22 September 2022

Pelatro Plc

("Pelatro" or the "Group")

Interim results

Pelatro Plc (AIM: PTRO), the precision marketing software specialist, is pleased to announce today its results for the 6 months ended 30 June 2022.

Financial highlights

•              Revenue $4.19m (H1 2021: $3.46m), an increase of 21%

•              Recurring revenue $2.41m (H1 2021: $2.43m), 58% of revenue

•              Adjusted EBITDA^* $1.87m (H1 2021: $1.61m)

•              Adjusted EBITDA^* margin 45% (FY 2021 39%)

•              Adjusted earnings per share 0.2¢ (H1 2021: 0.9¢)

Operational highlights

•              3 new customers won this year to date

•              Entry into financial services sector with a significant win

Post period end highlights

•              Further contract wins and change requests give visibility over at least c. $8.5m revenue for the full year

•              FY23 building steadily with over $6m of revenue already visible

•              Cash receipts in July and August of c. $1.6m

Outlook

Management expectations for the year underpinned by:

•              Strong revenue visibility for full year and diversification into non telco verticals  

•              Current pipeline** of c.$19m, of which c. $3m is from existing customers

Richard Day, Non-executive Chairman of Pelatro commented:

"It is a measure of the progress we have made in implementing our strategy of moving from a licence fee model to being more a recurring revenues service provider that, with three months still to go this year, we already have visibility over 95% of our expected full year revenue. We have already announced the winning of two new telco customers plus one in financial services, and our cost base is now increasingly stable. We are picking up new business and are looking forward with every confidence."

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* earnings before interest, tax, depreciation, amortisation, exceptional items and share-based payments

** "pipeline" is defined as opportunities where an RFI or RFP has been received and recurring revenue contracts are included as the sum of the likely revenue over 3 years in order to provide comparability with one-off license fee income

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

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

Managing Director's statement

Our results in the first half of 2022 and trading to date reflect both the consolidation of our existing customer base as well as a healthy flow of new business which will ensure growth in the coming years. Given that our first customer was secured in 2016, a number of our typically 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, and in fact have sought to strengthen their relationship with us by requesting upgrades and change requests and/or additional software modules or services. All of these 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.

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 retail, 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.

We have worked hard to enhance the quality of our earnings such that the significant majority of our revenue is now recurring in nature and, whilst license sales are still an important contributor to revenue, even these are often structured on the basis of regular monthly payments (for example, the recent contract won with a Middle East telco with an initial value of around $1m payable over three years). This contract also demonstrates our strategy of securing relationships with members of large international telco groups where we can leverage off the success of initial implementations to enable us to market powerfully from "reference" customers.

Financial review

Revenue and profitability

In the six months to 30 June 2022 revenue increased by 21% over the comparable period to $4.19m (H1 2021: $3.46m). Of the total revenue, approximately $2.41m (H1 2021: $2.43m) was recurring revenue, comprising managed services, post contract support and gain share revenue, the slight fall being due to currency effects on INR-denominated revenue, the timing of certain services in one of our larger contracts, and recent recurring revenue contract wins coming onstream only in H2. Taking change requests of just under $1m into account some 81% of H1 revenue was repeating revenue, with the balance relating to license and other revenue.

Underlying operating profit (excluding the impact of non-cash share-based payments, amortisation of customer-related intangible assets) was $0.27m (H1 2021: $0.48m). Within this, underlying "cash" costs rose only marginally from $3.3m to $3.7m, reflecting both relatively stable staff numbers compared to the growth of previous years as well as some benefit of the strength of the US dollar (only around 10% of the Group's costs are incurred directly in USD with some 70% in INR, around 10% in GBP and the rest in other currencies). However, we recognised an increased amortisation charge on our capitalised development costs, where amortisation of c. $1.3m is now ahead of the capitalised spend of c. $1.2m.

Cash flow and trade receivables

Cash generated from operating activities was approximately $0.15m after working capital movements (H1 2021: $0.52m). This reduction compared to the prior period resulted from an increase in trade receivables to $5.59m (31 December 2021 $4.96m). Whilst part of this increase was due to increased revenue, some is also due to delays in payment arising from routine foreign exchange approvals needed by certain customers. These approvals usually take a considerable period of time, and such delays are not unexpected and always resolved in due course. We expect the majority of these receivables to unwind in H2 and hence the H1 cash flow is not representative of our expectations for the year as a whole: cash of $1.6m has been received in the months of July and August and a further $0.3m to date.

