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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Pelatro Plc | LSE:PTRO | London | Ordinary Share | GB00BYXH8F66 | ORD 2.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.02 | 0.80 | 1.20 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMPTRO
RNS Number : 1315J
Pelatro PLC
08 April 2020
8 April 2020
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 2019.
Financial highlights
-- Revenue increased 9% to $6.67 million (2018: $6.12m) -- Recurring revenue increased 63% to $2.96m (2018: $1.82m), 44% of revenue -- Adjusted EBITDA(*) $2.89m (2018: $3.75m) -- Adjusted earnings per share 4.2c (2018: 10.2c)
-- Gross cash as at 31 December 2019 $1.10m (at 31 December 2018: $2.22m); $1.39m received from debtors since year end
Operational highlights
-- Won our largest contract to date, from one of the largest global telcos -- Added 5 customers organically, the highest number of customers in any year to date -- Won the first customer for our Data Monetisation Platform (Tele2, Kazakhstan)
-- More than doubled the number of subscribers being processed by our solutions, from 350m to 800m
-- Launched version 6 of the mViva Contextual Marketing Solution
-- Established sales presence in Latin America and Central America and enhanced sales presence in Asia.
-- Set up a dedicated team to focus on Customer Engagement
Post year end information
-- Current gross cash $0.94m ** -- Trade receivables at 29 February $4.4m
Outlook
-- Release of mViva v.6 further differentiates us from the competition -- Clear momentum towards building a recurring revenue model -- Current revenue visibility of $4.1m -- Pipeline of c. $18m
Richard Day, non-executive Chairman of Pelatro commented:
"Significant progress has been made by Pelatro this year in developing our product suite, expanding our customer base and broadening our business offering. Our software is now handling and processing the data for over 800 million subscribers from our 19 telco customers in 18 countries around the world, reflecting a step change in our capacity which is a clear validation by the industry of the quality of our mViva system.
Although it is still early in our year, revenue visibility already stands at $4.1m, with an encouraging pipeline of around $18m; despite some uncertainties introduced by the current coronavirus pandemic (which is further elaborated on in our announcement of 24 March 2020 and also below), we are maintaining our momentum in moving towards a revenue sharing business model alongside our licence offering, which gives us every confidence in the coming year and our future."
Coronavirus/COVID-19 - further update
Cash resources
As at 6 April the Group had gross cash of approximately $0.94m (as adjusted for committed near-term capital expenditure), and a drawn overdraft facility of $0.16m, out of a total facility of $0.43m. Of the cash, around two-thirds is held in USD and the balance mainly in INR with some GBP. The current portion of term loans due in the next 12 months is approximately $0.08m. There are no restrictions in transfer of cash intra-Group, and no liabilities arise from any such transfer.
Management of short-term expenditure
The Group has no material short-term capital expenditure requirements other than the remaining c. $0.65m on hardware for the managed services contract announced in December 2019, which has been match-funded with a 6 year term loan.
In terms of costs, for reference cash expenditure in 2019 was approximately $6m. Whilst in the ordinary course of events we would expect this to increase in 2020, because of both general investment for growth as well as specific projects such as the large managed services contract announced in December, on a pro forma basis this is well covered by the brought forward trade debtor balance of $5.5m as well as the recurring revenue contracted to date of c. $4.1m. Given this, the Group is not dependent on generation of new revenue for its short-term cash flows and risks are principally due to either non-payments by customers or a delay in the timing. Given the quality of the debtor base (all of whom are major telco groups for whom Pelatro's software is an integral and vital part of their customer proposition), the Board views the possibility of any material default as remote. In addition, we note the following:
(i) just over 50% of the cash costs in 2019 were denominated in INR, another 20% in RUB, and a further 15% in GBP. INR has weakened by approximately 6% since the beginning of 2020 (and approximately 3% since 11 March (when the WHO declared COVID-19 as a pandemic). Similarly, RUB has weakened by 22% and 15%, and GBP by 7% and 3%. If these currencies were to remain at these levels until the end of 2020, the Group's cash expenditure on a pro forma basis would reduce by around 7%. All of the Group's income is currently in USD (with approximately $1m of income expected this year in INR);
(ii) approximately $0.6m of costs in 2019 were travel-related; clearly such costs in 2020 will be minimal so long as COVID-19 restrictions remain in place; and
(iii) to the extent that the Board foresees any delay to incoming payments, it is able to defer or eliminate certain expenditure, notably on recruitment and related salary and other costs.
Country restrictions
India and Philippines have been in lock down for the past few weeks and are expected to be so for the next few weeks. This period has enabled us to experience and understand the real life scenario with respect to total Working from Home ("WFH"). We are pleased to note that efficiency is only marginally down by a maximum of around 10% (as measured by the time spent on various tasks). As the world gets more used to WFH, we expect this efficiency to improve, and while it may never reach the pre-COVID level, we expect any drop would be immaterial. The only real casualty seems to be the camaraderie of people working together in one location. The Group has taken adequate steps to mitigate this issue by having regular video conference calls among small groups, and as we have always had an adequate number of subscriptions to video links, this activity is progressing well. Russia is not under lock down, but our staff there are working from home in any case. In summary therefore all customer-related activities like implementation, support etc. are progressing as per plan.
Revenue and cost scenarios
In the short to medium term, for the reasons stated above the Group is largely unaffected in cash terms by any downturn in revenue generation as new contracts taken on now would be unlikely to produce cash for at least six months and even longer in the case of managed service contracts. As a base case, the Board's financial projections for the Group are based on a broadly "business as usual" scenario, other than a 75% reduction in travel costs for Q2 and Q3. However, In the light of potential COVID-19 challenges and taking into account the factors noted above in "Management of short-term cash expenditure", the Board has sensitised its forecasts and projections for the next 12 months to take account of possible changes in cash flow and performance in order to determine when and to what extent additional measures may be necessary. The Board's downside projections are based on a scenario whereby income from receivables is reduced by up to 10% in 2020 and 20% in 2021 and only 50% of expected new contracts are won (albeit this latter factor only affects cash flows towards the end of the projected period) - under this scenario, the Group would still have sufficient funding to pay planned overheads (including investment for growth) for the period of the projections. The Board's severe downside projections are based on a scenario where income from receivables is reduced by up to 20% in 2020 and 20% in 2021 (and likewise 50% of new contracts) - cost reductions can be made to offset this reduction in cash receipts, principally with a c. 15% reduction in staff costs which would result in the Group having sufficient cash for the period of the projections.
