TIDMPTRO
RNS Number : 0563V
Pelatro PLC
12 April 2021
12 April 2021
Pelatro Plc
("Pelatro" or the "Group")
Final results
Pelatro Plc (AIM: PTRO), the precision marketing software
specialist, is pleased to announce today its results for the year
ended 31 December 2020.
Financial highlights
-- Revenue decreased to $4.02m (2019: $6.67m) as result of
switch of focus to recurring revenue
-- Recurring revenue increased to 71% of revenue (2019: 44%) at $2.85m (2019: $2.96m)
-- Adjusted EBITDA(*) of $0.44m (2019: $2.89m)
-- Adjusted (loss)/earnings per share of (5.5)c (2019: 4.2c)
-- Equity placing to raise $2.6m to invest in our business
-- Focus on shift to recurring revenue: Annual Recurring Revenue
("ARR")(**) increased 35% to $5.4m (2019: $4.0m)
-- Gross cash as at 31 December 2020 $1.81m (2019: $1.10m)
-- Trade receivables of $3.48m (2019: $5.51m); $1.4m received
from debtors since year end
Operational highlights
-- Successfully adapted to coronavirus restrictions with minimal
residual impact on operations
-- Continued cross-selling of products to existing customers and
intra-Group selling in telco groups
-- Enhanced sales presence in Latin America and also for Africa,
the Middle East and Asia
-- Roll out of mViva version 6 has been well received, with 3
customers having purchased
-- mViva implemented successfully in one of the largest networks
globally - c. 400m subscribers across 23 markets
Outlook
-- Substantial order book and good visibility over revenues for the coming year
-- Current contracted revenue visibility for FY21 of $6.0m, of
which $5.2m is recurring
-- Pipeline of c. $16m
-- Launch of drive into fast growing mobile advertising space
Richard Day, non-executive Chairman of Pelatro commented:
"We ended 2020 in a much stronger position, with a substantial
order book and good visibility over revenues for the coming year.
The start of the second phase of our journey into the mobile
advertising space is particularly exciting as an area complementary
to our existing operations. We have every confidence in meeting our
customers' requirements, growing our business and meeting financial
expectations for the year."
Presentation
A copy of the results presentation provided to investors and
analysts will be available on Pelatro's website in due course
(www.pelatro.com).
For further information contact:
Pelatro Plc
Subash Menon, Managing Director c/o Cenkos
Nic Hellyer, Finance Director
Cenkos Securities plc (Nominated Adviser
and broker) +44 (0)20 7397 8900
Stephen Keys / Mark Connelly (Corporate
Finance)
Michael Johnson (Sales)
* earnings before interest, tax, depreciation, amortisation,
exceptional items and share-based payments
** ARR is calculated by reference to the full annualised value
of a contract; the total ARR thus calculated may not all accrue in
the 12 months following due to (for example) implementation periods
and other timing differences between signing a contract and the "Go
Live" or similar date
This announcement is released by Pelatro Plc and, prior to
publication, the information contained herein was deemed to
constitute inside information under the Market Abuse Regulations
(EU) No. 596/2014. Such information is disclosed in accordance with
the Company's obligations under Article 17 of MAR. The person who
arranged for the release of this announcement on behalf of Pelatro
Plc was Nic Hellyer, Finance Director.
Notes to editors
The Pelatro Group was founded in March 2013 by Subash Menon and
Sudeesh Yezhuvath with the objective of offering specialised,
enterprise class software solutions for customer engagement
principally to telcos who face a series of challenges including
market maturity, saturation and customer churn.
Pelatro provides its "mViva" platform for use by customers in
B2C and B2B applications, and is well positioned in the Customer
Engagement space. Our technology orchestrates the digital journey
of the customers of the telcos through contextual, relevant and
real time offers and loyalty programs across multiple channels
including websites, social media, apps and others.
For more information about Pelatro, visit www.pelatro.com
CHAIRMAN'S STATEMENT
Overview
This past year always promised to be one of continuing
development at Pelatro, and significant progress has been made
notwithstanding the COVID-19 pandemic and its effect on social and
business interaction. There is still a long way to go but there is
clearly light at the end of the tunnel, with the increasing
roll-out of effective vaccines around the world and effective steps
being taken to help keep the virus in check. Most of our employees
have been working from home, with an increasing though limited
number working from our offices in India as the lockdown
restrictions are being lifted there. We currently have 20-30% of
our staff safely attending our offices for work and we expect that
to rise steadily over the coming months.
Our customers, the telcos, have continued to rely on our support
and our mViva software platform to help them with dedicated and
appropriate customer engagement across their networks. We started
the year with 18 telco customers and increased that to 19; we have
focused this year on extending our reach across our managed
networks systems services. Our shareholders will be aware that we
have, over the last two years been gradually moving our business
model from a predominantly licence fee one to one based on annual
recurring revenues. Subash in his CEO's report covers this more
fully. I will simply say that this has been a process which we knew
would take some time and we very much appreciate the support we
have had from all our stakeholders in going through this process.
We already have visibility of c. $6m of revenues for this current
year, which is a much stronger position than we have been in
before; furthermore, our earnings from predominantly licence fee
income historically tended to be more back-end weighted, whereas we
are now seeing with our annual recurring revenues model a much more
even income stream throughout the year. The collection cycle for
trade debtors also tends to be shorter.
Operations
From an operational point of view, the roll-out of our upgraded
version of mViva to the current V6 has been well received, with
three existing customers placing contracts to upgrade. We are also
seeing numerous Change Requests coming in as well as customers
taking up the Group's new modules. Importantly, this demonstrates
Pelatro's ability to enhance our mViva platform to ensure we
continue to satisfy the changing and evolving needs of our
industry.
In August, we took the opportunity to raise $2.6m net of
expenses by way of an equity placing. The funds were raised to
invest in growing the business, as well as to fund working capital
to ensure we were well placed to look for larger contracts.
Marketing for new business is still being impacted due to the
pandemic, allowing us to focus more on selling our services to our
existing customers. We have taken on two new salespeople, for Latin
America and also for Africa, the Middle East and Asia. We were also
able to expand our relationship with two separate large telco
groups which were already customers of Pelatro, by winning from
each a new contract from other operating companies in other
territories respectively within those groups.
We continue to develop and look at new applications for our
mViva platform. By way of example, during the year we collaborated
closely with one of our large telco group customers which is seeing
us develop with them advanced analytical capabilities for four
operating companies in their group in different countries.
In February 2021, we were delighted to be able to announce the
final implementation of mViva had been completed in the network of
our largest customer under our five-year Managed Services contract
with them. The network has over 400 million individual subscribers
and the roll-out was achieved in several tranches, with a smooth
and successful implementation. It was executed during the pandemic
remotely without any on-site activity being required. This is a
significant validation of the scalability of our mViva product.
Environmental, Social and Governance
We present in these accounts our Environmental, Social and
Governance report. As a support service company to the telco
industry, we are not engaged in any manufacturing process directly
producing harmful substances or products. However, we are mindful
of the sustainable conservation of natural resources and monitor
and control our energy and water consumption as well as our waste
production. All employees are valued members of the team and we
seek to implement provisions to retain and incentivise them in a
fair and open way. We have adopted the Quoted Companies Alliance
Corporate Governance Code and believe that strong and transparent
governance policies are a key ingredient of our success.
Outlook
We ended 2020 in a much stronger position, with a substantial
order book and good visibility over revenues for the coming year.
Our mViva platform has been successfully stress-tested to the
extreme in being implemented across a network of over 400m
subscribers without any losses or fall out. We have been
successfully selling our enhanced offering out across our customer
base and reaching out to new customers. The start of the second
phase of our journey into the mobile advertising space is
particularly exciting as an area complementary to our existing
operations. We have every confidence in meeting our customers'
requirements, growing our business and meeting financial
expectations for the year.
