Small Cap Value Report (1 Apr 2014) - GTC, CRA, ACC

Tuesday, Apr 01 2014 by

Good morning! For the avoidance of doubt, I won't be doing any April Fools today, as Twitter is so full of them, I've had to turn it off. So that should mean a lot more work gets done today!



Getech (LON:GTC)

This £20m market cap (at 65p per share) data provider to oil exploration companies has this morning released its interim results for the six months to 31 Jan 2014. I've been wary of this share since the company warned on profits on 17 Feb 2014. As I explained in my report that morning, the operational gearing (i.e. high margin sales, on a fixed cost base) is such that the reported decline in sales would have a savage impact on profit. My figures indicated that a drop in profit from £1.4m to somewhere in the £250-500k area was likely for H1 this year.

It's even worse than that, with revenue of £3.1m (down 22%) delivering a profit of £233k, down 83% on H1 last year (£1.4m profit). That's a basic EPS of only 0.6p, so at this run rate full year EPS would only be 1.2p. Put that on a PER of say 15, and you only have a share price of 18p. The current share price is actually 65p, so the market is factoring in nearly a 4-fold increase in profitability from the run rate in this set of interims. I fail to see how that is prudent.

On the positive side, Getech has a good Balance Sheet. The working capital position is strong, with £5.6m in current assets, against only £2.3m of current liabilities, so a ratio of a very healthy 243% there. Long term creditors are negligible at £88k. Working capital includes net cash of £3.6m, which has supported an increased dividend, up 10% to 0.44p, although providing the final dividend is maintained or increased, it looks on track to deliver 2.1p forecast full year divis - a reasonable yield of 3.1%. Although I wouldn't hang my hat on an uncovered dividend like this one.

So, lousy figures as expected. What is the outlook like, as that is crucial for the valuation?  There is a fair bit of detail in the outlook section, but the key paragraph (in my view) says this;


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Getech Group Plc is a United Kingdom-based company, which provides geological services, reports and data to the petroleum and mining industries to assist in their exploration activities. The Company's segments include Multiclient products and services, Consultancy projects and All other segments. Its Multiclient products and services segment includes Globe, which is its live Geographic Information Systems (GIS) Earth platform; Gravity and magnetics, which offers global databases; Multiclient regional reports, which include reports on various exploration areas, and Multi-Satellite Altimeter Gravity Programme, which is a three-year study covering gravity data for the continental margins of the world. Its Consultancy projects include Consultancy and licensing rounds, under which the Company provides technical support and advice to the Mozambique government, and GIS software and services, under which, the Company, through Exprodat Consulting Limited, offers Exploration Analyst Online. more »

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TP Group plc, formerly Corac Group plc, is United Kingdom-based engineering company, which focuses on the defense and energy sectors. The Company's principal activities consists of TPG Maritime, which provides air purification equipment for submarines, including oxygen/hydrogen generation and purification, air handling and distribution systems; TPG Design and Technology, which specializes in the design and development of turbomachinery; TPG Engineering, which includes the manufacture of heat exchange equipment used in the heating and cooling of large scale industrial processes and other fabricated structures, and TPG Managed Solutions, which provides services to major organizations through prime contracting and provision of specialist resources. The Company's services include analysis, design, project control, cost engineering, prime contract management, equipment build, equipment maintenance and supply chain management. more »

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Access Intelligence Plc is a United Kingdom-based software and computer services company. The Company is engaged in providing business critical compliance and legislative driven software solutions and services, to both public and private sectors. Its segments include Reputation; Governance, Risk & Compliance, and Head Office. It offers various solutions, such as crisis and incident management, training and competence expertise, reputation management, and cloud and hosting. Its reputation and risk management solutions include Vuelio, AIControlPoint and AITrackRecord. Vuelio operates a portfolio of products and services for public relations and public affairs professionals throughout the United Kingdom and Europe. AIControlPoint is a suite of technologies that help companies in high-risk industries manage incidents and crises and mitigate risk. AITrackRecord is a solution for training, competence and compliance management. more »

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  Is LON:GTC fundamentally strong or weak? Find out More »

5 Comments on this Article show/hide all

Damian Cannon 1st Apr '14 1 of 5

On Corac I can see that the share count tripled between 2007 and 2012 - which is pretty extraordinary - but I can't see where you got the £56m of raised money figure from Paul. You mention the bottom of the balance sheet but all I can see there is the number of shares and the book value.

I must be missing something?



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aiminvesting 1st Apr '14 2 of 5

Thank Paul for the report, as ueful as usual!
I was surprised to see in the Getech report an increase in the cost of sales on the back of declining revenues. Anyone has thoughts on this?

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Paul Scott 1st Apr '14 3 of 5

In reply to post #82399

Hi Damian,

The £56m figure on Corac that I quoted is just the total of Share Capital + Share Premium a/c, in the bottom section of the Bal Sheet. That will normally tell you how much money shareholders have injected into the company in total share capital from Day 1. Unless there's been a reorganisation of reserves, which sometimes happens.

Regards, Paul.

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Jon1958 2nd Apr '14 4 of 5

Thanks Paul as usual a really useful note.

ACC are indeed worth a closer look IMO. From a quick look at their web site they produce software solutions to help companies monitor compliance (anti bribery / money laundering etc). This is a massive concern to corporates - particularly those with international operations and they are prepared to spend to protect themselves. Once a company has bought a solution they will keep spending to keep it in place and monitor and train staff etc. I note that a high proportion of ACC's revenues are recurring which is .

Will post further once I have had a look at what they offer in more detail but they are certainly operating in a growth area IMO.


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Damian Cannon 2nd Apr '14 5 of 5

In reply to post #82413

Hi Paul,

Thanks very much for your reply. I'd thought that you were looking at the balance sheet summary in Stockopedia but of course you were looking directly at the results (although having this information on the site would be great).

What's interesting is that the share capital + share premium value was £44m in 2012 and that suggests that £12m was raised last year in new capital. Substantial dilution. Also I guess with the retained earnings being negative £30m that explains how the balance sheet "balances" and just how much money the company has burnt?

NB looking at the historical announcements a placing for around £11m was made in December and so this all ties together!



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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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