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 finnCap Nic Hellyer, Finance Director finnCap Limited (Nominated Adviser and broker) +44 (0)20 7220 0500 Carl Holmes/Kate Bannatyne/Matthew Radley Tim Redfern / Camille Gochez - ECM
* earnings before interest, tax, depreciation, amortisation, exceptional items and share-based payments
** adjusted for $0.65m of term financing matched to expenditure on managed services hardware which will be paid in April
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 applications, and is well positioned in the Multichannel Marketing Hub space (MMH) - this is technology that orchestrates a customer's communications and offers to customer segments across multiple channels to include websites, social media, apps, SMS, USSD and others.
For more information about Pelatro, visit www.pelatro.com
MANAGING DIRECTOR'S STATEMENT
"Deepening connections" is a very powerful theme in our industry. We serve telcos who, in turn, serve tens of millions of people. The telecom market has reached saturation point and has also become highly commoditised. In such a scenario, growth depends entirely on engaging with the subscribers in a very deep manner to understand them thoroughly with the objective of providing a superior customer experience leading to higher revenue and lower churn for the telcos. Your company empowers the marketers to achieve this.
Deepening the connections
While empowering the telcos to deepen their relationships, Pelatro too has been forging deeper relationships with its customers, the telcos. This has meant a strategic shift in our revenue model leading to a more stable, sustainable and predictable future.
In its infancy, Pelatro depended mainly on a license model for various reasons, not least an initial lack of credibility to win multi-year contracts and a pressing need to win customers as quickly as possible. Telcos run extremely complex networks with a variety of dependencies and as a result are highly risk averse. Given this, Pelatro could not win large contracts from leading telcos without first building credibility. That in turn, called for customers who could be showcased, thus leading to a "Catch 22" situation. Pelatro opted to pursue one-time license contracts to break out of this situation and, as has been well demonstrated over the past few years, this strategy bore fruit resulting in several large customers. The advanced nature of our products, coupled with superior customer engagement, stood us in good stead in those initial stages .
Winning these customers and serving them well helped to establish Pelatro as a credible player in the industry. Furthermore, our products kept evolving in keeping with our vision which was well aligned with that of the telcos. Progressively, Pelatro invested in other capabilities to slowly build a market-leading suite of services to make its offering complete. By the start of 2019, Pelatro was ready to embark on a new strategy - to deepen its connections.
Strategic shift
Investing in an excellent product offering alone does not help telcos to meet their objectives. Proper, consistent and continued utilisation of the product is equally critical. This has been a major challenge for telcos for a number of reasons, such as inability to attract and retain talent, and to keep up with the evolution of the industry and its practices etc. Consequently, telcos have always relied on specialists to help leverage acquired technology and products. We therefore decided to pursue a strategy of transitioning to such a specialist offering, and offering our products primarily on revenue models other than licensing. This shift in focus towards recurring and repeat revenue was the highlight of last year.
Contracts of a recurring and repeat revenue nature lead to deeper engagement between Pelatro and our customers, as we are able to deliver higher value over several years. Owing to the very nature of the model, cash flow improves along with visibility. However, this shift impacts revenue in the near term as large license contracts that bring in spikes in revenue will be absent resulting in a shortfall in revenue in the initial years. Pelatro's management opted for the long term future upside against the short term and the Board is confident this strategy will prove to be correct and the benefits are starting to show.
Managed services being provided by Pelatro can be categorized as:
-- Business Operations - configuring campaigns, executing campaigns, provisioning and reporting
-- Business Consultancy - defining strategy and designing campaigns -- IT Operations - monitoring the application on a 24 x 7 basis
This revenue model, which results in a gross margin of about 50%, is either a fixed monthly fee or a combination of a fixed monthly fee and revenue gain share. Contracts typically have an initial term of 3 to 5 years and are renewable at the end of the term. Given the nature of such contracts, the Group benefits from a cumulative effect with every passing year. Thus, the exit "run rate" of recurring and repeat revenue in each year will be higher than the entry level in that particular year - in 2019, the Group won recurring and repeat revenue contracts worth about $15-17m over their term, resulting in the exit level in 2019 being more than twice the entry level.
While the Group at the start of 2019 had $1.5m of recurring and repeat revenue to be recognised in that year; we started 2020 with $4m. With the increasing success of our new strategy, we expect this figure to climb steadily each year directly resulting in visibility for each year improving. Consequently, the proportion of recurring and repeat revenue in the total revenue of a particular year will keep rising as time progresses.
Product differentiation
The mViva Platform comprises a number of products and modules relating to Contextual Marketing, Loyalty Management and Data Monetisation. The platform has always been advanced, in comparison to similar products from other vendors and we endeavour constantly to maintain the differentiation of mViva and launched version 6 recently. This updated version further differentiates mViva from competing products. Some of the key benefits that the new features in mViva V6 will deliver to our customers are detailed below:
State Flows : Managing and influencing the journey of every subscriber is increasingly critical. mViva V6 delivers a brand new campaign orchestration framework called State Flows. State Flows can be used to manage a complex journey for any customer over a long period of time resulting in higher revenue, improved customer experience and lower churn.
DPeU : Telcos are experiencing an explosion in transaction volume due to increasing consumption of data and a significant increase in online transactions. In large telcos, streaming data for such transactions by subscribers results in billions of transactions each day. mViva V6 employs various new concepts and technologies including DPeU (Distributed Partitioned Execution Unit), which facilitates its application to collect and process such transactions.
Glue : Real time interventions by the telcos, with respect to their subscribers, is a key element in Contextual Marketing. For example, if a special offer is to be sent to a subscriber when near a particular retail outlet or when the subscriber has just performed a specific action on the phone, the offer has to be sent at that moment. A delay in such intervention will not help. Hence the need for real time. This requirement means that the solution has to have "high availability". Glue is a proprietary and patent pending technology from Pelatro to achieve this.
I thank every one of our stakeholders for the support extended during the last year while the Group was deepening the connections. We will continue to build Pelatro into a global leader in our chosen space.