Richard Day
Chairman
MANAGING DIRECTOR'S STATEMENT
Relationships between organisations are heavily dependent on the
value delivered by one organisation to the other. The higher the
value, the deeper and stronger the relationship. As a reliable
partner to the telecom industry, your company endeavours to
consistently deliver value in every area of engagement covering all
aspects of our business such as provisioning of software,
implementation, support, consulting and related services. This
leads to the concept of recurring delivery of value.
Recurring Value Delivery
Pelatro has been morphing from a company that relies on one-time
revenue engagements with telcos to a company that derives most of
its revenue from recurring engagements. Such recurring engagements
result in higher revenue at a lower cost of obtaining that sale and
also leads to a deep relationship with our customers. It enables us
to become an integral and almost indispensable part of their
business process and system architecture. Attaining such a position
is very valuable and will ensure zero or minimal churn in our
customer base.
When your company embarked on this journey of strategic change
in the nature and quality of our revenue, most of our revenues were
"one off" in nature. Over a three-year period the scenario has
changed significantly with Annual Recurring Revenue ("ARR") run
rate moving from zero to $5.4 million. This metamorphosis is the
result of various new products being accepted by our customers and
a marked change in the underlying activities that are part of the
engagement model. The most fundamental shift is the addition of
several customers for our Managed Services offering. While the
scope and size of the operations for each customer is different,
the general offering is by and large the same - Pelatro handles the
operations of the mViva Campaign Management Solution on behalf of
the telco, including configuration of campaigns, execution of
campaigns, reporting, support and business consulting.
This change has led to increasing value addition from Pelatro to
its customers. It is pertinent to note that this value addition
continues for a long period of time spread over several years. The
period is generally between three to five years and the contracts
provide for further extension of this period. An important
consequence of such long periods of value creation is the embedding
of Pelatro and its products and services within the business of our
customers. We will continue to endeavour to leverage the
relationships thus built to further grow our business and
revenue.
Quality of Revenue
One time revenues are both lumpy and unpredictable which leads
to a high level of volatility in annual revenue and profit.
Further, new contracts need to be won each year to generate revenue
for that particular year. In contrast, recurring revenue contracts
ensure a stable predictable stream of revenue each year. New
contracts will continue to build on the existing base resulting in
the power of compounding. Given the excellent visibility provided
by recurring revenue contracts, the Group can also plan investments
well in advance and for a longer period of time. Thus, the
recurring revenue model tends to be more highly valuable to us
compared to new business from one-off contracts.
Our strategy to shift our business from reliance largely on
one-time revenues to predominantly recurring revenue has led to an
increasing proportion of recurring revenue in the overall revenue
of the Group. This proportion has increased steadily over the past
four years to reach 71% in 2020. As the Group continues to win
recurring revenue contracts, we expect the proportion to tilt
further in favour of this attractive and highly beneficial revenue
model.
2019 and 2021 - a study in contrast
As we have stated many times in recent years, your company
started the shift from contracts with one-time revenues to
contracts with recurring revenues in early 2019. The process
gathered momentum, and was largely complete towards the end of
2020. Consequently, 2021 will be our first full year of operation
after this strategic shift. During the 2019-20 period, reported
revenues experienced stagnation and decline, although the overall
value of contracts over a longer period is higher, as we are able
to rely on dependable receipts over several years. The natural
consequence was lumpy revenue giving way to more dependable revenue
spread over a longer period of time.
In view of this major shift, it is pertinent to compare the two
relevant years (2019 and 2021) to appreciate the full impact of the
change. At the start of 2021, we had $5.6m of contracts in hand to
be executed and the associated revenue recognised in 2021 (and have
since increased that figure to $6.0m). With the mix of potential
contracts in our current pipeline, we would expect the year end
outturn to be broadly 80/20 in favour of recurring revenue. Thus,
while the level of revenues in 2019 and the anticipated revenues in
2021 similar, the composition and quality has changed dramatically
with Recurring Revenue increasing in proportion from 44% to around
80%. This is leading to a fundamental change in the quality of
revenue and the underlying value of the business. As explained
earlier, we expect this trend to continue in the coming years with
the proportion of recurring revenue increasing steadily.
Establishing scale
The year that passed has been one when the scalability of our
platform mViva and that of our operations was established. We
rolled out mViva across 23 markets covering the entire country of
India encompassing over 400 million subscribers. This huge project
was executed remotely without any onsite presence. The execution
was flawless and the migration from two incumbent campaign
management solutions was completed without negatively impacting the
business of our customer. Consequent to this successful roll out,
mViva now has one of the largest implementations in the world and
handles the data of over 800 million subscribers globally.
Entry into mobile advertising space
For some time, the Group has been reviewing opportunities in the
fast-growing mobile advertising space. as an area complementary to
its existing operations. The global mobile advertising market,
according to a survey by IMARC Group, is expected to grow from $52
billion in 2018 to $221 billion in 2024 at a CAGR of 27%.
Commenting on this space as one of the key opportunities for
telecom companies, Gartner identified entry into mobile advertising
model as given below and commented as follows:
"Market Trends: CSPs Must Transform Their Advertising Model",
Gartner
Formulate and prioritize investments to develop a position in
data monetisation in the advertising market before other
advertising strategies. Focus should be on maximising Communication
Service Provider ("CSP") data usage and availability, rather than
on generating and selling ad inventory.
Develop a trusted data provider position with brands, agencies
and the wider ecosystem on top of the media or technology
activities already developed. As a trusted source of data, CSPs
will add transparency by reducing fraud and waste."
The Business
Mobile phones are ubiquitous and the significant penetration of
smart phones (in developed countries as high as 80%, and in Asia
for example currently about 50%) has opened up a new channel for
advertising, namely mobile advertising. This segment is growing at
a frenetic pace and currently accounts for about $100 billion
globally. Communication Service Providers or CSPs are in a unique
situation in this market as they hold the maximum amounts of data
about their customers (who may number tens of millions and even
hundreds of millions in some countries). This data, with
appropriate consent and anonymity, can be shared with B2C players
in financial services, retail, travel & hospitality, FMCG and
brands to enable the latter to engage in targeted marketing of
their products across advertising, campaigns, surveys, loyalty
programmes etc. Such targeted campaigning will be contextual,
relevant, personalised and real time. Pelatro's platform mViva,
which handles such marketing for telcos using the vast quantity of
data that it collects and processes applying AI/ML and other
analytical techniques, is uniquely positioned to provide access to
the segments mentioned earlier for mobile advertising and related
activities.
Pelatro's strategy and readiness
Pelatro is now seeing various opportunities by partnering with
its telco customers to enter this huge market. To start with, we
have already identified six large markets where we have several
telco customers using our software collecting and processing the
data of about 700 million mobile subscribers. Out of these, about
350 million i.e. 50%, have smart phones. Our technology can help
brands and B2C companies to target these 350 million subscribers
and mViva's AI/ML capabilities will help us to differentiate our
offering from that of the competition by enriching the data through
deep analysis. Pelatro's strategy is to partner with our telco
customers and sell this access to data to ad agencies who will in
turn on-sell to their customers, who are the brands and B2C
companies. These end customers will pay based on their usage (i.e.
number of campaigns sent, targeting parameters used, number of
people targeted etc.). This revenue is then shared by the ad
agency, Pelatro and the telco, with a large portion being retained
by Pelatro. This strategy therefore builds on our relationships
with our telco customers, underpinned by the expansion of our
existing business and with clear synergies between the two.
Looking forward
Your company has come a long way since its inception in 2013 and
the IPO in December 2017. Apart from winning several Tier 1 telecom
companies as customers in 17 countries, we have also built a strong
foundation for the future. We will continue to build on this strong
foundation to deliver superior results and shareholder value in the
coming years.
I thank every one of our stakeholders for the support extended
during the last year while the company was progressing on the
recurring revenue front. We will continue to build Pelatro into a
global leader in our chosen space.
