financial statements.
Materiality for the current year is lower than the
level that we determined for the period ended
31 December 2017 due to the reduction in the
Group materiality level.
75% of financial statement materiality.
75% of financial statement materiality.
Communication of
misstatements to the
audit committee
£2,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£1,850 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.
Overall materiality — group
Overall materiality — parent
25%
25%
75%
75%
Tolerance for potential
uncorrected mistatements
Performance materiality
Tolerance for potential
uncorrected mistatements
Performance materiality
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
30
Independent Auditor’s Report cont.
to the members of Getech Group Plc
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 and other significant risks.
• 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 the 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 specific scope procedures over the balance sheet
and income statement, performed taking into account group materiality and group performance materiality, with a focus on Key audit
matters and other significant risks and the significance to the Group’s balances.
• The components subject to a full scope audit approach cover 83% of the consolidated revenues, 92% of consolidated assets and 77%
of total profit before tax, with the component subject to a specific scope approach representing 17% of the consolidated revenues,
8% of consolidated assets and 23% of total profit before tax.
• 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,
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.
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
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 31
Responsibilities of Directors for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on pages 20 and 21 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.
Use of our report
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.
Victoria McLoughlin BA FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
3 May 2019
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 32
Consolidated Statement of Comprehensive Income
For the 12 months ended 31 December 2018
Revenue
Cost of sales
Exceptional inventory impairments
Gross profit
Administrative expenses
Operating profit/(loss) before exceptional administrative expenses
Exceptional administrative expenses:
Restructure costs
Operating (loss)/profit
Finance income
Finance costs
Profit/(Loss) before tax
Income tax credit
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.
12 months
ended 31
Dec 2018
£’000
Note
17 months
ended 31
Dec 2017
(Restated)
£’000
12 months
ended 31
Dec 2017
(Unaudited)
£’000
4
4
5
7
8
9
8,019
(4,231)
—
3,788
(3,341)
447
(197)
250
—
(25)
225
283
508
36
544
10,946
(5,801)
(461)
4,684
(4,858)
(174)
(487)
(661)
2
(34)
(693)
653
(40)
(10)
(50)
7,215
(3,556)
(461)
3,198
(3,514)
(316)
(113)
(429)
—
(30)
(459)
517
58
7
65
11
11
1.35p
1.33p
(0.11)p
(0.11)p
0.15p
0.15p
The accompanying Notes on pages 36 to 62 form an integral part of these financial statements.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
As at 31 December 2018
Company registration number: 02891368
33
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
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
Trade and other payables
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
31 Dec 2018
£’000
Note
31 Dec 2017
(Restated)
£’000
31 Jul 2016
(Restated)
£’000
12
13
14
9
15
16
17
18
17
18
9
21
3,428
4,018
3,086
305
10,837
4,941
104
1,400
6,445
3,428
3,827
2,499
207
9,961
2,121
490
2,393
5,004
3,428
4,015
2,691
283
10,417
3,372
434
2,788
6,594
17,282
14,965
17,011
113
2,906
—
3,019
819
565
137
1,521
4,540
12,742
94
3,053
2,407
183
25
6,980
12,742
279
1,958
—
2,237
355
—
194
549
2,786
12,179
94
3,053
2,407
164
(11)
6,472
12,179
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 32 to 62 were approved and authorised for issue by the Board of Directors on 3 May 2019.
Dr Stuart Paton
Non-executive Chairman
3 May 2019
The accompanying Notes on pages 36 to 62 form an integral part of these financial statements.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 34
Consolidated Statement of Cash Flows
For the 12 months ended 31 December 2018
12 months
ended
31 Dec 2018
£’000
Note
17 months
ended
31 Dec 2017
(Restated)
£’000
12 months
ended
31 Dec 2017
(unaudited)
£’000
13/14
15
18
14
13
13
Cash flows from operating activities
Profit/(loss) before tax
Share-based payment charge
Depreciation and amortisation charges
Impairment of intangible assets
Loss on disposal of fixed assets
Finance income
Finance costs
Exchange adjustments
Cash inflow from operating activities before working
capital movement
Movement in working capital:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash (used in)/generated from operations
Income taxes refunded
Net cash (used in)/generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Development costs capitalised
Capitalised cost of Reports
Acquisition costs, net of cash received
Interest received
Net cash used in investing activities
Cash flows from financing activities
Receipt of new loan
Repayment of long-term borrowings
Repayment of lease liabilities
Interest paid
Net cash generated from/(used in) financing activities
Net (decrease)/increase 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
16
The accompanying Notes on pages 36 to 62 form an integral part of these financial statements.
225
19
820
—
—
—
25
(16)
(693)
67
1,306
700
11
(2)
34
(7)
(459)
44
813
661
—
—
31
18
1,073
1,416
1,108
(2,820)
901
(846)
514
(332)
(78)
(861)
(13)
—
—
1,251
(1,091)
1,576
467
2,043
(54)
(1,154)
(429)
(500)
2
919
(447)
1,580
437
2,017
(9)
(804)
(427)
(400)
—
(952)
(2,135)
(1,640)
950
(652)
(29)
(25)
244
(1,040)
2,393
47
1,400
—
(266)
—
(34)
(300)
(392)
2,788
(3)
2,393
—
(266)
—
(31)
(297)
80
2,317
(4)
2,393
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
For the 12 months ended 31 December 2018
35
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
Transfer of reserves
Share-based payment charge
Transactions with owners
Profit for the year
Other comprehensive income
Currency translation differences
Total comprehensive income
for the year
At 31 December 2018
Share
capital
£’000
Share
premium
account
£’000
Merger
relief
reserve
£’000
Share
option
reserve
£’000
Currency
translation
reserve
£’000
Retained
earnings
£’000
Total
£’000
94
—
—
—
—
—
—
94
—
—
—
—
—
—
94
3,053
2,407
—
—
—
—
—
—
—
—
—
—
—
—
173
(76)
67
(9)
—
—
—
3,053
2,407
164
—
—
—
—
—
—
—
—
—
—
—
—
3,053
2,407
—
19
19
—
—
—
183
(1)
6,436
12,162
—
—
—
—
(10)
(10)
(11)
—
—
—
—
36
36
25
76
—
76
(40)
—
(40)
—
67
67
(40)
(10)
(50)
6,472
12,179
—
—
—
—
19
19
508
508
—
36
508
544
6,980
12,742
The accompanying Notes on pages 36 to 62 form an integral part of these financial statements.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 36
Notes to the Consolidated Financial Statements
For the year ended 31 December 2018
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 except for certain items measured
at fair value and are presented to the nearest thousand pounds (£’000) except as otherwise stated.
Going Concern
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.
2.1 New standards adopted as at 1 January 2018
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 ‘Revenue from Contracts with Customers’ and the related ‘Clarifications to IFRS 15 Revenue from Contracts with Customers’
(hereinafter referred to as ‘IFRS 15’) replace IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and several revenue-related Interpretations.
The new Standard has been applied retrospectively without restatement, with the cumulative effect of initial application recognised as an
adjustment to the opening balance of retained earnings at 1 January 2018. In accordance with the transition guidance, IFRS 15 has only
been applied to contracts that are incomplete as at 1 January 2018. Our review of prior period contracts resulted in no adjustment to the
opening balance of retained earnings.
Contracts with multiple performance obligations
Many of the Group’s contracts comprise a variety of performance obligations including, but not limited to, hardware, software, elements
of design and customisation, after-sales services, and installation. Under IFRS 15, the Group must evaluate the separability of the promised
goods or services based on whether they are ‘distinct’. A promised good or service is ‘distinct’ if both:
•
•
the customer benefits from the item either on its own or together with other readily available resources, and
it is ‘separately identifiable’ (ie the Group does not provide a significant service integrating, modifying or customising it).
Whilst this represents significant new guidance, the implementation of this new guidance did not have a significant impact on the timing
or amount of revenue recognised by the Group in any year.