Subash Menon
Managing Director, CEO and Co-Founder
FINANCIAL REVIEW
Introduction
For the year, total revenue increased by 9 per cent. to $6.67m, including some $4.51m repeat revenue (which comprises gain share, change requests and managed services, as well as PCS) accounting for around 68% of the total. This result highlights the pivot of the Group's revenues towards a repeating revenue base, and increasingly a longer-term managed services model which, with a maintenance and support base which builds with every new license, means that we benefit from truly contractually recurring revenue as well ($2.96m of this was contractually recurring , compared to $1.82m in 2018). This shift has been enhanced by the contract win announced in December 2019 to deliver our Contextual Marketing Platform and Unified Communication Manager software to a major global telco on a managed service basis for an initial period of 5 years; as noted in that announcement, the timing of conversion of certain other pipeline opportunities was impacted by the increasing focus on building such recurring and repeating revenue contracts in line with the Group's stated strategy, and hence the result for the year was below original expectations.
Key Performance Indicators
Hot Features
Premium
2019 2018 Growth
Revenue $6.67m $6.12m 9%
Repeat revenue $4.51m $3.10m 45%
Repeat revenue as percentage of total 68% 51%
Adjusted EBITDA (see Note 7) $2.89m $3.75m -23%
Adjusted EBITDA margin 43% 61%
Profit before tax (before exceptional
items) $0.77m $2.82m -73%
Cash generated from operating activities
(before exceptional items) $1.37m $0.88m 56%
Contracted customers (at year end) 19 14 36%
Income Statement
Revenue
Out of the total revenue of $6.67m, approximately $1.9m arose from sales of licenses and the associated implementation (2018: $2.5m) and some $4.5m arose from repeat revenue, notably from gain share contracts and in particular change requests (2018: $3.1m) which are driven from the underlying license base - as we add more licenses so the diversity and activity of the customer base increases, resulting in more change requests and continually improving the product suite. The geographic spread of income has also increased with new customer acquisitions; however, for the reported year customer concentration increased somewhat, driven largely by a strong growth in repeat revenues from one particular customer. We expect this trend to reverse as diverse contracts won in 2019 begin to generate revenue in 2020.
Whilst all the Group's revenue is currently in US Dollars (and hence there is currently no impact on revenue arising from foreign exchange movements) with recent contract wins a proportion of future revenue will be in Indian Rupees ("INR") which will form a natural hedge against the Group's cost base, of which just over 50% (in cash terms) is in INR.
Cost of sales
Cost of sales of $1.0m (2018: $0.56m) comprises principally (i) the direct salary costs of providing software support and maintenance, professional services and consultancy; as well as (ii) sales commissions payable; (iii) expensed customer integration and software maintenance costs. The increase reflects the diversification of revenue streams into managed services and PCS, as an increasing proportion of costs is allocated to cost of sales as the direct costs of service and support for the relevant contracts. However, as the constituents of cost of sales vary markedly depending on the product or service sold, this is not a KPI for the Group.
Overheads and exceptional gains
Pre-exceptional overheads (excluding depreciation and amortisation) increased to $2.8m (2018: $1.8m; the 2019 figure reflects approximately $0.2m of lease costs allocated to depreciation and interest as a result of the adoption of IFRS 16). This increase results largely from increases in salary costs concomitant with the growth of the number of employees in the Group, as well as travel and marketing costs which also reflect the Group's growth. We continue to target investment in our staff and the infrastructure of the business to support a high level of customer service and to provide a strong, scalable platform for continued organic growth.
Exceptional gains
As previously notified to shareholders, certain contracts within the pipeline of potential revenue which was acquired from Danateq took longer to complete than originally expected; as a result the related revenue did not fall within the first year earn out period (the 12 months to end July 2019), and hence the contingent cash payment of $2m pursuant to the terms of the acquisition was not payable in respect of that period. As the year progressed, the forecast of revenue deemed likely to arise from the pipeline on which the remaining earn-out payment was contingent became more certain and hence the Board was better able to assess the probable outturn revenue for the year. Given the structure of the earn-out terms (i.e. that a payout is fixed based on revenue between certain thresholds rather than being directly proportional) the Board are now able to predict with confidence that the payout (which is due after the close of the earn-out period on 31 July 2020) will be $1m. Given this re-evaluation, the Group, recorded (i) a credit to goodwill of $275,000 in the first half of the year as this element of the liability was adjusted; and (ii) an exceptional gain through profit and loss of $236,000 relating to the balance adjusted at the end of the financial year.
Profitability
Adjusted EBITDA (earnings before interest, tax, depreciation, amortisation and exceptional items) decreased by 23% in the year to $2.89m (2018: $3.78m). Profit before tax before exceptional items was $0.77m (2018: $2.82m). Adjusted earnings per share ("EPS") were 4.2c (2018: 10.2c), and reported EPS were 2.5c (2018: 8.0c). Reported profit before tax was $1.01m (2018: $2.51m).
Taxation
The taxation charge for the year comprises a charge of $0.25m relating to current tax (2018: $0.34m) and a credit of $0.05m relating to the recognition of deferred tax assets (2018: $8,000). Deferred tax assets have arisen in certain Group subsidiaries in which taxable losses arose in the year, which can be carried forward and offset against future profits.
Statement of Financial Position
Goodwill and other intangible assets
Goodwill
The goodwill in the Group balance sheet arises from the acquisitions of PSPL in December 2017 and the Danateq Acquisition in August 2018. As noted above, an adjustment of an element of the contingent liability relating to the potential payment to the vendors of the Danateq business led to a concomitant adjustment to goodwill during the year of $275,000.
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. The software acquired has now been fully integrated into the Group's existing mViva suite and is no longer considered separately. Net of accumulated amortisation for the year, the net book value of the standalone intangible assets thus acquired (i.e. the customer relationships) was approximately $5.9m at the year end.
Development costs
The Group is committed to the continuous enhancement of its core software suite, and we aim to offer a market-leading platform which addresses the needs of our telco customers. During the year therefore the Group continued to invest in the development of the software suite, leading to the release of mViva v.6 in January 2020, and has capitalised relevant costs of around $2.1m (2018: $1.6m) out of a total of underlying costs of approximately $4.0m ($2.6m in Bangalore, where the Group employs around 90 developers and the balance in the Group's other development centre in Nizhny Novgorod).
Amortisation on the standalone and acquired costs increased to $1.0m (2018: $0.6m) accordingly, and net of such amortisation, this capitalisation resulted in intangible assets relating to development costs in the statement of financial position of approximately $4.4m (2018: $3.2m).
Property, plant and equipment
Expenditure of $256,000 on property, plant and equipment relates principally to $106,000 spend on IT equipment to support the needs of the business. In addition, some $94,000 was spent on fixtures, fittings and leasehold improvements due to the continued expansion of the Group's office space. Also during the year, in line with common remuneration practice in India, a car was provided for the use of the Head of Development at a capital cost of $56,000 (representing an annual cost to the Group of approximately $8,000).