Subash Menon
Managing Director, CEO and Co-Founder
Financial review
Key Performance Indicators
2020 2019 Growth
Revenue $4.02m $6.67m (40)%
Recurring revenue $2.85m $2.96m (4)%
Recurring revenue as percentage of
total 71% 44%
Adjusted EBITDA (see Note 7) $0.44m $2.89m (85)%
Adjusted EBITDA margin 11% 43%
Profit/(loss) before tax (before exceptional
items) $(2.23)m $0.77m n/a
Cash generated from operating activities $2.26m $1.41m 60%
Contracted customers (at year end) 20 19 1
Income Statement
Revenue
For the year, total revenue decreased by 40 per cent. to $4.02m.
This included $2.85m recurring revenue (which comprises gain share,
managed services and post-contract support or "PCS") accounting for
around 71% of the total; together with around $0.4m of change
request revenue this resulted in repeating revenue of $3.3m. The
decline in revenue year on year arose principally from a
significant reduction in "one off" type revenue (typically license
fees) which was not unexpected as our sales efforts were targeted
towards the pivot of the Group's revenues towards a recurring
revenue base; however, in addition and as announced in November
2020, whilst the coronavirus pandemic had a relatively limited
impact on high-level decision making at our customers, other than
them necessarily needing to focus more on their day-to-day
operations, by Q4 COVID-19 had started to affect some of the
employees and immediate relatives of both Pelatro and our
customers. This led to a slower than scheduled implementation of
certain projects (principally change requests), and as this revenue
is recognised only on completion of the relevant project, certain
revenue which was visible and expected in 2020 was deferred to the
first half of 2021.
One new customer was added during the year; this, together with
the number of recurring revenue customers, further reduced customer
concentration with now only three customers accounting for more
than 10% of revenue. As noted last year, a proportion of the
Group's revenue is now invoiced in Indian Rupees ("INR") which
forms a natural hedge against the Group's cost base, of which
around 60% (in cash terms) is in INR.
Cost of sales
Cost of sales increased by 71% to $1.71m (2019: $1.00m) These
costs comprise principally (i) the direct salary costs of providing
software support and maintenance, professional services and
consultancy; (ii) expensed customer implementation; (iii)
third-party software maintenance and licensing costs; and (iv)
sales commissions. The increase in FY20 results almost entirely
from the cost of extra staff taken on to service several managed
service and similar contracts implemented during the year.
Overheads
Pre-exceptional overheads (excluding depreciation and
amortisation) decreased to $1.9m (2019: $2.8m), largely due to a
substantial reduction in travel costs. Additionally, whilst net
staff numbers grew in the year, leavers were all employees whose
cost was charged to overheads, whilst the majority of new joiners
were recruited for specific customer contract roles (and hence are
charged to cost of sales); accordingly the net cost of staff
charged to overheads reduced. There was also a general reduction in
other costs including plc costs and certain consultancy
contracts.
Exceptional gains
The second stage earn-out payment due to the vendors of Danateq
was agreed in the year at $1m gross under the terms of the SPA. The
net amount paid was some $193,000 lower, being reduced by sums
relating either to amounts paid by customers in advance to the
former Danateq business but due to Pelatro, or amounts deductible
under the terms of the SPA due to differences in outturn in
disclosure items. The difference between the estimated value of the
liability brought forward and the amount paid (as adjusted for the
imputed discount due to the time value of money to the date of
payment) resulted in the exceptional gain shown of $149,000.
Profitability
Adjusted EBITDA (earnings before interest, tax, depreciation,
amortisation and exceptional items) fell by 85% in the year to
$0.44m (2019: $2.89m). Loss before tax before exceptional items was
$(2.22)m (2019: profit $0.77m). Adjusted loss per share was (5.5)c
(2019: positive 4.2c), and reported loss per share was(7.2)c (2019:
positive 2.5c). The reported loss before tax was $(2.08)m (2019:
profit $1.01m).
Taxation
The Group suffers a tax charge despite a reported consolidated
loss before tax as (i) the Group's operating subsidiary in India is
necessarily profitable on a standalone basis in order to comply
with local tax laws; and (ii) customer payments in respect of sales
to certain jurisdictions suffer Withholding Tax ("WHT") deductions:
subject to various restrictions this may be offsetable against
other profits but, in the absence of such profits, the WHT is
treated as tax suffered.
The taxation charge for the year comprises a charge of $0.30m
relating to current tax (2019: $0.25m), which is net of a credit of
$18,000 relating to the reassessment of prior year Group tax
liabilities and WHT assets, principally in the UK and the US.
Partly as a result of that reassessment, the Group is due a tax
refund of approximately $42,000. WHT also accounts for the majority
of the "Income tax paid" of $0.34m in the Group Statement of Cash
Flows.
The tax charge also reflects a charge of $72,000 relating to the
derecognition of deferred tax assets (2019: $53,000 credit) due to
uncertainty over the timing of when the previously recognised
deferred tax assets could be offset against future profits.
Statement of Financial Position
Intangible assets
Customer relationships and acquired software for resale
Assets acquired pursuant to the Danateq Acquisition comprised
principally customer relationships and enterprise software for
resale to third parties; the customer relationships acquired are
being amortised over 10 years. Net of accumulated amortisation for
the year, the net book value of the standalone intangible assets
acquired (i.e. the customer relationships) was approximately $5.2m
at the year end.
Development costs
The Group is committed to the continuous enhancement of its
software suite, and we aim to offer a market-leading platform which
addresses the needs of our telco customers. The Group now employs
around 95 developers in Bangalore and around 20 in the Group's
other development centre in Nizhny Novgorod. In addition to the
release of the advanced V6 of our proprietary mViva software, the
Group released various add-on modules (as detailed above), thus
further expanding the scope, functionality and optionality of the
software suite. Costs incurred of around $2.9m (2019: $2.1m) were
capitalised accordingly. Amortisation on development cost assets
increased to $1.4m (2019: $1.0m) and, net of amortisation, this
capitalisation resulted in a net book value of intangible assets
relating to development costs in the statement of financial
position of approximately $5.9m (2019: $4.4m).
Property, plant and equipment
Expenditure of $0.90m on property, plant and equipment relates
principally to $0.87m spend on IT equipment placed on site at a
customer's premises to implement the related managed services
contract. The balance relates mainly to spend on fixtures, fittings
and leasehold improvements due to the continued expansion of the
Group's office space.
Depreciation in the year amounted to $0.20m (excluding amounts
relating to Right-to-Use assets now recognised under IFRS 16, and
gross of amounts capitalised as intangible assets) (2019: $93,000),
and the aggregate net book value of property, plant and equipment
rose from $0.52m to $1.22m.
Trade receivables and contract assets
Trade receivables
At 31 December 2020 total trade receivables (i.e. including
long-term receivables) stood at $3.5m (2019: $5.5m). Of these
receivables, approximately $1.4m has been received since the year
end to date.
The short-term trade receivables balance at the year end is
analysed as follows:
2020 2020 2020 2019 2019 2019
$'000 $'000 $'000 $'000
Receivables Associated "Debtor Receivables Associated "Debtor
revenue days" revenue days"
Total 3,335 3,819 319 5,283 6,566 294
Excluding Unbilled
Revenue 1,076 2,593 151 967 2,619 135
The above figures have been adjusted where appropriate for
balance sheet reallocations, and exclude contract assets and the
associated incremental revenue.
Given the wide variety and bespoke nature of the Group's
contracts, figures shown for debtor days are pro forma for
illustration only.
Contract assets
Contract assets are recognised relating to support and
maintenance revenue and license fees as invoices are raised in
arrears of the revenue recognition relating to the services being
provided. In addition, contract assets include contract fulfilment
assets relating to sales commission provisions, the cost of which
is amortised over the life of the corresponding contract.
Short-term contract assets deriving from revenue (i.e. those
which are expected to reverse in less than one year) increased to
$0.46m (2019: $0.29m) largely due to one license contract signed in
the year which had invoicing terms which differed significantly
from the underlying performance obligations. Long-term contract
assets deriving from revenue (i.e. those which are expected to
reverse after more than one year) decreased to $0.31m (2019:
$0.51m), reflecting the invoicing profile of various products and
services, principally on PCS.
