1
Building
a Strong
Foundation
Annual Report 2018
www.pelatro.com
ANNUAL REPORT 2018 2
WE OPERATE FROM...
ANNUAL REPORT 2018 3
COMPANY INFORMATION
Auditor
Crowe U.K. LLP
St Bride’s House
10 Salisbury Square
London EC4Y 8EH
United Kingdom
Bankers
ICICI Bank UK PLC
One Thomas More Street
London E1W 1YN
United Kingdom
Bank of America, N.A.
P.O. Box 25118
Tampa, FL 33622-5118
Nominated Advisers
and Stockbrokers
finnCap Limited
60 New Broad Street
London EC2M 1JJ
United Kingdom
Solicitors
Memery Crystal LLP
165, Fleet Street
London EC4A 2DY
United Kingdom
Public Relations/Investor
Relations
DBS Bank Ltd
12 Marina Boulevard, Marina Bay
Financial Centre Tower 3
Singapore 018982
Walbrook PR Limited
4 Lombard Street
London EC3V 9HD
United Kingdom
Kotak Mahindra Bank
4M/411, S.K.L.N.S Complex
3rd Block, Kammanahalli
Bangalore 560043
India
ICICI Bank Ltd
4M-417, HRBR Layout
3rd Block, Kammanahalli
Bangalore 560043
India
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
United Kingdom
Share Capital
The Ordinary Share capital of Pela-
tro Plc is admitted to trading on
AIM, a market operated by London
Stock Exchange Group plc. The
shares are quoted under the trading
ticker PTRO.
ISIN number
is GB00BYX-
The
H8F66 and the SEDOL number is
BYXH8F6.
Website
http://www.pelatro.com/investors/
Shareholder enquiries:
Tel. 0371 384 2030* (from UK);
+44 121 415 7047 (from overseas)
* lines are open from 8.30am to 5.30pm Monday to Friday
ANNUAL REPORT 2018 4
FOUR YEAR TRACK RECORD
Year to/as at 31 December
2018
2017
2016
2015
Revenue
$’000
6,123
3,146
1,205
Revenue growth
%
95%
161%
241%
EBITDA (before exceptional costs)
$’000
3,750
2,004
498
353
n/a
77
EBITDA margin
%
61%
64%
41%
22%
Operating profit
(before exceptional costs)
$’000
2,861
1,801
360
Operating margin
%
47%
57%
Statutory Profit before tax
$’000
2,513
1,096
30%
360
30
8%
30
Adjusted earnings per share
(basic and diluted)
Statutory earnings per share
(basic and diluted)
Net cash flow from operating
activities (pre exceptional items)
¢
¢
10.1¢
8.9¢
2.0¢
0.2¢
8.0¢
4.8¢
2.0¢
0.2¢
$’000
1,173
751
447
56
Net cash used in investing activities
$’000
(9,092)
(744)
(401)
(149)
Net cash from financing activities
$’000
6,814
4,707
54
214
Net cash at year end
$’000
1,823
3,086
196
119
1: from continuing operations
ANNUAL REPORT 2018 5
CONTENTS
Strategic Report
Chairman Speaks
Managing Director’s Letter to the Shareholders
Telecom Operators – The New Paradigm
Leveraging Technology
Building Human Capital
Key Performance Indicators
Principal Risks and Uncertainties
From the desk of the Finance Director – Financial Review
Corporate Governance
Board of Directors
Corporate Governance Review
Key Managerial Personnel
Director’s Report
Financial Details
Independent Auditor’s Report
Group Statement of Comprehensive Income
Group Statement of Financial Position
Group Statement of Cash Flow
Group Statement of Changes in Equity
Notes to the Group Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
6
7
11
13
15
17
18
21
28
30
40
41
45
49
50
51
52
54
88
89
90
ANNUAL REPORT 2018 6
CHAIRMAN SPEAKS
Visibility over some $5.3m of revenue
and a $15m pipeline, gives us every
confdence as we look forward to the
rest of the year.
Richard Day, Chairman
This first full year as an AIM-quot-
ed public company has been one
of progress and significant achieve-
ment for Pelatro, at both the opera-
tional and strategic levels. Growth in
our revenues from $3.1m to $6.1m
was in line with our expectations
and was underpinned by a combi-
nation of increased business with
existing customers as well as the
addition of new revenue lines as we
expanded our customer base, which
has grown from 7 to 16 to date.
We also broadened our geographic
reach, breaking into the European
market with our first contract win in
the region with Primetel of Cyprus in
October 2018.
In July 2018 we announced our
acquisition of certain assets from
Danateq, with its customers and
real-time self-learning analytics plat-
form and complementary campaign
management solutions. The acqui-
sition was funded with a further eq-
uity placing which was strongly sup-
ported by our shareholders, raising
approximately £6m. We are grateful
for their support. I am pleased to say
that the Danateq business is living
up to our expectations and the staff
joining our enlarged group have
been a tremendous fit.
All our staff are an important part of
the Pelatro story and I was pleased
that we were able to set up our initial
employee share ownership plan ear-
lier this year which is widely spread
across our employee base. As well
as our people at Pelatro, we want
to say thank you as well to all our
stakeholders in Pelatro – our share-
holders, customers, suppliers, advis-
ers and others who have all contrib-
uted to our growth this year.
With our growing customer base, we
have an increasing ability to cross-
sell our products deeper across
our network. We are winning new
business with the telcos and have
announced two new customers al-
ready in the current year, in addition
to the launch of our Data Monetiza-
tion Platform. Visibility over some
$5.3m of revenue and a $15m pipe-
line, gives us every confidence as we
look forward to the rest of the year.
Richard Day
Chairman
ANNUAL REPORT 2018” 7
MANAGING DIRECTOR’S
LETTER TO THE SHAREHOLDERS
Dear Shareholder,
Your company has completed one full year as a quoted entity and it has turned out to be a foundation building year for
us. Our objective is to build the best in our industry and the first step in the building of any edifice is building the foun-
dation. That is exactly what we did in 2018. Let me elaborate what we achieved in those twelve months.
The Past Year
We forged ahead in three areas during the year – products, customers and inorganic growth – as the first step towards
leadership in our chosen space. The result is a platform that can cater to the expanding needs of telcos, doubling of
customer relationships and a well thought out, strategic acquisition.
Products
Pelatro started out with one product
and that continued to be the case
well into 2018. While retaining that
product as the mainstay of the com-
pany, we have built out a large suite
in line with our vision for the indus-
try. The suite, called Multichannel
Marketing Hub, encompasses Con-
textual Marketing Solution, Loyalty
Management Solution, Gamification,
Data Monetization Platform and In-
telligent Notification Manager. While
the first four solutions help in deep-
ening the engagement between the
telco and its subscribers through
various means like contextual cam-
paigns,
loyalty programs, games
etc. for both telco and non-telco
products, the last product assists
the telco to support this extensive
engagement exercise by providing
a robust communication platform.
The products function in tandem as
a well integrated platform address-
ing the twin objectives of revenue
enhancement and churn reduction.
Your company is pioneering this ap-
proach by offering related products
on a common platform for the first
time. Needless to say, this pioneer-
ing endeavour will propel Pelatro to-
wards leadership.
Subash Menon
Managing Director, CEO & Co-Founder
ANNUAL REPORT 2018 8
Customers
Pelatro’s customer base has been growing by leaps and
bounds. It now includes several prestigious names in the
telco industry like Telenor, Axiata, Tele2, SingTel, Cable &
Wireless etc. The graph given below shows the progres-
sion with the base doubling in 2018. This growth has en-
abled us to reduce customer concentration and to gain
credibility and stature.
The exponential growth in the number of customers is
evidence of the fact that the customer acquisition and
growth strategy employed by Pelatro is working quite ef-
fectively. We will continue on the same path thereby en-
suring a steady and commendable progress on this front.
Global Footprint
Inorganic Growth
For all software companies, inorganic growth is a key
element. At Pelatro, we view this as an opportunity to
expand our global footprint and to strengthen the prod-
uct offering. In keeping with this philosophy, we contin-
uously scan the space for appropriate opportunities. In
2018, we identified a company that had certain assets
which turned out to be an excellent fit on both fronts –
customers and products. We acquired these assets from
Danateq, based out of Singapore, in August/September
2018 and completed the integration soon thereafter. This
acquisition catapulted the company to a higher orbit due
to variety of factors detailed herein.
Global Framework Agreement with the Telenor Group for
Contextual Marketing Solution and a large contract with
Globe, Philippines were the key assets on the customer
front. While the former brought entry into a large global
group with operations in 11 countries, and the potential
to sell to all of them, the latter brought us a very valuable
recurring revenue stream. We are in the process of ex-
panding and deepening our relationship with the Telenor
Group.
ucts in our portfolio.“
Another arrow in our
quiver is the ability to
leverage multiple prod-
A notable aspect of the addition of new customers is
the presence within specific telco groups. Pelatro stra-
tegically enters a large telco group by winning a contract
from one of the OpCos. For example, we won the con-
tract from Robi of Bangladesh, an Axiata Group company,
by offering a Proof of Concept engagement to establish
the differentiation and efficacy of our mViva Contextual
Marketing Solution. This extremely successful engage-
ment was followed by contracts from other Axiata Group
OpCos like Dialog, Celcom, Smart and Ncell. A similar
strategy has worked out well with the Telenor Group re-
sulting in our presence in Telenor OpCos in Bangladesh,
Myanmar and Bulgaria with more in the pipeline.
Another arrow in our quiver is the ability to leverage mul-
tiple products in our portfolio. As explained earlier, all
the products from Pelatro work in harmony to deliver the
same objectives from different angles. This has enabled
us to sell more than one product to each customer there-
by strengthening our relationship with customers which
leads to a virtuous cycle of growth. For example, the
Global Framework Agreement with Telenor currently in-
cludes two product – Contextual Marketing Solution and
Loyalty Management Solution – after having started with
one. We now have the possibility to sell both the prod-
ucts to Telenor OpCos. While the current average is 1.2
products per customer, it is our stated aim to constantly
increase this penetration which will bring rich dividends
to the company. Needless to say, a follow-on sale has a
higher probability as compared to the initial sale. Further,
when multiple products from Pelatro are used by any tel-
co, the overall gain realised by them will be higher due to
the benefits that they experience from the inter play of
the products.
ANNUAL REPORT 2018 9
As part of that activity, we have been successful in get-
ting another product – Loyalty Management Solution –
included in the Global Framework Agreement and also
sold that product to Grameenphone, the Telenor OpCo in
Bangladesh. We now have the opportunity to gradually
sell both Contextual Marketing Solution and Loyalty Man-
agement Solution across the Telenor operation. Efforts
are on to include a third product also in the Global Frame-
work Agreement. With regard to Globe, we have been
able to step up the revenue and to engage in dialogue to
expand the product portfolio that is being used by Globe.
We are confident of receiving significant revenue from
these relationships with Telenor and Globe in the com-
ing years. The engagement with Telenor helped us enter
Central & Eastern Europe and could also potentially take
us into Western Europe in the foreseeable future.
The acquisition also brought us two additional products –
Loyalty Management Solution and Intelligent Notification
Manager – and helped us to strengthen our Multichannel
Marketing Hub. This has now enabled us to sell multiple
products from the platform thereby leveraging existing
relationships through cross selling. Further, the presence
of multiple products forming a platform has substantially
increased our credibility resulting in a positive thrust to
our endeavour to grow quickly. In addition to this obvious
benefit, we are now able to enter telcos through multiple
opportunities by leveraging different products as against
the earlier situation of having to rely on a single product
to enter with.
Needless to say, the acquisition is expected to be accre-
tive in this current year. Thus, we have been able to iden-
tify, acquire and integrate these assets resulting in huge
benefits across various elements. Your company will
continue to seek out such highly beneficial opportunities
in the future.
Cash Collection
At the end of the financial year, trade receivables stood
at $4.1m (2017: $1.8 million) i.e. 251 days. The increase
relates largely to the weighting of revenues in the second
half of the year, with over 60% of the total revenue billed
in the last quarter (of the $4.1m, $1.8m represented rev-
enue which had been accounted for in the last quarter
of 2018) as certain contracts are bespoke and under
extended settlement terms and others (notably change
requests) are typically billed on a cumulative basis. Ap-
proximately $1.8m has been collected since the year end
and to date, resulting in debtor days of 153.
Cash collection has been a key strategic focus for man-
agement this year - cash generated by operations, as
adjusted for exceptional items, amounted to just under
$1.2m (2017: $750,000), largely as a result of the improv-
ing timing of collection of trade receivables (operating
cash outflow of $52,000 in the first half comparing to
adjusted operating cash inflow of approximately $1.2m
in the second); this improvement is expected to continue
as the Group becomes more established and also with
an increasing proportion of repeat or monthly contracts
in the revenue mix (e.g. from revenue share or managed
services).
Vision
Building an organisation calls for vision. Articulation of
this vision, acceptance of the same by all stakeholders
and flawless execution results in leadership. Pelatro has
always been a visionary in its chosen space. Our vision is
resonating well with the telco industry which has led to
their enthusiasm for our products. The telcos have com-
prehended that Pelatro could play the role of a valuable
partner in their quest for digitization of their business, in-
crease in revenue and reduction in churn. Over the past
few years, we have been executing in line with this vision
and have now built a strong foundation to grow on.
Our vision encompasses the entire area of customer en-
gagement and monetization of deep customer relation-
ship. The most important asset that any telco has is the
continuing relationship with its subscribers and the data
that is generated as a result of this relationship. Pelatro’s
solutions help the telcos to ensure continuous and deep
engagement with customers to ensure a high level of
satisfaction leading to higher revenue and lower churn.
This multichannel and multifaceted engagement gener-
ates a significant amount of data related to consumption
behaviour of these subscribers covering a wide gamut of
areas like voice, data, broadband, music, video, messag-
ing, browsing etc. This data is collected by the platform
from Pelatro and is then analysed to come up with ac-
tionable insights. Thus, the solutions from Pelatro hold a
wealth of data and insights that are valuable for various
B2C business entities like banks, insurance companies,
retail, brands etc. Our visions is to build an ecosystem
of all these players who will benefit from this vast un-
derstanding of hundreds of millions of subscribers. The
telcos can monetize this by providing access to the B2C
business entities mentioned earlier, who will gain by be-
ing able to engage with the subscribers of the telco in a
contextual, relevant and real time manner. This engage-
ment will be in the form of campaigning and mobile ad-
vertisement. This means that, with the help of Pelatro,
the telcos can earn a material share of the burgeoning
mobile advertisement market.
Pelatro’s products cover about 370 million subscribers
now, including a penetration level of about 70% of the
population of 4 countries. Consequently, Pelatro’s plat-
form facilitates partnership with B2C companies in those
countries and Pelatro’s telco customers based on the
ability of these telcos to provide mobile advertising and
campaigning to 70% of the population in these countries
to their B2C partners. Thus, Pelatro is building an ecosys-
tem of its telco customers and a variety of B2C players
in each country. As this gets built and achieves a critical
mass in a large number of countries in the foreseeable
future, Pelatro will become an indispensable partner to
the telcos leading to Pelatro’s revenue growing at a fast
pace on the back of increasing revenue for the telcos
and sharing of that revenue with Pelatro. In short, Pela-
tro envisions an ecosystem that generates significant
revenue for the telcos through mobile advertising and
ANNUAL REPORT 2018 10
campaigning and sharing of the same by Pelatro.
