Client cutbacks have knock-on effect on Getech profits

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Oil mapping firm Getech Group said that while it has seen strong demand in its first half, profits will be substantially below last year as budget constraints have hit customers’ purchasing patterns.

The Leeds-based company expects revenue for the first half to be £3.0m, down from £3.9m, and it warned that pre-tax profits in the six months to January 31 will be substantially below last year’s £1.4m.

The group said a substantial part of its second half income has already been committed and a return to more regular purchasing patterns by customers is expected given the significant interest in its products.

Getech said its balance sheet is strong with over £4.0m in cash at the end of January.

Stuart Paton, non-executive chairman of Getech, said: “Whilst we have witnessed lower than expected revenue in the first half, we believe this is an industry wide issue and anticipate a return to normal demand cycles in the second half.

“The positive feedback we have received from clients has confirmed there is no reason to question the value proposition of our products and we remain optimistic that we will see further significant contracts coming through in the second half.”

The group said it is focused on delivering results in line with full year expectations, which it believes are achievable.

The firm said it will continue its progressive interim dividend policy, given its strong cash balance and the belief that there will be no fundamental change in its future prospects.

Analyst Eric Burns at WH Ireland said: “Today’s update flags that whilst consultancy work has seen good demand, the somewhat irregular purchasing profile of customers driven by cyclical budget constraints has led to a first half outcome considerably lower than the comparative period last year.

“Order intake is expected to return to more normal levels in the second half and the company believes it is still on track to deliver a full-year outcome in line with market expectations.

“We therefore retain our full year numbers whilst flagging a greater than usual forecast risk based on the first half outcome.

“For the time being, and reflecting the short term uncertainty, we reduce our rating to ‘market perform’.”

Getech announced an 80 per cent leap in annual pre-tax profits last year.

The group, which maps out areas around the world where oil may be found, said historically high oil prices and strong demand for its proprietary global information system, Globe, will continue to drive sales and profits.

Getech has said it is on the hunt for acquisitions. Dr Paton said the group is looking at firms that have similar skills, firms that have different technical data or it could spend money on new datasets.