Depreciation in the year amounted to $93,000 (excluding amounts relating to Right-to-Use assets now recognised under IFRS 16, and gross of amounts capitalised as intangible assets) (2018: $47,000), and the aggregate net book value of property, plant and equipment rose from $362,000 to $515,000.
Trade receivables and contract assets
Trade receivables
At 31 December 2019 total trade receivables (i.e. including long-term receivables) stood at $5.5m (2018: $4.1m). The increase reflects a significant last quarter weighting of revenues, with over 61% of the total contractual revenue accounted for in the last quarter. Of these receivables, approximately $1.4m has been received since the year end to date.
The trade receivables balance at the year end is analysed as follows:
2019 2019 2019 2018 2018 2018
$'000 $'000 $'000 $'000
Receivables Associated "Debtor Receivables Associated "Debtor
revenue days" revenue days"
Total 5,283 6,566 294 3,752 6,019 228
Excluding
UBR 967 2,619 135 1,453 3,694 144
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 illustrative only. UBR receivables have increased as two significant contracts were completed in December 2019 and had not been invoiced at the year end (as invoicing milestones had not been reached). UBR receivables also include approximately $0.6m relating to contracts on term payment structures which are invoiced over the relevant periods.
Contract assets
Contract assets are recognised relating to support and maintenance revenue and license fees as payments are received in arrears of the services being provided. Short-term contract assets (i.e. those which are expected to reverse in less than one year) increased to $0.29m (2018: $0.07m) largely due to three significant contracts signed in the year which had invoicing terms which differed significantly from the underlying performance obligations. Long-term contract assets (i.e. those which are expected to reverse after more than one year) increased similarly to $0.52m (2018: $0.31m).
Trade and other payables and contract liabilities
Trade and other payables
At the year end, trade payables stood at $82,000 (2018: $118,000). Other payables of $441,000 (2018: $463,000) comprise accrued tax liabilities and provisions of $149,000 and sundry creditors and accruals.
Contract liabilities
Contract liabilities represent customer payments received in advance of satisfying performance obligations, which are expected to be recognised as revenue in 2020 and beyond. Short-term contract liabilities increased to $0.66m (2018: $0.06m) and long-term contract liabilities to $0.27m (2018: $0.11m) largely as the result of one particular contract entered into in the year.
Statement of Cash Flows
Cash flow and financing
Cash collection has continued to be a key strategic focus for the Group - cash generated by operations, as adjusted for exceptional items, and before tax payments amounted to $1.70m (2018: $1.17m), largely as a result of continued improvement in timing of collection of trade receivables (operating cash inflow of $0.34m in the first half compared to approximately $1.36m in the second); this trend is expected to continue with an increasing proportion of repeat or recurring contracts in the revenue mix (e.g. from revenue share or managed services).
During the year the Group refinanced certain term loans and took out a further term loan of c. $56,000 in order to finance the purchase of a motor vehicle for employee use. In addition an overdraft facility used during the year had an outstanding balance of $167,000 at the year end. As a result of the above, the Group had closing gross cash of $1.1m (2018: $2.2m) and net cash of $0.5m (2018: $1.8m) (excluding amounts relating to lease liabilities). Since the year end, the Group has 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. Gross cash at 6 April stood at $1.59m; however, this figure includes approximately $0.65m remaining from this financing and relating to capital expenditure expected to be paid out in April.
Contingent liabilities
The Group acquired certain assets from the Danateq Group in August 2018, including enterprise software and customer relationships, both formal (i.e. via a framework agreement) and informal. Potential deferred consideration of up to $5m was payable in respect of this acquisition, based on revenue realised against a defined pipeline of actual or target contracts. Due to the adjustment of previously provided contingent amounts, the contingent liability recognised now stands at $975,000, representing the expected payout of $1m discounted to the balance sheet date (with the amount shown on the balance sheet net of a $27,000 post-acquisition adjustment due from the vendors)
Summary
The significant contract win announced in December 2019 clearly validated the quality of our software, especially in the context of its relevance to Tier 1 telcos, and marked a major shift for our business in terms of moving towards a recurring revenue model, thus enhancing the quality and visibility of our earnings. Furthermore, the winning of a consultancy contract, also in December 2019, demonstrated our ability to monetise our domain expertise to analyse data, devise campaigning strategies and design appropriate campaigns to enable customers further to increase revenue and reduce churn.
The increased product range in the now integrated mViva product suite enables us to target both existing customers with new products and new customers, especially within multi-national groups. With a substantially enlarged customer base of now 19 telcos, we expect an increasing volume of change requests which, combined with a greater proportion of managed services and other repeat income, gives us a solid foundation for the year ahead. As noted below, it remains unclear how, how long the current coronavirus pandemic will last and what the short to medium term effects of this pandemic will be on consumer and corporate behaviour; however, the Directors believe that the telecommunications industry is likely to be less affected by any economic downturn, whether local or global, than most, particularly as certain telecoms activities tend to increase in "stay at home" periods such as end of year holidays and festivals such as Christmas and Ramadan, generating more user spending and more targeted marketing. This is supported by our experience to date, with customers maintaining a broadly "business as usual" approach despite the logistical disruption of working from home (to which any software based business is well suited). Accordingly, our overall (12 month) pipeline remains strong and notably we have started 2020 with a material proportion of the expected revenues for the year underpinned by recurring and repeating revenue, including the contracts referenced above as well as support and maintenance income built up from previous years' license sales and regular change request income. Together this will deliver higher quality, sustainable and visible revenues that will significantly enhance the value of the Group over the longer term.