IFRS 9 ‘Financial Instruments’
IFRS 9 replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’. It makes major changes to the previous guidance on the
classification and measurement of financial assets and introduces an ‘expected credit loss’ model for the impairment of financial assets.
When adopting IFRS 9, the Group has applied transitional relief and opted not to restate prior periods. Differences arising from the
adoption of IFRS 9 in relation to classification, measurement, and impairment are recognised in retained earnings.
There have been no changes in classification or measurement of financial assets or liabilities as a result of the application of IFRS 9.
IFRS 16 ‘Leases’
IFRS 16 replaces IAS 17 ‘Leases’ and three related Interpretations. It completes the IASB’s long running project to overhaul lease
accounting. Leases will be recorded in the statement of financial position in the form of a right-of-use asset and a lease liability.
There are two important reliefs provided by IFRS 16 for assets of low value and short-term leases of less than 12 months.
IFRS 16 is effective from periods beginning on or after 1 January 2019. The Group have decided to early adopt using the Standard’s
modified retrospective approach. Under this approach the cumulative effect of initially applying IFRS 16 is recognised as an adjustment
to equity at the date of initial application. Comparative information is not restated.
The Group did not hold any leases in the prior year with a term of over 12 months and as a result there is no adjustment to equity
as at 1 January 2018.
As a result of implementing IFRS 16, leases are recorded on the statement of financial position in the form of a right-of-use asset and
a lease liability. There are no other material impacts on the Group’s financial statements.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 37
2 Basis of preparation cont.
2.2 Standards, amendments and interpretations not yet applied
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 2018 financial statements:
Standard or Interpretation
Annual Improvements to IFRS Standards 2015-2017 Cycle
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 22 Foreign Currency Transactions and Advance Consideration
Amendments to IFRS 9: Prepayment Features with Negative Compensation
Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions
EU effective date
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
The Group does not anticipate any material impact on the financial statements from the implementation of the above future
standards.
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 2018. 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 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
The Group has adopted IFRS 15 and its principles. 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. Typical invoice payment
terms are 30 days for all categories of revenue.
Revenue from products and services falls into the four categories below:
Consultancy services
The Group provides various consulting services to its customers. Revenue from these services is recognised on a time-and-materials
basis plus a margin as the services are provided. Customers are invoiced monthly as work progresses.
The Group also provides outsourcing services for a fixed fee for an agreed period. As the amount of work required to perform these
services does not vary significantly from month-to-month, revenue is recognised on a straight-line basis over the term of the contract.
This revenue accounting policy is applicable for revenues from Government Advisory Services, Geoscience Services and Geospatial
Solutions.
Multiclient products
For sales of data and completed products, revenue is recognised when performance obligations have been satisfied, which is on
dispatch unless otherwise agreed.
This revenue accounting policy is applicable for revenues from Geophysical Data, Globe and Regional Reports.
Multiple element contracts
Where contracts for multiple element products with staged deliverables 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.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
38
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
3 Summary of Accounting Policies cont.
3.2 Revenue cont.
Multiple element contracts cont.
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 performance
obligations have been satisfied, which is on dispatch unless otherwise agreed
• Service elements of the contract — revenue is recognised in line with the accounting treatment for consultancy services
• Project elements that are to be delivered from development work that is yet to be completed — revenue is recognised when the
performance obligations have been satisfied, which is on dispatch unless otherwise agreed
Software licences
Customers subscribe to Getech’s software licences, usually over a 12-month term. The customer has the rights to all of the benefits
provided by the product over the term of the licence, as such, revenue is recognised over the term of the licence. The balance of the
revenue invoiced is deferred.
This revenue accounting policy is applicable for revenues from Geospatial Solutions Software.
3.3 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.
3.4 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.
3.5 Research
Research expenditure is charged to profit or loss in the period in which it is incurred.
3.6 Right-of-use assets and lease liabilities
The Group recognises a right-of-use asset and a lease liability at the commencement date of the contract for all leases conveying the right
to control the use of an identified asset for a period of time. The commencement date is the date on which a lessor makes an underlying
asset available for use.
The right-of-use assets are initially measured at cost, which comprises:
• The amount of initial measurement of the lease liability;
• any lease payments made at or before the commencement date, less any lease incentives;
• any initial direct costs incurred by the lessee;
• an estimate of costs to be incurred by the lessee in dismantling and removing the underlying assets or restoring the site on which
the assets are located.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 39
3 Summary of Accounting Policies cont.
3.6 Right-of-use assets and lease liabilities cont.
After the commencement date of the right-to-use assets are measured at cost less accumulated depreciation and accumulated
impairment losses and adjusted for any re-measurement of the lease liability.
Depreciation is calculated using the straight-line method over the life of the lease.
The lease liability is initially measured at the present value of the lease payments that are not paid at that date. The lease payments
are discounted using the Group’s incremental borrowing rate (3.5%), or the rate implicit in the lease contract.
After the commencement date, the Group measures the lease liability by:
Increasing the carrying amount to reflect interest on the lease liability; and
•
• reducing the carrying amount to reflect lease payments made.
3.7 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
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.
3.8 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
Reports
Data holdings
Goodwill on consolidation
– 15 years
– five years
– five to ten years
– ten years
– ten years
– indefinite, annual impairment review
Amortisation is included within ‘Administrative costs’, except for amortisation of Reports, which is included in Cost of Sales.
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.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 40
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
3 Summary of Accounting Policies cont.
3.9 Financial Assets
Financial assets are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset
and substantially all the risks and rewards are transferred.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price
in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
• amortised cost
•
•
fair value through profit or loss (FVTPL)
fair value through other comprehensive income (FVOCI)
In the periods presented the Group does not have any financial assets categorised as FVOCI or FVTPL.
Subsequent measurement of financial assets - Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
•
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal
amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the
effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category
of financial instruments.
Impairment of financial assets
IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses — the ‘expected credit loss
(ECL) model’. This replaces IAS 39’s ‘incurred loss model’.
Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers
a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions,
reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk
(‘Stage 1’) and
• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low
(‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second
category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the
financial instrument.
Previous financial asset impairment under IAS 39
In the prior year, the impairment of trade receivables was based on the incurred loss model. Receivables were considered for impairment
when they were past due or when other objective evidence was received that a specific counterparty will default.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 41
3 Summary of Accounting Policies cont.
3.10 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).
3.11 Cash and Cash Equivalents
Cash and cash equivalents comprise cash-in-hand and demand deposits.
3.12 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
3.13 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.
3.14 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.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 42
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
3 Summary of Accounting Policies cont.
3.15 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.
3.16 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 relating to specific market events; and
• other particularly significant or unusual items.
3.17 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
Management use judgement in determining the fair value of multiple element contracts in order to appropriately recognise the revenue
attributable to each element. The value of revenue recognised in the period is dependent on an assessment of work to completion
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:
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. 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 £48,000.
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, including goodwill, 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 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. See Note 12 for further details of assumptions made and sensitivity testing regarding Goodwill
and Intangible Assets.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 43
3 Summary of Accounting Policies cont.
3.17 Significant Areas of Judgement and Estimation Uncertainty cont.
Share options
Share-based payments are valued using the Black Scholes valuation model. Estimates are made in expected volatility and the risk-free
rate. Where appropriate, management uses historical market data as a basis for estimating the fair value of share options on grant.
Increasing the risk-free rate by 2% and increasing the volatility window in the calculation of volatility from 5 days to 30 days made no
material difference to the valuation of share options issued during the year.
3.18 Reporting period
The current period covers a 12-month period from 1 January 2018 to 31 December 2018. The comparative period was 17 months.
To aid analysis we include unaudited financial comparators in the main financial statements for the 12 months ended 31 December
2017. These comparators were derived by deducting the five-month period to 31 December 2016 unaudited management accounts
from the audited 17-month period to 31 December 2017.
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.