Fulfilment assets included in contract assets total $0.15m
(2019: $9,000) in respect of short-term assets (representing costs
directly relating to certain contracts to be recognised in profit
and loss in the next 12 months); and $0.44m (2019: $nil) in respect
of long-term assets (representing costs directly relating to
certain contracts to be recognised in profit and loss after one
year).
Trade and other payables, provisions and contract
liabilities
Trade and other payables
At the year end, short-term trade payables stood at $0.81m
(2019: $82,000) principally comprising an amount of $0.72m due in
respect of sales commissions payable. Other short-term payables of
$0.28m (2019: $0.44m), were due principally to $0.22m in respect of
staff bonuses and the balance for sundry creditors.
Provisions
Short-term provisions include amounts estimated in respect of
leave encashment and "gratuity" payments (in respect of staff
leavers in the Group's Indian subsidiary), plus sundry expense
provisions, in total $79,000 (2019: $53,000). Tax provisions of
$84,000 (2019: $149,000) comprise $60,000 relating to current tax
payable and a deferred tax liability of $24,000.
Long-term provisions of $0.17m (2019: $0.12m) relate solely to
amounts estimated in respect of leave encashment and gratuity
payments.
Contract liabilities
Contract liabilities represent customer payments received in
advance of satisfying performance obligations, which are expected
to be recognised as revenue in 2021 and beyond. Short-term contract
liabilities decreased to $0.50m (2019: $0.66m) and long-term
contract liabilities to $0.21m (2019: $0.27m) as the performance
conditions in the underlying contracts were satisfied.
Statement of Cash Flows
Cash flow and financing
Cash generated by operations before tax payments amounted to
$2.60m (2019: $1.75m), largely resulting from the realisation of
trade receivables (net working capital inflow of c. $2.2m). As the
Group transitions to a recurring revenue model, more contracts and
hence revenue will be on a quarterly or even monthly billing cycle
and hence we would expect this trend to continue.
During the year the Group secured financing of approximately
$0.8m (on a term basis over 6 years) in order to match fund the
cost of hardware associated with the major managed services
contract announced in December 2019. In addition, the FY19 year end
overdraft of $0.17m was repaid. In August the Group raised c. $2.6m
net of expenses by way of an equity placing. This has supported the
Group's expansion, both in terms of recruitment (in particular in
sales) and working capital generally.
Net of expenditure on intangibles (principally development costs
of $2.8m) and the hardware referred to above, the Group had closing
gross cash of $1.8m (2019: $1.1m). Borrowings amounted to $1.4m
(2019: $0.6m) excluding amounts relating to lease liabilities.
Summary
Our performance this year represents a year of transition: the
change in the quality of revenue, which now includes major
long-term managed service contracts, a solid base of support
revenue as well as valuable high margin training and other
consultancy income, gives us a sound platform from which to build.
Given the geographic spread of the Group, Brexit had little or no
effect and, whilst we continue to stay abreast of any developments,
we do not anticipate any material impact arising from the EU-UK
Trade and Cooperation Agreement. Whilst COVID-19 provides a
continuing cause for caution across the world, the Group has made
an excellent start to the year, with a material proportion of the
expected revenues for the year underpinned by recurring and
repeating revenue with significant further change request and other
contracts added in the first quarter. The Board therefore remains
optimistic that the Group is on track to deliver a strong year of
growth.
Nic Hellyer
Finance Director
Group Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019
Note $'000 $'000
(audited) (audited)
Revenue 5 4,020 6,667
Cost of sales and provision of services (1,710) (999)
_______ _______
Gross profit 2,310 5,668
Adjusted administrative expenses 6 (3,647) (4,048)
_______ _______
Adjusted operating profit/(loss) (1,337) 1,620
Exceptional items 7 149 236
Amortisation of acquisition-related intangibles 18 (686) (686)
Share-based payments 11 (32) (52)
---------- ----------
_______ _______
Operating profit/(loss) (1,906) 1,118
Finance income 12 64 54
Finance expense 13 (240) (164)
_______ _______
Profit/(loss) before taxation (2,082) 1,008
Income tax expense 14 (375) (194)
_______ _______
PROFIT/(LOSS) FOR THE YEAR ATTRIBUTABLE
TO OWNERS OF THE PARENT (2,457) 814
Other comprehensive income/(expense):
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of
foreign operations 25 (25)
_______ _______
Other comprehensive income, net of tax 25 (25)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR (2,432) 789
Earnings per share
Attributable to the owners of the Pelatro
Group ( basic and diluted) 15 (7.2)c 2.5c
Group Statement of Financial Position
For the year ended 31 December 2020
2020 2019
Note $'000 $'000
(audited) (audited)
Assets
Non-current assets
Intangible assets 18 11,649 10,891
Tangible assets 19 1,218 515
Right-of-use assets 20 308 339
Deferred tax assets 14 16 63
Contract assets 21 751 519
Trade and other receivables 21 149 231
_______ _______
14,091 12,558
Current assets
Contract assets 21 609 293
Trade receivables 21 3,335 5,283
Other assets 22 485 501
Cash and cash equivalents 1,805 1,101
_______ _______
6,234 7,178
TOTAL ASSETS 20,325 19,736
Liabilities
Non-current liabilities
Borrowings 23 1,196 362
Lease liabilities 24 172 187
Contract liabilities 25 207 274
Long-term provisions 26 173 124
_______ _______
1,748 947
Current liabilities
Trade and other payables 25 1,093 321
Short term borrowings 23 244 246
Lease liabilities 24 174 205
Contract liabilities 25 495 665
Provisions 26 163 202
Other financial liabilities - 948
_______ _______
2,169 2,587
TOTAL LIABILITIES 3,917 3,534
NET ASSETS 16,408 16,202
Issued share capital and reserves attributable
to owners of the parent
Share capital 27 1,212 1,065
Share premium 27 14,045 11,603
Other reserves 27 (583) (643)
Retained earnings 1,734 4,177
_______ _______
TOTAL EQUITY 16,408 16,202
Group Statement of Cash Flows
For the year ended 31 December 2020
2020 2019
$'000 $'000
(audited) (audited)
Cash flows from operating activities
Profit/(loss) for the year (2,457) 814
Adjustments for:
Income tax expense recognised in profit
or loss 375 194
Finance income (20) (11)
Finance costs 232 160
Depreciation of tangible non-current assets 366 188
Profit on disposal of fixed assets (10) -
Amortisation of intangible non-current
assets 2,122 1,726
Fair value adjustment on contingent consideration (149) (236)
Share-based payments 32 52
Foreign exchange gains/(losses) 25 (8)
_______ _______
Operating cash flows before movements
in working capital 516 2,879
(Increase)/decrease in trade and other
receivables 2,229 (1,509)
(Increase) in contract assets (544) (428)
Increase in trade and other payables 676 103
Increase/(decrease) in contract liabilities (276) 701
_______ _______
Cash generated from operating activities 2,601 1,746
Income tax paid (339) (334)
_______ _______
Net cash generated from operating activities 2,262 1,412
Cash flows from investing activities
Development of intangible assets (2,807) (2,102)
Purchase of intangible assets (9) (35)
Acquisition of property, plant and equipment (902) (256)
Payment of earn out consideration relating (851) -
to prior period acquisition
_______ _______
Net cash used in investing activities (4,569) (2,393)
Cash flows from financing activities
Proceeds from issue of ordinary shares, 2,589 -
net of issue costs
Proceeds from borrowings 1,753 317
Repayment of borrowings (919) (313)
Repayments of principal on lease liabilities (171) (171)
Interest received 20 11
Interest paid (185) (93)
Interest expense on lease liabilities (16) (40)
_______ _______
Net cash generated by/(used in) financing
activities 3,071 (289)
Net increase/(decrease) in cash and cash
equivalents 764 (1,270)
Foreign exchange differences (60) (20)
Cash and cash equivalents at beginning
of period 1,101 2,224
_______ _______
Cash and cash equivalents at end of period 1,805 934
Comprising:
Cash at bank and in hand 1,805 1,101
Overdraft - (167)
_______ _______
1,805 934
Group Statement of Changes in Equity
For the year ended 31 December 2020
hare Share Exchange Merger Share-based Retained Total
capital premium reserve reserve payments profits
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January
2019 as previously reported 1,065 11,603 (193) (527) - 3,363 15,311
Profit after taxation
for the period - - - - - 814 814
Share-based payments - - - - 100 - 100
Other comprehensive
income:
Exchange differences - - (23) - - (23)
Transactions with owners:
Shares issued by Pelatro - - - - - - -
Plc for cash
Issue costs - - -
_____ _____ _____ _____ _____ _____ _____
Balance at 31 December
2019 1,065 11,603 (216) (527) 100 4,177 16,202
Profit after taxation
for the period - - - - - (2,457) (2,457)
Share-based payments - - - - 98 - 98
Transfer on lapse of
share options (14) 14 -
Other comprehensive
income:
Exchange differences - - (24) - - - (24)
Transactions with owners:
Shares issued by Pelatro
Plc for cash 147 2,620 - - - - 2,767
Issue costs - (178) - - - - (178)
_____ _____ _____ _____ _____ _____ _____
Balance at 31 December
2020 1,212 14,045 (240) (527) 184 1,734 16,408
Notes to the Financial Statements
As this summary announcement is extracted from the full
financial statements, certain references may refer to notes which
are not included herein, and the Notes section is not reproduced in
full.