Capitalised development expenditure was $1.22m (H1 2021: $1.19m), again reflecting the relative stability in underlying numbers of the development team.

Current trading and outlook

Business has been improving significantly throughout the year with several new customers signing up for our products; in particular entry into the financial services sector has been a major step for us during the past few months. Our efforts in this sector have resulted in a strong pipeline getting built and we expect to win several new customers in the financial services sector in the coming quarters.

Revenue visibility for the full year reached around 95% of market forecasts earlier this month, which we view as a good measure of the momentum in the business. Given this traction, we expect to end 2022 with a strong base of recurring revenue and to start 2023 with excellent visibility for that year in turn. As in previous years, existing customers continue to take more products and services from us thereby increasing the annual revenue from them. Accordingly, we view our prospects for 2022 positively and look forward to further growth in years to come.

Group statement of comprehensive income

Group statement of financial position

Group statement of cash flows

Group statement of changes in equity

Notes to the Group financial statements

1              Segmental analysis

Revenue by type

Revenue by geography

The Group recognises revenue in seven geographical regions based on the location of customers, as set out in the following table:

2              Non-GAAP profit measures and exceptional items

Reconciliation of operating profit to earnings before interest, taxation, depreciation and amortisation ("EBITDA"):

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.

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.

3              Finance income

4              Finance expense

5              Earnings per share

Earnings per share - reported ("EPS")

The calculation of the basic and diluted EPS is based on the following data:

The weighted average number of shares and the loss for the year for the purposes of calculating the fully diluted earnings per share are the same as for the basic loss per share calculation. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under IAS33.

Adjusted earnings per share

Adjusted EPS is calculated as follows:

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 3. Additionally, amortisation of acquisition-related intangibles relates to the amortisation of intangible assets in respect of customer relationships which are recognised on a business combination and are non-cash in nature.

The Group has one category of potentially dilutive ordinary share, 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.

6              Intangible assets

Intangible assets comprise capitalised development costs, acquired software, customer relationships and goodwill.

7              Contract assets

Contract assets are comprised as follows:

8              Loans and borrowings

9              Trade and other payables

10           Provisions

11           Post balance sheet events

Other than disclosed above there have been no events subsequent to the reporting date which would have a material impact on these interim financial results.

Basis of preparation

The Group has prepared its interim financial statements (the "statements") for the 6 months ended 30 June 2022 (the "interim results") in accordance with the AIM Rules of the London Stock Exchange and not in accordance with IAS34 Interim Financial Reporting; the statements are prepared in accordance with the recognition and measurement principles of International Accounting Standards in conformity with the requirements of the Companies Act 2006, but do not include all the disclosures that would otherwise be required

The statements have been prepared under the historical cost convention. The accounting policies adopted in the statements are consistent with those adopted in the Group's Annual Report and Financial Statements for the year ended 31 December 2021 and those which will be adopted in the preparation of the annual report for the year ending 31 December 2022. The statements do not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited.

Going concern

The Directors have considered trading and cash flow forecasts prepared for the Group, and based on these, and confirmed banking facilities, are satisfied that the Group will continue to be able to meet its liabilities as they fall due for at least one year from the date of these results. On this basis, they consider it appropriate to have adopted the going concern basis in the preparation of the interim results, which were approved by the Board of Directors on 21 September 2022.

Comparative financial information

The comparative financial information presented herein for the year ended 31 December 2021 does not constitute full statutory accounts for that period. Statutory accounts for the year ended 31 December 2021 have been filed with the Registrar of Companies. These statutory accounts carried an unqualified Auditor's Report, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. The accounts for the 6 months to 30 June 2021 have been restated to reflect a reallocation of amortisation expense on capitalised development costs resulting from a revised assessment of amortisation costs undertaken as part of the review of the financial results for the year ended 31 December 2021. The resulting adjustment to amortisation expense has not effected either the 30 June 2021 cash position or the full year results.