Specifically, the Group’s reportable segments under IFRS 8 are as follows:
• Products (Including Geophysical Data, Globe, Regional Reports and Software revenues)
• Services (Including Government Advisory Services, Geoscience Services and Geospatial Solutions revenues)
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.
12 months ended
31 Dec 2018 (audited)
17 months ended
31 Dec 2017 (audited)
12 months ended
31 Dec 2017 (unaudited)
Revenue
£’000
6,434
1,585
—
—
8,019
Revenue
£’000
7,570
3,372
4
—
10,946
Profit
£’000
4,013
(225)
—
—
3,788
(3,341)
(197)
(25)
225
Profit
£’000
4,921
220
4
(461)
4,684
(4,858)
(487)
(32)
(693)
Revenue
£’000
5,155
2,060
—
—
7,215
Profit
£’000
3,591
68
—
(461)
3,198
(3,514)
(113)
(30)
(459)
Products
Services
Other segments
Exceptional intangible impairments1
Central administrative costs
Restructuring costs
Net finance costs
Profit before tax
1 Profit for the 17 months and 12 months ended 31 December 2017 includes impairment of intangibles of £461,000.
The segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in
the current year (2017: £nil).
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 44
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
4 Segmental Reporting cont.
4.2 Segment Revenues and Results cont.
The analysis of revenue by timing of revenue recognition:
Year ended 31 Dec 2018
At a point in time
Over time
Products
Services
Other
Consolidated
3,470
2,964
6,434
—
1,585
1,585
—
—
—
3,470
4,549
8,019
17 months ended 31 Dec 2017
Products
Services
Other
Consolidated
At a point in time
Over time
3,796
3,774
7,570
—
3,372
3,372
4
—
4
3,800
7,146
10,946
12 months ended 31 Dec 2017 (Unaudited)
Products
Services
Other
Consolidated
At a point in time
Over time
2,786
2,369
5,155
—
2,060
2,060
—
—
—
2,786
4,429
7,215
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 finance costs. 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.
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
12 months ended
31 Dec 2018
17 months ended
31 Dec 2017
12 months ended
31 Dec 2017 (unaudited)
Revenue
£’000
Non-current
assets
£’000
Revenue
£’000
Non-current
assets
£’000
Revenue
£’000
Non-current
assets
£’000
1,309
992
282
4,122
740
504
70
261
10,576
—
—
—
—
—
3,509
2,336
668
2,095
1,562
219
557
267
9,694
—
—
—
—
—
8,019
10,837
10,946
9,961
2,313
1,540
440
1,381
1,030
144
367
7,215
267
9,694
—
—
—
—
—
9,961
Within revenue, there are sales to one customer exceeding 10% of turnover, amounting to £2,506,000 (2017: no sales to customers
exceeded 10% of turnover).
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS
5 Operating Profit/(Loss)
The operating profit/(loss)for the year has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Amortisation of intangible assets
Exceptional impairment of inventories
Other impairment of intangibles
Exceptional restructure costs
Remuneration receivable by the Group’s auditor for services:
– the auditing of the accounts
– audit related services
Operating leases:
– rental costs of land and building
Foreign exchange movement
Share-based payments charge
Research and development costs expensed as incurred
45
12 months
ended 31
Dec 2018
£’000
17 months
ended 31
Dec 2017
£’000
132
689
—
—
197
43
6
311
39
19
597
235
1,072
461
239
487
42
12
418
(77)
67
916
The above charges and credits are included in ‘Cost of sales’ and ‘Administrative costs’ in the consolidated statement of comprehensive
income.
The rental costs of land and buildings relate to leases that expired in the year and were therefore not restated under IFRS 16
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
The average number employed by the Group, including Executive Directors, was as follows:
Directors
Administration
Technical
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
3,825
6,421
401
222
30
702
367
68
4,478
7,558
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
Number
4
16
59
79
3
18
74
95
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 46
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
6 Directors and Employees cont.
Directors’ remuneration for the year ended 31 December 2018 was as follows:
Executive
Dr Jonathan Copus
Chris Jepps1
Andrew Darbyshire1
Huw Edwards2
Non-executive
Dr Alison Fielding3
Dr Stuart Paton
Peter Stephens4
Chris Flavell5
Executive
Dr Jonathan Copus
Huw Edwards6
Dr Paul Carey7
Dr Paul Markwick8
Non-executive
Dr Alison Fielding3
Dr Stuart Paton
Peter Stephens4
Chris Flavell5
12 months ended 31 Dec 2018
Fees/salary
£’000
Pension
contributions
£’000
Benefits
in kind
£’000
Total before
share options
£’000
Share-based
payment
charge
£’000
250
125
83
30
20
40
20
20
588
11
6
4
—
—
—
—
—
21
—
—
—
—
—
—
—
—
—
261
131
87
30
20
40
20
20
609
15
1
1
—
—
—
—
—
17
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
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
1 Andrew Darbyshire and Chris Jepps were appointed to the Board on 28 February 2018, as such only remuneration from this date is included.
2 Huw Edwards worked a four-day week and left office on 28 February 2018, as such only remuneration up to this date is included.
3 Director’s fees for Alison Fielding were paid to IP Group plc, a company of which she is an employee.
4 Director’s fees for Peter Stephens were paid to Noon and Co. Limited, a company of which he is a Director.
5 Director’s fees for Chris Flavell were paid to TantlonGeo Limited, a company of which he is a Director.
6 Huw Edwards took a three-month sabbatical in the 17 months to 31 December 2017 and worked a four-day week.
7 Dr Paul Carey left office on 31 December 2016.
8 Dr Paul Markwick left office on 31 January 2017, included in 2017 salary is £63,000 compensation for loss of office.
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.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 47
6 Directors and Employees cont.
Directors’ Share Options
Details of the share options held by Directors are:
Date granted
Exercise period
Option price
31 Dec 2017
Granted
Lapsed
31 Dec 2018
Number of shares
Dr Jonathan Copus
2 Aug 2016
2 Aug 2016
2 Aug 2016
20 Nov 2018
20 Nov 2018
20 Nov 2018
Chris Jepps
20 Nov 2018
20 Nov 2018
Andrew Darbyshire
20 Nov 2018
20 Nov 2018
Dr Stuart Paton
27 Apr 2011
27 Apr 2011
27 Apr 2011
27 Apr 2011
Peter Stephens
24 Dec 2010
2 Aug 2017 — 2 Aug 2026
2 Aug 2018 — 2 Aug 2026
2 Aug 2019 — 2 Aug 2026
2 Aug 2019 — 19 Nov 2028
20 Nov 2019 — 19 Nov 2028
20 Nov 2020 — 19 Nov 2028
20 Nov 2019 — 19 Nov 2028
20 Nov 2020 — 19 Nov 2028
20 Nov 2019 — 19 Nov 2028
20 Nov 2020 — 19 Nov 2028
27 Apr 2011—27 Apr 2021
27 Apr 2012—27 Apr 2021
27 Apr 2013—27 Apr 2021
27 Apr 2014—27 Apr 2021
24.50p
24.50p
24.50p
35.00p
35.00p
35.00p
35.00p
35.00p
35.00p
35.00p
17.50p
17.50p
17.50p
17.50p
500,000
500,000
400,000
—
—
—
—
—
—
—
300,000
200,000
200,000
200,000
24 Dec 2012—24 Dec 2021
15.00p
41,490
—
—
—
100,000
125,000
125,000
125,000
125,000
125,000
125,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
500,000
500,000
400,000
100,000
125,000
125,000
125,000
125,000
125,000
125,000
300,000
200,000
200,000
200,000
41,490
The market price of the shares at the end of the financial year was 31.00p and the range of market prices during the year was between
42.00p and 22.50p.
