REG - Pelatro PLC - Final Results
26/05/2023 07:00
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RNS Number : 7254A Pelatro PLC 26 May 2023
26 May 2023
Pelatro Plc
("Pelatro" or the "Group")
Final Audited Results for the Year ended 31 December 2022
Pelatro Plc (AIM: PTRO), the precision marketing software specialist, today
announces today results for the year ended 31 December 2022.
Financial highlights
· Decrease in revenue to $5.4m (2021: $7.3m)
· Recurring revenue of $4.3m (2021: $4.8m)
· Adjusted EBITDA(*) of $0.6m (2021: $2.8m)
· Adjusted loss per share of (27.3)¢ (2021:
(0.4)¢)
• Trade receivables of $3.5m (2021: $5.0m)
• Exceptional costs incurred of $1.1m, relating
primarily to write off of one trade receivable and one contract asset,
together with staff retention share issue
• Impairment charges of $9.3m incurred, primarily
relating to intangible assets as a result of reduction in revenue in 2022
Operational highlights
• Three new customers added during the year,
bringing total to 26, increased presence in Africa and the Middle East
• Continuing to retain customers at end of initial
contracts
• Shortlisted by an increasing number of banks,
demonstrating the validity of our product for non-telcos
Outlook
· Substantial order book with a number of new
contracts won since the year end, including a good level of repeat activity
from change requests, and a large number of significant contracts in advanced
stages of negotiation, including banks
• New customer wins for the year expected to be in
double figures
• Excellent visibility over revenues for the
current year, currently around $8m
• ARR now c.$7m
• New business pipeline(#) of c. $23m, including
some $5m of non telco business
Harry Berry, non-executive Chairman of Pelatro commented:
"Despite a disappointing 2022, I look forward with cautious optimism to 2023
as the efforts put in to date, particularly our diversification into non-telco
customers, begin to pay off. Our new business pipeline is at its highest ever
level and I am confident that this will produce results in the coming months
and years."
Presentation
A copy of the results presentation to be provided to investors and analysts
will be available on Pelatro's website in due course (www.pelatro.com
(http://www.pelatro.com) ).
For further information contact:
Pelatro Plc
Subash Menon, Managing Director c/o finnCap
Nic Hellyer, Chief Financial Officer
finnCap Limited (Nominated Adviser and Joint Broker) +44 (0)20 7220 0500
Carl Holmes/Milesh Hindocha (Corporate Finance)
Dowgate Capital Limited (Joint Broker) +44 (0)20 3903 7715
Stephen Norcross
* 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
# Pipeline value is defined as expected license revenue or 3 x ARR, depending
on the nature of the contract
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, CFO.
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
I joined the Group in December 2022 at the end of a mixed year in which we had
consolidated our position with existing customers and continued to win new
ones, in particular in the non-telco space. However, a number of these wins
will only produce revenue in 2023 or later and hence did not contribute to the
2022 results. Unusually, we also renegotiated contracts with a small number of
customers, in particular a Middle East telco (part of a wider international
group) with which we had originally agreed a license contract (worth around
$1m in total). The value of this contract was recognised in the interim
results for the 6 months to 30 June 2022; however, based on mutually
beneficial discussions, we agreed to convert this to a managed services
contract which, whilst overall better for the Group in economic terms,
resulted in a deferral of the revenue to following years.
Also unusually for the Group, we recognised two write offs of trade
receivables or contract assets, the former a long-standing debtor of around
$0.2m where a change of ownership of the customer meant that the new
management refused to recognise the validity of certain products and services
provided by Pelatro on its usual commercial terms. Despite protracted
negotiations the Directors are now of the view that this debt is unlikely to
be recovered and hence we have written it off. Contract assets of around $0.3m
arising from the sale of a license (and where there is no trade receivable as
the revenue was recognised on an IFRS 15 basis on transfer of the license)
have also been written off where it has not been possible to agree the
detailed technical terms of implementation with the customer concerned.
More positively our mViva product was selected by Orea Money and Banque
Nationale d'investissement in Africa to provide its Contextual Campaign
Management in a SaaS model to analyse user behaviour, generate predictions
using AI/ML based models and increase revenue, with a. contract value of
around US$ 1.5 million for an initial period of three years.
Also we were selected by a large global telco to provide our mViva Campaign
Management Solution to provide a Proof of Concept (POC) prior to the telco
choosing a service provider. We have done well at this POC stage; however, the
telco finally progressed with two telcos and so the opportunity is smaller
than initially thought. Notwithstanding this, the contract is likely to
produce an attractive revenue stream from 2023 onwards and leaves us well
positioned to expand within the customer group in due course.
Outlook
Since the year end we have continued to add new customers and additional
product contracts, with wins across the range of licenses, managed services
and change requests. We therefore have confidence in 2023 being a better year
for the Group overall.
Harry Berry
Chairman
CEO's statement
Our results for 2022 reflect a year of both progress and some setbacks as
already announced. We added 5 new customers, including an entry into the
financial services sector with a significant win. We therefore closed the year
with 26 customers, of which 9 are on contracts which mostly recurring revenue
in nature. However, the global macro-economic environment has not left our
customer base (both current and prospective) untouched. Consequently certain
customers cut back on their demand for our services, in one case
significantly, although it is pleasing to note that there has been no
indication that they would consider alternative suppliers. Similarly,
depending on their particular circumstances, certain customers may lean more
towards license contracts or recurring revenue contracts, reflecting changing
"capex v. opex" budget requirements. Over the past few years we have worked
hard to enhance the quality of our earnings such that the significant majority
of our revenue is now recurring in nature; however, we will always seek to
accommodate the wishes of customers, even to the extent of renegotiating the
terms of existing, signed contracts. This was particularly relevant this year
where one customer in particular agreed to transition from a license contract
to a managed service contract, which is more beneficial for both the customer
and Pelatro, as we will benefit from an addition to recurring revenue and the
termination of the contract (in this case after 3 years) and prospective
renewal on revised terms thereafter, rather than a perpetual license.
Existing customers
Existing customer relationships continue to be "sticky" - given that our first
customer was secured in 2016, a number of our typically three to five year
contracts have been coming up for renewal in the last 12-18 months, and it is
extremely pleasing to note that not one of our existing customers has sought
to replace us. We pro-actively chose to terminate two relatively small
contracts as the economic return did not match the effort involved. Most
customers have sought to strengthen their relationship with us by requesting
upgrades and change requests and/or additional software modules or services.
All of these activities produce valuable income for us and embed Pelatro at
the very heart of the customers' operations. The success of our mViva software
in enabling users to increase their revenue; this is further demonstrated by
the consistency of income from contracts where we take a share of the
resulting gain by the customer. Additionally we regularly see mViva enabling
significant reductions in subscriber churn.
