Oil exploration firm Getech reported a sharp fall in first half profits after its big oil company customers cut back on spending.
The Leeds-based company said it is optimistic that the budget cuts are temporary and said it has started the second half with a substantial pipeline of sales opportunities.
Chairman Stuart Paton said feedback from meetings early in 2014 suggest that clients are interested in its major products and that they now have the budget to spend money.
There were fears that oil prices would fall this year, but Dr Paton said this doesn’t appear to be the case.
“The oil price is currently above the corresponding prices last year and we do not see signs of it weakening,” he said.
“We’re optimistic that the trading performance in the first half represented a short term market related issue and we’re confident about our medium and longer term prospects.”
Getech reported pre-tax profits of £233,000 for the six months to the end of January, down from £1.4m last time.
Revenue fell 22 per cent to £3.1m. The board is recommending a dividend of 0.44p a share, up from 0.4p a share last year, and said cash levels are strong with gross cash of £4.1m.
Analyst Eric Burns at house broker WH Ireland said: “The company notes a strong second half sales pipeline and a freeing up of customer budgets which indicates that the disappointing first half performance will not be repeated in the second half.”
Mr Burns is forecasting revenue growth of five per cent to £8.4m for the full year and a six per cent increase in pre-tax profits to £2.39m.
“As a result of last month’s share price decline, Getech shares can be picked up for 10.8 times current year earnings bringing them back into buying territory against our unchanged 92p price target. Although the more risk averse may prefer to hold off given a greater than usual forecast risk we return to ‘buy’,” he said.
Getech, which maps out areas around the world where oil may be found, believes that strong demand for its proprietary global information system, Globe, will continue to drive sales and profits.