I thank every one of our stakeholders for the support extended during the last year while the company was building a
strong foundation. Let us work towards enhanced growth by leveraging the foundation that we have built.
Subash Menon
Managing Director, CEO & Co-Founder
25 March 2019
ANNUAL REPORT 2018 11
TELECOM OPERATORS -
THE NEW PARADIGM
All consumer related businesses
are undergoing a paradigm shift
and telecom is no exception. The
phase of revenue growth through
new subscriber addition is gone and
the new paradigm is about revenue
growth by maximizing opportunities
from existing customer base. This
change calls for a difference in busi-
ness practices from what telecom
operators were used to and that also
means a new approach to systems,
processes etc. Pelatro, through its
mViva suite of solutions, empowers
telcos to manage and navigate this
change.
So, what exactly is the new para-
digm all about? One phrase: cus-
tomer centricity. This is about keep-
ing the customer at the centre for
all your processes and systems.
While telcos had adopted this as a
philosophy to shape their customer
attitude in the last decade or so, sys-
tems are yet to be fully incorporate
this approach.
Telcos are very well postioned to
make the best use of this global phe-
nomenon as a telecom operator is
an entity that has very regular ouch
points with its customers, in fact
many times a day. They also gath-
er a lot of very relevant information
about the activities of the customer.
For instance, a telco knows when
a customer of a particular profile
is near a Starbucks outlet or when
a customer is using mobile data or
accessing a streaming video site
etc. Thus, a telco has immediate
and timely awareness of the context
of the customer. If the information
gathered by the telecom operator
is combined or enriched with data
from other sources such as banks
or retail outlets, there is a sudden-
ly a mine of customer contextual
data that can be capitalized on, for
mutual benefit, through value based
exchange. The customer gains be-
cause they can now get very rele-
vant offers that they want to pursue
and the enterprise (telcos, banks
etc.) has opportunity for much deep-
er engagement with the customer.
Banking
Retail
Insurance
Financial
Services
Mobile: Centre of the B2C World
ANNUAL REPORT 2018 12
Telcos are best positioned to take advantage of this because their frequent and on-going relationship with the custom-
er. With the support of the mViva suite of solutions, there are four immediate opportunities for the telcos to monetize
their customer base and data:
• Contextual Marketing: Capture and utilize on the context of the customer with relevant, targeted offers and
messages
• Loyalty: Enhance customer engagement and longevity through loyalty programs
• Data Monetisation: Enable partners to utilize telco data for targeted advertising
• Gamification: Enrich interaction with customers through gamification of processes and objectives
Empowering telcos through mViva suite
This unique vision from Pelatro, as captured in the figure above is enabling telcos to take advantage of the shift in land-
scape through its mViva suite. It may be noted that most other providers are only providing bits and pieces and not a
holistic solution as envisaged above. Pelatro is able to put together such a suite because of its commitment and vision
of empowering the customer. Indeed, business velocity is a key requirement in these times and mViva differentiates
itself from the competition based on:
• Optimised data analytics engine.
• Tightly integrated AI-ML applications.
• Patent pending application of big data technology.
• Deep understanding of the telecom domain.
• Intuitive and rich user interface.
• Comprehensive coverage of functionality.
Sudeesh Yezhuvath
Chief Operating Officer & Co-founder
ANNUAL REPORT 2018 13
LEVERAGING TECHNOLOGY
LEVERAGING TECHNOLOGY
of
volume
Telcom operators generate enor-
mous
structured,
semi-structured and unstructured
data at an ever increasing pace.
This includes call records, subscrib-
er location, recharge logs, purchase
transactions and a whole lot of QoS
metrics from signalling systems and
network probes. This manifests into
a classical use case for Big Data An-
alytics. Big Data refers to extremely
large data sets that may be analysed
computationally to reveal patterns,
trends, and associations, especial-
ly relating to human behaviour and
interactions. mViva leverages tried
and tested Hadoop MR framework
on HBase Big Tables with various
proprietary optimizations to aggre-
gate billions of records from hun-
dreds of sources and stores them
as Hypercubes rolled up to desired
level of granularity.
Pelatro has developed a state-of-the-
art co-location based Hummingbird
Store and Map-Reduce framework to
handle time sensitive, wide sweep,
mViva specific workloads very effi-
ciently using the right mix of IO, CPU
and Memory resources. Two way
bridges connect Hummingbird MR
and Hadoop MR interfaces allowing
jobs to seamlessly use resources
from either of the frameworks in the
most optimal manner. Pelatro lever-
ages on several Big Data backed
custom libraries to achieve highly
optimized runtimes for business
sensitive processes. Real Time In-
sights are realized using our patent
pending Vector Search implemen-
tation on Big Data. mViva relies on
high performance, Dynamic View-
port Synthesis, Hakken library for
seamless multidimensional slicing
and dicing in real time.
The world
is getting more and
more connected by every passing
day. Each individual is influenced
unknowingly by many events and
actions within their connected com-
munities. Social Network Analysis
helps detect such deeply hidden
influence patterns and helps Busi-
ness Analysts ride on this invaluable
information when designing cam-
paigns and offers.
Efficient processing of large graphs
is challenging. Graph algorithms of-
ten exhibit poor locality of memory
access, very little work per vertex,
and a changing degree of parallel-
ism over the course of execution.
Distribution over many machines
exacerbates the locality issue, and
increases the probability that a ma-
chine will fail during computation.
Vertex Centric Model is an approach
to graph processing that helps ad-
dress the above concerns efficiently
by using iterative algorithms.
mViva leverages on VCM backed
Page Rank implementation to as-
influences and cascade of
sess
influences in a Telcom Social Net-
work. It also runs Community Detec-
tion algorithms to identify business
relevant communities that help Mar-
keting Analysts design offers and
target subscribers at a higher cohe-
sive plane
in the
Additionally, mViva uses VCM based
implementations of Collaborative
Filtering Algorithms
likes
of SVD (Singular Value Decom-
position), ALS (Alternating Least
Squares), SGD (Stochastic Gradient
Descent), PMF (Probabilistic Matrix
Factorization) etc. to help design
and deliver smart campaigns with
intelligent offer recommendation.
In the field of Contextual Marketing,
it is extremely critical to act up on
a subscribers data before we lose
context. Technological advanced
and adoption of high speed Net-
works has resulted in enormous
amounts of real time data that ren-
ders itself to analysis of behavioural
patterns on the fly. Stream process-
ing analyses and performs actions
on real-time data though the use
of continuous queries. Stream-
ing Analytics connects to external
data sources, enabling applications
to integrate certain data into the
ANNUAL REPORT 2018 14
application flow and it is an evolution of Complex Event
Processing (CEP). Pelatro is powered by high perfor-
mance ZMQ backed Streaming Analysis library with
smart memory management algorithms aimed at achiev-
ing very high levels of operational efficiency when pro-
cessing workloads at rates of over a million events per
second. High performance aggregation allows data to be
profiled on the fly thus enabling Business Analysts and
marketers to reach out to the subscribers in real time us-
ing the right offers before losing context.
We are in an era of data explosion where amount of min-
able data is increasing at an unprecedented rate and re-
search says the trend shall continue northwards with the
advent of newer technologies like 5G and RCS. This cre-
ates a situation where smartness and innovation in ap-
proaches to solving large problems at scale are inevita-
ble for existence. Brute force algorithms and techniques
cannot be shielded by even the best of hardware. Dy-
namic Programming is a method for solving a complex
problem by breaking it down into a collection of simpler
subproblems, solving each of those subproblems just
once, and storing their solutions using a memory-based
data structure. Dynamic Programming helps us solve
problems that work in exponential complexity, otherwise,
in polynomial times. mViva leverages on Dynamic Pro-
gramming based Algorithms to efficiently handle data
synthesis and data processing in many of its high impact
Data Visualization components such as Sankey Charts
and Pivotal Analysis.
Distributed Processing is modern day mantra towards
solving complex data analysis problems and this lays
considerable emphasis on need for efficient, high speed,
low latency communication between various processing
components. The concept of “Messaging Enabled Net-
work” has evolved from an attempt to integrate AMQP
with high-performance messaging use cases, such as
those encountered in stock trading businesses, telecom
and high volume social media traffic analysis.
mViva leverages on high performance asynchronous
messaging provided by Zero MQ (ZMQ) with optimal us-
age of various patterns like Request-Reply, Publish-Sub-
scribe, Push-Pull, Exclusive-Pair. Pelatro has built a cus-
tom protocol called GLUE for seamless replication of
application data over distributed network components
with optional support for cascaded streaming which
serves as backbone for mViva In-Memory Constructs.
Arun Kumar Krishna
Head - Engineering
ANNUAL REPORT 2018 15
BUILDING HUMAN CAPITAL
“Human Capital – The Potential of an individual – is
going to be the most important long term investment a
company can make for its people and company’s growth”
At Pelatro, we are committed to the above mentioned
thought process.
Following are some of the benefits of investing in human
capital. As per Gallup, Millennials want to work for a busi-
ness that invests in their human capital.
Values Understanding through Outbound camp – Pela-
tro engages with an Outbound learning institute called
Pegasus, which organizes an outbound camp. Activities
are planned in this camp to highlight Pelatro Values. This
helps in bonding at a personal level and bonding with the
ethos of the organization.
Onboarding and training develops employee engage-
ment, improves ROI and improves Organizational com-
munication.
1. Increase Employee Satisfaction
2. Improve Retention Rates
3. Develop Employee Engagement
4. Develop Client Engagement
5. Improve ROI
6. Improved Organizational Communication
7. Better Recruitment Greater Company
Pelatro has realized the importance of Developing Hu-
man Capital. For a product company the longevity of ex-
perience with the product is an important differentiating
factor.
At Pelatro, we build human capital through the following
interventions:
1. Onboarding and training
2. Assessment and Development Centre
3. Cross-functional tasks
4. Recruitment
5. Fun activities
Onboarding and training:
On joining a new hire is assigned a mentor (Can be peer
or senior). It is the job of the mentor to ensure that all
training is given and mentor often discusses and quiz-
zes the new member on various aspects of work that the
person will be assigned to. For the initial few weeks (4-8
weeks), the defined learning process is practiced. Often
the new joiner is asked to present his understanding of
different topics to his/her team. The new joiner is initi-
ated into the tasks after completion of training and after
undergoing Product Fitment Test (varies based on roles).
The mentoring concept and presentations improve Orga-
nizational communication.
Training is given through a one on one interaction be-
tween new member and existing members on different
topics as defined for the role. This is followed by a prac-
tical session.
Assessment and Development Centre:
This is a concept that we have co-developed with Pega-
sus Institute of learning. A set of core competencies are
defined by Pelatro which we would like to see in our mid-
dle and senior level leadership team. Tasks are defined
in a non-threatening environment in the outbound model.
This assessment is carried out with a dedicated observ-
er for a person. In addition, there are psychometric tools
which are used to assess the current state of the Pelatro
member.
The observed results from Outbound and the results of
the psychometric tools are co-related. Based on the cor-
relation development needs are chalked out. The suitable
interventions for the development needs are identified
and Pelatro members undergo the intervention for devel-
opment defined for him. Based on this a career planning
is done for each of the employees.
Assessment and Development center increases employ-
ee satisfaction, improves retention rates and develops
employee engagement.
“
Human Capital - The
Potential of an individual
- is going to be the most
important long term
investment a company
can make for its people
and company’s growth.
ANNUAL REPORT 2018 16
Cross-Functional tasks:
Fun and Games activities:
The Pelatro team members are exposed to different
tasks which are not over and above their core skills. This
is done in a controlled and limited way. These tasks could
be related to End to End implementation at a customer
end, training a customer or to provide L1/L2 support a
customer. This ensures that employees have an end to
end view of the product, understand the customer needs
and incorporate the same when he/she comes back to
their core skills role.
Cross functional intervention improve employee and cli-
ent engagement, improves ROI and increases employee
satisfaction.
These are activities that Pelatro Club, headed by an HR
representative holds from time to time. There is cross-
team participation and all members of Pelatro partici-
pate. This builds connect and engagement across differ-
ent roles in the organization.
Human Capital is the measure of the economic value that
an employee provides, through their knowledge, skills,
and abilities. At Pelatro, we are very conscious of this
fact and dedicated to ensure that Pelatro Team member
gets the skills and opportunities which is a Win-Win situ-
ation for the employee and the organization.
Anuradha
Chief Mentor
Recruitment:
Pelatro hires experienced resources and also fresh grad-
uates in Engineering. In the recruitment cycle, a brief
about the company, its field of working and what one can
gain by working in Pelatro is given. During the interview,
Pelatro not only looks for an understanding of the con-
cepts but also the application of the concepts. During
the interview process, clues and hints are given to the
candidates for the candidate to reach the correct answer.
This ensures that we give sufficient challenge for anyone
to entre Pelatro. In addition potential employees are also
asked to solve puzzles Often we have got the feedback
from potential employees, who have multiple offer, that
one thing they liked about the whole process was the en-
gagement of Interviewer in making them reach the an-
swers. They get a feeling that there is sufficient interest
in the senior members of the organization to help new
members in realizing their potential.
ANNUAL REPORT 2018 17
KEY PERFORMANCE
INDICATORS
For the year ended 31 December 2018
In addition, the Group monitors
certain non-financial performance
indicators at an operational
lev-
el, including the number of new
customers in the year, Requests
for Proposal received, movement
of sales pipeline and Change Re-
quests. However, none of these
are currently considered to be indi-
vidually appropriate as a measure
of overall strategy execution suc-
cess. All KPIs are reviewed annual-
ly and this includes consideration
of appropriate non-financial KPIs.
As the business develops the Board
will consider adding, as appropriate,
further KPIs to monitor progress
against a broader range of objec-
tives.
Introduction
The Directors consider that revenue,
adjusted EBITDA (Earnings Before
Interest, Depreciation and Amortisa-
tion) (see Note 9 for adjustments)
and profit before tax, and the related
margins as a percentage of reve-
nue, are key performance indicators
("KPIs") in measuring Group financial
performance and will continue to be
so as the profile of the Group chang-
es as a result of future licences and
other commercial agreements are
concluded. The performance of the
Group in this latter area is set out in
detail in the Financial Review.
In addition, the Directors believe
that further important KPIs are the
Group’s cash flows, including op-
erating cash flow and expenditure
on investing activities (principally
on capitalised development costs).
Net cash inflows from operating ac-
tivities for FY2018 were $864,000
(2017: $45,000), reflecting increased
profitability and improved working
capital. Capitalised expenditure on
development costs was $1,604,000
(2017: $752,000) reflecting the in-
creased activity of the Group. Fur-
ther details of cash flows in 2018
are set out in the Group Statement
of Cash Flows.
Non- financial
performance indicators
In a small business with a high pro-
portion of well qualified and experi-
enced staff the rate of staff turnover
is seen as an important KPI: in 2018
we recruited 30 new members of
staff and 11 left the business (2017:
25 joined and 7 left, treating PSPL,
the Group's software development
centre, as having been part of the
group for the whole of the year). In
addition, 33 new members of staff
joined as a result of the Danateq Ac-
quisition, a further 3 were recruited
subsequently, and 4 have left.
ANNUAL REPORT 2018 18
PRINCIPAL RISKS AND
UNCERTAINTIES
For the year ended 31 December 2018
Introduction
Our aim is to recognise and address the key risks and uncertainties facing the Group at all levels of our business.