New sectors
We have also been expanding the range of industries we cover: having started
serving solely the telecommunications sector, we have now secured contracts in
the financial services sector and are closely tracking opportunities in
banking, all data rich sectors where our powerful data analytics capabilities
with advanced features like AI/Machine Learning technologies and real time
engagement enable our customers to enhance, enrich and extend their
relationships with their consumers. By analysing customer behaviour data, such
as purchase history, spending patterns, and product feedback, fintech
companies for example can identify trends and preferences that can help them
tailor their services and offerings to meet their customers' needs. This can
lead to increased customer loyalty, retention, and engagement. Data analytics
is also crucial for the efficient and effective management of operations - by
analysing operational data, such as transaction processing times, customer
support response times, and system performance metrics, fintech firms can
identify areas for improvement and optimize their processes. This can help to
reduce costs, improve operational efficiency, and increase customer
satisfaction.
Ukraine
We of course continue to closely monitor the situation in Ukraine. Pelatro has
a small development and support team in Russia, representing around 10% of the
Group's cash cost base. This team can and does operate remotely with no
requirement for travel, and remains currently fully operational, with support
services and similar being reallocated to other jurisdictions where
appropriate for the relevant customer. The Group has no revenue from Russia or
any other related sanctioned jurisdiction.
Conclusion
We continue to focus on recurring revenue while building a strong pipeline in
the telecom space. Entering the banking sector is also a key area of focus.
Subash Menon
Managing Director, CEO and Co-Founder
Financial review
Overview
The financial results for the year reflect a consolidation of our existing
customer base and the loss of some business from long-standing customers as a
result of underlying economic pressures. Limited revenue was recognised from
new customers; those customers won in the year will generate revenue in 2023
onwards (as noted above certain prospective customers were slower than
expected to commit to contracts and/or renegotiated their terms from license
to recurring revenue, with the result that income originally expected in 2022
will now be recognised later). Currency headwinds due to the strength of the
dollar (USD) against the Indian Rupee (INR) also contributed to the reduction
in total revenue from $7.27m in 2021 to $5.38m in 2022.
On the cost side, in addition to the operating cost base, the Group also
incurred a number of exceptional costs, including a retention payment made to
a small number of key staff, in shares in lieu of cash but with the same
effect on the profit and loss account. Highly unusually for the Group, we also
provided an amount against a trade receivable which, due to a very specific
set of circumstances (largely deriving from the change of ownership of the
customer) is now considered unlikely to be received. Similarly we wrote off a
contract asset initially recognised on the sale of a low value license where,
following the sale, we could not agree on the detailed technical terms of
installation and operation and hence, by mutual agreement, took the decision
to withdraw.
Largely due to a reduction in activity levels in one particular customer
group, but also due to the overall reduction in revenue for the Group, we also
recognised a significant impairment charge against our customer relationship
assets (which arose on the acquisition of the Danateq assets in 2018). Given
the reduction in revenue in the year and the short-term outlook, we also
recognised a wider impairment of tangible and intangible assets across the
Group, including a specific charge against the computer hardware assets
relating to one specific managed services contract.
Income Statement
Revenue
Out of our total revenue of $5.38m, approximately $4.27m (79%) arose from
recurring revenue (2021: $4.79m), comprising some $3.11m from managed service
and gain share contracts and the balance from post-contract support. A further
$1.11m came from change requests (2021: $1.96m) and thus all of our revenue
was "repeating" in nature, compared to just over 90% in 2021. We had
recognised some $0.85m of license revenue in the first half of the year (as
reported in the interim results for the 6 months to 30 June 2022); however, as
noted above, during the year negotiations commenced to convert this license
contract to a managed services contract and, whilst the revised agreement was
not finally formally signed until February 2023, in order to give a true and
fair view of the results for the year this revenue has not been recognised in
2022.
With a significant proportion of the Group's revenue denominated in Indian
Rupees ("INR") rather than US Dollars ("USD"), and a small but significant
amount in other currencies, the Group is exposed to currency fluctuations on
revenue as well as costs. 2022 was a year of exceptional volatility in global
currency markets and, whilst a depreciation of INR against USD is normal (in
the last few years averaging around 2-3%), in 2022 the INR weakened by around
10%.
Cost of sales and overheads
Cost of sales decreased slightly to $2.09m (2021: $2.21m). These costs
comprise principally (i) the direct salary costs of providing software support
and maintenance, professional services and consultancy; (ii) third-party
software maintenance and licensing costs; and (iii) sales commissions. The
decrease reflected mainly a reduction in sales commission accruing over the
term of contracts for which revenue was recognised in the year and other
software-related purchases, offset by an increase in support staff salary
costs.
Pre-exceptional overheads (excluding depreciation and amortisation) increased
to $2.69m (2021: $2.27m), reflecting some increase in overall staff costs,
additional efforts in sales and marketing and the cost of travel compared to
the restricted travel in previous years.
Exceptional items and impairments
During the year the Group was unable to agree on the technical terms of
implementation of a license contract entered into in 2021 with a small
customer. The Group has now formally withdrawn from this contract and
accordingly the Group has provided $0.3m against the carrying value of the
contract on the statement of financial position (shown in contract assets).
This amount is reflected in exceptional items for the year.
Unusually for the Group, we also wrote off a receivables balance with a
long-standing debtor of around $0.2m where a change of ownership of the
customer meant that the new management refused to recognise the validity of
certain products and services provided by Pelatro on its usual commercial
terms. The group concerned continues to be a customer with contracts entered
into by new management which recoverability is not impaired.
During the year it became clear that the activity level of one particular
customer (which the Group had acquired as a result of the Danateq acquisition
in 2018) was reducing considerably. As a result the value of the "customer
relationships" asset recognised at the time of that acquisition was considered
impaired and an impairment charge of $3.83m taken against this (and the
corresponding goodwill was also written off). Given the effect of the wider
downturn and volatility in global markets and the demand for Pelatro's
products, we also recognised a further impairment charge of $5.48m against the
Group's other non-current assets, resulting in a total impairment charge of
$9.31m.
Profitability
Adjusted EBITDA (earnings before interest, tax, depreciation, amortisation and
exceptional items, as adjusted for the effect of certain non-recurring or
exceptional items) fell to $0.61m (2021: $2.81m).
After taking into account net finance costs, depreciation and amortisation
(including c. $0.7m of acquisition-related amortisation) and impairment, loss
before tax was $(13.86)m (2021: loss of $(0.67)m) before impairment and
exceptional items. Comprehensive Loss for the year was $(14.54)m (2021:
$(0.94)m).
