It is over a year ago now since I last penned something on GETECH (GTC) , an AIM quoted business where I have an interest.
So, following a recent update to the market, I was pleased to engage with Executive Chairman Richard Bennett in order to hear more on the progress and future direction of the operations.
Having previously spoken with former CEO Jonathan Copus on a number of occasions, the catch up with Bennett was certainly overdue, particularly as the company has been through the process of a strategic review and has arguably endured something of a difficult period.
Additionally, there has been something of a hiatus on the news front regarding the previously trumpeted embracing of the hydrogen opportunity, so this was an area I was also keen to be updated on.
Suffice to say though, my attraction to GTC in the first instance was very much down to the core historic business as opposed to any hydrogen aspect, so it was good to see a more positive outlook on that front emerging in the recent update.
Speaking of the business, Bennett highlights the history of its assets, where the company has one of the world’s largest collections of magnetic and gravity data that was sourced in various ways.
Historically, the company did very well for a number of years selling its offering to oil and gas companies Bennett said, but following on from that, it didn’t really do much to expand or grow beyond a tightly focused space.
“When I came in” he explained, “we really said what do we do next, as the company had already gone off on the green hydrogen tangent.” Bennett added that he urged the team to take a look at how they could apply the geoscience to the emerging energy transition space such as that of geothermal and other areas.
In terms of the green hydrogen spot, where GTC is involved in projects such as Inverness and Shoreham, Bennett says that following a lot of talk and interest across the energy space some three years back, more recently it has proven more muted.
Various factors have come into play to stall progress across the UK, such as a differing and more lukewarm response from the government combined with economic viability issues, which in turn has seen a lack of real monetary commitment.
In contrast, there has been more notable and significant investment and progress across Europe and the US, suggesting that hydrogen is still a player and Bennett does acknowledge that there has at least been some movement into Industrial applications in the UK.
For GTC, the Chairman says that they are really just sitting on their projects at present, which to develop, requires capital expenditure from external sources. “The intent has always been to try and find other partners to work with” said Bennett, but given the lack of wider commitment, GTC finds itself caught in an uncertain spot in relation to developing the hydrogen aspect of the business.
“What we are doing is holding on to the projects, but without actually spending any money on them, where hopefully there will be some upside later.”
Bennett also added that they are currently having some talks going on in the hydrogen spot, which is why it wasn’t mentioned in the recent update, but are hopeful that in the coming four to six weeks they will be able to put out a dedicated release to say exactly where they are at.
As mentioned at the outset, the core historic business remains the key aspect and Bennett acknowledges that the hydrogen angle has been something of a distraction.
Expanding he said, “we have been trying to keep the oil and gas business providing the cash cow kind of income coming in as much as we can, but at the same time, really kind of repurposing our proposition for the other subsurface industries that are vital for the energy transition.
We have been working with a company called Sandfire looking for copper in S. America and also with East Star where we have been working on one project with another smaller one coming down which we should see in the next few weeks.”
Bennett adds that they have also been doing a bit of work in geothermal, but are finding an enormous amount of interest in natural hydrogen which he says has taken on a bit of a leap. Indeed, he expands to say that they are now receiving substantial interest in the using of their tech for the exploration of white hydrogen and the company has in recent days featured in the Telegraph business section in relation to this market.
Returning to the strategic review that was previously undertaken, Bennett said they realised that green hydrogen is going nowhere in the UK at present and it will ultimately be a political decision whether it goes anywhere or not and they will just slug that aspect out until a choice is made either way.
On a more positive note, he added that they really have some unique stuff going back to basics, where they can apply their immense amount of data held and make it relevant to other growing industries.
This takes in critical minerals, geothermal and the aforementioned natural hydrogen, where, with customers across all of those areas, they are now looking to grow from the current position.
As part of its own transition, GTC is shifting toward a subscription model which the Chairman says that although it can be a bit painful in the short term, it brings notable benefits ahead.
In terms of its client base the company works with some of the biggest big-blue chip names that have large budgets, whilst at the other end of the spectrum it also provides services to the mid-tier players where GTC operates a kind of hybrid model where they embark on a cash and equity partnership, whilst at the junior end they will accept an equity only option.
Expanding on the latter point, Bennett said that whilst they don’t want to do that for all operators, if the client is deemed to have something interesting it can be a positive option to adopt.
East Star appears to really fit the bill on this front where it is one of six companies that BHP has invested in and which sees East Star focused on copper discovery and development in Kazakhstan, so in that instance it made sense Bennett pointed out to take an equity stake.
This sees GTC with an option to obtain 5% of the issued share capital in the venture at nil cost at the decision to mine, which protects against any dilution.
Although 2023 was a very tough and disappointing year for GTC, Bennett sounds cautiously optimistic on the future and is clear that he doesn’t want to see or reside over another performance such as that which has been endured.
Having been somewhat cash constrained, the picture is one of vast improvement ahead, with tangible progress on the business front supported by the sale of surplus property with another to follow adding to the health and strengthening of the balance sheet.
Looking to the future, Bennett sees plenty of opportunities and with highly relevant and scalable data assets that they hold, the push is now on to concentrate on selling more and that is the mission.
Green hydrogen aside, the energy transition isn’t going away and there are many aspects within that journey which appear to provide for ample growth prospects for GTC, so it should be interesting to see what emerges on the news front throughout the remainder of this year.
Broker Cavendish has issued guidance for 2024 and beyond where revenues for the first two months are around 40% ahead of last year which also sees ARR increasing to £2.9m.
For the full year outcome, the broker anticipates total revenue of £5.5m with EBITDA of £0.8m as the business returns to a cash flow positive position.
Regarding next year 2025, Cavendish has pencilled in £6.6m on the revenue front with an improved EBITDA performance of £1.8m which in turn would deliver a pre-tax profit of £1m as net cash is forecast to swell to £3.1m.
Those 2025 numbers, if delivered, would see EPS of 1.5p which at the current price of 9.25p suggests a cheap looking forward PER of little more than 6.
Although a work in progress, GTC appears to be in a better spot than for some time and with increasing and emerging opportunities across a number of fronts the shares look potentially very cheap, given the current market cap of just over £6m.
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