There are a number of risk factors that could adversely affect the Group’s execution of its strategic plan and, more gen-
erally, the Group’s operations, business model, financial results, future performance, solvency, or the value or liquidity of
its equity. The Board is committed to addressing these risks by implementing systems for effective risk management
and internal control.
The Board has performed an assessment of the principal risks and uncertainties that could threaten Pelatro’s business,
business model, strategies, financial results, future performance, solvency or liquidity. The items listed below represent
the known principal risks and uncertainties but does not list all known or potential risks and uncertainties exhaustively.
Where possible, mitigation steps are taken to safeguard against materialised risks.
Principal Risk
Mitigation
Movement
Technology
The industry in which Pelatro operates is
in the process of continual change reflect-
ing technical developments as industry
and government standards and practices
change and emerge
The markets in which Pelatro operates
are competitive and rapidly evolving. The
Group’s existing products may become
less competitive or even obsolete as com-
petitors introduce new products and cus-
tomer behaviour changes.
Building sales
Central to our strategic growth plan is win-
ning new mViva contracts. Failure to do so
would directly impact our achievement of
overall objectives or lengthen the period
taken to achieve them. Specifically, failure
to win new mViva contracts early enough
in a financial year would jeopardise our
ability to deliver the implementations and
recognise the associated revenues in that
financial year. Sales cycles are often very
lengthy and may sometimes be delayed or
restructured late in the process.
New products and features are as-
sessed against their target markets
and in response to customer feed-
back prior to development. As Pela-
tro engages with more customers
with an increased product portfolio,
a broader spread of feedback is ob-
tained enabling the business to en-
gage with customers more quickly
and effectively.
We have strengthened our sales and
marketing operations in order to build
greater pipeline visibility and grow
revenues faster. In addition to existing
efforts In South and South-East Asia
and Africa, and the US, we are con-
centrating our new sales investment
in Central Asia and Eastern Europe
where we see significant opportunity
for new business and rapid growth.
We continue to develop and extend
the mViva offering as a Multi Chan-
nel Marketing Hub to extend market
reach.
ANNUAL REPORT 2018 19
Misdirected product, operational or
strategic investments
We are continually investing in product de-
velopment and operational requirements
to support mViva-led growth. Failure to
achieve meaningful returns on investments
would hinder the Group’s strategic growth
plan and potentially jeopardise the Group’s
position in the market and its prospects
Strong communication lines between
relevant stakeholders are ensured
through regular formal meetings and
monthly reporting. The Board reviews
and challenges all strategic invest-
ments
Competition and technology
The international software industry is sub-
ject to rapid and substantial technological
change. There can be no assurance that
developments by others will not render the
Group’s developments obsolete or uncom-
petitive
The Group employs highly qualified
software engineers and senior man-
agement who monitor and are aware
of developments in technology that
might affect its research capability
and product evolution
IP, data and cyber risks
A significant IP loss, third party IP challenge,
data loss, security breach or cyber-attack
could significantly threaten Pelatro’s abili-
ty to do business, particularly in the short
term, and could result in significant finan-
cial loss.
Reputational risk
Maintaining a strong reputation is vital to
the Group’s success as a business. A loss
of confidence in the Group’s ability to un-
dertake new client opportunities may be
caused by an adverse impact to the Group’s
reputation which may, in turn significant-
ly affect our financial performance and
growth prospects.
Significant impact to the Group’s reputation
could be caused by an incident involving
major harm to one of our people or custom-
ers, inadequate financial control processes
or failure to comply with regulatory require-
ments. Impact of this type would potential-
ly result in financial penalties, losses of key
contracts, an inability to win new business
and challenges in retaining key staff and re-
cruiting new staff.
implement
We
robust processes
across IP and IT systems, which are
overseen by the Head of Engineering.
Strong corporate governance and
dedicated senior management re-
main the key elements of effective
reputational management. Senior
management provide a model of
best practice and guidance to ensure
the Group’s values and expected be-
haviours are clear and understood by
everyone. As our business continues
to grow and develop, we will remain
strongly focused on protecting the
strength of the Group’s reputation
through effective governance, lead-
ership, and through cultivating open
and transparent relationships with all
stakeholders.
ANNUAL REPORT 2018 20
Product and service delivery failures
Issues or failures with our software prod-
ucts or services could lead to failed imple-
mentations, project delays, cost overruns,
data loss, security issues, customer dis-
satisfaction, early termination, service lev-
el breaches and contractual claims, all of
which could adversely impact the Group’s
revenues, earnings and reputation.
The risks of servicing large telcos are sig-
nificant but generally stable and well un-
derstood, and Pelatro has not suffered any
material product or service failures since
inception. Risks are generally greater with
new clients, but formal RFP processes are
routinely carried out by telcos, which pro-
vides clarity as to requirements and expec-
tations.
Attracting and Retaining
Skilled People
Attracting and retaining the best skilled
people at all levels of the business is criti-
cal. This is particularly the case in ensuring
we have access to a diverse range of views
and experience and in attracting specific
expertise at both managerial and opera-
tional levels where the market may be high-
ly competitive. Failure to attract new talent,
or to develop and retain the Group’s existing
employees, could impact the Group’s ability
to achieve the Group’s strategic growth ob-
jectives. As we continue to grow and diver-
sify into new areas, this risk will continue to
be a focus for the Board.
Pelatro mitigates
inherent product
and service risks through robust qual-
ity assurance and project governance
processes. Product releases are unit
tested prior to delivery and subjected
to further customer testing prior to
first use. Customer testing and ac-
ceptance sign-offs are required prior
to go-live.
Our business model has created a
pipeline of opportunities for staff at
every level of the business. This will
continue to be the case as the Group
develops. The Group’s focus on com-
petency at all levels of the business
continues to ensure that we develop
the Group’s people and enable them
to successfully manage the changing
profile of the Group’s business. Incen-
tive programmes are also in place
to ensure that key individuals are re-
tained.
Economic, international trade
and market conditions
The Group is generally exposed to eco-
nomic, trade and market risk factors, such
as global or localised economic downturn,
changing international trade relationships,
foreign exchange fluctuations, consolida-
tion or insolvency of existing or prospective
customers or competitor products, all of
which could significantly threaten Pelatro’s
performance and prospects. Pelatro’s cur-
rent focus on emerging markets customers
may increase such risks.
Mitigation against the short-term im-
pact of such risks is provided through
an increasing spread of geographies
and customers. Pelatro monitors po-
litical developments and will seek to
mitigate emerging risks where pos-
sible. Pelatro’s high margin revenues
provide a level of protection against
volatile economic or market condi-
tions and our policy of ongoing prod-
uct development helps us to maintain
our competitive advantage.
ANNUAL REPORT 2018 21
FROM THE DESK OF THE
FINANCE DIRECTOR -
FINANCIAL REVIEW
For the year ended 31 December 2018
Introduction
Our full year results highlight the rapid growth the Group has experienced in 2018, and reflect a broader product offer-
ing of both software and services. Revenue increased by 95 per cent. to $6.1m, including some $3.1m repeat revenue
(including gain share, change requests and managed services, as well as PCS). Repeat revenues such as this are a key
strategic focus and they have grown strongly because of both the continuing emphasis on growing sales of service
contracts (including PCS) and the acquisition of the Danateq Assets during the year which brought significant levels of
repeat revenue. We expect this growth to continue as our products achieve wider adoption throughout the telecommu-
nications industry – 2019 has already started positively with significant customer wins, notably Vinaphone of Vietnam
and Ooredoo in the Maldives (part of the large Ooredoo Group of Qatar).
KEY PERFORMANCE INDICATORS
Revenue
Repeat revenue
2018
2017
Growth
$6.12m
$3.15m
95%
$3.10m
$0.62m
411%
Repeat revenue as percentage of total
51%
20%
Adjusted EBITDA (see note 9)
$3.75m
$2.00m
88%
Adjusted EBITDA margin1
61%
69%
Profit before tax (pre exceptional items)
$3.1m
$1.8m
Cash generated from operating activities
(pre exceptional items)
$1.2m
$0.75m
73%
56%
Contracted Customers (at year end)
14
7
100%
1 2017 Margin Adjusted For $255,000 of Hardware Sales at Nil Net Profit
ANNUAL REPORT 2018 22
Income Statement
Revenue
2018 continued the trends seen in
the prior year, with total revenues
rising around 95% to $6.12m (2017:
$3.15m), and more than doubling
when adjusted for the $255,000 sale
of hardware in the 2017 figures. Of
this $6.1m, approximately $2.5m
arose from sales of licenses and the
associated implementation (2017:
$2.3m) and some $3.1m arose from
repeat revenue, notably from gain
share contracts and in particular
change requests (2017: $0.6m).
The geographic spread of income
has also increased, with some 14
customers across as many coun-
tries; likewise, the concentration of
revenue has significantly decreased,
with now two customers each ac-
counting for more than 10% of the
revenue compared to 6 in 2017.
As detailed further in Note 5, the
Group implemented IFRS 15 Reve-
nue from Contracts with Customers
(“IFRS 15”) with effect from 1 January
2018. The principal changes resulting
from its application were: (1)
recognition of revenue from the sale
of a license and its implementation
as two separate performance obliga-
tions, without reference to contractual
invoicing milestones; and (2) recog-
nition of revenue from post-contract
support (“PCS”) over the term for
which support is provided (typically
5 years) rather than the period over
which customers usually pay (usually
4 years). In addition, certain contracts
which have terms which allow for in-
stalment payments or similar over
an extended period are now treated
as contracts with a “Significant Fi-
nancing Component”; accordingly, the
Group recognises effective interest
income on the amounts deemed to be
credit extended to the customer.
implementation of
The
IFRS 15
has not affected the revenue rec-
ognition of income from change
requests, revenue gain share con-
tracts (except where there is also a
fixed monthly payment), managed
services or the resale of hardware.
In summary, the effect of IFRS 15
has been to accelerate approxi-
mately $271,000 of income (relating
to PCS and contracts where fixed
amounts are payable over time)
which otherwise would have been
recognised in later periods, and to
defer approximately $167,000 of in-
come (principally relating to license
fees) which otherwise would have
been recognised in this financial
year (offset by some $23,000 of rev-
enue which has been recognised as
interest).
As all the Group’s revenue is in US
Dollars, there is no impact on reve-
nue arising from foreign exchange
movements.
Cost of sales
Cost of sales of $555,000 (2017:
$799,000) represents the direct la-
bour costs of providing software
support and maintenance, profes-
sional services and consultancy, as
well as sales commissions payable,
expensed customer integration and
software maintenance costs. As
the Group diversifies its revenue
streams into (for example) man-
aged services and PCS, an increas-
ing proportion of costs will be allo-
cated to cost of sales reflecting the
direct costs of service and support
for the relevant contracts.
Prior to its acquisition in Decem-
ber 2017, amounts invoiced to the
Group by the then third-party owned
software development centre PSPL
and which were not eligible for cap-
italisation were accounted for as
cost of sales; these costs reflected
that company’s underlying adminis-
trative costs as well as costs direct-
ly relating to technical and related
services. Following its acquisition,
the Group cost of sales excludes
administrative expenses
in PSPL
which are included instead in the rel-
evant category; hence the prior year
figure is not directly comparable.
Such expenses were approximately
$200,000 in 2017, the majority of
which related to travel. The 2017 fig-
ure also includes $274,000 relating
to the cost of hardware which was
sold on to a customer.
Overheads and exceptional costs
Pre-exceptional overheads (exclud-
ing depreciation and amortisation)
increased to $1.8m (2017: $0.34m)
as a result of staff costs (which
were previously included in cost of
sales) and directors’ remuneration
as well as additional costs relating
to maintenance of the Company’s
admission to the AIM market (the
Group’s admission to AIM was in De-
cember 2017). Reflecting the global
reach of the Group, more than dou-
ble the number of customers and
a similar increase in staff needing
to travel to service them, travel and
other marketing costs were also
a significant contributor to this in-
crease. The Group will continue to
invest in staff to ensure a level of
service which befits the standard of
the software products; likewise, with
the number of opportunities avail-
able worldwide, marketing and trav-
el will continue to be an important
component of Group expenditure.
As well as exposure to Pounds Ster-
ling on costs arising in the UK, the
Group is exposed also to foreign
exchange movements in the Indian
Rupee due to the software develop-
ment and support activities carried
out by its Indian subsidiary, PSPL.
The Group has a small exposure to
the Philippines peso and the Rus-
sian rouble because of its activities
in those countries. Overhead costs
also include the net effect of real-
ised foreign exchange movements
which resulted in a gain in the year
of $70,000 (2017: $15,000), aris-
ing principally from the weakness
of Sterling and the Indian Rupee.
As a result of the acquisition of
ANNUAL REPORT 2018 Taxation
The increase in the income tax for
the year reflects the increased profit-
ability of the Group and in particular
the increased size of the PSPL sub-
sidiary which is taxed at higher rates
than the rest of the Group entities.
The effective rate of 13% (which
is lower than the statutory rates of
19% in the UK, 18% in Singapore and
31% in India, being the jurisdictions
of the majority of the Group’s activi-
ties, is principally a result of certain
items in the calculation of statutory
profit before tax not being factors in
the relevant local income tax calcu-
lation (e.g. capitalisation of devel-
opments costs and the associated
amortisation).
23
the Danateq Assets and the plac-
ing of ordinary share capital to
fund it, the Group incurred a num-
ber of exceptional costs during the
year amounting to approximately
$310,000, being principally
legal
and other fees (2017: $701,000 re-
lating to the Company’s IPO). Costs
relating directly to the placing were
taken directly to share premium.
Profitability
Adjusted EBITDA (earnings before
interest, tax, depreciation, amor-
tisation and exceptional
items)
increased by 88% in the year to
$3.75m (2017: $2.00m) reflecting in
part increasing levels of repeat rev-
enue. Profit before tax, exceptional
items and amortisation of acquisi-
tion-related intangibles was $3.1m
(2017: $1.8m). On a similar basis
adjusted earnings per share (“EPS”)
were 10.1¢ (2017: 8.9¢), and report-
ed EPS were 8.0¢ (2017: 4.8¢). Re-
ported profit before tax was $2.6m
(2017: $1.1m).
ANNUAL REPORT 2018 24
Statement of Financial Position
Goodwill and other intangible assets
Goodwill
The goodwill in the Group balance sheet arises from
the acquisitions of PSPL in December 2017 and the Da-
nateq Acquisition in August 2018. As PSPL was initially
loss-making and then minimally profitable, and had been
funded largely by related party and third-party debt, it had
significant negative net assets at the time of acquisi-
tion, thus leading to the goodwill acquired. Goodwill also
arose from the Danateq Acquisition as further explained
below.
Customer relationships and
acquired software for resale
As noted in more detail in Note 26, the assets acquired
pursuant to the Danateq Acquisition comprised princi-
pally customer relationships and enterprise software for
resale to third parties. The consideration payable for the
acquisition comprised an initial payment and two pay-
ments which are contingent on certain revenue targets
being met. As at the effective date of the acquisition, the
Directors calculated the expected value of the contingent
consideration payable as approximately $8.4m, which
has been allocated approximately $6.9m to customer
relationships and $1.3m to software, with the residual
balance being ascribed to goodwill. The customer rela-
tionships acquired are being amortised over 10 years,
and the software acquired (in common with the Group’s
existing capitalised development costs) over 4 years. Net
of accumulated amortisation for the 5 months from the
effective date of acquisition, the net book value of the in-
tangible assets thus acquired was approximately $7.7m
at the year end, which the Directors consider to be in line
with their fair value.