5 Revenue and segmental analysis
An analysis of revenue by product or service and by geography is
given below.
Revenue by type
At 31 December 2020 2019
$'000 $'000
Recurring software sales and services 1,528 1,563
Maintenance and support 1,323 1,399
_______ _______
Total recurring revenues 2,851 2,962
Change requests 426 1,551
_______ _______
Total repeating revenues 3,277 4,513
Software - new licenses 698 1,887
Consulting 45 258
Resale of hardware - 9
_______ _______
4,020 6,667
Revenue by geography
At 31 December 2020 2019
$'000 $'000
Caribbean 145 133
Central Asia 175 256
Eastern Europe 168 91
North Africa 64 135
South Asia 1,096 1,791
South East Asia 2,372 4,181
Sub-Saharan Africa - 80
_______ _______
4,020 6,667
Management makes no allocation of costs, assets or liabilities
between these segments since all trading activities are operated as
a single business unit.
An analysis of revenue by status of invoicing is as follows:
At 31 December 2020 2019
$'000 $'000
(i) Revenue invoiced to customers under contractual
terms 2,593 2,619
(ii) Revenue recognised under terms of contract
but unbilled at period end ("UBR") 1,232 3,947
(iii) Net revenue recognised other than (ii) 239 144
Less: revenue recognised or to be recognised
as interest under IFRS 15 (44) (43)
_______ _______
Total revenue recognised in the year 4,020 6,667
Customer concentration
The Group has three customers representing individually over 10%
of revenue each and in aggregate approximately 53% of total revenue
at $2.14m (2019: four such customers, in aggregate approximately
67% of revenue at $4.48m). The three customers accounted for
revenue of $0.89m, $0.63m and $0.62m respectively (2019: $2.02m,
$0.82m, $0.81m and $0.79m).
Revenue recognition
License revenue
Irrespective of the split between license and implementation
recognition, some contracts provide for fixed payments to be made
by customers (usually monthly) over a given term (e.g. three or
five years). Under IFRS 15, in order to reflect the time value of
money, such contracts are recognised (at the point of transfer of
the license) as the capitalised value of the income stream. In
addition, interest income accrues on the credit deemed to be
extended to the customer (on a reducing balance basis). For the
financial year 2020 this figure amounts to license revenue of
$0.20m and interest income of $44,000 (2019: $0.45m and
$7,000).
PCS
For the financial year 2020 revenue includes/(excludes) (i) a
net amount of $(101,000) representing income from PCS already
recognised ahead of its contractually due dates (2019: $104,000
recognised ahead of its contractually due dates), and (ii) an
amount of $nil (2019: $248,000) representing revenue netted off
license income and allocated to PCS.
Remaining performance obligations
There are certain software support, professional service,
maintenance and licences contracts that have been entered into for
which both:
-- the original contract period was greater than 12 months; and
-- the Group's right to consideration does not correspond directly with performance.
The amount of revenue that will be recognised in future periods
on these contracts when those remaining performance obligations
will be satisfied is shown below.
Year to 31 December
2021 2022 2023-6
$'000 $'000 $'000
Revenue expected to be recognised
on software and service contracts 579 394 442
Comparative figures for the year ended 31 December 2019 were as
follows:
Year to 31 December
2020 2021 2022-5
$'000 $'000 $'000
Revenue expected to be recognised
on software and service contracts 595 461 522
Costs of obtaining and fulfilling contracts of $0.59m have been
capitalised in 2020 (net of amortisation against revenue recognised
in respect of those contracts) (2019: $9,000).
6 Operating expenses
Profit for the year has been arrived at after charging:
2020 2019
$'000 $'000
Amortisation of intangible non-current assets 2,122 1,726
Depreciation of tangible non-current assets 198 93
(Profit)/loss on disposal of Right to Use (10) -
assets
Staff costs (see note 9) 1,787 1,503
Auditor's remuneration (see note 8) 41 41
Short-term lease expenses 23 23
Realised foreign exchange (gains)/losses 3 (14)
7 Non-GAAP profit measures and exceptional items
Reconciliation of operating profit to adjusted earnings before
interest, taxation, depreciation and amortisation ("EBITDA")
Year to 31 December 2020 2019
$'000 $'000
Operating profit/(loss) (1,906) 1,118
Adjusted for:
Amortisation and depreciation 2,420 1,915
Revenue recognised as interest under IFRS
15 44 43
Exceptional items:
- gain on adjustment of contingent liability (149) (236)
Expensed share-based payments 32 52
_______ _______
Adjusted EBITDA 441 2,892
Criteria for adjustments to operating profit or loss in the
calculation of adjusted EBITDA are that they (i) arise from an
irregular and significant event or (ii) are such that the
income/cost is recognised in a pattern that is unrelated to the
resulting operational performance.
Exceptional items are treated as exceptional by reason of their
nature and are excluded from the calculation of adjusted EBITDA
(and adjusted earnings per share in Note 15) to allow a better
understanding of comparable year-on-year trading and thereby an
assessment of the underlying trends in the Group's financial
performance. These measures also provide consistency with the
Group's internal management reporting. Exceptional items in 2020
comprise the gain on the adjustment of contingent liabilities
relating to the final earnout payment in respect of the Danateq
Acquisition.
Adjustment for share-based payment expense is made because, once
the cost has been calculated for a given grant of options, the
Directors cannot influence the share-based payment charge incurred
in subsequent years relating to that grant; also the value of the
share option to the employee differs considerably in value and
timing from the actual cash cost to the Group.
Elements of depreciation on right-to-use assets recognised under
IFRS 16 and share-based payment expense are deemed to be directly
attributable overheads for the purposes of capitalising relevant
expenditure on developing intangible assets. The figures above are
shown net of amounts so capitalised.
EBITDA (and adjusted EPS) are financial measures that are not
defined or recognised under IFRS and should not be considered as an
alternative to other indicators of the Group's operating
performance, cash flows or any other measure of performance derived
in accordance with IFRS. Accordingly, these non-IFRS measures
should be viewed as supplemental to, but not as a substitute for,
measures presented in this Annual Report and Accounts. Information
regarding these measures is sometimes used by investors to evaluate
the efficiency of an entity's operations; however, there are no
generally accepted principles governing the calculation of these
measures and the criteria upon which these measures are based can
vary from company to company. These measures, by themselves, do not
provide a sufficient basis to compare the Group's performance with
that of other companies and should not be considered in isolation
or as a substitute for operating profit or any other measure as an
indicator of operating performance, or as an alternative to cash
generated from operating activities as a measure of liquidity.
