Getech Group (LSE:GTC) — Trading Update Presentation

0:01 Good afternoon, ladies and gentlemen, and welcome to the GETECH GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Jonathan Copas. Good afternoon, sir. Good afternoon. Thank you very much. Welcome everyone to this investor meets company presentation.

0:48 Thank you for your time. The purpose of the presentation is to talk about GETECH's 2022 trading update, which was out on Monday.

0:57 Ahead of answering questions on that, I thought it'd be useful just to run through some slides that summarizes, you know, the the the trading update as well as saying some words about about GETECH. So first of all, some words on GETECH. So, you know, GETECH, we we locate energy and minerals that are essential for the energy transition. And in doing that, we generate revenue. And in 2022, we generated £5,000,000 of revenue. We have a market cap of just under £11,000,000. We have a very extensive dataset, you know, collection of data, and that's been amassed over about thirty years.

1:46 And it's integrated into a model of the Earth, and that looks at the Earth's evolution over the last four hundred million years. We commercialize that data through a number of different solutions, and we're also looking at ways that we can extend the value creation that we can bring to shareholders around that, and we own two green energy assets ourselves. As an organization, though, we have one focus, and that focus is to locate energy and minerals. And in doing that, we do it across a number of different business lines. So we are active in transitional petroleum. We're active in critical minerals. We're active in hydrogen, and we're active in geothermal. And the solutions we provide across those sectors can be integrated together into decarbonization solutions, and that's the point I'll come back to later.

2:44 If I think about the business model, our business model has two parts. So the first part is about near term value creation, and that's where we generate our our revenue today, where we provide solutions and services that help people locate energy and mineral assets in the sectors that I just mentioned. Now in being really there at the kind of ground floor of the of the identification of those assets, it gives us options around longer term value creation as well. And so as we enter these new markets, we are also seeing really exciting opportunities for early stage asset participation. And the path there is that we can secure a stake in an asset that we have located.

3:31 We then will be working to bring in partners and development expenditure investors. And then finally, what this allows us to do is to not just build value in an asset, but create a number of points at which we can crystallize that value in in the asset as as well. So it creates optionality around that value. Looking into the trading update for for 2022, this is the second consecutive year that we have delivered double digit growth. In terms of revenue, our revenue for last year was £5,000,000, and that was a 16 percent rise. And that 16% rise was delivered on a 19% rise between 2020 and 2021. And underpinning that was, you know, high client retention rates.

4:19 We expanded our revenue generation into critical minerals. We've also been upselling our products, services, solutions into existing clients as well. Alongside our revenue is also our order book, and we grew our order book in 2022 to a record level. So we finished the year with £4,600,000 of contractually secured business in our order book, and that was a 39% increase on 2021. And, again, 2021 built on strongly on 2020. So it's 25% growth going to 20 with 39% growth on top of that. So there's a, you know, strong theme of growth here through our revenue and and and order book.

5:07 As well as growing revenue, we're diversifying revenue, and this chart shows you the last three years. So you can see that back in 2020, 2021, somewhere between 9095% of our revenues came from the petroleum sector. Well, in 2022, having invested to diversify what we're doing, only grew revenue, but actually petroleum was only 66% of our, of our revenues. And alongside that, critical minerals now form 23% of revenues, and another 11% was generated from the other sectors we're in, such as geothermal and and green hydrogen as well.

5:50 If we look at our order book, a significant portion of our order book is also annually recurring in nature. And this is important because it gives us really good visibility on on on, you know, that foundation path for our our revenue as well. And at the end of twenty twenty two, our annual recurring revenue totaled £2,400,000, and that was a 14% rise on the year end period, at the end of twenty twenty one. We also finished the year with a strong cash position. The cash, balances at the year end were £4,300,000. And importantly, we held cash flat across the second half of twenty twenty two, and we did that through sales momentum and also through careful capital management, in the period as well. And this provides a really solid foundation, for us to execute our our strategy.

6:46 So how should we be thinking then about how this positioning our strategy is really sort of translating into opportunity and activity as well?