Full share-based payment disclosures are provided in Note 22.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 48
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
7 Finance Income
Interest on bank deposits
8 Finance Costs
Interest on bank borrowings
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
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
—
2
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
25
34
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
(57)
(80)
—
(137)
(141)
(5)
—
(146)
(283)
(410)
(159)
36
(533)
(222)
—
102
(120)
(653)
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 49
9 Income Tax cont.
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% (2017: 19.47%).
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% (2017: 19.47%) as follows:
Profit /(Loss) on ordinary activities before tax
Tax at UK corporation tax rate of 19% (2017: 19.47%)
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
Movement in deferred tax not recognised
Share-based payments charge
Foreign tax credits
Adjustment for tax computation in foreign jurisdictions
Other differences
Adjustment to tax charge in respect of prior years
Total tax credit reported in the consolidated statement of comprehensive income
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
Foreign tax jurisdictions
Balance carried forward
Deferred tax liabilities
Balance brought forward
Accelerated capital allowances
Intangible assets of foreign subsidiary company
Intangible assets acquired in business combinations
Share based payments
Foreign tax jurisdictions
Balance carried forward
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
225
43
14
10
—
(268)
74
—
(9)
(35)
(4)
—
(23)
(85)
(283)
(693)
(135)
8
13
(37)
(517)
140
11
—
—
36
(19)
6
(159)
(653)
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
207
—
2
42
—
54
305
283
(31)
23
(70)
2
—
207
(194)
(387)
—
—
22
35
—
47
70
41
—
35
(137)
(194)
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 50
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
9 Income Tax cont.
Deferred taxation cont.
The deferred taxation recognised in the financial statements, at 17% (2017: 17%) for UK taxation and 21% (2017: 21%) 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
Provisions
Post-employment benefits
Net deferred tax asset/(liability)
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
36
(91)
(5)
(28)
360
(111)
3
4
168
—
(86)
(56)
(22)
306
(133)
—
4
13
The most appropriate tax rate for the Group is considered to be 19% (2017: 19.47%), the standard average rate of profits tax in the UK,
which is the primary source of profit for the Group.
The deferred tax asset in respect of the UK company is calculated at 17% (2017: 17%) 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 year ended 31 December 2018.
Paid during the year
No final dividend in respect of the year ended 31 December 2017 (2016: £nil per share)
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
—
—
—
—
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.
Profit/ (Loss) attributable to equity holders of the Group
Weighted average number of Ordinary Shares in issue
Basic earnings per share
Diluted earnings per share
12 months
ended
31 Dec 2018
17 months
ended
31 Dec 2017
£508,000
£(40,000)
37,563,615
37,562,454
1.35p
1.33p
(0.11)p
(0.11)p
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 2018 is 738,949 (2017: 629,707).
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS
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 2016, 31 December 2017 and 31 December 2018
Accumulated impairment
At 1 August 2016, 31 December 2017 and 31 December 2018
Carrying amount
At 1 August 2016, 31 December 2017 and 31 December 2018
51
Goodwill
£’000
3,428
—
3,428
For the purpose of annual impairment testing, goodwill and intangibles assets are allocated to the relevant cash generating unit.
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 present value of the expected cash flows is determined by
applying a suitable discount rate reflecting the current market assessments of the time value of money and risks specific to the cash
generating unit.
The recoverable amount is set out below:
Group’s goodwill and intangible assets
31 Dec 2018
£’000
31 Dec 2017
£’000
18,399
18,399
9,847
9,847
In extrapolating future cash flows, long-term industry growth has been modelled at an annual rate of 3%, together with a 3% rate
of inflation on costs annually.
Sales volumes over the five-year period are based on past performance and management’s expectations of a market recovery
staggered over that period, reflected by 10% year-on-year growth. The cash flow model also includes revenues from a successful
licencing round in 2019.
The discount rate applied of 11.3% takes into consideration the industry-wide risks as well as those specific to the Group’s Services
operating segment.
Sensitivity analysis is carried out on all budgets, strategic plans and discount rates used in the calculations. The cash flow model is
sensitive to short term market recovery and to the initiation of a successful licencing round. In a scenario whereby revenues increase
at a lower rate matching the long-term industry growth rate of 3 percent annually and the licencing round is unsuccessful, then this
would result in an impairment to goodwill and intangibles of £234,000.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
52
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
13 Intangible Assets
The carrying amounts of intangible assets for the years presented in the consolidated financial statements are reconciled as follows:
Cost
At 1 August 2016 restated
Additions
Transferred
Disposals
Exchange differences
At 31 December 2017 restated
Additions
Exchange differences
At 31 December 2018
Amortisation and impairment
At 1 August 2016 restated
Amortisation charge
Impairment
Exchange differences
At 31 December 2017 restated
Amortisation charge
Exchange differences
At 31 December 2018
Carrying amount
At 31 December 2018
At 31 December 2017 restated
At 1 August 2016 restated
Customer
relationships
£’000
Software
development
£’000
Development
costs
£’000
Reports
£’000
Data
holdings
£’000
Other
intangibles
£’000
877
—
—
—
—
877
—
—
877
355
54
—
—
409
38
—
447
430
468
522
462
—
—
—
—
462
—
—
462
12
131
—
—
143
92
—
235
227
319
450
1,883
1,154
—
—
—
3,037
861
—
3,898
286
494
—
—
780
503
—
1,283
2,615
2,257
1,597
1,067
429
—
—
—
1,663
—
—
—
(29)
1,496
1,634
13
—
—
94
1,509
1,728
—
123
700
—
823
33
—
856
653
672
1,067
1,314
251
—
(34)
1,531
15
89
1,635
93
103
349
2
—
30
(3)
—
29
—
—
29
2
19
—
—
21
8
—
29
—
8
—
Total
£’000
5,954
1,583
30
(3)
(29)
7,535
874
94
8,503
1,969
1,072
700
(34)
3,707
689
89
4,485
4,018
3,827
4,015
Amortisation charges are included in ‘Administrative costs’ in the consolidated statement of comprehensive income with the exception
of Reports, where amortisation charges are included in ‘Cost of Sales’.
Included in development costs are completed phases of product development that are being amortised. The total cost of these products
is £3,461,000 and carry a net book value of £2,178,000.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS
53
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
Right-of-use
assets
£’000
Plant and
equipment
£’000
Total
£’000
Cost
At 1 August 2016
Additions
Transferred
Disposals
At 31 December 2017
Additions
Disposals
Exchange differences
At 31 December 2018
Depreciation
At 1 August 2016
Charge for the period
Disposals
At 31 December 2017
Charge for the period
Disposals
Exchange differences
At 31 December 2018
Carrying amount
At 31 December 2018
At 31 December 2017
At 1 August 2016
2,798
—
—
—
2,798
—
—
—
2,798
323
51
—
374
36
—
—
410
2,388
2,424
2,475
—
—
—
—
—
641
—
—
641
—
—
—
—
34
—
—
34
607
—
—
1,068
3,866
54
(30)
(12)
54
(30)
(12)
1,080
3,878
78
(33)
1
719
(33)
1
1,126
4,565
822
184
(1)
1,005
62
(33)
1
1,145
235
(1)
1,379
132
(33)
1
1,035
1,479
91
75
246
3,086
2,499
2,721
The carrying amount of freehold land not subject to depreciation amounted to £1,000,000 (2017: £1,000,000).
As detailed in the strategic report, the Group are exploring the future sale of Kitson House. The requirements of IFRS 5 have been
reviewed, and based on the expected timeframe for disposal it is considered appropriate to continue to classify the land and buildings
as a non-current asset rather than an asset held for sale.
Depreciation charges are included in ‘Administrative costs’ in the consolidated statement of comprehensive income.