The calculation of adjusted earnings per share is shown in Note
15.
8 Auditor's remuneration
Year to 31 December 2020 2019
$'000 $'000
Charged in the financial year:
Audit of the financial statements of Pelatro
Plc 41 41
Amounts receivable by auditor in respect
of:
Tax compliance 4 3
_______ _______
45 44
9 Staff costs
Year to 31 December 2020 2019
$'000 $'000
Wages and salaries 4,410 3,495
Social security contributions 83 65
Less: amounts capitalised as intangible assets (2,706) (2,057)
_______ _______
1,787 1,503
The average number of persons employed by the Company during the
period was:
Year to 31 December 2020 2019
Sales 4 4
Software development 96 88
Support 48 40
Marketing 3 3
Administration 15 15
_______ _______
166 150
10 Directors' remuneration and transactions
The Directors' emoluments in the year ended 31 December 2020
were:
Basic Bonus Benefits Share-based Pension
salary in kind payments Total Total
2020 2020 2020 2020 2020 2020 2019
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Executive Directors
N. Hellyer 90 28 11 5 3 137 111
S. Menon 191 - 29 - - 220 262
S. Yezhuvath 191 - 16 - - 207 253
Non-Executive
Directors
R. Day 70 - - - 2 72 72
P. Verkade 39 - - - - 39 38
_______ ______ ______ ______ _______ _______ _______
581 28 56 5 5 675 736
The remuneration of the executive Directors is decided by the
Remuneration Committee. Save as disclosed above no Director had a
material interest in any contract of significance with the Group in
either year.
11 Share-based payments
In addition to options granted to a director at the time of the
Group's IPO, the Group introduced a share option plan for senior
employees on 15 January 2019 (the "Plan"). Each share option
converts into one ordinary share of the Company on exercise. No
amounts are paid or payable by the recipient on receipt of the
option and the Company has no legal obligation to repurchase or
settle the options in cash. The options carry neither rights to
dividends nor voting rights prior to the date on which the options
are exercised. Options may be exercised at any time from the date
of vesting to the date of expiry.
A charge of $32,000 (net of amounts capitalised of $66,000)
(2019: $52,000) has been recognised during the year for share-based
payments over the vesting period. This share-based payment expense
comprises the charge in the current period relating to the
expensing of the fair value of (a) the 1,640,000 options granted
under the Plan and (b) the 50,000 options issued at the time of the
Company's IPO. The options issued under the terms of the Plan were
granted with an exercise price of 73p, vesting in tranches as
follows: 25% after one year, 25% after two years and 50% after
three years. There are no conditions attaching to the vesting of
the options other than continued employment. Of this amount,
$27,000 net (2019: $45,000) relates to costs of share options
issued to subsidiary employees.
Movements in the number of share options outstanding and their
related weighted average exercise prices are as follows:
No. of options Weighted average
exercise price
2020 2019 2020 2019
Outstanding at the beginning of
the year 1,631,500 50,000 72.7p 62.5p
Granted during the year - 1,640,000 - 73.0p
Forfeited/cancelled during the
year (126,000) (58,500) 73.0p 73.0p
_______ _______
Outstanding at the end of the year 1,505,500 1,631,500 72.7p 72.7p
Outstanding options are exercisable at prices between 62.5p and
73p, and have a weighted average remaining contractual life of 6.8
years.
12 Finance income
2020 2019
$'000 $'000
Interest receivable on interest-bearing deposits 20 11
Notional interest accruing on contracts with
a significant financing component 44 43
_______ _______
Total finance income 64 54
13 Finance expense
2020 2019
$'000 $'000
Interest and finance charges paid or payable
on borrowings 198 96
Interest on lease liabilities under IFRS
16 31 40
Less: amounts capitalised as intangible assets (14) (19)
Acquisition-related financing expense (unwinding
of discount on financial liabilities) 25 47
_______ _______
Total finance expense 240 164
An element of interest on lease liabilities is deemed to be
directly attributable overheads for the purposes of capitalising
relevant expenditure on developing intangible assets (see Note
18).
14 Taxation
Tax on profit on ordinary activities
Year to 31 December 2020 2019
$'000 $'000
Current tax
UK corporation tax charge/(credit) on profit
for the current year - (32)
Overseas income tax charge/(credit) 321 286
Adjustments in respect of prior periods (18) (7)
_______ _______
Total current income tax 303 247
Deferred tax
Reversal/(recognition) of deferred tax asset 72 (53)
_______ _______
Total deferred income tax 72 (53)
Total income tax expense recognised in the
year 375 194
Deferred tax
Recognised deferred tax asset
2020 2019
$'000 $'000
At 1 January 2020 63 10
Recognised in profit and loss (47) 53
_______ _______
At 31 December 2020 16 63
Comprising:
Timing differences - 8
Tax losses 16 55
_______ _______
16 63
Deferred income tax assets have only been recognised to the
extent that it is considered probable that they can be recovered
against future taxable profits based on profit forecasts for the
foreseeable future. The deferred income tax assets at 31 December
2020 above are expected to be utilised in the next two years.
Recognised deferred tax liability
2020 2019
$'000 $'000
At 1 January 2020 - -
Recognised in profit and loss 24 -
_______ _______
At 31 December 2020 24 -
Comprising:
Timing differences 24 -
_______ _______
24 -
15 Earnings
Reported earnings per share
Basic earnings per share ("EPS") amounts are calculated by
dividing net profit or loss for the year attributable to owners of
the Company by the weighted average number of ordinary shares
outstanding during the year.
The Group has one category of security potentially dilutive to
ordinary shares in issue, being those share options granted to
employees where the exercise price (plus the remaining expected
charge to profit under IFRS 2) is less than the average price of
the Company's ordinary shares during the period in issue. No
dilution arose in the year as the exercise price was above the
average share price for the year.
The following reflects the earnings and share data used in the
basic earnings per share computations:
Year to 31 December 2020 2019
$'000 $'000
Profit/(loss) attributable to equity holders
of the parent:
Profit/(loss) attributable to ordinary equity
holders of the parent for basic earnings (2,457) 814
Weighted average number of ordinary shares
in issue 34,136,617 32,532,431
Basic earnings/(loss) per share attributable
to shareholders (7.2)c 2.5c
Adjusted earnings per share
Adjusted earnings per share is calculated as follows:
2020 2019
$'000 $'000
Profit/(loss) attributable to ordinary equity
holders of the parent for basic earnings (2,457) 814
Adjusting items:
- exceptional items (see note 7} (149) (236)
- share-based payments 32 52
- finance expense on liabilities relating
to contingent consideration 25 47
- amortisation of acquisition-related intangibles 686 686
- prior year adjustments to tax charge (18) (7)
_______ _______
Adjusted earnings attributable to owners
of the Parent (1,881) 1,356
Weighted number of ordinary shares in issue 34,136,617 32,532,431
Adjusted earnings/(loss) per share attributable
to shareholders (5.5)c 4.2c
The criteria for inclusion of adjusting items in the calculation
of adjusted EPS are the same as those relating to the calculation
of adjusted EBITDA as set out in Note 7. Additionally, finance
expense on liabilities relating to contingent consideration are
non-cash costs reflecting the time value of money in arriving at
the fair value of such liabilities and the effluxion of time over
the period for which they are outstanding; and amortisation of
acquisition-related intangibles relates to the amortisation of
intangible assets in respect of customer relationships and brands
which are recognised on a business combination and are non-cash in
nature.
18 Intangible assets
Intangible assets comprise capitalised development costs (in
relation to internally generated software and software acquired
through business combinations), software acquired from third
parties for use in the business, patents, customer relationships
and goodwill.
