It was back in March of 2022 when I last posted something here on Getech, the AIM quoted company that is firmly focused on the energy space, via its geospatial software and data products.
Since my last comment and particularly in more recent weeks the share price has very much been on a downward trend, at one point slumping to 12.5p, which valued the business at what is fair to say very little.
As a holder of the shares, I was tempted to add to my position, as despite the share price weakness, the story, which is an evolving one appears intact and where the valuation attributed by the market looked just too cheap.
Given that Getech is largely in keeping with the major blue chip energy players on something of a transitionary journey, I suspect that a number of private investors had become frustrated or disappointed by a perceived lack of news and decided to exit.
Sentiment arguably changed somewhat yesterday though, when the company delivered a very welcome, reassuring and concrete pre-close update to the market, which in turn, resulted in my catching up again with CEO Jonathan Copus.
In the release, the highlights saw double-digit revenue growth being achieved for last year, which at £5m was ahead of market expectations and where importantly there was a defined split between the more historical petroleum end market and that of mining or critical minerals.
A record order book of £4.6m was also stated, being considerably ahead of the prior year, whilst with careful cash management the cash position was strong at £4.6m. Additionally, there was positive news on the freehold property of Kitson House in Leeds, where the company now has an intended buyer.
Speaking with Copus, it is clear that he is bullish and positive on prospects for the business which now has an increasing number of openings in relation to driving revenue and growth on the back of its technology and expertise.
As an opener, we first touch on the geothermal space, where earlier this month GTC announced a collaboration deal with Eavor Inc. to locate and de-risk multiple closed-loop geothermal projects for development across Latin America.
At this point, it is perhaps worth taking on board the sceptics out there, who will quite rightly refer to other AIM quoted companies that offer jam tomorrow, only to realise little in delivering positive returns.
In the case of GTC however, this particular opportunity looks real enough and whilst many will not have heard of Eavor it is perhaps worth delving a little deeper.
The Calgary based company has developed geothermal technology, this being a closed-loop system in which working fluid (freshwater) circulates several thousand meters underground and collects heat by thermal conduction, without the need for natural convective hydrothermal resources.
It is an extremely highly regarded business and having already attracted significant investment from the likes of BP, Chevron and Billiton has more recently seen massive commitment from Deep Energy Capital, which will finance at least five projects, requiring up to €1 billion, from Eavor’s growing European and North American project pipeline.
Whilst that doesn’t directly apply to GTC, it is worth noting as Copus explains, that Eavor, along with its other backers was already a customer of GTC.
Expanding, the CEO says that the Geothermal space provides significant opportunities for GTC, as the tool set which has for many years been used for Oil and Gas is ideally placed for the energy transition. “We already had a relationship with Eavor as they were using our data solution, so with strong mutual trust we came together and decided to combine the technology and develop commercial opportunities”.
The plan is to build a portfolio of projects, where they are super early entrants and then bring on other larger partners as the assets are identified and advanced.
Given the names already backing Eavor, who as Copus pointed out are already customers of GTC, then it seems reasonable to assume that there could be some exciting times ahead.
Although the CEO could not disclose specifics on timing, he said that the plan was to get on and start exploring and defining in the target region, where GTC has the data solutions to plot a clear strategic path.
Whilst the overriding objective for the company remains to drive the revenue momentum across the business as evidenced by its recent performance, the opportunity to play a key role in identifying assets and operate within those provides another prospect for future shareholder returns.
Aside the Geothermal opportunity, there is of course the Hydrogen aspect, which takes in the H2 Green element of the business, which investors perhaps currently see as a potential drain.
Copus, is again bullish on this arm of the operation though and says that H2 Green is really all about creating longer term value for shareholders.
Commenting he says, “ we now have two sides to the business, the products and services solutions which is cash profitable and the Hydrogen element which although consuming cash is developing Shoreham and Inverness.
The question for us though, is that while we want to progress the value, we also want to do that in a way that doesn’t overstretch our balance sheet or us as a business”.
He adds that they are now building up quite a lot of expertise across the Hydrogen space and that H2 Green actually generated £100k of revenue providing services to the Highland Council in relation to Inverness. “We think we can do more of that and we are going to have a good run this year where we are also building a Hydrogen service solution business too.