Taxation
The net taxation charge was $0.51m (2021: $0.18m) comprising some $0.54m
relating to current tax offset by a credit of $27,000 relating to a deferred
tax asset recognised in one of the Group's subsidiaries. The higher level of
current tax arises due to increased profitability in the Group's Indian
subsidiary as well as the continuing impact of withholding tax charges which
are an unavoidable feature of our global business.
Loss per share
Adjusted loss per share was (27.3)¢ (2021: loss of (0.4)¢), and reported
loss per share was (31.5)¢ (2021: loss (2.1)¢). No dividend is proposed for
the year (2021: nil).
Statement of Financial Position
Intangible assets
Capitalised development costs and patents
Approximately $2.78m (including $29,000 spent on patent protection) was
capitalised in the year in respect of software development, offset by
amortisation of $2.61m. As noted above an impairment charge of $4.69m was
recognised, resulting in a carrying value of $1.94m at the balance sheet date.
Property, plant and equipment
Expenditure on property, plant and equipment was minimal at $49,000,
principally relating to IT and peripheral equipment (2021: $88,000). The Group
recognised $0.12m in impairment charges against the Group's IT and other
equipment.
Depreciation in the year amounted to $0.28m (excluding amounts relating to
Right-of-Use assets now recognised under IFRS 16, and gross of amounts
capitalised as intangible assets) (2021: $0.30m). The aggregate net book value
of property, plant and equipment fell accordingly from $0.98m to $0.55m.
Right of use assets
The Group recognises certain long-term leases under IFRS 16 as "right of use"
assets. The reduction in the overall value of the right of use assets from
$0.24m in 2021 to $0.13m in 2022, is net of depreciation of $0.17m and capital
additions of $0.26m. These additions do not reflect new leases but instead the
capitalised value of expected extensions to current leases. The right-of-use
assets were also impaired by $0.18m as part of the Group impairment charge.
Trade receivables and contract assets
At 31 December 2022 total trade receivables (i.e. including long-term
receivables) stood at $3.45m (2021: $4.96m). The reduction is largely due to
the fall in related revenue.
Short-term contract assets relating to revenue (i.e. those which are expected
to reverse in less than one year) decreased to $0.08m (2021: $0.38m), These
relate entirely to the "run off" of pre-2022 contracts which have been
recognised under IFRS 15 differently to their invoicing profile. Likewise
long-term contract assets deriving from revenue decreased to $0.11m (2021:
$0.23m).
Short-term fulfilment assets included in contract assets total $0.30m (2021:
$0.18m) (representing costs relating to certain contracts to be recognised in
profit and loss in the next 12 months); and $0.41m (2021: $0.38m) in respect
of long-term assets (representing costs directly relating to certain contracts
to be recognised in profit and loss after one year). This reflects the charge
to P&L in respect of sales commissions contracted in previous years but
recognised in the line with the life of the related contract (therefore
typically over 3 to 5 years)
Trade and other payables, provisions and contract liabilities
Trade and other payables
At the year end, short-term trade payables stood at $0.53m (2021: $0.15m), the
increase being due principally to amounts due in respect of sales commissions
incurred in 2022 and payable during 2023. Other short-term payables of $0.36m
(2021: $0.45m), comprise principally amounts due in respect of staff bonuses
and the balance for sundry creditors.
Provisions
Under the Indian Payment of Gratuity Act 1972, employees in the Group's Indian
subsidiary with more than 5 years' service are eligible for the payment of a
"gratuity" upon certain end of employment events - short-term provisions
include amounts estimated in respect of such gratuity payments, as well as
carried over leave payments and sundry expense provisions, in total $52,000
(2021: $37,000). The tax provision fell from $35,000 to $21,000 mainly due to
an increase in the amount of advance tax payable from our Indian subsidiary
which reduced the year end tax creditor.
Long-term provisions of $0.20m (2021: $0.20m) relate solely to amounts
estimated in respect of leave encashment and gratuity payments. Further
details of such provisions are given in Note 26.
Contract liabilities
Contract liabilities represent customer payments received in advance of
satisfying performance obligations, which are expected to be recognised as
revenue in 2023 and beyond. Short-term contract liabilities fell to $0.17m
(2021: $0.47m) along with long-term contract liabilities to $0.18m (2021:
$0.28m).
Statement of Cash Flows
Cash flow and financing
Cash generated by operations before tax payments amounted to $1.64m (2021:
$1.27m), the increase largely resulting from the reduction in trade
receivables. The Group had closing gross cash of just under $1.0m (2021:
$3.3m). Borrowings amounted to $0.59m (2021: $0.75m) excluding amounts
relating to lease liabilities. These borrowings are to be repaid on an Equal
Monthly Instalment ("EMI") basis over the next 2-5 years. In March 2023 the
Group concluded a $1.2m funding into one of its subsidiaries, to be used for
working capital and/or acquisition purposes.
Summary
Whilst the year was disappointing in revenue terms, a significant portion of
the revenue "lost" will now be recognised in future years. The Group has
continued to invest in its software assets and this, together with targeted
marketing and increasingly successful sales efforts, has ensured an increasing
stream of new business for 2023 and beyond.