Development costs
During the year the Group has continued to invest sub-
stantially in the development of its proprietary software
through its software development centres in Bangalore
and, since the Danateq Acquisition, Nizhny Novgorod.
Over the year the Group capitalised relevant costs of
around $1.6m (2017: $752,000) out of a total of underly-
ing costs of approximately $2.7m, of which the majority
were incurred in Bangalore. This investment reflects the
continuing expansion of the development team (around
70% of Group staff in the year) and underpins the planned
further improvements to and diversification of products
and hence further growth in revenues. As noted above,
as part of the Danateq Acquisition, the Group also ac-
quired development costs (relating to the development
work on the acquired software products which had been
carried out in Nizhny Novgorod) which were valued at
approximately $1.3m on acquisition. Amortisation on
the standalone and acquired costs increased to $0.6m
(2017: $201,000) accordingly, and net of such amorti-
sation, this capitalisation resulted in an intangible asset
in the statement of financial position of approximately
$3.2m (2017: $908,000).
Property, plant and equipment
During the year the Group acquired motor vehicles for
the benefit of two Directors at a cost of $270,000. Fur-
thermore, due to expansion of the Group’s activities, an
additional lease over a property in Bangalore was taken
on; the property so acquired required substantial renova-
tion at the expense of the Group (which requirement was
reflected in the terms of the lease), and the associated
costs of $49,000 have been capitalised as leasehold im-
provements. Additional investments were made in com-
puter and office equipment amounting to $67,000. Depre-
ciation in the year amounted to $47,000 (2017: $1,000,
reflecting the acquisition of PSPL in December that year)
and the aggregate net book value of property, plant and
equipment rose from $30,000 to $362,000.
Trade and other receivables
At 31 December 2018 trade receivables stood at $4.1m
(2017: $1.8 million). The increase relates largely to the
weighting of revenues in the second half of the year, with
over 60% of the total revenue accounted for in the last
quarter, as well as certain contracts being on bespoke or
extended settlement terms and others (notably change
requests) typically being billed on a cumulative basis. Ap-
proximately $1.8m has been collected since the year end
and to date, of which $202,000 relates to the $502,000
debtor over 121 days referred to in Note 19 and the bal-
ance relates to one other customer.
As part of its reported debtor balances, the Group may
at any one time have amounts outstanding representing
Unbilled Revenue (“UBR”). This may arise, for example,
where Pelatro undertakes work for customers in accor-
dance with contract terms, but the “Go Live” date (which
may represent the initial invoicing date) is expected much
later in the term of the contract. As is standard practice
in the telecoms industry, contractual revenue milestones
(and now completion of a performance obligation for the
purposes of recognition of revenue for IFRS 15) are typi-
cally reached much earlier than invoicing milestones and
credit terms of 90 days start following the invoice. Also
certain contracts may be structured such that a fixed
amount is payable over an extended term, and hence at
any one time there will be a debtor balance outstanding
which is not invoiced under the contract terms.
ANNUAL REPORT 2018 25
The trade receivables balance at the year end is analysed as follows:
2018
$’000
Receivables
2018
$’000
Associated
revenue
2018
2017
2017
2017
“Debtor days”
$’000
Receivables
$’000
Associated
revenue
“Debtor days”
Gross trade receivables
4,138
6,019
251
1,778
3,146
Trade receivables excluding UBR
1,813
3,694
179
1,721
3,089
206
203
Trade receivables above exclude contract assets and the associated revenue is the relevant contractual revenue ex-
cluding any adjustment for IFRS 15. Given the wide variety and bespoke nature of the Group’s contracts, figures shown
for debtor days are illustrative only. Further commentary on trade receivables is given below in the section regarding
cash flow and financing.
Trade and other payables
At the year end trade payables stood at $118,000 (2017: $53,000). Other payables of $463,000 (2017: $320,000) com-
prise an accrued tax liability of $271,000 and sundry creditors and accruals. The Group has tax liabilities principally
with UK, Singaporean and Indian tax authorities in relation to trading in 2018. Costs relating to the IPO in 2017 and the
Placing in 2018 are not tax deductible, whether taken to share premium or through the profit and loss account, and
hence have a concomitant effect on the effective tax rate.
A further $28,000 (2017: $101,000) was owed to Directors largely as a result of travel and other expenses incurred by
them on behalf of Group companies for which reimbursement was outstanding at the year end.
ANNUAL REPORT 2018 26
Statement of Cash Flows
Cash flow and financing
Cash collection has been a key strategic focus this year - cash generated by operations, as adjusted for exceptional
items, amounted to just under $1.2m (2017: $750,000), largely as a result of the improving timing of collection of trade
receivables (operating cash outflow of $52,000 in the first half comparing to adjusted operating cash inflow of ap-
proximately $1.2m in the second); this improvement is expected to continue as the Group becomes more established
and also with an increasing proportion of repeat or monthly contracts in the revenue mix (e.g. from revenue share or
managed services).
During the year the Group used some of the funds raised from the Group’s IPO in 2017 to repay founders’ loans which
were acquired as a result of the acquisition of PSPL ($436,000). In addition, PSPL’s overdraft of c.$316,000 was repaid.
Two term loans totalling approximately $246,000 were taken out to part fund purchases of vehicles for the use of
directors.
The acquisition of the business and certain assets of Danateq (further detailed in Note 26) was broadly cash neutral: an
initial cash consideration paid of $7.0 million was funded via a placing of 8.2 million new ordinary shares at a price of
73p raising approximately $7.9 million before expenses; direct expenses relating to the placing amounted to $319,000
and expenses relating to the acquisition were around $310,000.
As a result of the above, the Group had closing gross cash of $2.2m (2017: $4.1m) and net cash of $1.8m (2017:
$3.1m).
Contingent liabilities
As explained in further detail in Note 26, the Group acquired certain assets from the Danateq Group in August 2018,
including enterprise software and customer relationships, both formal (i.e. via a framework agreement) and informal.
Potential deferred consideration of up to $5m may be payable in respect of this acquisition, contingent on certain reve-
nue hurdles being met. Such consideration would be payable in two tranches: up to $3m in August 2019 (the “2019 con-
tingent payment”) and up to $2m in August 2020. These hurdles relate to specific projects in a closely defined pipeline
of actual or target contracts and are each further structured in two bands: the 2019 payment is $2m cash if a hurdle of
$2.25m total revenue is cleared, and $3m (in total, i.e. an additional $1m) if a hurdle of $4.5m total revenue is cleared.
Since the acquisition, the Group has been successful in utilising the software acquired as well as the customer relation-
ships (for example as evidenced by the contract win for the Loyalty Management Solution with Grameenphone) and
expects to continue to win such business in 2019 and beyond, but predominantly outside the defined pipeline. Accord-
ingly, it is unlikely that the higher hurdle level for the 2019 contingent payment will be met and thus the $3m payment
will not be due. There is a greater possibility that the lower hurdle will be cleared, with the consequential $2m payment
falling due; however, the hurdle is absolute such that any shortfall, no matter how small, will mean that no payment is
due. In any event the Group is confident that it has adequate resources to make any such payment that falls due.
Summary
Throughout the year the Group has demonstrated its ability to win contracts across its product range from large telcos
across the globe, and particularly those in wider groups which enables Pelatro to open up multiple routes to market
within such groups. Our increased product range, including our recently announced Data Monetisation Platform, en-
ables us to target both existing customers with new products and new customers, and with wide geographic footprint
and a substantially enlarged customer base of now 16 telcos, we expect a significantly increasing volume of change
requests which, combined with a greater proportion of managed services and other repeat income, gives us a solid
foundation for the year ahead.
Nic Hellyer
Finance Director
25 March 2019
ANNUAL REPORT 2018 27
Conclusion
For the year ended 31 December 2018
The Strategic Report was approved by the Board of Directors on 25 March 2019.
On behalf of the Board
Subash Menon
25 March 2019
Nic Hellyer
25 March 2019
ANNUAL REPORT 2018 28
BOARD OF DIRECTORS
Executive Directors
Subash Menon
Managing Director,
CEO & Co-Founder
Subash co-founded the Group in
April 2013. Prior to Pelatro, Subash
was the CEO and founder of Subex
Limited (“Subex”), a company he
transformed from a systems inte-
grator in telecoms hardware to a
global leader in Telco software for
business optimisation. Subash also
guided Subex through a successful
IPO in India (NSE and BSE) in 1999
and through seven acquisitions in
the UK, US and Canada, driving reve-
nues to in excess of US$100m, prior
to leaving Subex in 2012.
Nic Hellyer
Finance Director
Sudeesh Yezhuvath
Chief Operating Office & Co-Founder
Sudeesh co-founded the Group with
Subash in 2013. Sudeesh joined
Subash at Subex in 1993, where he
worked as a Sales Engineer. There,
he progressed to a board Director
and Chief Operating Officer. Sudeesh
left Subex in 2012, by which time it
had grown to be a global leader with
over 200 telco operators, across
more than 70 countries.
Nic is a Chartered Accountant who
brings extensive board level expe-
rience from his 25 years in invest-
ment banking. Nic spent the major-
ity of his banking career at UBS and
HSBC, advising on a wide range of
transactions including public take-
overs, private M&A, IPOs and other
equity fund raisings. Nic is also a
non-executive director of two public
companies, one quoted on AIM and
the other on the Swedish Nasdaq
First North market.
ANNUAL REPORT 2018 29
Non-Executive Directors
Richard Day (i)(ii)(iii)
Chairman
Pieter Christiaan Verkade (i)(ii)(iii)
Richard is a qualified solicitor with more than 25 years of
corporate finance experience. Richard co-founded Arden
Partners in 2002 and was instrumental in their admis-
sion to AIM in 2006. Richard is currently a non-executive
director of EGS Energy Limited and sits on the board of
their special purpose vehicle Eden Geothermal Limited
which has been formed to develop and operate their
deep geothermal site in Cornwall. He is also Chairman of
Alchemac Limited, a boulders and aggregates quarrying
business in Southern India.
Pieter has been the Chief Commercial Officer for Uni-
tel in Angola since August 2017 and is Chairman and
Co-Founder of Viva Africa, an African content aggrega-
tor and producer for music and video, a role he has held
since February 2016. He also serves as a non-executive
director on the board of Discover Digital International.
Prior to this, Pieter spent sixteen years working in numer-
ous board level roles for various companies within the
telecommunications industry. These included Telenor In-
ternational, Orange and MTN, at which he worked across
both Europe and Africa.
(i) Member of Audit Committee
(ii) Member of Remuneration Committee
(iii) Member of Nomination Committee
ANNUAL REPORT 2018 30
CORPORATE
GOVERNANCE REVIEW
For the year ended 31 December 2018
Statement of Compliance With The
2018 QCA Corporate Governance Code
Chairman’s Introduction
High standards of corporate governance are a key priority for the Board of Pelatro and, in line with the London Stock
Exchange’s changes to the AIM Rules requiring all AIM-quoted companies to adopt and comply with a recognised
corporate governance code, the Board has adopted the 2018 Quoted Companies Alliance Corporate Governance Code
(the “QCA Code”) as the basis of the Group’s governance framework. It is the responsibility of the Board to ensure
that the Group is managed for the long-term benefit of all shareholders and stakeholders, with effective and efficient
decision-making. Corporate governance is an important aspect of this, reducing risk and adding value to the Group’s
business.
The Directors acknowledge the importance of the ten principles set out in the QCA Code and this section sets out the
Group’s current approach to complying with those principles.
Richard Day
Non-Executive Chairman
ANNUAL REPORT 2018 31
QCA PRINCIPLES
Section 1: Deliver Growth
Principle 1: Establish a strategy and business model
which promote long-term value for shareholders
Our strategy is discussed further in the Managing Di-
rector’s statement on pages 07 to 10. As evidenced by
continuing progress in winning contracts from new cus-
tomers as well as new business from existing customers,
Pelatro has an increasing reputation in the MultiChannel
Marketing software space. To deliver this growth and
hence promote long-term value for shareholders, the
Board has established a clear three-pronged strategy
and business model and has identified the following key
areas of operation to focus on improving on the Group’s
performance:
• Sales strategy, which encompasses all critical areas
progressively to open up new vistas and enable the
Group to address larger market opportunities while
positioning it as a key player in its chosen space.
• Diversification strategy to offer complementary ser-
vices.
Chairman and Non-executive Director are also available
to meet investors, whenever required.
Private shareholders
Shareholders are encouraged to attend the annual gen-
eral meeting (“AGM”) at which the Group’s activities and
results are considered, and questions answered by the
Directors. The AGM is the main forum for dialogue with
retail shareholders and the Board. The Notice of Meeting
is sent to shareholders at least 21 days before the meet-
ing. The chairs of the Board and all committees, together
with all other Directors, routinely attend the AGM and are
available to answer questions raised by shareholders.
For each vote, the number of proxy votes received for,
against and withheld is announced at the meeting. The
results of the AGM are subsequently published on the
Company’s corporate website.
Private shareholder events are also regularly attended by
the CEO and Finance Director, as well as the Chairman.
• Acquisition-led growth strategy where and when ap-
propriate to expand the business model.
The Board
A fuller explanation of how the strategy and business
model are executed is contained in both the Company’s
Admission Document dated 13th December 2017and
Placing Circular dated 30th July 2018. Both documents
are available to download in full of the Group website.
Principle 2: Seek to understand and meet
shareholder needs and expectations.
Introduction
The Company remains committed to listening and com-
municating openly with its shareholders to ensure that
its strategy, business model and performance are clearly
understood. Understanding what analysts and investors
think about us, and in turn, helping these audiences un-
derstand our business, is a key part of driving our busi-
ness forward and we actively seek dialogue with the mar-
ket. We do so via investor roadshows, attending investor
conferences, hosting capital markets days and our regu-
lar reporting.
Institutional shareholders
The Directors actively seek to build a relationship with in-
stitutional shareholders. Shareholder relations are man-
aged by the Chief Executive Officer and Finance Director
who make presentations to institutional shareholders
and analysts each year immediately following the release
of the full-year and half-year results. The Non-executive
At every Board meeting, the Chief Executive Officer and
the Finance Director provide a summary of the content of
any engagement they have had with investors to ensure
that major shareholders’ views are communicated to the
Board as a whole. The Board is also provided with bro-
kers’ and analysts’ reports when published. This process
enables the Chairman and the other Non-executive Direc-
tor to be kept informed of major shareholders’ opinions
on strategy and governance, and for them to understand
any issues or concerns.
The Non-executive Directors are available to discuss any
matter stakeholders might wish to raise, and the Chair-
man attends meetings with investors and analysts as
required.
Investors may also make contact requests through the
Company’s Nominated Adviser, finnCap Group plc.
Principle 3: Take into account wider stakeholder
and social responsibilities and their implications
for longer-term success
Engaging with our stakeholders strengthens our rela-
tionships and helps us make better business decisions
to deliver on our commitments. The Board is regularly
updated on wider stakeholder engagement feedback to
stay abreast of stakeholder insights into the issues that
matter most to them and our business, and to enable the
Board to understand and consider these issues in deci-
sion-making.