Although I don’t expect that to fully cover the cost of the Hydrogen business, it will bring revenue contribution in, which is really positive”.
Additionally. Copus is keen to emphasise the partnership aspect moving forward, where he says there is a very well- trodden path with wind, solar and other renewable asset classes with others subsequently coming on board at the CAPEX stage.
Away from the UK, Copus speaks of the US Inflation Reduction Act that includes billions of dollars in grants and loans to generate financing of development and deployment of new clean energy projects. “The act is having an absolutely fundamentally positive impact on the business renewable environment and Europe is responding too. We are seeing various initiatives there and if you look at Geothermal in places like France and Holland or Hydrogen in Germany in particular, there is tremendous momentum in those markets so its really important that we have feet on the ground out there.
We have business development colleagues out there now and they are bringing a wealth of opportunities through and some of those are solution based which will bring in revenue, with others being much more strategic in the form of that with Eavor”.
Copus adds that one of the things for investors to look out for across this area in the next twelve months will be how they are using the fiscal initiatives in both the US and Europe to progress the business, where having a footprint in both places is proving really helpful.
Away from the renewable space though, GTC still enjoys revenue from its historic oil and gas markets, which in 2022 saw two thirds of its revenue coming from that sector which despite the energy transition is buoyant.
However, Copus is perhaps most excited about the performance across Mining, which accounting for just short of 25% of total revenue he described as a fantastic result.
Regular visitors to the blog who have read my previous earlier coverage with the CEO will no doubt recall his highlighting the Mining sector as being an area for growth.
That clearly appears to be coming to fruition, as just three years ago 100% of revenue was derived from Oil and Gas, so the progress is tangible.
Having believed that there was a significant opportunity to redevelop and leverage its software and data assets into the critical mineral space, Copus sounds very upbeat on the future prospects here.
“We have signed our largest single critical mineral contract in our history” he says, “which was a mix of data and software licences. The most powerful thing though beyond the numbers is our copper solution, which is being used by three companies now, one in Australia another in N. America and also Canada.
This is helping unlock a type of copper that currently only accounts for around 20% of production but which is known to be geographically more widely distributed, so the upside potential here is significant”.
Copus elaborates, by saying that the demand for copper is absolutely huge and paramount for an energy transition world and that the type of copper referred to has benefits, including a smaller carbon footprint.
Whilst boasting the tools and data to assist across the copper space, there are other exciting openings emerging too, as Copus adds that they are now working on different sorts of deposits.
Looking into the current calendar yea the CEO says that they are road testing and finalising tools to help customers across lithium and white Hydrogen, the latter of which is naturally occurring.
Having expanded into new and emerging markets, Copus believes there is more to come in other areas as the need for new and alternative minerals gathers pace, which in turn provides plenty for GTC to target.
Whilst the Renewable and Mining spaces look extremely positive for both the near and longer term, Copus confirms that Oil and Gas is also still very much alive and certainly can’t be shut off anytime soon.
To that end, he says that they have been working in and around the Oil and Gas area relating to carbon storage, which saw the UK Government using its software and expertise for its first carbon storage licensing round.
This resulted in GTC staff being seconded into the North Sea Transition Authority, as the company’s software and tools were used to identify carbon storage sites.
Away from the main thrust of the business we touch upon Kitson House, the freehold asset which was acquired for circa £2.4m back in 2006 and which is now surplus to requirements.
“Kitson House is now under offer” Copus explains, “ so the next step will be completion and its good that we have got that engagement now”.
Not surprisingly, there is no indication on the potential price, but the CEO says that if they weren’t comfortable with the offer that has been made, they wouldn’t be selling.
Although the company see it as lazy capital and have wanted to relinquish the asset in order to put the capital to better use for shareholders, they certainly haven't been distressed or forced sellers, so it will be interesting to see what price is achieved.
All in all, there appears to be plenty of action and progress at GTC, although at times there may appear to be what some investors see as a period of protracted silence.
Copus is aware of the private Investors concerns though and sees reporting news as and when it is applicable as being key.
He is also tuned in to some of the grumblings regarding Director purchases or a lack of them as some may perceive.
To this end he says that they want investors to be aware that the board is aligned in generating returns and do get the message, although he couldn’t possibly comment on whether any Directors were currently engaged in buying the shares.
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