15 Trade and Other Receivables
Trade receivables
Other receivables
Prepayments
Accrued income
31 Dec 2018
£’000
31 Dec 2017
£’000
3,523
88
235
1,095
4,941
1,424
99
228
370
2,121
The carrying amounts of trade and other receivables are considered to be reasonable approximations to fair value.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 54
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
15 Trade and Other Receivables cont.
The Group’s trade receivables have been reviewed for expected credit losses. Provisions have been made amounting to £283,000 (2017:
£249,000). It is considered that expected credit loss for receivables balances less than six months is immaterial. Movement on provisions
for doubtful debts on trade receivables are as follows:
Loss allowance as at 1 January calculated under IAS 39
Loss allowance recognised during the year
Loss allowance unused and reversed during the year
Loss allowance as at 31 December
The expected credit loss for trade receivables as at 31 December 2018 was determined as follows:
31 December 2018
Expected credit loss rate
Gross carrying amount
Lifetime expected credit loss
Current
0%
2,917
—
Less than 3
months
Less than 6
months
More than 6
months
0%
275
—
0%
48
—
100%
283
283
The age of financial assets past due, but not impaired as at 31 December 2017 is as follows:
31 Dec 2018
£’000
249
34
—
283
Total
—
3,523
283
31 Dec 2017
£’000
609
14
10
633
31 Dec 2018
£’000
31 Dec 2017
£’000
1,400
2,393
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
16 Cash and Cash Equivalents
Cash at bank and in hand
17 Borrowings
During the year, the bank loan held at 1 January 2018 was re-financed, as a result, the outstanding balance of £634,000 was repaid during
the year. A new loan facility for £950,000 was drawn down. The new bank loan carries a variable interest rate of 2.75% above bank base
rate and is repayable in monthly instalments over a 60-month term. The loan is secured by land and buildings owned by the Parent
Company, with a current carrying value of £2,388,000 (2017: £2,424,000).
Borrowings are presented as £113,000 due in less than one year, and £819,000 due in more than one year.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 18 Trade and Other Payables
Trade and other payables due within one year
Trade payables
Social security and other taxes
Other payables
Accruals
Deferred income
Lease liabilities
55
31 Dec 2018
£’000
31 Dec 2017
£’000
1,805
1,072
120
36
172
701
72
205
28
156
497
—
2,906
1,958
All deferred revenue is expected to be recognised as revenue within one year. Revenue recognised in the year that was included
in opening deferred income amounted to £497,000.
Trade and other payables due after more than one year
Lease liabilities
Dilapidation provisions
31 Dec 2018
£’000
31 Dec 2017
£’000
540
25
565
—
—
—
The carrying amounts of trade and other payables are considered to be reasonable approximations to fair value.
The lease liabilities relate to long-term property leases.
19 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 2018. 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 2018. Sensitivity analysis is based on the Group’s foreign
currency financial instruments held at the end of each reporting period.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 56
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
19 Financial Instruments cont.
Foreign currency risk cont.
If pound sterling had strengthened or weakened against the US Dollar and the euro by 10%, this would have had the following impact:
Reported Profit/(loss) before tax
Sensitivity to movement in currency exchange rates:
US Dollar
Euro
(Loss)/Profit before tax
31 December 2018
31 December 2017
+10%
£’000
225
(119)
(12)
94
-10%
£’000
225
131
13
369
+10%
£’000
(693)
(63)
—
(756)
-10%
£’000
(693)
69
1
(623)
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
31 Dec 2018
£’000
31 Dec 2017
£’000
3,513
(1,516)
1,997
137
(10)
127
2,307
(777)
1,530
15
(10)
5
Credit risk analysis
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 2018
£’000
31 Dec 2017
£’000
4,706
1,400
6,106
1,891
2,393
4,284
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 15. 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.
Interest rate risk
At 31 December 2018 the Group had cash subject to variable rates of £929,000 (2017: £861,000) and borrowings subject to variable rates
of £931,000 (2017: £634,000). There is no other material interest rate risk.
To mitigate the Group’s exposure to interest rate risk, market rates are monitored.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 57
19 Financial Instruments cont.
Interest rate risk cont.
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
31 December 2018
31 December 2017
+1%
£’000
225
1
226
-1%
£’000
225
(1)
224
+1%
£’000
(693)
5
(688)
-1%
£’000
(693)
(5)
(698)
Capital and liquidity risk
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 2018
£’000
2,013
113
2,126
—
113
113
—
705
705
2,013
931
2,944
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
—
—
—
1,229
634
1,863
Summary of the Group’s financial assets and liabilities as defined in IFRS 9 ‘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 Dec 2018
£’000
31 Dec 2017
£’000
4,706
1,400
6,106
(113)
(2,013)
(2,126)
(819)
(819)
3,161
1,891
2,393
4,284
(279)
(1,229)
(1,508)
(355)
(355)
2,401
The Directors consider that the fair value of financial assets and liabilities equates to the carrying value for both 2018 and 2017.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
58
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
20 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 Dec 2018
£’000
31 Dec 2017
£’000
12,742
(1,400)
11,342
12,179
(2,393)
9,786
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.
21 Share Capital
Authorised
90,000,000 Ordinary Shares of £0.0025 each (2017: 90,000,000)
Issued, called up and fully paid
37,563,615 Ordinary Shares of £0.0025 each (2017: 37,563,615)
Shares issued, called up and fully paid
Balance brought forward
Acquisition of subsidiary
Shares issued under share-based payments
Balance carried forward
31 Dec 2018
£’000
31 Dec 2017
£’000
225
94
225
94
31 Dec 2018
Number
31 Dec 2017
Number
37,563,615
37,562,415
—
—
—
1,200
37,563,615
37,563,615
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.
22 Share-based Payments
At 31 December 2018, 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.
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS
59
22 Share-based Payments cont.
At 31 December 2018, rights to options over Ordinary Shares of the Parent Company were outstanding as follows:
EMI share scheme
Number of shares
Exercise period
31 Dec 2017
Granted
Exercised
Lapsed 31 Dec 2018
Granted 24 December 2010, exercise price: 15.0p 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
Granted 20 November 2018, exercise price: 35.0p per share
20 November 2019–19 November 2028
20 November 2020–19 November 2028
27,549
200,000
280,000
500,000
500,000
1,000,000
—
—
—
—
—
—
—
—
—
500,000
500,000
1,000,000
Total EMI share scheme options
1,507,549
1,000,000
—
—
—
—
—
—
—
—
—
—
—
27,549
—
200,000
—
280,000
—
—
500,000
500,000
— 1,000,000
—
—
500,000
500,000
— 1,000,000
— 2,507,549
Unapproved options scheme
Exercise period
31 Dec 2017
Granted
Exercised
Lapsed 31 Dec 2018
Number of shares
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
Granted 2 August 2016, exercise price: 24.5p per share
2 August 2019–1 August 2026
Granted 20 November 2018, exercise price:
35.0p per share
2 August 2019–19 November 2028
20 November 2019–19 November 2028
20 November 2020–19 November 2028
41,490
300,000
200,000
200,000
200,000
900,000
400,000
—
—
—
—
—
—
—
—
—
—
—
—
100,000
125,000
125,000
350,000
Total unapproved options
1,341,490
350,000
Total EMI share scheme and unapproved options
2,849,039
350,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
41,490
300,000
200,000
200,000
200,000
900,000
—
400,000
—
—
—
—
100,000
125,000
125,000
350,000
— 1,691,490
— 4,199,039
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
60
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
22 Share-based Payments cont.
Options outstanding at 31 December 2018
Options exercisable at 31 December 2018
Weighted
average
exercise price
24.1p
32.6p
Number
2,449,039
1,750,000
4,199,039
At 31 December 2017, rights to options over Ordinary Shares of the Parent Company were outstanding as follows:
EMI share scheme
Number of shares
Exercise period
31 Jul 2016
Granted
Exercised
Lapsed 31 Dec 2017
Granted 24 December 2010, exercise price: 15.0p 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
28,749
600,000
680,000
—
—
—
(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
31 Jul 2016
Granted
Exercised
Lapsed 31 Dec 2017
Number of shares
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
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 61
Weighted
average
exercise price
24.5p
24.7p
Number
900,000
1,949,039
2,849,039
22 Share-based Payments cont
Options outstanding at 31 December 2017
Options exercisable at 31 December 2017
No share options were exercised during the year.