6:58 And so the important thing here is that GETECH, we remain focused on locating energy and minerals. And these solutions that we've built to help people across the sectors that we're working in are you know, they they they they add value, across a whole number of markets. But where we're focusing, is where we can tailor our solutions to the most attractive market, opportunities. And to just run through some of what that, you know, that those growth market potentials are. Mean, if we look to transitional petroleum, it's forecast that $1,400,000,000,000 of additional primary energy CapEx is needed to be invested in 2025. That's a 60% increase on the current levels of investment. So lots of strong growth opportunity in in those traditional petroleum markets.

7:53 In critical minerals, we launched our first critical minerals product in copper. And the reason why we chose copper is that it's essential to the energy transition, essential to electrification, and there's a significant shortfall in copper forecast by 2030. If I look more broadly across critical minerals, you know, demand for critical minerals is forecast to rise by 500% by 2050. In hydrogen, we've seen some real clear targets being put in place. The UK government targeting 10 gigawatts of hydrogen production capacity in The UK by 2030, half of which is to be from green hydrogen. And if I look at Europe, Europe's energy mix, people are forecasting up to 15% of that coming from from green hydrogen.

8:39 In geothermal, double digit annual, growth is forecast by 2030. And, also, if I look at how we can deploy these solutions, you know, in an integrated way to provide integrated decarbonized solutions, 34% of the world's largest companies have committed to net zero targets. But it it it's estimated that 93% of them are gonna fail to hit those targets if they don't accelerate their their activities to decarbonize.

9:13 So in 2022, what do we do in these sectors that progressed our activities, and where do we see the business growing in 2023? Well, in transitional petroleum, we benefit from very high retention rates across our customer base. We added new customers, and those included operators in in US shale gas operations. We saw big contract renewals, and those renewals, were were secured across multiple years. And the North Sea Transition Authority used GETECH's, products and expertise in the first carbon storage licensing round that the UK government has run. Looking to 2023 and beyond, you know, energy security is a huge theme. Petroleum is gonna remain a transitional source of primary energy, but we're also future proofing what we're doing in this market by integrating our our offering with carbon storage solutions as well.

10:10 In critical minerals, I've mentioned our focus on copper, and we're focused on a particular sort of copper called sediment hosted copper. We are currently deploying that solution with three companies. Three companies are are are have bought that solution and and are using it. In the period, we closed our largest ever contract in the sector. That was a $900,000 sale to a global diversified miner. And we've also been using our skills with companies to explore for native heat helium. That's helium that occurs naturally in geological settings.

10:45 In 2023, we're gonna be expanding our offering. We are working on a lithium solution, and we're also seeing quite a few opportunities for low cost asset participation as well. And so we're exploring those at the moment too. If I move to to hydrogen, our hydrogen development in Shoreham, we extended exclusivity to 2027, and we increased the design capacity at the port from 800 kilograms a day to two and a half tons a day. In Inverness, SGN completed the decommissioning of the gas holder on the site, and that's a really important step in terms of, you know, markets hit marking the first steps of the our work to develop a regional hydrogen network in the Highlands.

11:33 Now we're funding these businesses from our balance sheet, and so it's really important to to to manage those costs. And in the, business update, we talked about, our plans to launch a hydrogen advisory service in in 2023, and that will generate revenue for us. And we also talked about how we can utilize our critical minerals expertise to start exploring for natural hydrogen, and this is sometimes referred to as white hydrogen. It's the hydrogen that it's hydrogen that can occur naturally in geological settings. And so this is another good example where we're taking our our underlying Geoscience USP and integrating it into our hydrogen activities as well. In geothermal, we announced a partnership with Ever, and that is to locate geothermal projects in Latin America.

12:21 And, again, that could generate asset participation opportunities. And, again, there's another crossover here, which is that in some places, geothermal fluids coming to surface can bring lithium to the surface. Well, we are developing solutions to help people find lithium. We have solutions to help people find geothermal projects. So by bringing the two together, we have an interesting proposition here for for lithium in geothermal brines. And then the final point is really about how we can integrate these solutions to provide, decarbonization paths for companies. And in the update, we we note that we've secured a contract with a global fast moving consumer goods company, and that's to deliver an integrated decarbonization solution for their operations.