Nic Hellyer
Chief Financial Officer
Group Statement of Comprehensive
Income
For the year ended 31 December 2022
2022 2021
Note $'000 $'000
Revenue 5 5,382 7,266
Cost of sales and provision of services (2,092) (2,206)
_______ _______
Gross profit 3,290 5,060
Operating expenses 6 (2,690) (2,290)
Depreciation and amortisation (3,068) (2,541)
_______ _______
Adjusted operating profit/(loss) (2,468) 229
Exceptional items 7 (1,152) -
Amortisation of acquisition-related intangibles 18 (686) (686)
Impairment of non-current assets 18 (9,305) -
Share-based payments 11 (45) (32)
_______ _______
Operating loss (13,656) (489)
Finance income 12 7 44
Finance expense 13 (212) (221)
_______ _______
Loss before taxation (13,861) (666)
Income tax expense 14 (509) (181)
_______ _______
LOSS FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT (14,370) (847)
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (134) (147)
Items that will not be reclassified subsequently to profit or loss:
Exchange differences on translation of equity balances (40) 50
_______ _______
Other comprehensive income, net of tax (174) (97)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (14,544) (944)
Earnings per share
Attributable to the owners of the Pelatro Group (basic and diluted) 15 (31.5)¢ (2.1)¢
Group Statement of Financial
Position
For the year ended 31 December 2022
2022 2021
Note $'000 $'000
Assets
Non-current assets
Intangible assets 18 1,952 11,453
Tangible assets 19 549 982
Right-of-use assets 20 132 240
Deferred tax assets 28 14
Contract assets 21 521 606
Trade receivables 21 - 163
_______ _______
3,182 13,458
Current assets
Contract assets 21 380 555
Trade receivables 21 3,450 4,793
Other assets 22 301 315
Cash and cash equivalents 987 3,331
_______ _______
5,118 8,994
TOTAL ASSETS 8,300 22,452
Liabilities
Non-current liabilities
Borrowings 23 429 608
Lease liabilities 24 130 80
Contract liabilities 25 181 278
Long-term provisions 26 199 202
_______ _______
939 1,168
Current liabilities
Short term borrowings 23 130 136
Lease liabilities 24 190 188
Trade and other payables 25 897 603
Contract liabilities 25 174 469
Provisions 26 73 72
_______ _______
1,464 1,468
TOTAL LIABILITIES 2,403 2,636
NET ASSETS 5,897 19,816
Issued share capital and reserves attributable to owners of the parent
Share capital 27 1,606 1,501
Share premium 27 18,502 18,046
Other reserves (779) (639)
Retained earnings (13,432) 908
_______ _______
TOTAL EQUITY 5,897 19,816
Group Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
$'000 $'000
Cash flows from operating activities
Profit/(loss) for the year (14,370) (847)
Adjustments for:
Income tax expense recognised in profit or loss 509 181
Finance income (7) (44)
Finance costs 212 221
Depreciation and impairment of tangible non-current assets 744 467
Amortisation and impairment of intangible non-current assets 12,314 2,814
Profit on disposal of fixed assets - (10)
Share-based payments and shares issued in lieu of cash 605 32
_______ _______
Operating cash flows before movements in working capital 7 2,814
(Increase)/decrease in trade and other receivables 1,690 (1,271)
Decrease in contract assets 273 206
Increase in trade and other payables 60 (532)
Increase/(decrease) in contract liabilities (392) 45
_______ _______
Cash generated from operating activities 1,638 1,262
Income tax paid (463) (258)
_______ _______
Net cash generated from operating activities 1,175 1,004
Cash flows from investing activities
Development of intangible assets (2,767) (2,540)
Purchase of intangible assets (29) (42)
Acquisition of property, plant and equipment (49) (88)
_______ _______
Net cash used in investing activities (2,845) (2,670)
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs - 4,290
Proceeds from borrowings - 70
Repayment of borrowings (122) (748)
Repayments of principal on lease liabilities (181) (173)
Interest received 7 44
Interest paid (197) (203)
Interest expense on lease liabilities (15) (25)
_______ _______
Net cash generated by/(used in) financing activities (508) 3,255
Net increase/(decrease) in cash and cash equivalents (2,178) 1,589
Foreign exchange differences (166) (63)
Cash and cash equivalents at beginning of period 3,331 1,805
_______ _______
Cash and cash equivalents at end of period 987 3,331
Group Statement of Changes in
Equity
For the year ended 31 December 2022
Share 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 2021 1,212 14,045 (240) (527) 184 1,734 16,408
(Loss) after taxation for the period - - - - - (847) (847)
Share-based payments - - - - 62 - 62
Transfer on forfeit of share options (21) 21 -
Other comprehensive income:
Exchange differences - - (97) - - - (97)
Transactions with owners:
Shares issued by Pelatro Plc for cash 289 4,334 - - - - 4,623
Issue costs - (333) - - - - (333)
_____ _____ _____ _____ _____ _____ _____
Balance at 31 December 2021 1,501 18,046 (337) (527) 225 908 19,816
(Loss) after taxation for the period - - - - - (14,370) (14,370)
Share-based payments - - - - 64 - 64
Transfer on forfeit of share options (30) 30 -
Other comprehensive income:
Exchange differences - - (174) - - - (174)
Transactions with owners:
Shares issued by Pelatro Plc in lieu of cash 105 464 - - - - 569
Issue costs - (8) - - - - (8)
_____ _____ _____ _____ _____ _____ _____
Balance at 31 December 2022 1,606 18,502 (511) (527) 259 (13,432) 5,897
Notes to the Group Financial
Statements
As at 31 December 2022
5 Revenue and segmental analysis
The Directors consider that the Group has a single business segment, being the
sale of information management software and related services principally to
providers of telecommunication services ("telcos") but also to other producers
and users of significant quantities of consumer data, at present being one
customer in the financial services space. The operations of the Group are
managed centrally with Group-wide functions covering sales and marketing,
development, professional services, customer support and finance and
administration.
An analysis of revenue by product or service and by geography is given below.
Revenue by type
The Group has five principal revenue models, being:
(1) contracts for the use of the Group's software on a regular (usually
monthly) basis, which may also provide for Group employees to provide related
services the customer ("managed services") and/or for the Group to take a
share of the revenue gain achieved through use of the software ("gain share");
(2) contracts based on the sale of perpetual licenses for use of the Group's
proprietary enterprise software;
(3) provision of specific customer-requested modifications to Group software
("change requests");
(4) provision of maintenance and support for the software and its users; and
(5) provision of consultancy services and/or training relating to the use of
the software
In addition, the Group may, if required by the customer, supply appropriate
hardware on which to host the software, either for the account of the customer
or (particularly in the case of managed services) retained in the ownership of
the Group.
An analysis of revenue by type is as follows:
At 31 December 2022 2021
$'000 $'000
Recurring software sales and services 3,112 3,456
Maintenance and support 1,160 1,334
_______ _______
Total recurring revenues 4,272 4,790
Change requests 1,110 1,958
_______ _______
Total repeating revenues 5,382 6,748
Software - new licenses - 498
Consulting - 20
_______ _______
5,382 7,266
Revenue by geography
The Group recognises revenue in seven geographical regions based on the
location of customers, as set out in the following table:
At 31 December 2022 2021
$'000 $'000
Caribbean 175 130
Central Asia - 443
Eastern Europe 241 426
MENA 77 104
South Asia 3,012 2,656
South East Asia 1,817 3,407
Sub-Saharan Africa 60 100
_______ _______
5,382 7,266
Management makes no allocation of costs, assets or liabilities between these
segments since all trading activities are operated as a single business unit.
Customer concentration
The Group has one customer representing over 10% of revenue (being 34% of
total revenue at $1.82m) (2021: two customers, approximately 38% of total
revenue at $2.73m).
Revenue recognition
License revenue
As explained in Note 3, the Group recognises revenue from the sale of licenses
and the implementation of the software so licensed separately, as the two
activities represent distinct performance obligations. However, as
implementation to date has always been carried out by Group personnel and is
usually viewed by the customer as an integral part of the license purchase,
the two activities are reported as one.
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 2022 this
figure amounts to license revenue of $nil and interest income (from pre 2022
contracts) of $7,000 (2021: $0.50m and $38,000).