Nic Hellyer
Finance Director
Group Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
Note $'000 $'000
(audited) (audited)
Revenue 5 6,667 6,123
Cost of sales and provision of services (999) (555)
_______ _______
Gross profit 5,668 5,568
Adjusted administrative expenses 6 (4,048) (2,421)
_______ _______
Adjusted operating profit 1,620 3,147
Exceptional items 7 236 (310)
Amortisation of acquisition-related intangibles 18 (686) (286)
Share-based payments 11 (52) -
---------- ----------
_______ _______
Operating profit 1,118 2,551
Finance income 12 54 33
Finance expense 13 (164) (71)
_______ _______
Profit before taxation 1,008 2,513
Income tax expense 14 (194) (334)
_______ _______
PROFIT FOR THE YEAR ATTRIBUTABLE TO
OWNERS OF THE PARENT 814 2,179
Other comprehensive income/(expense):
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of
foreign operations (25) 78
_______ _______
Other comprehensive income, net of tax (25) 78
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 789 2,257
Earnings per share
Attributable to the owners of the Pelatro
Group ( basic and diluted) 15 2.5c 8.0c
Adjusted
From continuing operations (basic and
diluted) 15 4.2c 10.2c
Group Statement of Financial Position
For the year ended 31 December 2019
2019 2018
Note $'000 $'000
(audited) (audited,
restated)
Assets
Non-current assets
Intangible assets 18 10,891 10,609
Tangible assets 19 515 362
Right-of-use assets 20 339 -
Deferred tax assets 14 63 -
Contract assets 21 519 312
Trade and other receivables 21 231 321
_______ _______
12,558 11,604
Current assets
Contract assets 21 293 72
Trade receivables 21 5,283 3,752
Other assets 22 501 382
Cash and cash equivalents 1,101 2,224
_______ _______
7,178 6,430
TOTAL ASSETS 19,736 18,034
Liabilities
Non-current liabilities
Borrowings 23 362 382
Lease liabilities 24 187 -
Contract liabilities 25 274 112
Long-term provisions 124 -
Other financial liabilities 26 - 1,141
_______ _______
947 1,635
Current liabilities
Trade and other payables 25 523 609
Short term borrowings 23 246 69
Lease liabilities 24 205 -
Contract liabilities 25 665 61
Other financial liabilities 26 948 298
_______ _______
2,587 1,037
TOTAL LIABILITIES 3,534 2,672
NET ASSETS 16,202 15,362
Issued share capital and reserves attributable
to owners of the parent
Share capital 27 1,065 1,065
Share premium 27 11,603 11,603
Other reserves 27 (643) (721)
Retained earnings 4,177 3,415
_______ _______
TOTAL EQUITY 16,202 15,362
Group Statement of Cash Flows
For the year ended 31 December 2019
2019 2018
$'000 $'000
(audited) (audited)
Cash flows from operating activities
Profit for the year 814 2,179
Adjustments for:
Income tax expense recognised in profit
or loss 247 342
Finance income (54) (33)
Finance costs 160 71
Depreciation of tangible non-current assets 188 46
Amortisation of intangible non-current
assets 1,726 843
(Recognition of) deferred tax assets (53) (8)
Fair value adjustment on contingent consideration (236) -
Share-based payments 52 -
Foreign exchange (gains) (8) (69)
_______ _______
Operating cash flows before movements
in working capital 2,836 3,371
(Increase)/decrease in trade and other
receivables (1,509) (2,438)
(Increase)/decrease in contract assets (428) (273)
Increase/(decrease) in trade and other
payables 103 57
Increase/(decrease) in contract liabilities 701 146
_______ _______
Cash generated from operating activities 1,703 863
Income tax paid (334) (292)
_______ _______
Net cash generated from operating activities 1,369 571
Cash flows from investing activities
Development of intangible assets (2,102) (1,604)
Purchase of intangible assets (35) (69)
Acquisition of property, plant and equipment (256) (384)
Cash outflow on acquisition of businesses
net of cash acquired - (7,035)
_______ _______
Net cash used in investing activities (2,393) (9,092)
Cash flows from financing activities
Proceeds from issue of ordinary shares,
net of issue costs - 7,395
Repayments to related parties - (436)
Proceeds from borrowings 317 394
Repayment of borrowings (313) (513)
Repayments of principal on lease liabilities (171) -
Finance income 54 33
Finance costs (93) (62)
Less interest accrued but not paid - 3
Interest expense on lease liabilities (40) -
_______ _______
Net cash generated by/(used in) financing
activities (246) 6,814
Net increase/(decrease) in cash and cash
equivalents (1,270) (1,707)
Foreign exchange differences (20) (195)
Cash and equivalent at beginning of period 2,224 4,126
_______ _______
Cash and cash equivalents at end of period 934 2,224
Comprising:
Cash at bank and in hand 1,101 2,224
Overdraft (167) -
_______ _______
934 2,224
Group Statement of Changes in Equity
For the year ended 31 December 2019
Share Share Exchange Merger Share-based Retained Total
capital premium reserve reserve payments profits
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January
2018 as previously
reported 801 4,472 (2) (527) - 1,217 5,961
Effect of change of
accounting policy (IFRS
15) - - - - - 18 18
_____ _____ _____ _____ _____ _____ _____
Balance at 1 January
2018 as restated 801 4,472 (2) (527) - 1,235 5,979
Profit after taxation
for the period - - - - - 2,179 2,179
Other comprehensive
income:
Exchange differences - - (191) - - (191)
Transactions with owners:
Shares issued by Pelatro
Plc for cash 264 7,450 - - - - 7,714
Issue costs - (319) (319)
_____ _____ _____ _____ _____ _____ _____
Balance at 31 December
2018 1,065 11,603 (193) (527) - 3,414 15,362
Effect of change of
accounting policy (IFRS
16) - - - - - (51) (51)
_____ _____ _____ _____ _____ _____ _____
Balance at 1 January
2019 as restated 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)
_____ _____ _____ _____ _____ _____ _____
Balance at 31 December
2019 1,065 11,603 (216) (527) 100 4,177 16,202
Notes
5 Revenue and segmental analysis
Revenue by type
The Group has five principal revenue models, being:
(1) contracts based on the sale of perpetual licenses for use of the Group's proprietary enterprise software;
(2) 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;
(3) provision of specific customer-requested modifications to Group software ("change requests");
(4) provision of maintenance and support of the software; 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 2019 2018
$'000 $'000
Repeat software sales and services 3,114 2,288
Maintenance and support 1,399 809
_______ _______
Total repeat revenues 4,513 3,097
Software - new licenses 1,887 2,511
Consulting 258 515
Resale of hardware 9 -
_______ _______
6,667 6,123
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 2019 2018
$'000 $'000
Caribbean 133 357
Central Asia 256 1,653
Eastern Europe 91 380
North Africa 135 314
South Asia 1,791 819
South East Asia 4,181 2,207
Sub-Saharan Africa 80 393
_______ _______
6,667 6,123
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:
Year to 31 December 2019 2018
$'000 $'000
(i) Revenue invoiced to customers under contractual
terms 2,619 3,694
(ii) Revenue recognised under terms of contract
but unbilled at period end ("UBR") 3,947 2,325
(iii) Net revenue recognised other than (ii) 144 191
Less: revenue recognised or to be recognised
as interest under IFRS 15 (43) (87)
_______ _______
Total revenue recognised in the year 6,667 6,123
Revenue recognition
License revenue
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 have been recognised as the capitalised value of the income stream plus interest accruing for the year on the credit deemed to be extended to the customer (on a reducing balance basis). For the financial year 2019 this figure amounts to license revenue of $0.45m and related interest income of $7,000 (2018: $0.13m and $2,000).