13:10 And this is a really tantalizing window into a new universe of of customers. And, you know, this is potentially a vast universe of new customers that really traditionally haven't been on our radar in terms of being just, you know, energy or mineral asset developers. These are the people who are physically working to decarbonize. So I think that's a really interesting theme that will be evolving over 2023. So in conclusion, we'd started 2023 with a strong balance sheet. We've also got sales pipeline growth, and we've also got good customer and partner momentum. We have no plans, you know, to raise capital from shareholders, and kids in house is currently under offer.

13:57 But if I step back from all of this, if I look to forecasts like this one made by Goldman Sachs, which, you know, says that a trillion dollars a year of additional energy investment is gonna be required to resolve this this dual underlying challenge, which is about energy affordability and security. And that trillion dollars is gonna be deployed not just across clean energy, but across hydrocarbons as well. And so what this is saying is is that fundamentally, what the world needs is to find more asset, more resources of energy and minerals. And that is how GETECH makes its money. And it's also where we're finding the opportunities to extend the value we create into some, you know, low cost asset participation opportunities.

14:43 Certainly, we feel that our business model is very well, you know, positioned for this market. There are some very strong growth drivers and very strong growth momentum in the markets that we're in. And we're really looking forward to the next twelve months because we think it's gonna be a period of, you know, more significant progress for us as as an organization as we work with our customers to locate energy and mineral resources. So thanks for for for for listening through those slides, and very happy to answer any questions that you might have. Jonathan, thank you very much indeed for your presentation this afternoon. And if I may just jump back in there. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the right hand corner of your screen. But just while Jonathan takes a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

15:43 Jonathan, we did receive a number of pre submitted questions ahead of today's event. As you can see there in the q and a tab, we have also received a number of questions throughout your presentation this afternoon as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And, Jonathan, if I could just hand back to you to respond to those where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Great. Thank you. Thanks very much. Right. Thanks, everyone, for for for your questions. Let me dive into the first one. The first one is about profitability. So the question is that for across four years, we have made losses, and it's likely there'll be three more years before our hydrogen business can generate revenue.

16:31 When will GETECH make a profit? So I think that just in answering this question, I I you know, the first thing I'd say is is that, you know, we're an organization that has unique IP, and that is valuable across multiple sectors. And we've seen that demonstrated by the diversification and growth in revenue in 2022. Now we could deploy that unique IP incrementally. And if we did, we would be a profitable but small low growth company. What we've seen instead are a number of investment opportunities that are created by the energy transition, and those opportunities can help us scale up and be a much larger and fast growing company.

17:20 And we believe that that is the best path for creating the most shareholder value. And so what we're doing as an organization is that we are, you know, expanding investment in our IP. We're investing in our sales and business development capabilities as as well. And alongside that, we're also very selectively investing in asset developments, and we carefully manage the cost of those activities as well. And and just referring back to the business update, you know, we discuss our work to establish, you know, a a hydrogen advisory service, and that will, you know, generate near term revenue. And we also discuss or or or highlight the discussions we're having with financial partners, and the purpose of those discussions is to reduce GETECH's direct cost exposure to the asset developments that it's it's undertaking.

18:19 And I think that through these activities, we see a path that not only brings us to profitability, but that also maximizes value creation, for our shareholders as well. So moving to the next question, it's about our focus across multiple sectors. It says, what other £10,000,000 market cap companies are taking on multiple energy transition businesses? When are we gonna see more focus? So we do have focus, and we've got one focus, and that focus is on locating energy and mineral resources. And what we then do is we tailor the solutions that we build to different types of customers. So it's one activity, which is locating these assets, but then tailored into different markets. And then what we're doing is is we're exploring, you know, different ways to to to monetize monetize the IP.

19:25 There's a question here about Kitson House. When do we expect to complete the sale of Kitson House? So, you know, Kitson House, for those who don't know, is our that's our our office in Leeds. We own the office. And kids in house has been on the market for some time. And the reason why we're looking to sell kids in house is because, you know, we would much rather see that capital working for shareholders in our business and, you know, creating value. And so so, you know, as an organization, you know, we're we're still obviously very focused on on crystallizing that those those financial resources and and putting them to work.