An analysis of goodwill and other intangible assets is as
follows:
Financial year Development Third Patents Customer Goodwill Total
2020 costs party relationships
software
$'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January
2020 6,391 108 23 6,862 470 13,854
Additions 2,872 4 4 - - 2,880
Foreign exchange - (2) - - - (2)
_______ _______ _______ _______ _______ _______
At 31 December
2020 9,263 110 27 6,862 470 16,732
Amortisation
At 1 January
2020 (1,957) (34) - (972) - (2,963)
Charge for the
year (1,416) (20) - (686) - (2,122)
Foreign exchange - 2 - - - 2
_______ _______ _______ _______ _______ _______
At 31 December
2020 (3,373) (52) - (1,658) - (5,083)
Net carrying
amount
At 31 December
2020 5,890 58 27 5,204 470 11,649
At 1 January
2020 4,434 74 23 5,890 470 10,891
Financial year Development Third Patents Customer Goodwill Total
2019 costs party relationships
software
$'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January
2019 4,144 98 - 6,862 745 11,849
Additions 2,247 12 23 - - 2,282
Fair value adjustment - - - - (275) (275)
Foreign exchange - (2) - - - (2)
_______ _______ _______ _______ _______ _______
At 31 December
2019 6,391 108 23 6,862 470 13,854
Amortisation
At 1 January
2019 (935) (19) - (286) - (1,240)
Charge for the
year (1,022) (18) - (686) - (1,726)
Foreign exchange - 3 - - - 3
_______ _______ _______ _______ _______ _______
At 31 December
2019 (1,957) (34) - (972) - (2,963)
Net carrying
amount
At 31 December
2019 4,434 74 23 5,890 470 10,891
At 1 January
2019 3,209 79 - 6,576 745 10,609
19 Tangible assets
Financial year 2020 Leasehold Computer Office Vehicles Total
improvements equipment equipment
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2020 109 197 59 312 677
Additions 24 877 1 1 902
Foreign exchange differences (2) 10 (1) (7) -
_______ _______ _______ _______ _______
At 31 December 2020 131 1,084 59 305 1,579
Depreciation
At 1 January 2020 (7) (87) (9) (59) (162)
Charge for the year (17) (134) (11) (36) (198)
Foreign exchange differences - (1) - - (1)
_______ _______ _______ _______ _______
At 31 December 2020 (24) (222) (20) (95) (361)
Net carrying amount
At 31 December 2020 107 862 39 210 1,218
At 1 January 2020 102 110 50 253 515
Financial year 2019 Leasehold Computer Office Vehicles Total
improvements equipment equipment
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2019 49 93 30 264 436
Additions 63 106 31 56 256
Foreign exchange differences (3) (2) (2) (8) (15)
_______ _______ _______ _______ _______
At 31 December 2019 109 197 59 312 677
Depreciation
At 1 January 2019 - (46) (2) (26) (74)
Charge for the year (7) (44) (8) (34) (93)
Foreign exchange differences - 3 1 1 5
_______ _______ _______ _______ _______
At 31 December 2019 (7) (87) (9) (59) (162)
Net carrying amount
At 31 December 2019 102 110 50 253 515
At 1 January 2019 49 47 28 238 362
20 Right-of-use assets
Right-of-use assets comprise leases over office buildings and
vehicles as follows:
Office Vehicles Total
buildings
$'000 $'000 $'000
Cost
At 1 January 2020 690 31 721
Additions in respect of new leases 227 - 227
Disposals in respect of leases terminated (231) - (231)
Effects of foreign exchange movements (25) 1 (24)
_______ _______ _______
At 31 December 2020 661 32 693
Depreciation
At 1 January 2020 (368) (14) (382)
Charge for the period (153) (14) (167)
Eliminated on leases terminated 157 - 157
Effects of foreign exchange movements 9 (2) 7
_______ _______ _______
At 31 December 2020 (355) (30) (385)
Net carrying amount
At 31 December 2020 306 2 308
At 1 January 2020 322 17 339
2019 Office Vehicles Total
buildings
$'000 $'000 $'000
Cost
At 1 January 2019 - - -
Effect of adoption of IFRS 16 557 - 557
Additions in the period 139 30 169
Effects of foreign exchange movements (6) 1 (5)
_______ _______ _______
At 31 December 2019 690 31 721
Depreciation
At 1 January 2019 - - -
Effect of change of accounting policy (212) - (212)
Charge for the period (160) (13) (173)
Effects of foreign exchange movements 4 (1) 3
_______ _______ _______
At 31 December 2019 (368) (14) (382)
Net carrying amount
At 31 December 2019 322 17 339
At 1 January 2019 - - -
21 Trade and other receivables and contract assets
The timing of revenue recognition, invoicing and cash collection
results in the recognition of the following assets on the
Consolidated Statement of Financial Position:
(i) invoiced accounts receivable;
(ii) accounts invoiceable but uninvoiced at the period end (i.e.
"unbilled revenue" or UBR) (collectively with (i) recognised as
"trade receivables"); and
(iii) amounts relating to revenue recognised at the date of the
statement of financial position but not invoiceable under the terms
of the contract, or fulfilment assets ("contract assets")
Aged analysis of trade receivables
At 31 December Carrying Neither Past due (in days) but not
amount impaired impaired
or past
due
More than
61-90 91-120 121
$'000 $'000 $'000 $'000 $'000
2020
Trade receivables 3,484 3,152 34 93 205
2019
Trade receivables 5,514 5,114 - - 400
Contract assets
Due after one year 2020 2019
$'000 $'000
At 1 January 519 312
Contract assets recognised in the period 441 320
Transfer to current contract assets (209) (113)
_______ _______
At 31 December 751 519
Due within one year 2020 2019
$'000 $'000
At 1 January 293 72
Contract assets recognised in the period,
net of releases to receivables or cash,
or amortisation to profit or loss 107 108
Transfer from non-current contract assets 209 113
_______ _______
At 31 December 609 293
Contract assets are comprised as follows:
Due after one year 2020 2019
$'000 $'000
Contract assets relating to revenue 311 519
Contract fulfilment assets 440 -
_______ _______
751 519
Due within one year 2020 2019
$'000 $'000
Contract assets relating to revenue 457 284
Contract fulfilment assets 152 9
_______ _______
609 293
Credit risk and impairments
As outlined in Note 2, the Group recognises impairments under
IFRS 9 for relevant classes of assets. The Group thus reviews the
amount of expected credit loss associated with its trade
receivables based on forward looking estimates that take into
account current and forecast credit conditions as opposed to
relying on past historical default rates. In the absence of any
historic credit losses and the expectation of no specific losses in
the foreseeable future, the Directors assess a hypothetical likely
default amount by applying a percentage "probability of default" to
the receivables balance, such probability being related to the
underlying credit rating of the customer or country of origin.
Furthermore, taking into account the time value of money when
applied to contracts assets (which may unwind over a period of
years following their initial recognition), a loss allowance for
expected credit losses has been recorded as follows:
2020 2019
$'000 $'000
Loss allowance at 1 January 29 -
Increase in loss allowance 8 29
_______ _______
Loss allowance at 31 December 37 29
The loss allowance is comprised as follows:
2020 2019
$'000 $'000
On trade receivables 30 25
On contract assets 7 4
_______ _______
Loss allowance at 31 December 37 29
The largest individual counterparty to a receivable included in
trade and other receivables at 31 December 2020 was $562,000 (of
which some $523,000 related to unbilled revenue) (2019:
$1,067,000). Based on invoiced receivables, the largest individual
counterparty owed the Group $200,000 (2019: $210,000). The Group's
customers are spread across a broad range of geographies and
consequently it is not otherwise exposed to significant
concentrations of credit risk on its trade receivables.
22 Other assets
At 31 December 2020 2019
$'000 $'000
Prepayments 130 109
Deposits 80 131
Other assets (including withholding tax, GST
and VAT refunds) 275 261
_______ _______
Total other assets 485 501
23 Loans and borrowings
Loans and borrowings comprise:
At 31 December 2020 2019
$'000 $'000
Non-current liabilities
Secured term loans 277 362
Unsecured borrowings 919 -
_______ _______
1,196 362
Current liabilities
Current portion of term loans 99 79
Unsecured borrowings 145 167
_______ _______
244 246
Total loans and borrowings 1,440 608
The Group has six term loans, all in its operating subsidiary in
India and denominated in INR, with interest rates between 10% and
13.5% (in INR) and one USD-linked loan at 5.5%, and repayable
between 5 and 6 years from their inception, between April 2023 and
September 2026.