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 this is treated as income accruing 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 (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 2019 revenue therefore includes (i) an amount of $104,000 representing revenue from PCS recognised ahead of its contractually due dates (2018: $141,000), and (ii) an amount of $248,000 (2018: $80,000) 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
2020 2021 2022-5
$'000 $'000 $'000
Revenue expected to be recognised
on software and service contracts 595 461 522
Comparative figures for the year ended 31 December 2018 were as follows:
Year to 31 December
2019 2020 2021-4
$'000 $'000 $'000
Revenue expected to be recognised
on software and service contracts 419 420 476
6 Operating expenses
Profit for the year has been arrived at after charging:
2019 2018
$'000 $'000
Amortisation of intangible non-current assets 1,726 843
Depreciation of tangible non-current assets 189 47
Staff costs (see note 9) 1,503 582
Auditor's remuneration (see note 8) 41 45
Short-term lease expenses 23 24
Realised foreign exchange (gains)/losses (14) (69)
Financial effect of initial application of IFRS 16
The tables below show the amount of adjustment for each financial statement line item affected by the application of IFRS 16 for the current period. As noted above, where lease-related expenses are directly attributable to the cost of development of the Group's proprietary software such expenses are capitalised in accordance with the Group's accounting policy relating to such development expenditure. The amounts shown in this note are gross of such capitalisation unless otherwise noted.
The Group has adopted the modified retrospective approach to the application of IFRS 16 and accordingly the prior year is not restated and hence there is no effect shown.
Impact on profit/(loss) for the period
Year to
31 December
2019
$'000
(Increase) in depreciation (173)
(Increase) in finance costs (40)
Decrease in administrative expenses 210
Effects of foreign exchange 1
_______
(Decrease) in profit for the period (2)
Certain lease expenses are deemed to be directly attributable overheads for the purposes of capitalising relevant expenditure on developing intangible assets (see Note 18); accordingly, under IFRS 16 the corresponding depreciation and interest expense is capitalised instead. Figures above are shown gross before capitalisation.
Impact on earnings per share for the period
The impact on earnings per share is too small to be reflected in disclosure to the nearest 0.1c.
Impact on consolidated statement of cash flows
The application of IFRS 16 has an impact on the consolidated statement of cash flows of the Group as under the Standard lessees must present:
-- Short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement of the lease liability as part of operating activities (such payments have no material effect on these financial statements);
-- Cash paid for the interest portion of lease liabilities as part of financing activities; and
-- Cash payments for the repayment of the principal portions of leases liabilities as part of financing activities.
Under IAS 17, all lease payments on operating leases were presented as part of cash flows from operating activities. Consequently, for the year ended 31 December 2019, the net cash generated by operating activities has increased by $210,000 and net cash used in financing activities increased by the same amount.
Extension and termination options
Extension and termination options are included in a number of property leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. All of the extension and termination options held are exercisable only by the Group and not by the respective lessor. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
For lease liabilities on balance sheet at 31 December 2019 the Group has used a weighted average interest rate of 9.6% in relation to INR liabilities, 9.7% in relation to RUB liabilities and 2.7% in respect of GBP liabilities.
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 2019 2018
$'000 $'000
Operating profit 1,118 2,551
Adjusted for:
Amortisation and depreciation 1,915 889
Revenue recognised as interest under IFRS
15 43 26
Exceptional items:
- acquisition expenses - 310
- gain on adjustment of contingent liability (236) -
Expensed share-based payments 52 -
_______ _______
Adjusted EBITDA 2,892 3,776
The criteria for adjusting operating income or expenses in the calculation of adjusted EBITDA are that they are material and either (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. Materiality is defined as an amount which, to a user, would influence decision-making based on, and understandability of, the financial statements.
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 below) 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 2019 comprise the gain on the adjustment of contingent liabilities relating to the potential earnout payment in respect of the Danateq Acquisition (see Note 26). Exceptional items in 2018 comprise legal and other costs relating to 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 (see Note 18). The figures above are shown net of amounts so capitalised.
The calculation of adjusted earnings per share is shown in Note 15.
9 Staff costs
Year to 31 December 2019 2018
$'000 $'000
Wages and salaries 3,495 1,975
Social security contributions 65 40
Less: amounts capitalised as intangible assets (2,057) (1,433)
_______ _______
1,503 582
The average number of persons employed by the Company during the period was:
Year to 31 December 2019 2018
Sales 4 2
Software development 88 70
Support 40 18
Marketing 3 2
Administration 15 13
_______ _______
150 105
10 Directors' remuneration and transactions
The Directors' emoluments in the year ended 31 December 2019 were:
Basic Bonus Benefits Share-based Pension
salary in kind payments Total Total
2019 2019 2019 2019 2019 2019 2018
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Executive
Directors
S. Menon 189 49 24 - - 262 223
S. Yezhuvath 189 49 15 - - 253 210
N. Hellyer 85 - 17 7 2 111 80
Non-Executive
Directors
R. Day 70 - - - 2 72 53
P. Verkade 38 - - - - 38 30
_______ ______ ______ ______ _______ _______ _______
571 98 56 7 4 736 596
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
A charge of $52,000 (net of amounts capitalised of $48,000) (2018: nil) 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, $45,000 net (2018: nil) 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 Average exercise
price
2019 2018 2019 2018
Outstanding at the beginning of
the year 50,000 50,000 62.5p 62.5p
Granted during the year 1,640,000 - - -
Forfeited/cancelled during the
year (91,500) - 73.0p -
Exchanged for shares - - - -
_______ _______
Outstanding at the end of the year 1,598,500 50,000 72.7p 62.5p
12 Finance income
2019 2018
$'000 $'000
Interest receivable on interest-bearing deposits 11 10
Notional interest accruing on contracts with
a significant financing component 43 23
_______ _______
Total finance income 54 33
13 Finance expense
2019 2018
$'000 $'000
Interest and finance charges paid or payable
on borrowings 96 62
Interest on lease liabilities under IFRS 40 -
16
Less: amounts capitalised as intangible assets (19)
Acquisition-related financing expense (unwinding
of discount on financial liabilities) 47 9
_______ _______
Total finance expense 164 71
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 2019 2018
$'000 $'000
Current tax
UK corporation tax charge/(credit) on profit
for the current year (32) 136
Overseas income tax charge/(credit) 286 206
Adjustments in respect of prior periods (7) -
_______ _______
Total current income tax 247 342
Deferred tax
(Recognition)/reversal of deferred tax asset (53) (8)
_______ _______
Total deferred income tax (53) (8)
Total income tax expense recognised in the
year 194 334
Deferred tax
Recognised deferred tax asset
2019 2018
$'000 $'000
At 1 January 2019 10 2
Recognised in profit and loss 53 8
_______ _______
At 31 December 2019 63 10
Comprising:
Timing differences 8 10
Tax losses 55 -
_______ _______
63 10
The deferred income tax assets at 31 December 2019 above are expected to be utilised in less than one year. 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.