ANNUAL REPORT 2018 32
Employees
Aside from our shareholders, suppliers and customers,
our employees are one of our most important stakehold-
er groups and the Board therefore closely monitors and
reviews the performance and satisfaction of our employ-
ees through regular dialogue and a regular appraisal pro-
gramme as well as other feedback it receives to ensure
alignment of interests.
year the Group hired a senior person to fulfil the new role
of Head of Customer Engagement to ensure a high level
of customer satisfaction. The team holds periodic meet-
ings with every customer to understand and resolve their
“pain points” while collecting valuable feedback on all
aspects of business such as product features, quality of
delivery, support and so on.
A new Employee Share Option scheme has recently
been established, with options being made available to
some 70 employees, being over half of the work force.
The Group is still a young, dynamic business and is small
enough to ensure that each employee is able to meet
with management at any time to discuss business-relat-
ed issues.
The Group believes that having empowered and respon-
sible employees who display sound judgment and aware-
ness of the consequences of their decisions or actions,
and who act in an ethical and responsible way, is key to
the success of the business.
Corporate Social Responsibility
The Group recognises the increasing importance of cor-
porate social responsibility and endeavours to take it into
account when operating its business in the interests of
its stakeholders, including its investors, employees, cus-
tomers, suppliers, business partners and the communi-
ties where it conducts its activities.
The operation of a profitable business is a priority and
that means investing for growth as well as providing re-
turns to its shareholders. To achieve this, the Group rec-
ognises that it needs to operate in a sustainable manner
and therefore has adopted core principles to its business
operations which provide a framework for both manag-
ing risk and maintaining its position as a good “corporate
citizen”, and also facilitate the setting of goals to achieve
continuous improvement.
The Group aims to conduct its business with integrity, re-
specting the different cultures and the dignity and rights
of individuals in the countries where it operates. The
Group supports the UN Universal Declaration of Human
Rights and recognises the obligation to promote univer-
sal respect for and observance of human rights and fun-
damental freedoms for all, without distinction as to race,
religion, gender, language or disability.
Customers
The Group encourages feedback from its customers
through engagement with individual customers through-
out a project. Despite the number of customers having
more than doubled in the past year, the overall number
of customers means that there is regular interface with
customers and their needs are appreciated. During the
Health and Safety
The Directors are committed to ensuring the highest
standards of health and safety, both for employees and
for the communities within which the Group operates.
The Group seeks to exceed legal requirements aimed at
providing a healthy and secure working environment to
all employees and understands that successful health
and safety management involves integrating sound prin-
ciples and practice into its day-to-day management ar-
rangements and requires the collaborative effort of all
employees. All employees are positively encouraged to
be involved in consultation and communication on health
and safety matters that affect their work.
Environment
The Directors are committed to minimising the impact
of the Group’s operations on the environment. The Group
recognises that its business activities have an influence
on the local, regional and global environment and accepts
that it has a duty to carry these out in an environmentally
responsible manner. It is the Group’s policy to endeavour
to meet relevant legal requirements and codes of prac-
tice on environmental issues so as to ensure that any
adverse effects on the environment are minimised. It
strives to provide and maintain safe and healthy working
conditions, and to keep its entire staff informed of its en-
vironmental policy whilst encouraging them to consider
environmental issues as an everyday part of their role.
Principle 4: Embed effective risk management,
considering both opportunities for threats,
throughout the organisation
The Board has overall responsibility for the Group’s in-
ternal control systems and for monitoring their effective-
ness. The Board, with the assistance of the Audit Commit-
tee, maintains a system of internal controls to safeguard
shareholders’ investment and the Group’s assets, and has
established a continuous process for identifying, evaluat-
ing and managing the significant risks the Group faces.
The Board currently takes the view that an internal audit
function is not considered necessary or practical due to
the size of the Group and the close day to day control ex-
ercised by the executive directors. However, the Board will
continue to monitor the need for an internal audit function.
ANNUAL REPORT 2018 33
Further details of the principal risks faced by the Group,
together with their potential impact and the mitigation
measures in place, are set out in “Principal risks and un-
certainties” on pages 18 to 20 in this Annual Report. The
Board believe these risks to be currently the most signif-
icant with the potential to impact the Group’s strategy,
financial and operational performance and ultimately, its
reputation.
The Board considers risk to the business on an ongoing
basis and the Group formally reviews and documents the
principal risks at least annually. Both the Board and se-
nior management are responsible for reviewing and eval-
uating risk and the executive Directors meet on a regular
basis to review ongoing trading performance, discuss
budgets and forecasts and any new risks associated
with ongoing trading, the outcome of which is reported
to the Board.
Section 2: Maintain a
Dynamic Management
Framework
Principle 5: Mantain the Board as a well-funtioning
balanced team led by the Chair.
The Chairman, Richard Day, is responsible for leadership
of the Board, ensuring its effectiveness on all aspects of
its role, setting its agenda and ensuring that the Direc-
tors receive accurate, timely and clear information. The
Chairman also ensures effective communication with
shareholders and facilitates the effective contribution
of the other Non-executive Director. The Company is
satisfied that the current Board is sufficiently resourced
to discharge its governance obligations on behalf of all
stakeholders.
To enable the Board to discharge its duties, all Directors
receive appropriate and timely information. Briefing pa-
pers are distributed to all Directors in advance of Board
and Committee meetings. All Directors have access to
the advice and services of the Finance Director and Com-
pany Secretary, who is responsible for ensuring that the
Board procedures are followed, and that applicable rules
and regulations are complied with. In addition, proce-
dures are in place to enable the Directors to obtain inde-
pendent professional advice in the furtherance of their
duties, if necessary, at the Company’s expense.
Principle 6: Ensure that between them the Directors
have the necessary up-to-date experience, skills and
capabilities
The Board currently comprises three executive and two
non-executive Directors with an appropriate balance of
sector, financial and public market skills and experience.
The skills and experience of the Board are set out in their
biographical details on pages 28 and 29. The experience
and knowledge of each of the Directors gives them the
ability constructively to challenge the strategy and to
scrutinise performance. The Board also has access to
external advisers where necessary.
Executive and non-executive Directors are subject to
re-election intervals as prescribed in the Company’s Ar-
ticles of Association. At each Annual General Meeting
one-third of the Directors, who are subject to retirement
by rotation shall retire from office. They can then offer
themselves for re-election. The executive directors are
employed under service contracts requiring 12 months’
notice (by either party) in the case of Subash Menon and
Sudeesh Yezhuvath, and three months’ notice in the case
of Nic Hellyer. The non-executive director and the Chair-
man receive payments under appointment letters which
are terminable on three months’ notice.
The Board encourages the ownership of shares in the
Company by executive and non-executive Directors alike
and in normal circumstances does not expect Directors
to undertake dealings of a short-term nature. The Board
considers ownership of Company shares by non-exec-
utive Directors as a positive alignment of their interest
with shareholders. The Board will periodically review the
shareholdings of the non-executive Directors and will
seek guidance from its advisers if, at any time, it is con-
cerned that the shareholding of any non-executive Direc-
tor may, or could appear to, conflict with their duties as
an independent non-executive Director of the Company
or their independence itself. Directors’ emoluments, in-
cluding Directors’ interest in shares and options over the
Company’s share capital, are set out on pages 42, 43, 66
and 67.
The Board meets at least 6 times a year. It has estab-
lished an Audit Committee, Nominations Committee
and a Remuneration Committee. Throughout their peri-
od in office the Directors are continually updated on the
Group’s business, the industry and competitive environ-
ment in which it operates, corporate social responsibility
matters and other changes affecting the Group by written
briefings and meetings with the executive Directors. They
are reminded by the Company Secretary of these duties
and are also updated on changes to the legal and gover-
nance requirements of the Group, and upon themselves
as Directors, on an ongoing and timely basis.
The Board is responsible to the shareholders and sets
the Group’s strategy for achieving long-term success.
It is ultimately responsible for the management, gover-
nance, controls, risk management, direction and perfor-
mance of the Group.
The Company has adopted a code for directors’ and em-
ployees’ dealings in securities which is appropriate for a
company whose securities are traded on AIM and which
is in accordance with Rule 21 of the AIM Rules and the
Market Abuse Regulations.
ANNUAL REPORT 2018 34
Principle 7: Evaluate board performance based on
clear and relevant objectives, seeking continuous
improvement
The Board is committed to formal annual Board evalua-
tions: in 2018 this has been conducted by way of a ques-
tionnaire and Chairman interviews. The performance of
the Board, its Committees and that of the individual Di-
rectors is monitored by the Chairman on an ongoing ba-
sis. The Chairman is assessed by the rest of the directors
through the other non-executive Director.
The Nomination Committee is responsible for succes-
sion planning of the executive leadership team and
makes recommendations to the Board for the re-appoint-
ment of any non-executive Directors if and when nec-
essary. Succession planning is reviewed on an ongoing
basis alongside the capability of the senior management
and Directors. Pieter Verkade is the Chairman of the
Nominations Committee.
management of the Group and the implementation of
Board strategy and policy. By dividing responsibilities in
this way, no one individual has unfettered powers of de-
cision-making.
There is a formal schedule of matters reserved for de-
cision by the Board in place which enables the Board
to provide leadership and ensure effectiveness. Such
matters include business strategy and management, fi-
nancial reporting (including the approval of the annual
budget), Group policies, corporate governance matters,
major capital expenditure projects, material acquisitions
and divestments and the establishment and monitoring
of internal controls.
The appropriateness of the Board’s composition and cor-
porate governance structures are reviewed through the
ongoing Board evaluation process and on an ad hoc ba-
sis by the Chairman together with the other Directors, and
these will evolve in parallel with the Group’s objectives,
strategy and business model as the Group develops.
Principle 8: Promote a corporate culture that is based
on ethical values and behaviours
Board committees
The Group adopts a policy of equal opportunities in the
recruitment and engagement of staff as well as during
the course of their employment. It endeavours to pro-
mote the best use of its human resources on the basis of
individual skills and experience matched against those
required for the work to be performed.
The Group recognises the importance of investing in its
employees and, as such, the Group provides opportuni-
ties for training and personal development and encour-
ages the involvement of employees in the planning and
direction of their work. These values are applied regard-
less of age, race, religion, gender, sexual orientation or
disability.
The Group recognises that commercial success depends
on the full commitment of all its employees and commits
to respecting their human rights, to provide them with fa-
vourable working conditions that are free from unneces-
sary risk and to maintain fair and competitive terms and
conditions of service at all times.
Principle 9: Maintain governance structures and
processes that are fit for purpose and support good
decision-making by the Board
The Chairman, Richard Day, is responsible for leadership
of the Board, ensuring its effectiveness on all aspects of
its role, setting its agenda and ensuring that the Direc-
tors receive accurate, timely and clear information. The
Chairman also ensures effective communication with
shareholders and facilitates the effective contribution
of the other non-executive Director. Subash Menon, as
Chief Executive Officer, is responsible for the operational
The Board has established Audit, Nomination and Remu-
neration Committees.
The Audit Committee has Richard Day as Chairman and
has primary responsibility for monitoring the quality of
internal controls, ensuring that the financial performance
of the Group is properly measured and reported on, and
for reviewing reports from the Group’s auditors relating
to the Group’s accounting and internal controls, in all
cases having due regard to the interests of shareholders.
The Audit Committee meets at least twice a year.Pieter
Verkade is the other member of the Audit Committee. A
report on the duties of the Audit Committee and how it
discharges its responsibilities is provided in pages 36 to
38.
The Remuneration Committee has Richard Day as Chair-
man, and reviews the performance of the Executive Di-
rectors, and determines their terms and conditions of
service, including their remuneration and the grant of
options, having due regard to the interests of sharehold-
ers. The Remuneration Committee meets at least twice
a year. Pieter Verkade is the other member of the Remu-
neration Committee. Details of the activities and respon-
sibilities of the Remuneration Committee are set out on
page 39.
The Nomination Committee has Pieter Verkade as Chair-
man, and identifies and nominates, for the approval of
the Board, candidates to fill board vacancies as and
when they arise. The Nomination Committee meets as
necessary and has not met in the financial year 2018 as
there have been no board vacancies. Richard Day is the
other member of the Nomination Committee.
The terms of reference of each Committee can be down-
loaded from www.pelatro.com.
ANNUAL REPORT 2018 35
Section 3: Build Trust
Principle 10: Communicate how the Group is governed and is performing
The Board maintains a healthy dialogue with all of its stakeholders. Throughout the course of the financial year the
Board communicates with shareholders frequently and directly.
ANNUAL REPORT 2018 36
Audit Committee Report
For the year ended 31 December 2018
Dear Shareholder,
As Chairman of Pelatro’s Audit Committee, I present the Audit Committee Report for the year ended 31 December 2018,
which has been prepared by the Committee and approved by the Board.
The Committee is responsible for reviewing and reporting to the Board on financial reporting, internal control and risk
management, and for reviewing the performance, independence and effectiveness of the external auditors in carrying
out the statutory audit. The Committee advises the Board on the statement by the Directors that the Annual Report
when read as a whole is fair, balanced and understandable and provides the information necessary for shareholders to
assess the Group’s performance, business model and strategy.
During the year, the Committee’s primary activity involved meeting with the external auditors, considering material is-
sues and areas of judgement, and reviewing and approving the interim and year end results and accounts.
In addition, the Committee reviewed the audit and tax services provided by Crowe U.K. LLP (“Crowe”), the Group’s exter-
nal auditors. The Committee concluded that Crowe are delivering the necessary audit scrutiny and that the tax services
provided did not pose a threat to their objectivity and independence. Accordingly, the Committee recommended to the
Board that Crowe be re-appointed for the next financial year.
In the coming year, in addition to the Committee’s ongoing duties, the Committee will:
• consider significant issues and areas of judgement with the potential to have a material impact on the financial
statements, including impairments of the Company’s investments and technologies;
• consider the impact on the Group of the introduction of IFRS 16 Leases; and
• keep the need for an internal audit function under review, having regard to the Company’s strategy and resources
Richard Day
Chairman of the Audit Committee
25 March 2019
ANNUAL REPORT 2018 37
Audit Commitee and Attendance
The Audit Committee comprises
Richard Day and Pieter Verkade.
The Board considers that Richard
Day has sufficient relevant financial
experience to chair the Audit Com-
mittee given that he has worked for
more than 25 years in corporate fi-
nance, first at Cazenove & Co (now
JP Morgan Cazenove) and then at
institutional stockbrokers Arden
Partners plc, where he was Head of
Corporate Finance for most of his
time there. He is a qualified solicitor
and was chief financial officer from
2015 to 2018 at iEnergizer Limited
which is quoted on the AIM Market
of the London Stock Exchange.
The Committee is required by its
terms of reference to meet at least
twice a year. During the year, the
Committee met twice. In addition,
Nic Hellyer, Finance Director, attend-
ed both Committee meetings by in-
vitation.
Objectives and responsibilities
is
The Committee
responsible
for monitoring the integrity of the
Group’s financial statements, includ-
ing its Annual and Interim Reports,
preliminary results announcements
and any other formal announce-
ments relating to its financial perfor-
mance prior to release.