24 Lease liabilities
Lease liabilities comprise liabilities arising from the
committed and expected payments on leases over office buildings and
vehicles.
Financial year 2020
Amounts due in more than one year Office Vehicles Total
buildings
$'000 $'000 $'000
At 1 January 2020 186 1 187
Liabilities taken on in the period 163 - 163
Liabilities (disposed of) in the
period (28) - (28)
Transfer from long-term to short-term (140) (1) (141)
Effects of foreign exchange movements (9) - (9)
_______ _______ _______
At 31 December 2020 172 - 172
Amounts due in less than one year Office Vehicles Total
buildings
$'000 $'000 $'000
At 1 January 2020 193 12 205
Liabilities taken on in the period 69 - 69
Liabilities (disposed of) in the
period (56) - (56)
Repayments of principal (164) (12) (176)
Transfer from long-term to short-term 140 1 141
Effects of foreign exchange movements (8) (1) (9)
_______ _______ _______
At 31 December 2020 174 - 174
Financial year 2019
Amounts due in more than one year Office Vehicles Total
buildings
$'000 $'000 $'000
At 1 January 2019 - - -
Effect of change of accounting policy 273 - 273
Leases taken on in the period 97 12 109
Transfer from long-term to short-term (180) (11) (191)
Effects of foreign exchange movements (4) - (4)
_______ _______ _______
At 31 December 2019 186 1 187
Amounts due in less than one year Office Vehicles Total
buildings
$'000 $'000 $'000
At 1 January 2019 - - -
Effect of adoption of IFRS 16 124 - 124
Leases taken on in the period 43 17 60
Repayments of principal (155) (16) (171)
Transfer from long-term to short-term 180 11 191
Effects of foreign exchange movements 1 - 1
_______ _______ _______
At 31 December 2019 193 12 205
PSPL, the Group's main operating subsidiary, has entered into
various leases over office space in Bangalore and Mumbai, typically
on 3 to 4 year terms with rollover options. The Group also has a
lease on office space in Nizhny Novgorod in Russia. Given the
impact of COVID-19 and working from home options, and the near-term
expiry of certain leases, the Group intends to review its office
accommodation arrangements in 2021/22.
25 Trade and other payables and contract liabilities
At 31 December 2020 2019
$'000 $'000
Due within one year
Trade payables 810 82
Other payables 283 239
_______ _______
Total trade and other payables 1,093 321
Trade payables include amounts due in respect of sales
commissions due to sales agents. Other payables comprise
principally amounts due in respect of staff bonuses declared for
December and paid in January.
The average credit period taken for normal trade purchases is
between 30 and 60 days. Most suppliers do not charge interest on
trade payables for the first 30 days from the date of the invoice.
The Group has risk management policies in place to ensure that all
payables are paid within the appropriate credit time frame. The
Directors consider that the carrying amount of trade payables
approximates to their fair value.
Contract liabilities
Contract liabilities represent consideration received in respect
of unsatisfied performance obligations. Changes to the Group's
contract liabilities are attributable solely to the satisfaction of
performance obligations.
At 31 December 2020 2019
$'000 $'000
Due after one year
Contract liabilities at 1 January 274 112
Contract liabilities recognised in the period 20 202
Transfers to short-term liabilities (87) (40)
_______ _______
Contract liabilities at 31 December 207 274
At 31 December 2020 2019
$'000 $'000
Due within one year
Contract liabilities at 1 January 665 61
Contract liabilities recognised/(released
to revenue) in the period (257) 564
Transfers from long-term liabilities 87 40
_______ _______
Contract liabilities at 31 December 495 665
26 Provisions
At 31 December 2020 2019
$'000 $'000
Due within one year
Employee gratuities 13 9
Leave encashment 24 16
Other provisions (including tax) 126 177
_______ _______
163 202
At 31 December 2020 2019
$'000 $'000
Due after one year
Employee gratuities 116 81
Leave encashment 57 43
_______ _______
173 124
Other provisions comprise tax and other expenses.
Under the Indian Payment of Gratuity Act 1972, employees with
more than 5 years' service are eligible for the payment of a
"gratuity" upon certain end of employment events, including
retirement, resignation, death and termination or redundancy. The
calculation of the gratuity due is based on the last drawn salary
and number of years of service. The potential liability arising
from these requirements is calculated by third party actuaries
based on employee profiles, their completed number of years in the
organization, their age, salary and also on the probability of
termination of employment, and a provision made accordingly.
Under the terms of their employment, employees are eligible to
carry forward 30 "earned leaves" (EL) to the next calendar year.
Any EL balance over and above this is paid in cash by March the
following year, hence resulting in a long-term provision.
27 Share capital and reserves
Share capital and share premium
Ordinary shares of 2.5p each (issued and fully $'000 Number
paid)
At 1 January 2019 1,065 32,532,431
Issued for cash during the year - -
_______ _______
At 31 December 2019 1,065 32,532,431
Issued for cash during the year 147 4,500,000
_______ _______
At 31 December 2020 1,212 37,032,431
On 21 and 22 August the Company issued a further 4,500,000 2.5
pence Ordinary shares at a price of 47.0 pence per share by way of
a placing to institutional and other investors. The Company
incurred incremental costs totalling $178,000 in respect of the
Placing. IAS 32 Financial Instruments: Presentation requires the
costs of issuing new shares to be charged against the share premium
account. Management reviewed the incremental costs to identify
those solely incurred in issuing new shares, those incurred in
connection with the entire share capital, and those not associated
with issuing new shares. All of the costs relating to the Placing
were deemed to relate directly to the issue of new shares and thus
resulted in a debit to share premium of $178,000.
31 Events after the reporting date
There have been no events subsequent to the reporting date which
would have a material impact on the financial statements.
General
Audited accounts
The financial information set out above does not comprise the
Group or the Company's statutory accounts. The Annual Report and
Financial Statements for the year ended 31 December 2019 have been
filed with the Registrar of Companies. The Independent Auditors'
Report on the Annual Report and Financial Statements ("Annual
Report") for the year ended 31 December 2019 was unqualified, did
not draw attention to any matters by way of emphasis, and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
The Independent Auditors' Report on the Annual Report for the
year ended 31 December 2020 is unqualified, does not draw attention
to any matters by way of emphasis, and does not contain a statement
under 498(2) or 498(3) of the Companies Act 2006. The Annual Report
will be filed with the Registrar of Companies following the annual
general meeting.
The Annual Report, together with an notice of the annual general
meeting, are expected to be made available to shareholders in June
2021. Copies will also be available on the Company's website
(www.pelatro.com) and from the Company's registered office at 49
Queen Victoria Street, London EC4N 4SA from that date.
Related party transactions
During the year Suresh Yezhuvath (the brother of Subash Menon
and Sudeesh Yezhuvath) arranged a loan whereby a syndicate of
certain business associates of his would provide funding of INR 60m
(approx. $820k) in order to facilitate the acquisition of computer
hardware needed for the implementation of a long-term managed
services contract. The loan was on a 6 year term basis at an
interest rate of 15.25%. Neither Mr Menon nor Mr Yezhuvath took any
benefit from this loan, which was considered to be on reasonable
commercial terms. Suresh Yezhuvath participated in the funding in
the amount of c. $130k at the same rate.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group together
with actions being taken to mitigate them and future potential
items for consideration will be set out in the Strategic Report
section of the Annual Financial Report 2020.
Presentation of figures
Figures are rounded to the nearest $0.1m, $0.01m or $'000 as the
case may be. Percentage increases or decreases stated above are
based on the figures as rounded. Minor differences may arise in
tabulation and figures presented elsewhere due to rounding
differences.
This announcement was approved by the Board of Directors on 11
April 2021.
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END
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