RNS Number : 7254A
Pelatro PLC
26 May 2023
 

26 May 2023

Pelatro Plc

 

("Pelatro" or the "Group")

 

Final Audited Results for the Year ended 31 December 2022

 

 

Pelatro Plc (AIM: PTRO), the precision marketing software specialist, today announces today results for the year ended 31 December 2022.

 

Financial highlights

 

·              Decrease in revenue to $5.4m (2021: $7.3m)

·              Recurring revenue of $4.3m (2021: $4.8m)

·              Adjusted EBITDA* of $0.6m (2021: $2.8m)

·              Adjusted loss per share of (27.3)¢ (2021: (0.4)¢)

•              Trade receivables of $3.5m (2021: $5.0m)

•              Exceptional costs incurred of $1.1m, relating primarily to write off of one trade receivable and one contract asset, together with staff retention share issue

•              Impairment charges of $9.3m incurred, primarily relating to intangible assets as a result of reduction in revenue in 2022

 

Operational highlights

 

•              Three new customers added during the year, bringing total to 26, increased presence in Africa and the Middle East

•              Continuing to retain customers at end of initial contracts

•              Shortlisted by an increasing number of banks, demonstrating the validity of our product for non-telcos

 

Outlook

 

·              Substantial order book with a number of new contracts won since the year end, including a good level of repeat activity from change requests, and a large number of significant contracts in advanced stages of negotiation, including banks

•              New customer wins for the year expected to be in double figures

•              Excellent visibility over revenues for the current year, currently around $8m

•              ARR now c.$7m

•              New business pipeline# of c. $23m, including some $5m of non telco business

 

 

Harry Berry, non-executive Chairman of Pelatro commented:

 

"Despite a disappointing 2022, I look forward with cautious optimism to 2023 as the efforts put in to date, particularly our diversification into non-telco customers, begin to pay off. Our new business pipeline is at its highest ever level and I am confident that this will produce results in the coming months and years."

 



 

Presentation

 

A copy of the results presentation to be provided to investors and analysts will be available on Pelatro's website in due course (www.pelatro.com).

 

 

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

 


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)



1,152

-

45

32

686

686

22

(42)

_______

_______

(12,465)

(171)



45,644,075

41,153,537



(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:

 

 

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







 






 

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

 



 

 

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







 






 

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

606

751

238

195

(56)

-

(267)

(340)

_______

_______

521

606

 

 

Due within one year

2022

2021

 

$'000

$'000

555

609

(202)

(394)

(234)

-

267

340

_______

_______

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

113

227

408

379

_______

_______

521

606

 

 

Due within one year

2022

2021

 

$'000

$'000

80

375

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

131

146

70

77

101

92

_______

_______

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



534

152

363

451

_______

_______

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



278

207

-

152

(97)

(81)

_______

_______

181

278

 

 

At 31 December

2022

2021


$'000

$'000



469

495

(392)

(107)

97

81

_______

_______

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

289

8,375,000


_______

_______

At 31 December 2021

1,501

45,407,431

105

3,455,000

_______

_______

1,606

48,862,431

 

 



 

General

 

Audited accounts

 

The financial information set out above does not comprise the Group or the Company's statutory accounts. The Annual Report and Financial Statements for the year ended 31 December 2021 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements ("Annual Report") for the year ended 31 December 2021 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

The Independent Auditors' Report on the Annual Report for the year ended 31 December 2022 is unqualified, does not draw attention to any matters by way of emphasis, and does not contain a statement under 498(2) or 498(3) of the Companies Act 2006.  The Annual Report will be filed with the Registrar of Companies following the annual general meeting.

 

The Annual Report, together with a notice of the annual general meeting, are expected to be made available to shareholders in May 2023.  Copies will also be available on the Company's website (www.pelatro.com) and from the Company's registered office at 49 Queen Victoria Street, London EC4N 4SA from that date.

 

As this summary announcement is extracted from the full financial statements, certain references may refer to notes which are not included herein, and the Notes section is not reproduced in full.

 

Principal risks and uncertainties

 

The principal risks and uncertainties facing the Group together with actions being taken to mitigate them and future potential items for consideration will be set out in the Strategic Report section of the Annual Financial Report 2022.

 

Presentation of figures

 

Figures are rounded to the nearest $0.1m, $0.01m or $'000 as the case may be. Percentage increases or decreases stated above are based on the figures as rounded. Minor differences may arise in tabulation and figures presented elsewhere due to rounding differences.

 

 

This announcement was approved by the Board of Directors on 25 May 2023.

 

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