The Committee’s main responsibili-
ties can be summarised as follows:
• to review the Company’s internal
financial controls and risk man-
agement systems;
• to monitor the integrity of the
financial statements and any
formal announcements relating
to the Group’s financial perfor-
mance,
significant
reviewing
judgements contained in them;
• to make recommendations to the
Board in relation to the appoint-
ment of the external auditors and
to recommend to the Board the
approval of the remuneration and
terms of engagement of the ex-
ternal auditors;
• to review and monitor the external
auditors’ independence and ob-
jectivity, taking into consideration
relevant UK professional and reg-
ulatory requirements;
• to develop and implement policy
on the engagement of the exter-
nal auditors to supply non-audit
services, taking into account rel-
evant ethical guidance regarding
the provision of non-audit ser-
vices by the external auditors; and
• to report to the Board, identifying
any matters in respect of which it
considers that action or improve-
ment is needed, and to make rec-
ommendations as to steps to be
taken
The terms of reference are re-
viewed annually and are avail-
able on the Company’s website at
pelatro.com/investors.
Significant issues considered
during the year
During the year, the Committee:
• reviewed and approve the annu-
al audit plan and met with the
external auditors to receive their
findings and report on the annual
audit;
• considered significant
issues
and areas of judgement with the
potential to have a material im-
pact on the financial statements,
including
the
Group’s investments and technol-
ogies;
impairments of
• considered the integrity of the
published financial
information
and whether the Annual Report
and Accounts taken as a whole
are fair, balanced and understand-
able and provide the information
necessary to assess the Group’s
position and performance, busi-
ness model and strategy; and
• reviewed and approved the inter-
im and year end results and ac-
counts
The significant accounting areas
and judgements considered by the
Committee were:
Revenue recognition
The Committee considered the ap-
praisal of the impact of adopting
IFRS 15 prepared by management
and related disclosures in the inter-
im and these full year financial state-
ments.
Recoverability of debtors
The Committee continued to review
the track record of receipts from
slow-paying debtors and sought reg-
ular updates from management as
to the status of trade receivables. In
light of this, the Committee reviewed
and accepted management pro-
posals that no impairment of trade
receivables was required and was
satisfied that the trade receivables
balance was fairly stated.
Valuation of intangible assets
The Committee reviewed the basis
of capitalisation and considered
the intangible value attributed to its
intangible software development
costs. The Committee also consid-
ered the intra-group transfer of in-
tangible assets to bring intellectual
property together with the internal
resources able to develop, maintain
and support such assets. The Com-
mittee was satisfied that the resul-
tant net book values were appro-
priately prepared on a reasonable
basis.
Going concern
The Committee reviewed the cash
flow forecasts for the Group and
discussed the key assumptions and
risks relevant to their achievement.
The Committee was satisfied that
the basis for adopting the going con-
cern basis in preparing the Group
and Company financial statements,
set out in note 3, was reasonable.
ANNUAL REPORT 2018 38
Risk review process
External audit and non-audit services
During the year, Crowe provided
tax advisory services. An analysis
of the audit and non-audit fees is
provided in note 10 to the financial
statements. The Audit Committee
considered the independence and
objectivity of Crowe in carrying out
both tax and audit services.
The Audit Committee is responsi-
ble for reviewing the financial risks
and the internal controls relating
thereto but the Board as a whole has
responsibility for reviewing the over-
all business risks and risk manage-
ment framework. The Group’s prin-
cipal risks and uncertainties are set
out in the Strategic Report together
with mitigating actions and the inter-
nal controls and risk management
procedures are summarised in the
Corporate Governance Report.
External Auditor
The Committee reviewed the effec-
tiveness of the audit process in re-
spect of the year ended 31 Decem-
ber 2017. In doing so, the Committee
considered the reports produced by
Crowe, met the audit engagement
partner and discussed the audit with
the Finance Director. The Commit-
tee continues to be satisfied that
the external auditors are delivering
the necessary scrutiny and robust
challenge in their work. Accordingly,
the Committee recommended to the
Board that it is appropriate to re-ap-
point Crowe as the Group’s external
auditors for the next financial year.
ANNUAL REPORT 2018 39
Remuneration Committee Report
For the year ended 31 December 2018
Dear Shareholder,
As Chairman of Pelatro’s Remuneration Committee, I present the Remuneration Committee Report for the year ended
31 December 2018, which has been prepared by the Committee and approved by the Board.
The Remuneration Committee is responsible for determining the remuneration policy for the Executive Directors, and
for overseeing the Company’s long-term incentive plans. The Board as a whole is responsible for determining non-ex-
ecutive Directors’ remuneration.
As an AIM company, the Directors’ Remuneration Report Regulations do not apply to Pelatro and so the report that
follows is disclosed voluntarily and has not been subject to audit.
The Committee will continue to monitor market trends and developments in order to assess those relevant for the
Group’s future remuneration policy.
Remuneration Decisions for 2018
During the year, the basic remuneration for non-executive Chairman Richard Day was increased from £40,000 to £50,000
per annum and non-executive Director Pieter Verkade from £24,000 to £30,000 per annum. Each of the Executive Direc-
tors Subash Menon, Sudeesh Yezhuvath and Nic Hellyer were provided with the use of a car (the latter with effect from
January 2019). In the case of Subash Menon and Sudeesh Yezhuvath, because of the unavailability of lease plans in
the Indian market, the decision was taken for the Group to purchase the cars outright. These purchases were funded
by corresponding term loans such that the upfront cash outlay to the Group was minimised; the cars are intended to
be owned for a minimum of 5 years and hence the annual cost to the Group will be approximately $30,000 per director.
Remuneration Policy For 2019 And Future Years
Pelatro has changed considerably since admission to AIM, with the acquisition of the Danateq Assets in August 2018,
an approximate doubling of revenues and increase in number of customers from 7 to 16. Future salary awards and
increases will be set in line with relevant market levels and to retain and attract high quality executives with regard to
this growth and the aspirations of the business.
A new long-term incentive plan has recently been set up, with awards made to 70 of our employees, being over 50% of
our team. An award of options over 50,000 shares in the Company was awarded to Nic Hellyer under this plan.
Richard Day
Chairman of the Remuneration Committee
25 March 2019
ANNUAL REPORT 2018 40
KEY MANAGERIAL PERSONNEL
Subash Menon
Sudeesh Yezhuvath
Nic Hellyer
Arun Kumar Krishna
Anuradha
Vishwanath B V
ANNUAL REPORT 2018 41
DIRECTOR’S REPORT
For the year ended 31 December 2018
The Directors present their annual report on the affairs of the Group, together with the consolidated financial state-
ments and independent auditor’s report, for the year ended 31 December 2018.
Principal activities
The Pelatro Group was founded in March 2013 by Subash Menon and Sudeesh Yezhuvath with the objective of offering
specialised, enterprise class software solutions for customer engagement principally to telcos who face a series of
challenges including market maturity, saturation and customer churn.
Pelatro provides its mViva platform for use by customers in B2C applications and is well positioned in the Multichannel
Marketing Hub space (MMH) - this is technology that orchestrates a customer’s communications and offers to custom-
er segments across multiple channels to include websites, social media, apps, SMS, USSD and others.
Further information on the Group’s activities, its prospects and likely future developments is given in the sections titled
“Strategic Report” and “Financial Statements”.
Directors’ responsibilities
The Directors are responsible for preparing the Directors’ Report and the financial statements for each financial year in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Direc-
tors have elected to prepare the financial statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the EU and applicable law.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that
period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed
and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the pre-
vention and detection of fraud and other irregularities. They are further responsible for ensuring that the Report of the
Directors and other information included in the Annual Report and Financial Statements is prepared in accordance with
applicable law in the United Kingdom.
Website publication
The maintenance and integrity of the Pelatro Plc web site, which includes compliance with AIM Rule 26, is the respon-
sibility of the Directors; the work carried out by the auditor does not involve the consideration of these matters and,
accordingly, the auditor accepts no responsibility for any changes that may have occurred in the accounts since they
were initially presented on the website.
ANNUAL REPORT 2018 42
Financial instruments and liquidity risks
Information about the use of financial instruments by the Company and its subsidiaries and the Group’s financial risk
management policies are given in note 25 of the financial statements.
Directors and their interests
The Directors who served during the year are as shown below:
R. Day
Chairman
S. Menon
Managing Director, CEO &
Co-Founder
N. Hellyer
Finance Director
S. Yezhuvath
P. Verkade
Chief Operating Officer &
Co-Founder
Non-Executive Director
In accordance with the Company’s articles Richard Day and Subash Menon will retire by rotation at the Annual General
Meeting and, being eligible, will offer themselves for re-election.
The Directors at 31 December 2018 and their beneficial interests in the share capital of the Company were as follows:
Name of Director
Number of Ordinary Shares
of 2.5p each
Options over Ordinary
shares
S. Menon1
S. Yezhuvath
N. Hellyer2
R. Day
P. Verkade
9,684,244
3,309,309
80,000
19,457
-
-
-
17,000
-
-
1held by his sons Varun Menon - 4,842,122 Ordinary Shares and Kiran Menon - 4,842,122 Ordinary Shares
240,000 Ordinary shares held by his wife, Dr Fawzia Ali
ANNUAL REPORT 2018
43
Nic Hellyer was granted options over a further 50,000 Ordinary shares (subject to certain vesting conditions) on 15
January 2018; otherwise no changes took place in the beneficial interests of the Directors between 31 December 2018
and 25 March 2019.
The market price of the Ordinary Shares at 31 December 2018 was 71.0p and the range during the year was 65.5p to
92.0p.
Substantial shareholdings
As at 25 March 2019, the Company had received notification of the following significant interests in the ordinary share
capital of the Company:
Name of Holder
Number of Ordinary Shares
Percentage of issued
share capital
Chelverton Asset Management
Rathbones Investment Management
Herald Investment Management
Artemis Fund Management
Hargreave Hale
Maven Capital Partners
2,054,794
1,746,956
1,561,986
1,542,465
1,027,397
1,005,479
6.3%
5.8%
4.8%
4.7%
3.2%
3.1%
Corporate governance
The Company has formalised the following matters by
Board resolution:
• A formal schedule of Board responsibilities;
• The procedure for Directors to take independent pro-
fessional advice if necessary, at the Company’s ex-
pense;
• The procedure for the nomination and appointment
of non-executive Directors, for specified periods and
without automatic re-appointment; and
• Establishment of and written terms of reference for an
audit, nominations and remuneration committees
Internal control
The Board has overall responsibility for ensuring that the Group
maintains a system of internal control to provide its members
with reasonable assurance regarding the reliability of financial
information used within the business and for publication, and
that assets are safeguarded. There are inherent limitations in
any system of internal control and accordingly even the most
effective system can provide only reasonable, and not absolute,
assurance with respect to the preparation of accurate financial
information and the safeguarding of assets.
The key features of the internal control system that operated
throughout the year are described under the following headings:
• Control environment - particularly the definition of the
organisation structure and the appropriate delegation of
responsibility to operational management.
• Identification and evaluation of business risks and con-
trol objectives - particularly through a formal process of
consideration and documentation of risks and controls
which is periodically undertaken by the Board.
• Main control procedures, which include the setting of an-
nual and longer-term budgets and the monthly reporting
of performance against them, agreed treasury manage-
ment and physical security procedures, formal capital ex-
penditure and investment appraisal approval procedures
and the definition of authorisation limits (both financial
and otherwise).
• Monitoring, particularly through the regular review of per-
formance against budgets and the progress of develop-
ment and sales undertaken by the Board.
ANNUAL REPORT 2018 44
The Board reviews the operation and effectiveness of
this framework on a regular basis. The Directors consider
that there have been no weaknesses in internal controls
that have resulted in any losses, contingencies or uncer-
tainties requiring disclosures in the financial statements.
Research and development
Details of the Group’s activities on research and develop-
ment during the year are set out in the Financial Review.
Going concern
Auditor
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Strategic Report on pages 06 to
27 and the financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in
the notes to the financial statements, in particular in the
consolidated cash flow statement on page 51, in Note
21 “Loans and borrowings” and Note 25 “Financial instru-
ments”.
The financial statements have been prepared on a going
concern basis. Overall, the Directors are of the view that
the Group has adequate financing to be able to meet its
financial obligations for a period of at least 12 months
from the date of approval of this annual report and finan-
cial statements.
Events after the balance sheet date
There have been no significant events which have oc-
curred subsequent to the reporting date.
Liability insurance for Company officers
Each of the persons who are Directors of the Company
at the date when this report was approved confirms that:
• so far as the Director is aware, there is no relevant
audit information (as defined in the Companies Act
2006) of which the Company’s auditor is unaware; and
• the Director has taken all steps that he ought to have
taken as a Director to make himself aware of any rel-
evant audit information (as defined in the Companies
Act 2006) and to establish that the Company’s auditor
is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
The Directors intend to place a resolution before the An-
nual General Meeting to appoint Crowe U.K. LLP as audi-
tor for the following year.
As permitted by section 233 of the Companies Act 2006, the Company has purchased insurance cover for the Directors
against liabilities that might arise in relation to the Group.
By order of the Board
N. Hellyer
Company Secretary
49 Queen Victoria Street
London
EC4N 4SA
25 March 2019
ANNUAL REPORT 2018 45
INDEPENDENT AUDITOR’S REPORT
For the year ended 31 December 2018
Opinion
We have audited the financial statements of Pelatro Plc (the “Parent Company”) and its subsidiaries (the “Group”) for
the year ended 31 December 2018, which comprise:
• The Group statement of comprehensive income for the year ended 31 December 2018;
• The Group and Parent Company statements of financial position as at 31 December 2018;
• The Group statement of cash flows for the year then ended;
• The Group and Parent Company statements of changes in equity for the year then ended; and
• The notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the group financial statements is appli-
cable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial
reporting framework that has been applied in the preparation of the parent company financial statements is applica-
ble law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosures
Framework (UKGAAP).
In our opinion:
• The financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 December 2018 and of the Group’s profit for the period then ended;
• The Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
• The Parent Company financial statements have been properly prepared in accordance with UKGAAP; and
• The financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the fi-
nancial statements section of our report. We are independent of the Group in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you
when:
• The Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• The Directors have not disclosed in the financial statements any identified material uncertainties that may cast sig-
nificant doubt about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of ac-
counting for a period of at least twelve months from the date when the financial statements are authorised for issue
ANNUAL REPORT 2018 46
Overview of our audit approach
Materiality
Overview of the scope of our audit
In planning and performing our audit we applied the con-
cept of materiality. An item is considered material if it
could reasonably be expected to change the economic
decisions of a user of the financial statements. We used
the concept of materiality to both focus our testing and
to evaluate the impact of misstatements identified.
Based on our professional judgement, we determined
overall materiality for the Group financial statements as
a whole to be $140,000, based on approximately 5.5% of
group profit before tax (2017: $90,000 based on 8% of
normalised group profit before tax).
We use a different level of materiality (“performance ma-
teriality”) to determine the extent of our testing for the
audit of the financial statements. Performance materiali-
ty is set based on the audit materiality as adjusted for the
judgements made as to the entity risk and our evaluation
of the specific risk of each audit area having regard to the
internal control environment.
Where considered appropriate performance materiality
may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all
identified errors in excess of $3,000. Errors below that
threshold would also be reported to it if, in our opinion as
auditor, disclosure was required on qualitative grounds.
Key Audit Matters
Whilst the Parent Company’s activity and accounting is
in the United Kingdom, the main activity of the Group is
accounted for from its operating location in India.