20:16 We say in the update that the office is is currently under offer. We also acknowledge in the update that the completion has been delayed by, you know, volatility in the commercial lending market. So I think it's quite difficult to put, you know, like, a date on on the sale. But, of course, you know, what what what I wanna reassure shareholders is is that, you know, we're working hard to to move that sale forward because when we do, we'll be able to release the capital into the business and and and create more value. So and when there's news, we'll obviously we'll obviously be updating. Next question is how likely is it that the company will have access to grant funding moving forward and any expectation what that will look like?

21:10 So, you know, we've talked in the past about grant funding, and, you know, that is an important area of capital that is being put to work across, you know, all of these new sectors because, you know, governments, be it through the inflation reduction act or the activities of the EU or The UK Governments, you know, people are trying to find ways to accelerate progress towards energy security and sustainable decarbonization. We, as an organization, are active in a number of grant processes. We talk about that in in the trading update, specifically grant processes with the, you know, with with the the UK government and the the Scottish government.

21:59 And, you know, across all of those things, you know, as we progress through those processes, obviously, we'll we'll, you know, update people. But, you know, what I would say is is that, you know, we have exciting, you know, development projects in terms of our our solution IP based offerings, but also in and around our our our asset developments. And that is you know, that positions us very well for those grants. So, you know, certainly, you know, focus on those applications, and we'll be updating as as as we see progress. And then the last question is is is one or the last question on my list at the moment is one about, you know, finance in the past of profitability.

22:44 And I I think that, you know, what I'd say about this is that if we kind of step back and just think about that in relation to the first half results, in the first half results, you know, we we we looked at the profitability of the foundation business, you know, the the product services solutions. And you can see that in the first half of the year, you know, those were cash profitable. So, you know, when we talk about profitability, it's important to remember that, you know, that valuable solution based offering that builds on all of our IP, you know, there's strong demand for that. We're seeing, you know, good growth, and, you know, we manage that carefully. And and, you know, as I said in the first half, it was it was it was generating cash. I think more broadly, of course, we're, you know, we are spending capital in terms of asset developments. But I would just go back and I would stress that point that I made earlier, which is whenever we very selectively take on an asset development, what our focus is is to to minimize the cost of that, minimize the direct costs, you know, maximize the value, and also maximize the the optionality.

23:53 So as we look across our business, you know, the kind of structures we're looking for are, know, investment partnerships, you know, equity carries through development, or even potentially a path to things like net smelter royalties and things like that. So the way that we're we're managing that path to profitability is very much to be, you know you know, good custodians of shareholder capital, you know, making sure that we extract, you know, the most value from the money that we spend and making sure that we always have, you know, a balanced approach to any sort of investment opportunity that we look at. Because underneath this all, what we you know, the most important thing is delivering a a robust, exciting, and resilient organization.

24:42 And, you know, coming out of '22, you know, there's a lot of exciting things that have come out of our diversification work, and I can see a lot of things on the horizon for '23 as well. So I think that certainly that concludes the questions I put on my list. Yeah. Jonathan, absolutely. And thank you for being so generous of your time then, addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses on the investor meet company platform. Jonathan, perhaps before redirecting those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.

25:33 Thanks very much. Well, no. Thank you very much, everyone, for your time. I think that, you know, the world we live in, you know, there is a huge focus on energy security. There's a huge focus on delivering a path to a sustainable, you know, decarbonized future as well. And, you know, GETECH is very well positioned in the sense that we have these unique offerings, you know, built on our data, built on our our expertise and our our software. And you can see in 2022 that these are opening value. We're growing revenue. We're growing order book. And as we look into 2023, you know, we're confident that the momentum around those products and services will build because they are absolutely ideally positioned for this essential need, which is to go out and find more energy and mineral resources.

26:30 And there are many ways that we can use to build, you know, the the the value of our solutions business, but also to carefully deploy, you know, our time and and and some capital into some asset participation opportunities that marry, you know, the near term potential of the solutions with that longer term value equation around the assets as well. So I think it's a super exciting time for GETECH, and I think it will be a super exciting time for GETECH shareholders as we move through 2023. So thank you for your time, and I I look forward to to updating you on progress as we move through the year. Jonathan, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations?

27:20 This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team with GETECH GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.