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).

 

 

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 salary	Bonus	Benefits in kind	Share-based payments	Pension	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 earnings	(14,370)	(847)
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 earnings	(14,370)	(847)
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 buildings	Vehicles	Total
	$'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 buildings	Vehicles	Total
	$'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 cash, or amortisation to profit or loss	(202)	(394)
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 buildings	Vehicles	Total
	$'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 buildings	Vehicles	Total
	$'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 buildings	Vehicles	Total
	$'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 buildings	Vehicles	Total
	$'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.