In establishing our overall approach to the Group audit,
we determined the type of work that needed to be under-
taken at each of the components by us, as the primary
audit engagement team. For the full scope components
in America, Singapore and India where the finance func-
tions were carried out in India work was performed by a
local audit team in India under our direction. The local au-
dit team were from a Crowe Global network firm. We de-
termined the appropriate level of involvement to enable
us to determine that sufficient audit evidence had been
obtained as a basis for our opinion on the Group as a
whole. We discussed the risks of material misstatement
with the subcontracting auditor.
The primary team led by the Senior Statutory Auditor was
ultimately responsible for the scope and direction of the
audit process. The primary team interacted regularly with
the local team where appropriate during various stages
of the audit, reviewed relevant working papers and were
responsible for the scope and direction of the audit pro-
cess. This, together with the additional procedures per-
formed at Group level, gave us appropriate evidence for
our opinion on the Group financial statements.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit
Key audit matter
How the scope of our audit addressed the key audit matter
Revenue recognition
The Group’s operating revenue arises from mViva
products. Customer contracts can contain multiple
different performance obligations with different rev-
enue recognition points. Given this the transition to
IFRS 15 and the application of the new accounting
policies was considered to be a significant audit risk.
We obtained the Group’s assessment of the impact
of IFRS 15 and the modified accounting policies. We
challenged this assessment by obtaining a sample of
contracts to ensure that the performance obligations
had been correctly identified, the transaction price al-
located appropriately and evidence existed of the sat-
isfaction of those performance obligations before rev-
enue was recognised. For support and maintenance
revenue recognised over time we reperformed the
calculation on the recognition of revenue for a sample
of contracts.
ANNUAL REPORT 2018 47
Capitalisation of development costs
As disclosed in note 17, the Group has capitalised ap-
proximately $1.6 million of development costs relat-
ing to the development of the mViva product.
We have focussed on this because research and de-
velopment represents a significant part of this busi-
ness and judgement is required in determining the
appropriate accounting treatment.
The Directors use judgement to determine whether
research and development costs should be expensed
or whether they meet the criteria for capitalisation.
This criteria includes assessing whether the product
being developed is commercially feasible, whether
the Group has adequate technical, financial and other
required resources to complete the development and
whether the costs will be fully recovered through fu-
ture sale or licensing of the product. The Directors de-
termined that the development costs meet the criteria
for capitalisation.
The capitalisation of intangibles is included within
note 4 as an area of critical accounting estimate and
judgement. The accounting policy for intangibles is
outlined in note 3.
Acquisition accounting
As described in note 26 the Group acquired certain
assets from Danateq. We considered the risk that the
contingent consideration, customer relations asset
and acquired software was inappropriately valued.
We obtained an understanding of the processes and
controls over the recognition of research and develop-
ment expenses.
We have evaluated the appropriateness of the capital-
isation of the development expenditure by:
• Discussing with management and obtaining a tech-
nical overview of the developments made to the
mViva software in the year, we challenged manage-
ment to ensure that the developments were capi-
tal in nature and did not relate to routine software
maintenance;
• Testing the allocation of overhead costs to capital-
ised development costs for mathematical accuracy
and reasonableness including challenging whether
the overheads were directly attributable to the soft-
ware development and agreeing underlying data to
headcount information; and
• On a sample basis, we tested the amounts allocat-
ed to development costs to underlying payroll re-
cords and invoices.
We obtained an understanding of the terms of the
acquisition and the calculations supporting the rec-
ognition of the intangible assets and the contingent
consideration. We challenged the key assumptions,
including the useful economic life assessment on the
customer relations asset, and reviewed supporting ev-
idence to assess the appropriateness of the assump-
tions.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They
were not designed to enable us to express an opinion on these matters individually and we express no such opinion.
Other information
The Directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit:
• the information given in the strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
ANNUAL REPORT 2018 48
• the Directors’ report and strategic report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
• Adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• The Parent Company financial statements are not in agreement with the accounting records and returns; or
• Certain disclosures of Directors’ remuneration specified by law are not made; or
• We have not received all the information and explanations we require for our audit.
Responsibilities of the Directors for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on page 41, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from ma-
terial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Report-
ing Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Com-
panies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body,
for our audit work, for this report, or for the opinions we have formed.
Matthew Stallabrass (Senior Statutory Auditor)
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
25 March 2019
ANNUAL REPORT 2018 49
GROUP STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December 2018
Revenue
Cost of sales and provision of services
Gross profit
Adjusted administrative expenses
Adjusted operating profit
Exceptional items
Amortisation of acquisition-related intangibles
Operating profit
Finance income
Finance expense
Profit before taxation
Income tax expense
PROFIT FOR THE YEAR
Attributable to:
Owners of the Pelatro Group
Non-controlling interests
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Items that will not be reclassified subsequently to profit or loss:
Gain on bargain purchase of minority interest
Other comprehensive income, net of tax
Note
2018
$’000
(audited)
2017
$’000
(audited)
5
6
9
17
7
8
13
6,123
(555)
5,568
(2,421)
3,147
(310)
(286)
2,551
33
(71)
2,513
(334)
2,179
2,179
-
2,179
78
-
78
3,146
(799)
2,347
(546)
1,801
(701)
-
1,100
-
(4)
1,096
(252)
844
830
14
844
(2)
14
12
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
2,257
856
Attributable to:
Owners of the Pelatro Group
Non-controlling interests
Earnings per share
Statutory
Attributable to the owners of the Pelatro Group (basic
and diluted)
From continuing operations (basic and diluted)
Adjusted
From continuing operations (basic and diluted)
The accompanying notes 1 to 30 are an integral part of these financial statements
2,257
-
2,257
8.0¢
8.0¢
10.1¢
842
14
856
4.8¢
4.8¢
8.9¢
14
14
14
ANNUAL REPORT 2018 50
GROUP STATEMENT OF
FINANCIAL POSITION
For the year ended 31 December 2018
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Trade receivables
Contract assets
Other assets
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
Other financial liabilities
Current liabilities
Trade and other payables
Short term borrowings
Contract liabilities
Other financial liabilities
Total liabilities
NET ASSETS
Issued share capital and reserves attributable
to owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
TOTAL EQUITY
Note
2018
$’000
(audited)
2017
$’000
(audited)
17
18
19
19
21
22
20
21
20
22
23
23
23
10,609
362
10,971
4,138
384
382
2,224
7,128
18,099
382
1,141
1,523
609
69
238
298
1,214
2,737
15,362
1,065
11,603
(721)
3,415
1,324
30
1,354
1,778
-
217
4,126
6,121
7,475
266
-
266
474
774
-
-
1,248
1,514
5,961
801
4,472
(529)
1,217
15,362
5,961
The financial statements of Pelatro Plc, registered number 10630166, were approved by the board of Directors and authorised for
issue on 25 March 2019. They were signed on its behalf by:
S. Menon (Director)
N. Hellyer (Director)
The accompanying notes 1 to 30 are an integral part of the financial statements.
ANNUAL REPORT 2018 51
GROUP STATEMENT OF
CASH FLOWS
For the year ended 31 December 2018
Cash flows from operating activities
Profit for the year
Adjustments for:
Income tax expense recognised in profit or loss
Finance income
Finance costs
Depreciation of tangible non-current assets
Amortisation of intangible non-current assets
Provision for/(recognition of) deferred taxes
Foreign exchange
2018
$’000
(audited)
2017
$’000
(audited)
2,179
342
(33)
71
46
843
(8)
(69)
844
247
-
4
1
202
5
5
Operating cash flows before movements in working capital
3,371
1,308
(Increase)/decrease in trade and other receivables
(Increase)/decrease in contract assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in contract liabilities
Cash generated from operating activities
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Development of intangible assets
Acquisition of intangible assets
Cash inflow/(outflow) on acquisition of businesses net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs
Amounts advanced by related parties
Repayments to related parties
Repayment of loans from members of Pelatro LLC
Proceeds from borrowings
Repayment of borrowings
Finance income
Finance costs
Less interest accrued but not paid
Net cash generated by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Foreign exchange differences
Cash and cash equivalent at beginning of period
Cash and cash equivalents at end of period
(2,438)
(273)
57
146
863
(292)
571
(384)
(1,604)
(69)
(7,035)
(9,092)
7,395
-
(436)
-
394
(513)
33
(62)
3
6,814
(1,707)
(195)
4,126
2,224
(1,698)
-
440
-
50
(78)
(28)
(1)
(752)
-
9
(744)
4,742
2
(9)
17
2
(47)
-
(4)
4
4,707
3,935
(5)
196
4,126
ANNUAL REPORT 2018 52
GROUP STATEMENT OF
CHANGES IN EQUITY
For the year ended 31 December 2018
Share
capital
Share
premium
Trans-
lation
reserve
Merger
reserve
Retained
profits
Attribut-
able to
owners
of the
Pelatro
Group
Non-con-
trolling
interests
Total
equity
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
(531)
359
379
-
379
830
830
14
844
-
14
(2)
14
-
-
(2)
14
14
14
(14)
-
Pro forma balance at 1 January
2017
551
-
Profit after taxation for the financial year
Other comprehensive income:
Exchange differences
Bargain purchase of non-controlling inter-
est in subsidiary
Non-controlling interest lost on acquisition
of minority interest in subsidiary
Transactions with owners:
-
-
-
-
Reserves arising on reconstruction
(20)
-
Shares issued by Pelatro Plc for cash
270
4,901
Issue costs
-
(429)
-
-
(2)
-
-
-
-
4
-
-
-
(16)
5,171
(429)
Balance at 31 December 2017 as
previously reported
801
4,472
(2)
(527)
1,217
5,961
Effect of IFRS 15
-
-
-
18
18
801
4,472
(2)
(527)
1,235
5,979
Balance at 31 December 2017 as
restated
Profit after taxation for the year
Other comprehensive income:
Exchange differences
Transactions with owners:
-
-
-
(191)
-
-
-
2,179
2,179
(191)
-
7,714
(319)
Shares issued by Pelatro Plc for cash
264
7,450
-
Issue costs
-
(319)
Balance at 31 December 2018
1,065
11,603
(193)
(527)
3,414
15,362
-
15,362
-
-
-
-
-
-
-
-
-
-
(16)
5,171
(429)
5,961
18
5,979
2,179
(191)
7,714
(319)
ANNUAL REPORT 2018 53
Reserve
Share capital
Share premium
Merger reserve
Description and purpose
Nominal value of issued shares
Amount subscribed for share capital in excess of nominal value less associated cost
Amounts arising on the elimination of the members’ capital in Pelatro LLC and its sub-
sidiary on presentation of the Group results under merger accounting principles
Translation reserve
The difference arising on the translation of balances denominated in currencies other
than US Dollars into the presentational currency of the Group
Retained earnings
All other net gains and losses not recognised elsewhere
The accompanying notes 1 to 30 are an integral part of these financial statements.
ANNUAL REPORT 2018 54
NOTES TO GROUP FINANCIAL
STATEMENTS
1. General information
Pelatro Plc (“Pelatro” or the “Company”) is a public lim-
ited company incorporated and domiciled in England.
The Company’s ordinary shares are traded on the AIM
market of the London Stock Exchange. These financial
statements are the consolidated financial statements of
Pelatro Plc and its subsidiaries (“the Pelatro Group” or
the “Group”) and the company financial statements for
Pelatro Plc. The financial statements are presented in US
dollars as the currency of the primary economic environ-
ment in which the Group operates.
Pelatro’s registered office is at 49 Queen Victoria Street,
London EC4N 4SA and its principal place of business is
at No. 403, 7th A Main, 1st Block, HRBR Layout, Banga-
lore 560043, India.
2. Adoption of new and revised standards
Certain new standards and amendments to existing stan-
dards that have been published and are mandatory for
the first time for the financial year beginning 1 January
2018 have been adopted and their impact on the Group
and Company is explained later in this section. New stan-
dards, amendments to standards and interpretations
which have been issued but are not yet effective (and in
some cases had not been adopted by the EU) for the fi-
nancial year beginning 1 January 2018 have not been ad-
opted early in preparing these financial statements. The
main new accounting standards which are relevant to the
Group are set out below:
IFRS 9 Financial Instruments
The Group has adopted IFRS 9 from 1 January 2018, re-
placing IAS 39 Financial instruments: Recognition and
Measurement. IFRS 9 sets out the requirements for as-
sessing the impairment of financial assets, requiring con-
sideration of the likelihood of their default or impairment,
firstly by splitting out the high-risk balances and continu-
ing to provide for these separately, and then applying a
loss rate to the remaining balance where it is known from
experience that the loss rate is not nil.
The Group has three types of financial assets that are
subject to IFRS 9’s new expected credit loss model: (1)
trade receivables from the sale of software and the pro-
vision of services; (2) contract assets arising from sale
of software and from the provision of services; and (3)
sundry deposits and other similar assets. The Group was
required to revise its impairment methodology under
IFRS 9 for each of these classes of assets; however, on
application of this revised methodology no provision was
required (see Note 19). IFRS 9 largely retains the existing
requirements in IAS 39 for the classification and mea-
surement of financial liabilities and has not had a signifi-
cant effect on the Group’s accounting policy.
IFRS 15 Revenue Recognition
IFRS 15 has replaced IAS 18 Revenue, IAS 11 Construc-
tion Contracts and related interpretations and has been
adopted for the Group’s IFRS financial statements for the
period beginning on 1 January 2018. This standard intro-
duces a single, five-step revenue recognition model that
is based upon the principle that revenue is recognised at
the point that control of goods or services is transferred
to the customer. The standard also updates revenue dis-
closure requirements.
The Directors have considered the effect of the adoption
of IFRS 15 on the Group’s activities, and in particular on
(i) the revenue recognition of the Group’s on-premise
software license contracts, which combine the delivery
and implementation of software; and (ii) support and
maintenance services (“post contract support” or “PCS”).
Under accounting policies applicable to prior years, the
Group recognised license income in accordance with
contractual milestones agreed with customers, and PCS
as invoiced (typically after one year free of payment). Im-
plementation services were typically included in the over-
all cost of the license or, if specifically agreed, invoiced
on completion.
Revised accounting policies under IFRS 15
As part of the review of IFRS 15 accounting policies, the
Directors have considered whether contracts under (i)
above represent a right and ability to use the software at
the point of initial delivery (with license revenue recognis-
able at that point), and a further delivery of implementa-
tion services, irrespective of associated cashflows. The
Directors concluded that:
(a) such license contracts represent an immediate right
and ability to benefit from the software (as it is techni-
cally possible for the customer to engage a third party to
implement the software concerned) and hence that an
appropriate amount of the total fee payable should be
recognised at that point;
(b) a further appropriate amount (based on a deemed
market rate for such services as if provided on a stand-
alone basis) should also be recognised on completion of
the implementation; and
(c) PCS income (under (ii) above) should be recognised
rateably over the term of the contract provision.
The Group’s four other revenue categories are: gain share
contracts; change requests; consulting/managed ser-
vices and hardware. Of these, gain share contracts have
a performance obligation that is met at points in time
ANNUAL REPORT 2018 55
as defined by the contract (typically monthly). Likewise
change requests are typically short-term projects which
performance obligation is met on delivery of the relevant
update in the software to the customer. Revenue from
the sale of hardware has a performance obligation that
is met at a point in time, being the point in time when
hardware is delivered. The performance obligations for
the Group’s consulting and managed services are typical-
ly satisfied over time as the service is provided.
