REG - Pelatro PLC - Final Results
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)¢ (2019: 4.2¢)
• 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)¢ (2019: positive 4.2¢), and reported loss per share was(7.2)¢ (2019: positive 2.5¢). 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 revenue
"Debtor days"
Receivables
Associated revenue
"Debtor 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)¢
2.5¢
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 to prior period acquisition
(851)
-
_______
_______
Net cash used in investing activities
(4,569)
(2,393)
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs
2,589
-
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 capital
Share premium
Exchange reserve
Merger reserve
Share-based payments reserve
Retained profits
Total
$'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 assets
(10)
-
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
salary
Bonus
Benefits
in kind
Share-based payments
Pension
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)¢
2.5¢
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)¢
4.2¢
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 2020
Development costs
Third party software
Patents
Customer relationships
Goodwill
Total
$'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 2019
Development costs
Third party software
Patents
Customer relationships
Goodwill
Total
$'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 improvements
Computer equipment
Office equipment
Vehicles
Total
$'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 improvements
Computer equipment
Office equipment
Vehicles
Total
$'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
buildings
Vehicles
Total
$'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
buildings
Vehicles
Total
$'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 amount
Neither impaired or past due
Past due (in days) but not impaired
61-90
91-120
More than 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
buildings
Vehicles
Total
$'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
buildings
Vehicles
Total
$'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
buildings
Vehicles
Total
$'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
buildings
Vehicles
Total
$'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 paid)
$'000
Number
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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