PCS
Ancillary to a license sale, the Group typically provides five years of PCS
but does not charge for the first year; similarly in certain contracts the
Group may provide PCS at other than a standalone selling price ("SSP"). For
revenue recognition purposes PCS income is deemed to accrue over the full term
of the service provision (whether paid or otherwise) and, as far as is
estimable, at a deemed market rate (i.e. the SSP). Accordingly, the financial
statements reflect adjustments to income:
(i) to accelerate the recognition of revenue for initial years for which no
contractual payment is due (and consequent adjustments to revenue to
derecognise revenue in later years when contractual payments exceed revenue to
be recognised); and
(ii) to accelerate or defer the recognition of revenue in cases where the
contractual PCS charge is lower (or higher) than a market rate (the difference
being netted off or added to the revenue recognised in respect of the license
fee).
For the financial year 2022 revenue includes/(excludes) (i) a net amount of
$(64,000) representing income from PCS already recognised ahead of its
contractually due dates (2021: $(101,000)), and (ii) an amount of nil (2021:
$40,000) representing revenue netted off license income 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
2023 2024 2025-8
$'000 $'000 $'000
Revenue expected to be recognised on software and service contracts 366 229 133
Comparative figures for the year ended 31 December 2021 were as follows:
Year to 31 December
2022 2023 2024-7
$'000 $'000 $'000
Revenue expected to be recognised on software and service contracts 449 314 320
Costs of obtaining and fulfilling contracts of $0.35m have been capitalised in
2022 (net of amortisation against revenue recognised in respect of those
contracts) (2021: $0.12m).
6 Operating expenses
Profit for the year has been arrived at after charging:
2022 2021
$'000 $'000
Amortisation of intangible non-current assets 3,306 2,814
Impairment of intangible non-current assets 9,008 -
Depreciation of tangible non-current assets 448 413
Impairment of tangible non-current assets 122 -
(Profit)/loss on disposal of Right of Use assets - (10)
Impairment of Right of Use assets 175 -
Staff costs (see note 9) 2,888 2,865
Auditor's remuneration (see note 8) 59 47
Short-term lease expenses 21 35
Realised foreign exchange (gains)/losses 64 17
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 2022 2021
$'000 $'000
Operating profit/(loss) (13,656) (489)
Adjusted for:
Amortisation, depreciation and impairment 13,059 3,227
_______ _______
EBITDA (597) 2,738
Revenue recognised as interest under IFRS 15 7 38
Expensed share-based payments 45 32
Exceptional items:
Write off of trade receivables and contract assets 493 -
Expenses of aborted acquisition 90 -
Employee share issue 569 -
_______ _______
Adjusted EBITDA 607 2,808
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.
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 (see Note 18). 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.
Adjusted operating profit is calculated as reported operating profit as
adjusted for share-based payments, exceptional items, impairment and
acquisition-related amortisation.
The calculation of adjusted earnings per share is shown in Note 15.
9 Staff costs
Year to 31 December 2022 2021
$'000 $'000
Wages and salaries 5,611 5,256
Social security contributions 44 80
_______ _______
5,655 5,336
Less: amounts capitalised as intangible assets (2,767) (2,471)
_______ _______
2,888 2,865
The average number of persons employed by the Group during the period was:
Year to 31 December 2022 2021
Sales 3 3
Software development 109 98
Support 130 113
Marketing 2 3
Administration 20 18
_______ _______
264 235
10 Directors' remuneration and transactions
The Directors' emoluments in the year ended 31 December 2022 were:
Basic Bonus Benefits Share-based payments Pension
salary in kind Total Total
2022 2022 2022 2022 2022 2022 2021
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Executive Directors
N. Hellyer 183 10 7 34 5 239 122
S. Menon 186 - 16 - - 202 279
S. Yezhuvath 164 - 12 - - 176 272
Non-Executive Directors
R. Day (resigned 3 December 2022) 71 - - - 2 73 68
P. Verkade 37 - - - - 37 41
H. Berry (appointed 5 December 2022 5 - - - - 5 -
_______ ______ ______ ______ _______ _______ _______
646 10 35 34 7 732 782
11 Share-based payments
A charge of $45,000 (net of amounts capitalised of $34,000) (2021: $32,000)
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) 1,323,500 options
granted under the Plan (net of forfeited options) and (b) the 33,000 options
(net of forfeited options) issued at the time of the Company' 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, $10,000 net (2021:
$14,000) 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
2022 2021 2022 2021
Outstanding at the beginning of the year 1,356,500 1,505,500 72.7p 72.7p
Granted during the year 250,000 - 2.5p -
Forfeited during the year (170,000) (149,000) 73.0p 73.0p
_______ _______
Outstanding at the end of the year 1,436,500 1,356,500 60.8p 72.7p
Outstanding options are exercisable at prices between 2.5p and 73p and have a
weighted average remaining contractual life of 7.4 years.
12 Finance income
2022 2021
$'000 $'000
Interest receivable on interest-bearing deposits - 6
Notional interest accruing on contracts with a significant financing component 7 38
_______ _______
Total finance income 7 44
13 Finance expense
2022 2021
$'000 $'000
Interest and finance charges paid or payable on borrowings 197 202
Interest on lease liabilities under IFRS 16 15 25
Less: amounts capitalised as intangible assets - (6)
_______ _______
Total finance expense 212 221
14 Taxation
Tax on profit on ordinary activities
Year to 31 December 2022 2021
$'000 $'000
Current tax
UK corporation tax charge/(credit) on profit for the current year - -
Overseas income tax charge/(credit) 514 232
Adjustments in respect of prior periods 22 (42)
_______ _______
Total current income tax 536 190
Deferred tax
Reversal/(recognition) of deferred tax asset (27) (9)
_______ _______
Total deferred income tax (27) (9)
Total income tax expense recognised in the year 509 181
Reconciliation of the total tax charge
The effective tax rate in the income statement for the year is higher than the
standard rate of corporation tax in the UK of 19% (2021: higher). A
reconciliation of income tax expense applicable to the profit before taxation
at the statutory tax rate to income tax expense at the effective tax rate is
as follows:
Year to 31 December 2022 2021
$'000 $'000
(Loss) before taxation (13,861) (666)
Tax charge/(credit) at the applicable rate of 19% (2,634) (127)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Differences arising on capitalisation of expenses (327) (275)
Fixed asset differences - impairment 1,768 -
Expenses not deductible for tax purposes and other permanent items 467 244
Income not taxable and other permanent items 2 11
Tax exemptions, allowances and rebates (49) -
Foreign tax credits (53) -
Overseas taxation at different rates 69 12
Overseas withholding tax expenses 326 109
(De)recognition of deferred tax liability 12 (11)
(De)recognition of deferred tax asset (101) (2)
Loss carry back/tax repayable - (67)
Adjustments recognised in current year tax in respect of prior years 29 13
Current tax (prior period) exchange difference - -
Deferred tax asset not recognised 999 274
_______ _______
Income tax expense recognised for the current year 509 181
The Group had approximately $8.45m of tax losses carried forward as at 31
December 2022 against which no deferred tax asset has been recognised.