23 Financial Commitments
Capital commitments
There were no capital commitments at 31 December 2018 (2017: £nil).
Guarantees
No guarantees have been given, or have been received, by the Group.
24 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 Dec 2018
£’000
31 Dec 2017
£’000
830
44
39
913
1,270
62
39
1,371
The remuneration of the Directors, who are all Directors of the Parent Company, is set out in Note 6.
The Directors did not receive dividends during the year.
During the period Getech made payments to Zinc Consultants Limited amounting to £nil (2017: £59,000) for recruitment services,
a company of which Chris Flavell is a Director. All transactions were conducted under standard commercial terms.
25 Pensions
The Group currently operates a Group personal pension plan for the benefit of employees. The amount recognised as an expense
is £222,000 (2017: £367,000).
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
62
Notes to the Consolidated Financial Statements cont.
For the year ended 31 December 2018
26 Prior year adjustment
The prior period has been adjusted to reclassify Reports generated internally from Inventories to Intangible Assets. The nature of the
underlying Reports and their longer-term value means they meet the criteria for recording as Intangible Assets. The adjustment has
resulted in the following revisions to line items in the financial statements:
Statement of Comprehensive Income
No amendments have been made to the prior period Statement of Comprehensive Income.
Statement of Financial Position
31 December 2017
Intangible assets
Inventories
The opening balance adjustment for the period ending 31 December 2017 was as follows:
1 August 2016
Intangible assets
Inventories
Statement of Cash Flows
17 months to 31 December 2017
Depreciation and amortisation charges
Impairment of intangible assets
Decrease in inventories
Capitalised cost of Reports
There was no impact to Earnings per Share.
Unadjusted
balance
£’000
Adjustment
£’000
3,155
672
672
(672)
Unadjusted
balance
£’000
Adjustment
£’000
2,948
1,067
1,067
(1,067)
Adjusted
balance
£’000
3,827
—
Adjusted
balance
£’000
4,015
—
Unadjusted
balance
£’000
Adjustment
£’000
Adjusted
balance
£’000
1,184
—
395
—
123
700
(395)
(429)
1,307
700
—
(429)
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS Parent Company Balance Sheet
As at 31 December 2018
Company registration number: 02891368
63
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Current assets
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Current liabilities
Borrowings
Trade and other payables
Non-current liabilities
Borrowings
Trade and other payables
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
Retained earnings
Total equity
Note
31 Dec 2018
£’000
31 Dec 2017
(Restated)
£’000
31 July 2016
(Restated)
£’000
4
5
6
7
8
9
10
11
10
11
7
12
2,879
3,032
6,519
—
2,640
2,475
7,228
—
2,082
2,643
7,228
24
12,430
12,343
11,977
3,910
46
606
4,562
1,262
358
1,032
2,652
1,325
226
1,626
3,177
16,992
14,995
15,154
113
2,707
2,820
819
565
25
1,409
4,229
12,763
94
3,053
2,407
183
7,026
279
1,676
1,955
355
—
60
415
2,370
12,625
94
3,053
2,407
164
6,907
133
2,502
2,635
767
—
109
876
3,511
11,643
94
3,053
2,407
173
5,916
12,763
12,625
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 £119,000 (2017 restated: £914,000).
The financial statements on pages 63 to 74 were approved and authorised for issue by the Board on 3 May 2019.
Dr Stuart Paton
Non-executive Chairman
The accompanying Notes on pages 65 to 74 form an integral part of these financial statements.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 64
Parent Company Statement of Changes in Equity
For the year ended 31 December 2018
At 1 August 2016
Transfer of reserves
Share-based payment charge
Transactions with owners
Profit for the period restated
Total comprehensive income for the period restated
At 31 December 2017 restated
Share-based payment charge
Transactions with owners
Profit for the year
Total comprehensive income for the year
At 31 December 2018
Share
capital
£’000
Share
premium
account
£’000
Merger
relief
reserve
£’000
Share
option
reserve
£’000
Retained
earnings
£’000
Total
£’000
94
—
—
—
—
—
94
—
—
—
—
94
3,053
2,407
—
—
—
—
—
—
—
—
—
—
173
(77)
68
(9)
—
—
5,916
11,643
77
—
77
914
914
—
68
68
914
914
3,053
2,407
164
6,907
12,625
—
—
—
—
—
—
—
—
19
19
—
—
—
—
119
119
19
19
119
119
3,053
2,407
183
7,026
12,763
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS
65
Notes to the Parent Company Financial Statements
For the year ended 31 December 2018
1 Company Information
The financial statements of the Company for the year ended 31 December 2018 were approved by the Board and authorised for issue
on 3 May 2019, 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 year 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)
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
Reports
– five to ten years on a straight-line basis.
– ten years on a straight-line basis
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 66
Notes to the Parent Company Financial Statements cont.
For the year ended 31 December 2018
2 Accounting Policies cont.
2.5 Revenue
The Company has adopted IFRS 15 and its principles. Revenue is measured by reference to the fair value of consideration received
or receivable by the Company for products and services provided, excluding VAT and comparable overseas taxes. Typical invoice
payment terms are 30 days for all categories of revenue.
Revenue from products and services falls into the three categories below:
Consultancy services
The Company provides various consulting services to its customers. Revenue from these services is recognised on a time-and-materials
basis plus a margin as the services are provided. Customers are invoiced monthly as work progresses.
The Company also provides outsourcing services for a fixed fee for an agreed period. As the amount of work required to perform these
services does not vary significantly from month-to-month, revenue is recognised on a straight-line basis over the term of the contract.
This revenue accounting policy is applicable to revenues from Geoscience Services.
Multiclient products
For sales of data and completed products, revenue is recognised when performance obligations have been satisfied, which is on dispatch
unless otherwise agreed.
This revenue accounting policy is applicable for revenues from Geophysical Data, Globe and Regional Reports.
Multiple element contracts
Where contracts for multiple element products with staged deliverables 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 performance
obligations have been satisfied, which is on dispatch unless otherwise agreed
• Service elements of the contract — revenue is recognised in line with the accounting treatment for consultancy services
• Project elements that are to be delivered from development work that is yet to be completed — revenue is recognised when the
performance obligations have been satisfied, which is on dispatch unless otherwise agreed
2.6 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 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.
2.7 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
‘Share option reserve’ represents the fair value of share options in accordance with IFRS 2 ‘Share-based Payment’
‘Retained earnings’ represents retained profits
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 67
2 Accounting Policies cont.
2.8 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.
2.9 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.
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.
2.10 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
Management use judgement in determining the fair value of multiple element contracts in order to appropriately recognise the
revenue attributable to each element. The value of revenue recognised in the period is dependent on an assessment of work to
completion.
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.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 68
Notes to the Parent Company Financial Statements cont.
For the year ended 31 December 2018
2 Accounting Policies cont.
2.10 Significant Areas of Judgement and Estimation Uncertainty cont.
Significant areas of estimation uncertainty
The key sources of estimation uncertainty at the end of the reporting period are as follows:
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.
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 £48,000.
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 and investments 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 intangible assets and investments, future cash flows are forecast revenues from
the associated asset or 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. See Note 6 for further details of assumptions made and sensitivity testing
regarding Investments.
Share options
Share-based payments are valued using the Black Scholes valuation model. Estimates are made in expected volatility and the risk-free rate.
Where appropriate, management uses historical market data as a basis for estimating the fair value of share options on grant. Increasing
the risk-free rate by two percent and increasing the volatility window in the calculation of volatility from 5 days to 30 days made no material
difference to the valuation of share options issued during the year.