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 following reflects the earnings and share data used in the basic earnings per share computations:
Year to 31 December 2019 2018
$'000 $'000
Profit attributable to equity holders of
the parent:
Profit attributable to ordinary equity holders
of the parent for basic earnings 814 2,179
Weighted number of ordinary shares in issue 32,532,431 27,375,741
Basic earnings per share attributable to
shareholders 2.5c 8.0c
Adjusted earnings per share
Adjusted earnings per share is calculated as follows:
2019 2018
$'000 $'000
Profit attributable to ordinary equity holders
of the parent for basic earnings 814 2,179
Adjusting items:
- exceptional items (see note 7} (236) 310
- share-based payments 52 -
- finance expense on liabilities relating
to contingent consideration 47 9
- amortisation of acquisition-related intangibles 686 286
- prior year adjustments to tax charge (7) 7
_______ _______
Adjusted earnings attributable to owners
of the Parent 1,356 2,791
Weighted number of ordinary shares in issue 32,532,431 27,375,741
Adjusted earnings per share attributable
to shareholders 4.2c 10.2c
The criteria for inclusion of adjusting items in the calculation of adjusted EPS are the same as those relating to the calculation of adjusted EBITDA as set out in Note 7. Additionally, finance expense on liabilities relating to contingent consideration are non-cash costs reflecting the time value of money in arriving at the fair value of such liabilities and the effluxion of time over the period for which they are outstanding; and amortisation of acquisition-related intangibles relates to the amortisation of intangible assets in respect of customer relationships and brands which are recognised on a business combination and are non-cash in nature.
18 Intangible assets
Intangible assets comprise capitalised development costs (in relation to internally generated software and software acquired through business combinations), software acquired from third parties for use in the business, patents, customer relationships and goodwill.
An analysis of goodwill and other intangible assets is as follows:
Financial Development Third Patents Customer Goodwill Total
year 2019 costs party relationships
software
$'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January
2019 4,144 98 - 6,862 745 11,849
Additions 2,247 12 23 - - 2,282
Fair value
adjustment - - - - (275) (275)
Foreign exchange - (2) - - - (2)
_______ _______ _______ _______ _______ _______
At 31 December
2019 6,391 108 23 6,862 470 13,854
Amortisation
or impairment
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
The Company and the Danateq Group entered into a sale and purchase agreement ("SPA") on 30 July 2018 to acquire certain assets of Danateq Pte and Danateq Limited. Further consideration for the Danateq Acquisition of up to $5,000,000 was contingent on the achievement of certain revenue targets ("pipeline revenue") in the two years following the acquisition. On acquisition these liabilities were provisionally assessed at an aggregate fair value of $1.43m (as discounted to the present value at the time of acquisition) based on a probability-weighted analysis of revenue expectations at the time and hence the likely outturn payments; this valuation was unchanged at end of the first measurement period (i.e. as at 31 December 2018) other than as due to the finance expense relating to the unwinding of the time-value discount.
At the end of the 6 months to 30 June 2019 the Directors reassessed this fair value due to the deferral of certain potential pipeline revenue from the first year relevant to earnout calculation to the second; the reassessed value was $1.19m and the difference of $275,000 (gross of finance expense) reflecting the net of (i) the derecognition of the then short-term liability in respect of the first year earnout and (ii) a corresponding increase to the then long-term liability in respect of the second. The difference thus arising during the measurement period was credited to goodwill arising on acquisition.
Financial year Development Third Patents Customer Goodwill Total
2018 costs party relationships
software
$'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January
2018 1,290 32 - - 287 1,609
Additions 1,604 69 - - - 1,673
Fair value
adjustment - - - - 140 140
Created as
part of a business
combination - - - - 318 318
Acquired as
part of a business
combination 1,250 - - 6,862 - 8,112
Foreign exchange - (3) - - - (3)
_______ _______ _______ _______ _______ _______
At 31 December
2018 4,144 98 - 6,862 745 11,849
Amortisation
or impairment
At 1 January
2018 (382) (16) - - - (398)
Acquired as - - - - -
part of a business
combination
Charge for
the year (553) (4) - (286) - (843)
Foreign exchange - 1 - - 1
_______ _______ _______ _______ _______ _______
At 31 December (1,240
2018 (935) (19) - (286) - )
Net carrying
amount
At 31 December
2019 3,209 79 - 6,576 745 10,609
At 1 January
2018 908 16 - - 287 1,211
19 Tangible assets
Financial year Leasehold Computer Office Vehicles Total
2019 improvements equipment equipment
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January
2019 49 93 30 264 436
Additions 63 106 31 56 256
Foreign exchange
differences (3) (2) (2) (8) (15)
_______ _______ _______ _______ _______
At 31 December
2019 109 197 59 312 677
Depreciation
At 1 January
2019 - (46) (2) (26) (74)
Charge for the
year (7) (44) (8) (34) (93)
Foreign exchange
differences - 3 1 1 5
_______ _______ _______ _______ _______
At 31 December
2019 (7) (87) (9) (59) (162)
Net carrying
amount
At 31 December
2019 102 110 50 253 515
At 1 January
2019 49 47 28 238 362
Financial year Leasehold Computer Office Vehicles Total
2018 improvements equipment equipment
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January
2018 - 56 4 - 60
Additions 49 44 23 270 386
Foreign exchange
differences - (7) 3 (6) (10)
_______ _______ _______ _______ _______
At 31 December
2018 49 93 30 264 436
Depreciation
At 1 January
2018 - (29) (1) - (30)
Charge for the
year - (20) - (27) (47)
Foreign exchange
differences - 3 (1) 1 3
_______ _______ _______ _______ _______
At 31 December
2018 - (46) (2) (26) (74)
Net carrying
amount
At 31 December
2018 49 47 28 238 362
At 1 January
2018 - 27 3 - 30
20 Right-of-use assets
As disclosed further in Note 2, the Group has adopted IFRS 16 in the year. The following sets out the Impact on assets, liabilities and equity as at 1 January 2019 (the corresponding impact on profit and loss is set out in Note 6):
As previously IFRS 16 As restated
reported adjustments
$'000 $'000 $'000
Right-of-use assets - 346 346
_______ _______ _______
Net impact on total assets - 346 346
Lease liabilities - (397) (397)
___________ _______ _______
Net impact on total liabilities - (397) (397)
Retained earnings - 51 51
_______ _______ _______
Net impact on total liabilities
and equity - 346 346
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