Deferred tax
Recognised deferred tax asset
2022 2021
$'000 $'000
At 1 January 2022 14 16
Recognised in profit and loss 14 (2)
_______ _______
At 31 December 2022 28 14
Comprising:
Tax losses 13 14
Timing differences 15 -
_______ _______
28 14
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 2022 above are expected to be utilised in the next two
years.
Recognised deferred tax liability
2022 2021
$'000 $'000
At 1 January 2022 13 24
Recognised in profit and loss (13) (11)
_______ _______
At 31 December 2022 - 13
Comprising:
Timing differences - 13
_______ _______
- 13
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 2022 2021
$'000 $'000
Profit/(loss) attributable to equity holders of the parent:
Profit/(loss) attributable to ordinary equity holders of the parent for basic (14,370) (847)
earnings
Weighted average number of ordinary shares in issue 45,644,075 41,153,537
Basic earnings/(loss) per share attributable to shareholders (31.5)¢ (2.1)¢
Adjusted earnings per share
Adjusted earnings per share is calculated as follows:
2022 2021
$'000 $'000
Profit/(loss) attributable to ordinary equity holders of the parent for basic (14,370) (847)
earnings
Adjusting items:
- exceptional items (see note 7} 1,152 -
- share-based payments 45 32
- amortisation of acquisition-related intangibles 686 686
- prior year adjustments to tax charge 22 (42)
_______ _______
Adjusted earnings attributable to owners of the Parent (12,465) (171)
Weighted number of ordinary shares in issue 45,644,075 41,153,537
Adjusted earnings/(loss) per share attributable to shareholders (27.3)¢ (0.4)¢
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:
2022 Development costs Third party software Patents Customer relationships Goodwill Total
$'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2022 11,839 120 57 6,862 470 19,348
Additions 2,786 - 29 - - 2,815
Foreign exchange - (5) (1) - - (6)
_______ _______ _______ _______ _______ _______
At 31 December 2022 14,625 115 85 6,862 470 22,157
Amortisation and impairment
At 1 January 2022 (5,478) (71) (2) (2,344) - (7,895)
Charge for the year - amortisation (2,591) (23) (6) (686) - (3,306)
Charge for the year - impairment (4,635) (18) (55) (3,832) (470) (9,010)
Foreign exchange 1 4 1 - - 6
_______ _______ _______ _______ _______ _______
At 31 December 2022 (12,703) (108) (62) (6,862) (470) (20,205)
Net carrying amount
At 31 December 2022 1,922 7 23 - - 1,952
At 31 December 2021 6,361 49 55 4,518 470 11,453
2021 Development costs Third party software Patents Customer relationships Goodwill Total
$'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2021 9,263 110 27 6,862 470 16,732
Additions 2,576 12 30 - - 2,618
Foreign exchange - (2) - - - (2)
_______ _______ _______ _______ _______ _______
At 31 December 2021 11,839 120 57 6,862 470 19,348
Amortisation and impairment
At 1 January 2021 (3,373) (52) - (1,658) - (5,083)
Charge for the year - amortisation (2,105) (21) (2) (686) - (2,814)
Charge for the year - impairment - - - - - -
Foreign exchange - 2 - - - 2
_______ _______ _______ _______ _______ _______
At 31 December 2021 (5,478) (71) (2) (2,344) - (7,895)
Net carrying amount
At 31 December 2021 6,361 49 55 4,518 470 11,453
Impairment of non-financial assets and goodwill
Goodwill arose on the acquisition of (i) the Danateq Assets and (ii) PSPL. It
is assessed as having an indefinite life but the Group tests whether goodwill
has suffered any impairment on an annual basis.
Danateq
The Danateq Acquisition in 2018 (the "Acquisition") comprised various
contracts and customer relationships, certain enterprise software and the
related workforce (together the "Danateq Assets"). Given the opportunity to
leverage this expertise across Pelatro's existing business and the ability to
exploit the Group's thus enlarged customer base, the fair value of the Danateq
Assets was deemed to be greater than the assessed book value of the assets as
recognised in the financial statements of Pelatro, thus leading to the
recognition of an amount of goodwill (the "Danateq Goodwill"). Given that the
software acquired has been subsumed into the Group's mViva product suite, the
contracts acquired have been transitioned onto and/or are being fulfilled (for
example in the case of the Telenor framework agreement) by the mViva product,
and the workforce are employed by a branch of Pelatro in Singapore and work
across the product suite, the former Danateq cash-generating unit ("CGU") no
longer has a separable identity. However, the customer relationships asset
which was recognised following the acquisition is directly related to the
Danateq Assets and accordingly, given the impairment provision recognised in
respect of that asset, it was considered appropriate to write off the Danateq
Goodwill in its entirety.
Further details are given in "Customer Relationships" below.
PSPL
The PSPL CGU comprises the Group's software development and administrative
centre in Bangalore which was acquired in December 2017, and whose principal
activity was at the time to develop the Group's software and provide
administrative support for the rest of the Group. The fair value of the
acquired assets was deemed to be greater than the assessed book value of the
assets as recognised in the financial statements of Pelatro, thus leading to
the recognition of an amount of goodwill (the "PSPL Goodwill"). Subsequent to
its acquisition, the activities of this subsidiary have grown to include the
provision of managed services, post-contract support and other services to
customers, using both intangible assets (including developed software, patents
and third-party software) along with various tangible assets (in particular
on-premise hardware purchased to fulfil a significant contract) and right-of
use assets recognised under IFRS 16 (principally office leases).
The carrying value of these assets, including the associated PSPL Goodwill,
was assessed, individually where applicable, as part of the impairment review
carried out at 31 December 2022, and given the impairment loss deemed
appropriate for the related assets, the PSPL Goodwill was written off in its
entirety. Further details are given in "Other intangible and tangible assets"
below.
Other intangible and tangible assets
Other intangible and tangible assets comprise the development costs, patents
and third-party software referenced above, together with customer
relationships recognised on the Danateq Acquisition, together with the Group's
tangible assets (principally computer hardware and office-related assets,
referenced in Note 19 and similar Right-of-Use assets recognised under IFRS
16.