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
The average number employed by the Company, including Executive Directors, was as follows:
Directors
Administration
Technical
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
2,384
256
136
30
2,806
3,490
353
197
68
4,108
12 months
ended
31 Dec 2018
£’000
17 months
ended
31 Dec 2017
£’000
3
13
39
55
2
12
46
60
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 69
Development
costs
£’000
Reports
£’000
Total
£’000
3,037
766
3,803
780
501
1,281
2,522
2,257
399
—
399
16
26
42
357
383
Freehold
property
£’000
Plant and
equipment
£’000
Right-of-use
assets
£’000
2,798
—
2,798
373
36
409
2,389
2,425
986
20
1,006
936
34
970
36
50
—
641
641
—
34
34
607
—
3,436
766
4,202
796
527
1,323
2,879
2,640
Total
£’000
3,784
661
4,445
1,309
104
1,413
3,032
2,475
4 Intangible Assets
Cost
At 1 January 2018 restated
Additions
At 31 December 2018
Depreciation
At 1 January 2018 restated
Charge for the period
At 31 December 2018
Net book value
At 31 December 2018
At 1 January 2018 restated
5 Property, Plant and Equipment
Cost
At 1 January 2018
Additions
At 31 December 2018
Depreciation
At 1 January 2018
Charge for the period
At 31 December 2018
Net book value
At 31 December 2018
At 1 January 2018
The net book value of freehold land in the Parent Company, not subject to depreciation, amounted to £1,000,000 (2017: £1,000,000).
6 Investments
Gross carrying value
At 1 January 2018
Additions
At 31 December 2018
Accumulated impairment
At 1 January 2018
Charge for the period
At 31 December 2018
Carrying amount
At 31 December 2018
31 Dec 2018
£’000
31 Dec 2017
£’000
—
7,228
—
7,228
—
709
709
—
7,228
—
7,228
—
—
—
6,519
7,228
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 70
Notes to the Parent Company Financial Statements cont.
For the year ended 31 December 2018
6 Investments cont.
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 & Magnetics 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 & gas consultancy.
The Parent Company owns 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 & gas industry.
The investment in subsidiary undertakings has been tested for impairment and the Company has impaired the carrying value of its
investment in ERCL Limited by £709,000. 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.
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 present value of the expected cash flows is determined by applying
a suitable discount rate reflecting the current market assessments of the time value of money and risks specific to the segment.
In extrapolating future cash flows, long-term industry growth has been modelled at an annual rate of 3%, together with a 3% rate
of inflation on costs annually.
Sales volumes over the five-year period are based on past performance and management’s expectations of a market recovery staggered
over a five-year period, reflected by 10% year-on-year growth. The cash flow model also includes revenues from a successful licencing
round in 2019.
The discount rate applied of 11.3% takes into consideration the industry-wide risks as well as those specific to the Group’s Services
operating segment.
Sensitivity analysis is carried out on all budgets, strategic plans and discount rates used in the calculations. The cash flow model is sensitive
to short term market recovery and to the initiation of a successful licencing round. In a scenario whereby revenues increase at a lower rate
matching the long-term industry growth rate of 3 percent annually and the licencing round is unsuccessful, then this would result in an
impairment to investments of £836,000.
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
Share based payments
Accelerated capital allowances
Balance carried forward
31 Dec 2018
£’000
31 Dec 2017
£’000
—
—
—
—
—
(60)
—
35
(25)
24
2
(25)
(1)
—
(109)
25
—
24
(60)
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 71
7 Deferred Tax cont.
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)
31 Dec 2018
£’000
31 Dec 2017
£’000
(85)
21
35
4
(25)
(85)
21
—
4
(60)
The most appropriate tax rate for Getech is considered to be 19% (2017: 19.47%), 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% (2017: 17%) in light of the future tax rates announced.
8 Trade and Other Receivables
Trade receivables
Amounts owed by Group undertakings
Social security and other taxes
Other receivables
Prepayments and accrued income
31 Dec 2018
£’000
31 Dec 2017
£’000
2,856
26
—
28
1,000
3,910
912
120
—
66
164
1,262
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 expected credit loss. Any credit loss against receivables
were found to be immaterial. 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
9 Cash and Cash Equivalents
Cash at bank and in hand
31 Dec 2018
£’000
31 Dec 2017
£’000
162
25
—
187
500
—
—
500
31 Dec 2018
£’000
31 Dec 2017
£’000
606
1,032
10 Borrowings
The bank loan carries a variable interest rate of 2.75% 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 £2,389,000 (2017: £2,425,000).
Borrowings — held at amortised cost
113
113
706
932
Within
one year
£’000
In one
to two years
£’000
In two
to five years
£’000
31 Dec 2018
£’000
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 72
Notes to the Parent Company Financial Statements cont.
For the year ended 31 December 2018
11 Trade and Other Payables
Trade and other payables due within one year
Trade payables
Amounts owed to Group undertakings
Social security and other taxes
Other payables
Lease liabilities
Accruals and deferred income
Trade and other payables due after one year
Lease liabilities
Dilapidation provisions
31 Dec 2018
£’000
31 Dec 2017
£’000
1,780
425
81
34
72
315
995
359
150
26
—
146
2,707
1,676
31 Dec 2018
£’000
31 Dec 2017
£’000
540
25
565
—
—
—
The carrying amounts of trade and other payables are considered to be reasonable approximations to fair value. The lease liabilities relate
to long-term property leases.
12 Share Capital
Authorised
90,000,000 Ordinary Shares of 0.25p each (2017: 90,000,000)
Issued, called up and fully paid
37,563,615 Ordinary Shares of 0.25p each (2017: 37,562,415)
Shares issued, called up and fully paid
Balance brought forward
Shares issued under share-based payments
Balance carried forward
31 Dec 2018
£’000
31 Dec 2017
£’000
225
94
225
94
31 Dec 2018
Number
31 Dec 2017
Number
37,563,615
37,562,415
—
1,200
37,563,615
37,563,615
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 73
13 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
Noon and Co. Limited
TantlonGeo Limited
For the 17-month period ended 31 December 2017:
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 2018
£’000
—
—
20
20
3
5
Dividends
paid
£’000
Amounts
charged to
the Group
£’000
Amounts
payable at
31 Dec 2017
£’000
—
—
—
—
19
19
19
59
7
4
5
—
*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.
14 Ultimate Controlling Party
The Directors consider that there is no ultimate controlling party.
15 Subsidiaries
Details of the Company’s subsidiaries as at 31 December 2018 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
ERCL Limited 2
England & Wales
England & Wales
Consultancy
Consultancy
Ordinary
Ordinary
Geophysical Exploration
Technology Inc 3
United States of America
Sales & Marketing agency
Ordinary
100
100
100
—
—
—
The registered offices of the subsidiaries listed above are as follows:
1 As the Company.
2 As the Company.
3 3000 Wilcrest Drive, Suite 155, Houston, TX 77042, USA.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 74
Notes to the Parent Company Financial Statements cont.
For the year ended 31 December 2018
16 Prior year adjustment
The prior period has been adjusted to reclassify Reports generated internally from Inventories to Intangible Assets as, on consideration,
the nature of the underlying Reports and their longer-term value means they meet the criteria for recording as Intangible Assets.
The adjustment has resulted in the following revisions to line items in the financial statements:
Statement of Financial Position
31 December 2017
Intangible assets
Inventories
Retained earnings
The opening balance adjustment for the period ending 31 December 2017 was as follows:
1 August 2016
Intangible assets
Inventories
Profit in the period ended 31 December 2017 was reduced by £16,000 to £914,000.
Unadjusted
balance
£’000
Adjustment
£’000
2,257
399
6,923
383
(399)
(16)
Unadjusted
balance
£’000
Adjustment
£’000
1,597
485
485
(485)
Adjusted
balance
£’000
2,640
—
6,907
Adjusted
balance
£’000
2,082
—
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS 75
Notice of Annual General Meeting
Notice is given that the twenty-fifth 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 25 June 2019 at 12.00 noon to consider and, if thought fit, pass
the resolutions below. Resolutions 8 and 9 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 6 as ordinary resolutions.