Right-of-use assets comprise leases over office buildings and vehicles as follows:
Office Vehicles Total
buildings
$'000 $'000 $'000
Cost
At 1 January 2019 - - -
Effect of change of accounting
policy (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
Aged analysis of trade receivables
At 31 December Carrying Neither Past due (in days) but not
amount impaired impaired
or past
due
More than
61-90 91-120 121
$'000 $'000 $'000 $'000 $'000
2019
Trade receivables 5,263 4,863 - - 400
2018
Trade receivables 3,752 3,250 - - 502
Contract assets
Due within one year 2019 2018
$'000 $'000
Contract assets at 1 January 72 -
Effect of change of accounting policy - -
Contract assets recognised in the period,
net of releases to receivables or cash 108 72
Transfer from non-current contract assets 113 -
_______ _______
Contract assets at 31 December 293 72
Due after one year 2019 2018
$'000 $'000
Contract assets at 1 January 312 -
Effect of change of accounting policy - 119
Contract assets recognised in the period 320 193
Transfer to current contract assets (113) -
_______ _______
Contract assets at 31 December 519 312
22 Other assets
At 31 December 2019 2018
$'000 $'000
Prepayments 109 125
Deposits 131 84
Other assets (including withholding tax,
GST and VAT refunds) 261 173
_______ _______
Total other assets 501 382
23 Loans and borrowings
Loans and borrowings comprise:
At 31 December 2019 2018
$'000 $'000
Non-current liabilities
Secured term loans 362 382
_______ _______
362 382
Current liabilities
Current portion of term loans 79 69
Unsecured borrowings 167 -
_______ _______
246 69
Total loans and borrowings 608 451
The Group has four term loans, all in its operating subsidiary in India and denominated in INR. Each has an interest rate of 10%; they are repayable over 5 years from their inception, between January and July 2024.
24 Lease liabilities
Lease liabilities comprise liabilities arising from the committed and expected payments on leases over office buildings and vehicles.
Amounts due in less than one year Office Vehicles Total
equipment
$'000 $'000 $'000
At 1 January 2019 - - -
Effect of change of accounting policy 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
Amounts due in more than one year Office Vehicles Total
equipment
$'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
25 Trade and other payables and contract liabilities
At 31 December 2019 2018
$'000 $'000
Due within a year
Trade payables 82 118
Other payables and provisions 441 463
Amounts due to related parties - 28
_______ _______
Total trade and other payables 523 609
"Other payables" principally comprise provisions for taxation liabilities and other costs.
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.
Due within one year 2019 2018
$'000 $'000
Contract liabilities at 1 January 61 -
Effect of change of accounting policy - 20
Contract liabilities recognised/(released to
revenue) in the period 564 1
Transfers from long-term liabilities 40 40
_______ _______
Contract liabilities at 31 December 665 61
Due after one year 2019 2018
$'000 $'000
Contract liabilities at 1 January 112 -
Effect of change of accounting policy - 73
Contract liabilities recognised in the period 202 79
Transfers to short-term liabilities (40) (40)
_______ _______
Contract liabilities at 31 December 274 112
26 Other financial liabilities
As at 31 December 2019 2018
$'000 $'000
Contingent consideration on the acquisition
of the Danateq Assets
- potentially due within one year 948 298
- potentially due after one year - 1,141
_______ _______
948 1,439
Part of the consideration for the Danateq Acquisition in August 2018 was contingent on the achievement of certain stretch targets for revenue pertaining to the assets acquired ("Danateq Revenue"), payable (if earned) in two tranches in respect of the first year following completion of the acquisition (the "First Year Earnout") and similarly the second (the "Second Year Earnout"). The contingent amount payable under these arrangements was between $nil and $5m, with up to $3m payable in respect of the First Year Earnout and a further $2m in respect of the Second Year Earnout.
On acquisition these liabilities were provisionally assessed at an aggregate fair value of $1.43m (as discounted to the present value at the time of acquisition) based on a probability-weighted analysis of revenue expectations at the time and hence the likely outturn payments; this valuation was unchanged at end of the first measurement period (i.e. as at 31 December 2018) other than as due to the finance expense relating to the unwinding of the time-value discount.
At the end of the 6 months to 30 June 2019 the Directors reassessed this fair value due to the deferral of certain potential Danateq Revenue from the First Year Earnout to the Second Year Earnout; the reassessed value was $1.19m and the difference of $275,000 (gross of finance expense) reflecting (i) the derecognition of the then short-term liability in respect of the First Year Earnout and (ii) a corresponding increase to the then long-term liability in respect of the Second Year Earnout. The difference thus arising during the measurement period was credited to goodwill arising on acquisition.
At the end of the 6 months to 31 December 2019 the Directors further reassessed this fair value based on updated business projections and the likelihood of certain Danateq Revenue thus being either unlikely to be realised or to be deferred into subsequent years which would therefore not fall to be recognised under the terms of the acquisition. The resulting difference of $236,000 (gross of finance expense) arising on the reduction of this liability has been taken as an exceptional gain through profit and loss. The carrying value of this liability will continue to be reassessed at future reporting dates; in any event the liability is expected to be settled in or around October 2020.
30 Capital commitments and contingent liabilities
Other than as disclosed above, as at 31 December 2019 the Group had no material capital commitments (2018: nil) nor any contingent liabilities (2018: nil).
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 2018 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 2018 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 2019 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 May 2020. 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.
Related party transactions
No related party transactions have taken place during the year that have materially affected the financial position or performance of the Company or the Group.
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 2019.
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 7 April 2020.
[END]
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR FLFETSLIDIII
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April 08, 2020 02:00 ET (06:00 GMT)
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