Management reviews the carrying value of intangible and tangible assets for
impairment annually, or on the occurrence of an impairment indicator. Some
revenue streams in the group of assets related to the Danateq Acquisition of
2018 have shown a steep decline as one customer in particular has retrenched
its operations and withdrawn from taking the Group's managed service
operations in the short-term. More widely, given the downturn in Group revenue
in 2022, the management have considered the value attributable to the entirety
of the Group's non-current tangible and intangible asset base. Of this asset
base, other than the Danateq assets referenced above, individual
cash-generating units ("CGUs") can be identified as the hardware assets
pertaining to one particular large managed services contract (and certain
related right-of-use lease assets) and a small number of motor vehicles
(whether owned outright or as a right-of-use asset). In the latter case, due
to the fair value less costs of disposal no impairment has been recognised.
The remaining assets (comprising principally the capitalised value of software
developed for resale, associated patents and related third party software),
"administrative" assets such as office equipment and leasehold improvement,
along with similar right-of-use assets have been assessed together by
considering the profitability and cash flows remaining to the Group once the
specific assets referred to above have been taken into account.
The recoverable amounts of assets have been determined from value in use
calculations based on cash flow projections covering five years plus a
terminal value. Based on these assessments, an impairment loss has been
recognised during the year totalling $3.88m against the Danateq goodwill and
related customer relationship assets. Similarly an impairment loss has been
recognised during the year totalling $4.63m against capitalised software and a
further $55,000 and $18,000 respectively against related patents and third
party software. A specific impairment charge of $52,000 has been made against
the computer hardware assets (and related right of use assets) associated with
the Group's significant managed services contract in India (the "MS
Contract"); for the rest of the Group, a total impairment loss of $0.67m has
been recognised against other intangible and tangible assets, allocated as to
$0.43m (goodwill), $44,000 leasehold improvements, $13,000 office equipment
and $0.17m against other right-of-use assets. These provisions have resulted
in the total write down of all goodwill on the Group balance sheet.
With the exclusion of CGUs deemed particularly sensitive to impairment from a
reasonably possible change in key assumptions, which have been reviewed in
further detail below, management forecasts for 2023 and 2024 anticipate
revenue growth of between 8% and 13% when compared to 2022 levels. In
accordance with IAS 36 forecasts for the subsequent periods (years 3-5) assume
nil real growth in revenues, nil real growth in certain costs and a reduction
in certain growth-related "investment" costs in line with the forecast of nil
real growth. Management has applied pre-tax discount rates to the cash flow
projections between 29% and 33%.
Certain CGUs which are referred below are considered sensitive to changes of
assumptions used for the calculation of the value in use.
The recoverable amount of the MS Contract CGU, with a net book value of
$0.49m, has been determined using cash flow forecasts that include annual
revenue growth rates (in real terms) of nil% over the 2 year forecast period,
nil% real long-term growth rate, growth in associated costs of 5% over the 2
year forecast period and nil thereafter (in real terms) and a pre-tax discount
rate of 29%. The recoverable amount would equal the carrying amount of the CGU
if the discount rate applied was lower by 5% or revenue growth was higher by
3%.
The recoverable amount of the Customer Relationships asset, with a net book
value of $3.88m, has been determined using cash flow forecasts that include
annual revenue growth rates of nil% over the 2 year forecast period, nil% real
long-term growth rate, growth in associated costs of 5% over the 2 year
forecast period and nil thereafter (in real terms) and a pre-tax discount rate
of 33%. The recoverable amount is nil at any reasonable discount rate, and
would equal the carrying amount of the CGU if revenue growth was higher by
80%.
Sensitivity to changes in assumptions
The key assumptions for the value in use calculations are those regarding
growth rates, discount rates and expected changes to selling prices and direct
costs during the period. Changes in selling prices and direct costs, if any,
are based on expectations of future changes in the market. Management
estimates discount rates using pre-tax rates that reflect current market
assessments of the time value of money.
19 Tangible assets
2022 Leasehold improvements Computer equipment Office equipment Vehicles Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2022 129 1,151 58 299 1,637
Additions - 45 4 - 49
Foreign exchange differences (12) (113) (6) (30) (161)
_______ _______ _______ _______ _______
At 31 December 2022 117 1,083 56 269 1,525
Depreciation
At 1 January 2022 (41) (454) (31) (129) (655)
Charge for the year (18) (215) (11) (35) (279)
Impairment (44) (63) (13) - (120)
Foreign exchange differences 5 55 4 14 78
_______ _______ _______ _______ _______
At 31 December 2022 (98) (677) (51) (150) (976)
Net carrying amount
At 31 December 2022 19 406 5 119 549
At 31 December 2021 88 697 27 170 982
2021 Leasehold improvements Computer equipment Office equipment Vehicles Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2021 131 1,084 59 305 1,579
Additions - 88 - - 88
Foreign exchange differences (2) (21) (1) (6) (30)
_______ _______ _______ _______ _______
At 31 December 2021 129 1,151 58 299 1,637
Depreciation
At 1 January 2021 (24) (222) (20) (95) (361)
Charge for the year (18) (238) (11) (36) (303)
Foreign exchange differences 1 6 - 2 9
_______ _______ _______ _______ _______
At 31 December 2021 (41) (454) (31) (129) (655)
Net carrying amount
At 31 December 2021 88 697 27 170 982
As explained in Note 18, the carrying value of the Group's non-financial
assets was reviewed at 31 December 2022 and as a result an impairment charge
was recognised against all categories of tangible assets.
20 Right-of-use assets
Right-of-use assets comprise leases over office buildings and vehicles as
follows:
2022 Office Vehicles Total
buildings
$'000 $'000 $'000
Cost
At 1 January 2022 750 - 750
Additions in respect of new or extended leases 232 24 256
Effects of foreign exchange movements (70) - (70)
_______ _______ _______
At 31 December 2022 912 24 936
Depreciation
At 1 January 2022 (510) - (510)
Charge for the period (167) (2) (169)
Impairment recognised (175) - (175)
Effects of foreign exchange movements 50 - 50
_______ _______ _______
At 31 December 2022 (802) (2) (804)
Net carrying amount
At 31 December 2022 110 22 132
At 31 December 2021 240 - 240
2021 Office Vehicles Total
buildings
$'000 $'000 $'000
Cost
At 1 January 2021 661 32 693
Additions in respect of new or extended leases 112 - 112
Disposals in respect of leases terminated (10) (32) (42)
Effects of foreign exchange movements (13) - (13)
_______ _______ _______
At 31 December 2021 750 - 750
Depreciation
At 1 January 2021 (355) (30) (385)
Charge for the period (164) (2) (166)
Eliminated on leases terminated - 32 32
Effects of foreign exchange movements 9 - 9
_______ _______ _______
At 31 December 2021 (510) - (510)
Net carrying amount
At 31 December 2021 240 - 240
At the end of 2021 the Group had had plans to relocate certain office
functions then spread over a number of offices in the Bangalore area to one
larger office. However, the Group was not able to find a suitable space and
accordingly no such relocation was made. The relevant existing leases (all of
which are on short term notice periods) were deemed to have been extended
accordingly.