1. To receive the Report of the Directors, the Strategic Report and the audited accounts of the Company for the year ended
31 December 2018.
2. To re-elect Peter Stephens 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.
3. To re-elect Jonathan Copus 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.
4. 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.
5. 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.
6. 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 7 will be proposed as an ordinary
resolution and in the case of resolutions 8 and 9 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 3 May 2019
– 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
7. 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:
7.1. 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
7.2. 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 7.1) in connection
with or pursuant to a Rights Issue (as defined below), provided that:
a) such authorities shall expire on the earlier of either midnight on 25 September 20201 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 7.
For the purposes of resolution 7, ‘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.
1 15 months from date of AGM.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
76
Notice of Annual General Meeting cont.
Special Resolutions
8. To empower the Board (subject to the passing of resolution 7) 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 7 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:
8.1. the allotment of equity securities in connection with or pursuant to a Rights Issue (as defined in resolution 7); and
8.2. the allotment (otherwise than pursuant to sub-paragraph 8.1 above) of equity securities up to an aggregate nominal value
of £14,086.36 (being 15% of the issued share capital of the Company as at the Latest Practicable Date); and
the authorities given by resolution 8 shall expire on the earlier of either midnight on 25 September 2020 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.
9. To authorise the Company generally and unconditionally for the purpose of Section 701 of the Act to make one or more market
purchases (within the meaning of Section 693(4) of the Act) of Ordinary Shares provided that:
9.1. 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);
9.2. the minimum price that may be paid for such Ordinary Shares is 0.25p per share (exclusive of expenses);
9.3. 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 five business
days immediately preceding the day on which the Ordinary Share is purchased and 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
9.4. unless previously revoked or varied, the authority conferred by this resolution shall expire on the earlier of either midnight on
25 September 2020 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
3 May 2019
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77
Notes
The following notes explain your general rights as a shareholder and your right to attend and vote at this Meeting or to appoint
someone else to vote on your behalf.
1. To be entitled to attend and vote at the Meeting (and for the purpose of the determination by the Company of the number of
votes they may cast), shareholders must be registered in the Register of Members of the Company at close of trading on 21 June.
Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to
attend and vote at the Meeting.
2. Shareholders, or their proxies, intending to attend the Meeting in person are requested, if possible, to arrive at the Meeting venue
at least 20 minutes prior to the commencement of the Meeting so that their shareholding may be checked against the Company’s
Register of Members and attendances recorded.
3. Shareholders are entitled to appoint another person as a proxy to exercise all or part of their rights to attend and to speak and
vote on their behalf at the Meeting. A shareholder 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 Ordinary Share or Ordinary Shares held by that shareholder.
A proxy need not be a shareholder of the Company.
4.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted
by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in
the Company’s Register of Members in respect of the joint holding (the first named being the most senior).
5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the
resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote
(or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.
6. You can vote:
• by logging on to www.signalshares.com and following the instructions;
• by requesting a hard copy form of proxy directly from the registrars, Link Asset Services (previously called Capita), on
Tel: 0871 664 0300. Calls cost 12p per minute plus your phone company’s access charge. If you are outside the United
Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate.
Lines are open between 09:00-17:30, Monday to Friday excluding public holidays in England and Wales; or
in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures
set out below.
•
In order for a proxy appointment to be valid a completed form of proxy must be received by Link Asset Services at 34 Beckenham
Road, Beckenham, Kent, BR3 4ZF by 12 noon on 21 June 2019 (together with, in the case of a hard copy form of proxy, the original
or a certified copy of any power of attorney or other authority pursuant to which such form of proxy has been signed).
7.
If you return more than one proxy appointment, either by paper or electronic communication, the appointment received
last by the Registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms
and conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them
will not be disadvantaged.
8. The return of a completed form of proxy, electronic filing or any CREST Proxy Instruction (as described in Note 11 below) will not
prevent a shareholder from attending the Meeting and voting in person if he/she wishes to do so.
9. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so
for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual (available from
www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members
who have appointed a 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.
10. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a ‘CREST
Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s 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 RA10) by 12 noon on 21 June 2019. For this purpose, the time of receipt will be taken
to mean the time (as determined by the timestamp applied to the message by the CREST application host) from which the issuer’s
agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of
instructions to proxies appointed through CREST should be communicated to the appointee through other means.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
78
Notice of Annual General Meeting cont.
11. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland
Limited does not make available special procedures in CREST for any particular message. 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 his 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 system providers are referred, in particular, to those sections of the CREST Manual concerning 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.
12. Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise on its behalf
all of its powers as a shareholder provided that no more than one corporate representative exercises powers in relation to the
same shares.
13. As at 3 May 2019 (being the latest practicable business day prior to the publication of this Notice), the Company’s ordinary issued
share capital consists of 37,563,615 Ordinary Shares, carrying one vote each. Therefore, the total voting rights in the Company as
at 3 May 2019 are 37,563,615.
14. Under Section 527 of the Companies Act 2006, shareholders meeting the threshold requirements set out in that section have
the right to require the Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s
financial statements (including the Auditor’s Report and the conduct of the audit) that are to be laid before the Meeting; or (ii) any
circumstances connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual financial
statements and reports were laid in accordance with Section 437 of the Companies Act 2006 (in each case) that the shareholders
propose to raise at the relevant meeting. The Company may not require the shareholders requesting any such website publication
to pay its expenses in complying with Sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a
statement on a website under Section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not
later than the time when it makes the statement available on the website. The business which may be dealt with at the Meeting for the
relevant financial year includes any statement that the Company has been required under Section 527 of the Companies Act 2006 to
publish on a website.
15. Any shareholder attending the Meeting has the right to ask questions. The Company must cause to be answered any such question
relating to the business being dealt with at the Meeting but no such answer need be given if: (a) to do so would interfere unduly with
the preparation for the Meeting or involve the disclosure of confidential information; (b) the answer has already been given on a
website in the form of an answer to a question; or (c) it is undesirable in the interests of the Company or the good order of the Meeting
that the question be answered.
16. Copies of the Directors’ letters of appointment or service contracts are available for inspection during normal business hours
at the registered office of the Company on any business day from the date of this Notice until the time of the Meeting and may
also be inspected at the Meeting venue, as specified in this Notice, from 11.45 am on the day of the Meeting until the conclusion
of the Meeting.
17. You may not use any electronic address (within the meaning of Section 333(4) of the Companies Act 2006) provided in either this
Notice or any related documents (including the form of proxy) to communicate with the Company for any purposes other than those
expressly stated.
18. All references to times in this Notice are to UK time.
A copy of this Notice, and other information required by Section 311A of the Companies Act 2006, can be found on the Company’s website
at www.getech.com
Getech Group plc Annual Report and Accounts 2018FINANCIAL STATEMENTS
79
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 year ended 31 December 2018. That report and those accounts, and the report of the Company’s auditor on those accounts,
are set out on pages 20 to 74 of this document.
Resolution numbers 2, 3 and 4 — re-election 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. Peter Stephens,
Jonathan Copus and Alison Fielding retire by rotation and are offering themselves for re-election.
Resolution number 5 — 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.
Resolution number 6 — 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 7 — 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 3 May 2019.
In line with guidance issued by the Association of British Insurers, resolution 7 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 3 May 2019) as reduced by the nominal
amount of any shares issued under resolution 7.1.
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 8 — 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
3 May 2019. 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 9 — 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 3 May 2019) 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.
Getech Group plc Annual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 80
Notes
Getech Group plc Annual Report and Accounts 2018 Getech Group plc Annual Report and Accounts 2018
Design and Production
www.carrkamasa.co.uk
Getech Group plc
Kitson House
Elmete Hall
Elmete Lane
Leeds
LS8 2LJ
UK
+44 113 322 2200
info@getech.com
www.getech.com