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")
In addition (iv) contract assets are recognised in respect of certain
trade-related liabilities (notably sales commissions payable) where the full
amount of such commission is payable within one year but the revenue to which
it relates is recognised over several years (i.e. "contract fulfilment
assets").
Contract assets
Due after one year 2022 2021
$'000 $'000
At 1 January 606 751
Contract assets recognised in the period 238 195
Contract assets impaired (56) -
Transfer to current contract assets (267) (340)
_______ _______
At 31 December 521 606
Due within one year 2022 2021
$'000 $'000
At 1 January 555 609
Contract assets recognised in the period, net of releases to receivables or (202) (394)
cash, or amortisation to profit or loss
Contract assets impaired (234) -
Transfer from non-current contract assets 267 340
_______ _______
At 31 December 386 555
The Group was unable to agree on appropriate terms of implementation of a
license contract with a small customer entered into in 2021 (and accordingly
part-recognised as revenue under IFRS 15 in that year). The Group chose to
withdraw from this contract after the year end; accordingly management has
impaired the entire carrying value of this contract as it is unlikely that
revenue will arise from it. No amounts have been invoiced to the customer (and
hence there is no write-off of trade receivables) and no penalties or similar
costs would arise from such a withdrawal.
Contract assets are comprised as follows:
Due after one year 2022 2021
$'000 $'000
Contract assets relating to revenue 113 227
Contract fulfilment assets 408 379
_______ _______
521 606
Due within one year 2022 2021
$'000 $'000
Contract assets relating to revenue 80 375
Contract fulfilment assets 300 180
_______ _______
380 555
The largest individual counterparty to a receivable included in trade and
other receivables at 31 December 2022 was $0.69m (of which some $0.24m related
to unbilled revenue) (2021: $1.14m). This customer was also the largest
individual counterparty based on invoiced receivables ($0.45m, 2021: $0.52m).
The small increase in loss allowance is due to a significant increase in a
number of country risks (driven partly by geo-political events) offset by the
reduction in the overall quantum of trade receivables. The Group's customers
are spread across a broad range of geographies.
22 Other assets
At 31 December 2022 2021
$'000 $'000
Prepayments 131 146
Deposits 70 77
Other assets (including withholding tax, GST and VAT refunds) 101 92
_______ _______
Total other assets 302 315
23 Loans and borrowings
Loans and borrowings comprise:
At 31 December 2022 2021
$'000 $'000
Non-current liabilities
Secured term loans 10 23
Unsecured borrowings 419 585
_______ _______
429 608
Current liabilities
Current portion of term loans 11 11
Unsecured borrowings 119 125
_______ _______
130 136
Total loans and borrowings 559 744
At the reporting date the Group had two term loans, in its operating
subsidiary in India and denominated in INR, with interest rates between 10%
and 15.5% (in INR), repayable between 5 and 6 years from their inception,
between June 2023 and September 2024.
24 Lease liabilities
Lease liabilities comprise liabilities arising from the committed and expected
payments on leases over office buildings and vehicles.
2022
Amounts due in more than one year Office Vehicles Total
buildings
$'000 $'000 $'000
At 1 January 2022 80 - 80
Liabilities taken on in the period 102 12 114
Liabilities (disposed of) in the period - - -
Transfer from long-term to short-term (53) (2) (55)
Effects of foreign exchange movements (9) - (9)
_______ _______ _______
At 31 December 2022 120 10 130
Amounts due in less than one year Office Vehicles Total
buildings
$'000 $'000 $'000
At 1 January 2022 188 - 188
Liabilities taken on in the period 130 12 142
Liabilities (disposed of) in the period - - -
Repayments of principal (180) (2) (182)
Transfer to short-term from long-term 53 2 55
Effects of foreign exchange movements (13) - (13)
_______ _______ _______
At 31 December 2022 178 12 190
2021
Amounts due in more than one year Office Vehicles Total
buildings
$'000 $'000 $'000
At 1 January 2021 172 - 172
Liabilities taken on in the period 24 - 24
Liabilities (disposed of) in the period (10) - (10)
Transfer from long-term to short-term (103) - (103)
Effects of foreign exchange movements (3) - (3)
_______ _______ _______
At 31 December 2021 80 - 80
Amounts due in less than one year Office Vehicles Total
buildings
$'000 $'000 $'000
At 1 January 2021 174 - 174
Liabilities taken on in the period 89 - 89
Liabilities (disposed of) in the period (1) - (1)
Repayments of principal (171) - (171)
Transfer to short-term from long-term 103 - 103
Effects of foreign exchange movements (6) - (6)
_______ _______ _______
At 31 December 2021 188 - 188
As noted above, at the end of 2021 the Group had had plans to relocate certain
office functions spread over a number of offices in the Bangalore area to one
larger office. However, the Group was not able to find a suitable space and
accordingly no such relocation was made. The relevant existing leases (all of
which are on short term notice periods) were deemed to have been extended
accordingly and additional lease liabilities recognised accordingly.
25 Trade and other payables and contract liabilities
At 31 December 2022 2021
$'000 $'000
Due within one year
Trade payables 534 152
Other payables 363 451
_______ _______
Total trade and other payables 897 603
Trade payables include amounts due in respect of sales commissions due to
sales agents which is payable in less than one year. Other payables comprise
principally amounts due in respect of staff bonuses declared for December and
paid in January.
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 2022 2021
$'000 $'000
Due after one year
Contract liabilities at 1 January 278 207
Contract liabilities recognised in the period - 152
Transfers to short-term liabilities (97) (81)
_______ _______
Contract liabilities at 31 December 181 278
At 31 December 2022 2021
$'000 $'000
Due within one year
Contract liabilities at 1 January 469 495
Contract liabilities recognised/(released to revenue) in the period (392) (107)
Transfers from long-term liabilities 97 81
_______ _______
Contract liabilities at 31 December 174 469
26 Provisions
At 31 December 2022 2021
$'000 $'000
Due after one year
Employee gratuities 144 141
Leave encashment 55 61
_______ _______
199 202
At 31 December 2022 2021
$'000 $'000
Due within one year
Employee gratuities 8 7
Leave encashment 44 30
Other provisions (including tax) 21 35
_______ _______
73 72
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 2021 1,212 37,032,431
Issued for cash during the year 289 8,375,000
_______ _______
At 31 December 2021 1,501 45,407,431
Issued in lieu of cash during the year 105 3,455,000
_______ _______
At 31 December 2022 1,606 48,862,431
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 2021 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 2021 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 2022 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 a notice of the annual general meeting, are
expected to be made available to shareholders in May 2023. 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.
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.
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
2022.
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 25 May 2023.
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