Contracts with any one customer may incorporate more
than one of these revenue categories such that revenue
which is contractually linked may be recognised sepa-
rately. Likewise, the standard requires the Group to adjust
the promised amount of consideration to reflect the time
value of money if the contract has a significant financing
component, irrespective of the recognition of license, im-
plementation or service income as the case may be.
Application of IFRS 15
The Group has applied IFRS 15 using the cumulative ef-
fect of initially applying the new revenue standard as an
adjustment to the opening balance of equity at 1 January
2018. Therefore, comparative information has not been
restated and continues to be reported under IAS 11 and
IAS 18. Furthermore, the Group has elected to make use
of the following practical expedients:
• Completed contracts under IAS 11 and IAS 18 before
the date of transition have not been reassessed
• Contract costs incurred relating to contracts with an
amortisation period of less than one year have been
expensed as incurred
• As permitted by paragraph 12.1 of IFRS 15 the Group
does not disclose information about remaining perfor-
mance obligations that have original expected dura-
tions of one year or less
• As permitted by paragraph C5(d) of IFRS 15 the Group
does not disclose the amount of transaction price allo-
cated to the remaining performance obligations nor an
explanation of when the Group expects to recognise
that revenue
In applying IFRS 15, the Directors have been required to
make certain estimates and assumptions in determin-
ing the allocation of the contract price between licence,
implementation and PCS where the market rate for pro-
vision of the software or services is not directly observ-
able. The Directors have used their judgement and expe-
rience in applying such estimates and assumptions and
consider that the range of possible outcomes from these
estimates and assumptions does not give rise to a mate-
rial difference on the revenue recognised.
Details of the significant changes and the quantitative
impact of the changes are set out in Notes 5 and 28.
interpretations, will require all leases to be recognised on
the balance sheet, eliminating the distinction between
operating and finance leases. This IFRS will thus require
the Group to recognise any operating leases as both an
asset and a rental commitment in its consolidated state-
ment of financial position. Pelatro does not intend to
apply the standard retrospectively and so any difference
between the carrying value of the asset created and the
corresponding liability will be applied as an adjustment
to opening equity at the date of initial application. Any
such adjustment is not expected to be material.
3. Significant accounting policies
Basis of accounting
The financial statements have been prepared in accor-
dance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and entities con-
trolled by the Company (its subsidiaries) made up to 31
December each year. Under Indian company law, PSPL
has a statutory year end of 31 March, however, for the
purposes of consolidation, financial statements have
been prepared for PSPL as at 31 December 2018 on the
same accounting principles as for the rest of the Group.
The Company controls an investee if, and only if, the
Company has the following:
• Power over the investee (i.e. existing rights that give
it the current ability to direct the relevant activities of
the investee);
• Exposure of rights, to variable returns from its involve-
ment with the investee; and
• The ability to use its power over the investee to affect
its returns
Other than as disclosed above in respect of those enti-
ties which became part of the Group as a result of the
Reconstruction, the results of subsidiaries or businesses
acquired or disposed of during the year are included in
the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal,
as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting poli-
cies used into line with those used by the Group. All in-
tra-group transactions, balances, income and expenses
are eliminated on consolidation.
IFRS 16 Leases (effective for 2019 financial report)
Comparative financial information and group
reconstruction
IFRS 16 (effective for the year ending 31 December
2019), which supersedes IAS 17 Leases and related
Pelatro Plc was incorporated on 21 February 2017. On
7 September 2017 Pelatro Plc acquired Pelatro LLC
ANNUAL REPORT 2018 56
in exchange for the issue of shares
in Pelatro Plc. At the same time, the
98% of the share capital in Pelatro
Pte Limited (“Pelatro Pte”) that was
held by Pelatro LLC, as well as the
2% owned by third parties as a mi-
nority interest, was purchased by
Pelatro Plc.
As a result of this group recon-
struction (the “Reconstruction”), the
members of Pelatro LLC received
shares in the Company in direct pro-
portion to their original membership
interest in Pelatro LLC, and Pela-
tro Plc became the direct owner of
100% of the share capital of Pelatro
Pte.
In determining the appropriate ac-
counting treatment for the Recon-
struction, the Directors considered
IFRS 3 Business Combinations (Re-
vised 2008) (“IFRS 3”). However,
they concluded that the Reconstruc-
tion fell outside the scope of IFRS
3 as it represented a combination
of entities already under common
control. In accordance with IAS 8
Accounting Policies, Changes
in
Accounting Estimates and Errors, in
developing an appropriate account-
ing policy, the Directors considered
the pronouncements of other stan-
dard setting bodies and specifically
looked to accounting principles gen-
erally accepted in the United King-
dom for guidance, and in particular
the merger accounting provisions of
FRS 102 section 19 Business Com-
binations and Goodwill, which does
not conflict with IFRS and reflects
the economic substance of the
transaction.
Under merger accounting principles,
the assets and liabilities of both
entities are recorded at book value,
not fair value. Intangible assets and
contingent liabilities are recognised
only to the extent that they were rec-
ognised by the legal acquirer in ac-
cordance within applicable IFRS, no
goodwill is recognised, any expens-
es of the combination are written
off immediately to the income state-
ment and comparative amounts,
if applicable, are restated as if the
combination had taken place at the
beginning of the earliest accounting
period presented. Accordingly, al-
though the Reconstruction did not
become effective until 7 Septem-
ber 2017, the comparative figures
for the financial year 2017 in these
consolidated financial statements
have been presented as if the cur-
rent Group structure had always
been in place.
On 12 December 2017 Pelatro Plc
acquired the whole of the issued
share capital of Pelatro Solutions
Private Limited (“PSPL”). This acqui-
sition has been accounted for as a
normal business combination under
IFRS 3.
Going concern
These financial statements have
been prepared on the going concern
basis. The Directors have reviewed
the Company’s and the Group’s
going concern position taking ac-
count of its current business activ-
ities, budgeted performance and
the factors likely to affect its future
development, set out in the Annual
report, and include the Group’s ob-
jectives, policies and processes for
managing its capital, its financial
risk management objectives and its
exposure to credit and liquidity risks.
Following such review, the Directors
are of the view that the Group has
adequate financing to be able to
meet its financial obligations for a
period of at least 12 months from
the date of approval of the annual
report and financial statements.
Business combinations, goodwill
and contingent consideration
Business combinations
The acquisition method of account-
ing is used to account for all busi-
ness combinations, regardless of
whether equity instruments or other
assets are acquired. The consider-
ation transferred for the acquisition
of a business (whether as a subsidi-
ary or an asset purchase) comprises
the:
• fair values of the assets trans-
ferred
• liabilities incurred to the former
owners of the acquired business
• equity interests issued by the
Group
• fair value of any asset or liability
resulting from a contingent con-
sideration arrangement; and
• fair value of any pre-existing equi-
ty interest in the subsidiary.
Identifiable assets acquired and li-
abilities and contingent liabilities
assumed in a business combination
are, with limited exceptions, mea-
sured initially at their fair values at
the acquisition date. The Group rec-
ognises any non-controlling interest
in the acquired entity on an acqui-
sition-by-acquisition basis either at
fair value or at the non-controlling
interest’s proportionate share of the
acquired entity’s net identifiable as-
sets.
When the consideration transferred
by the Group in a business combi-
nation includes assets or liabilities
resulting from a contingent consid-
eration arrangement, the contingent
consideration is measured at its fair
value on the acquisition date and in-
cluded as part of the consideration
transferred in a business combina-
tion.
Acquisition-related costs are ex-
pensed as incurred.
Goodwill
The excess of the:
• consideration transferred;
• amount of any non-controlling in-
terest in the acquired entity; and
• acquisition-date fair value of any
previous equity interest in the ac-
quired entity over the fair value
of the net identifiable assets ac-
quired
is recorded as goodwill, which is ini-
tially recognised as an asset at cost
and is subsequently measured at
cost less any accumulated impair-
ment. If those amounts are less than
the fair value of the net identifiable
assets of the business acquired, the
difference is recognised directly in
the statement of comprehensive in-
come as a bargain purchase
impairment
For the purpose of
testing, goodwill is allocated to the
cash-generating units expected
to benefit from the combination.
Cash-generating units
to which
goodwill has been allocated are test-
ed for impairment annually, or more
frequently when there is an indica-
tion that the unit may be impaired.
ANNUAL REPORT 2018 57
If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment
loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. Any impairment is rec-
ognised immediately in the income statement and is not
subsequently reversed.
Where settlement of any part of cash consideration is
deferred (whether because it is contingent or otherwise),
the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount
rate used is the Group’s incremental borrowing rate, be-
ing the rate at which a similar borrowing could be ob-
tained from an independent financier under comparable
terms and conditions.
Contingent consideration
Contingent consideration is initially measured at fair val-
ue at the date of completion of the acquisition and may
be classified either as equity or a financial liability. The
accounting for changes in the fair value of contingent
consideration arising on business combinations that
do not qualify as measurement period adjustments de-
pends on how the contingent consideration is classified:
• amounts classified as a financial liability are subse-
quently remeasured to fair value at subsequent report-
ing dates and the corresponding gain or loss is rec-
ognised in the Statement of Comprehensive Income
• contingent consideration that is classified as equity is
not remeasured at subsequent reporting dates and its
subsequent settlement is accounted for within equity
Revenue recognition
Revenue is measured based on the consideration to
which the Group expects to be entitled in a contract with
a customer and excludes amounts collected on behalf of
third parties. Each element of revenue (described below)
is recognised only when:
(i) provision of the goods or services has occurred;
(ii) consideration receivable is fixed or determinable; and
(iii) collection of the amount due from the customer is
reasonably assured
Some contracts include multiple deliverables, such as
the sale of hardware as well as software, and usually
include installation services. Typically, software installa-
tion could be performed by another party. It is therefore
accounted for as a separate performance obligation.
Where contracts include multiple performance obliga-
tions, the transaction price is allocated to each perfor-
mance obligation based on the Group’s best estimate of
their Standalone Selling Price (“SSP”) notwithstanding
any absence or contrary allocation of total cost within a
contract. Where this is not directly observable, it is esti-
mated based on the best available evidence, for example
expected cost plus margin.
Software licenses
Revenue on perpetual licenses for on-premise software
is recognised on the later of the grant of the license or
delivery of the software as appropriate. Certain contracts
provide for revenue which is contractually linked to the
incremental revenue derived by that customer from use
of the software, the revenue from which is based on a
pre-agreed share of the customer’s incremental revenue
which is calculated, agreed and recognised at the end of
each month.
Implementation services
Revenue in respect of implementation of on-premise
software is recognised on completion of the implemen-
tation.
Professional services
Revenue in respect of professional services is recognised
as these services are delivered.
Annual support and maintenance (also known as
Post-Contract Support or “PCS”)
Revenue is recognised on a time basis over the length
of the support period. A contract liability is recognised
when contractually stated PCS income is lower than its
SSP and an element thereof has thus effectively been
included in the license fee as stated in the contract. A
contract asset is recognised where PCS income is rec-
ognised even though it is not contractually due and pay-
able (for example when the first year of PCS is not paid
for).
Hardware
Revenue in respect of sales of third-party hardware is
recognised when goods are delivered.
Cost of sales and provision of services
The cost of provision of services includes the direct
costs of consultants and employees who provide ser-
vices, support or maintenance to customers, direct sales
commissions paid to third parties. Cost of sales includes
the acquisition cost of hardware resold to end custom-
ers.
Leasing
Rentals payable under operating leases are charged to
income on a straight-line basis over the term of the rel-
evant lease.
Foreign currencies
The
individual financial statements of each Group
company are prepared in the currency of the prima-
ry economic environment in which it operates (its
functional currency). For the purpose of the consol-
idated financial statements, the results and finan-
cial position of each Group company are expressed
ANNUAL REPORT 2018 58
in US Dollars, which is the function-
al currency of the Company and the
presentation currency for the con-
solidated financial statements.
rent tax is calculated using tax rates
that have been enacted or substan-
tively enacted by the balance sheet
date.
In preparing the financial statements
of the individual companies, trans-
actions in currencies other than the
entity’s functional currency (foreign
currencies) are recorded at the rates
of exchange prevailing on the dates
of the transactions. At each balance
sheet date, monetary assets and lia-
bilities that are denominated in for-
eign currencies are retranslated at
the rates prevailing on the balance
sheet date. Non-monetary
items
that are measured in terms of his-
torical cost in a foreign currency are
not retranslated.
Exchange differences arising on the
settlement of monetary items, are
included in profit or loss for the pe-
riod except for differences arising
on the retranslation of non-mone-
tary items in respect of which gains
and losses are recognised directly
in equity. For such non-monetary
items, any exchange component of
that gain or loss is also recognised
directly in equity.
For the purpose of presenting con-
solidated financial statements, the
assets and liabilities of the Group’s
foreign operations are translated
at exchange rates prevailing on the
balance sheet date. Income and ex-
pense items are translated at the av-
erage exchange rates for the period
where it approximates the rates on
the dates of the underlying transac-
tions. Exchange differences arising,
if any, are classified as equity and
transferred to the Group’s transla-
tion reserve.
Borrowing costs
All borrowing costs are recognised
in profit or loss in the period in which
they are incurred.
Taxation
Any tax payable is based on taxable
profit for the year. Taxable profit
differs from net profit as reported
in the income statement because
it excludes items of income or ex-
pense that are taxable or deductible
in other years and it further excludes
items that are never taxable or de-
ductible. The Group’s liability for cur-
Deferred tax is the tax expected
to be payable or recoverable on
differences between the carrying
amounts of assets and liabilities
in the financial statements and the
corresponding tax bases used in the
computation of taxable profit and
is accounted for using the balance
sheet liability method. Deferred tax
liabilities are provided in full, with no
discounting, for all taxable tempo-
rary differences; deferred tax assets
are recognised to the extent that it
is probable that taxable profits will
be available against which deduct-
ible temporary differences can be
utilised. Such assets and liabilities
are not recognised if the temporary
difference arises from the initial
recognition of goodwill or from the
initial recognition (other than in a
business combination) of other as-
sets and liabilities in a transaction
that affects neither the tax profit nor
the accounting profit.
tax
liabilities are
Deferred
rec-
ognised for taxable temporary dif-
ferences arising on investments in
subsidiaries and associates, and
interests in joint ventures, except
where the Group is able to control
the reversal of the temporary differ-
ence and it is probable that the tem-
porary difference will not reverse in
the foreseeable future.
The carrying amount of deferred tax
assets is reviewed at each balance
sheet date and reduced to the extent
that it is no longer probable that suf-
ficient taxable profits will be avail-
able to allow all or part of the asset
to be recovered.
Deferred tax is calculated at the tax
rates that are expected to apply in
the period when the liability is settled
or the asset is realised. Deferred tax
is charged or credited in the income
statement, except when it relates to
items charged or credited directly to
equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities
are offset when there is a legally
enforceable right to set off current
tax assets against current tax liabil-
ities and when they relate to income
taxes levied by the same taxation
authority and the Group intends to
settle its current tax assets and lia-
bilities on a net basis.
Property, plant and equipment
Items of property, plant and equip-
ment are stated at cost less accu-
mulated depreciation and accumu-
lated impairment losses, if any. The
cost of an asset comprises its pur-
chase price and any directly attrib-
utable costs of bringing the asset
to the location and condition for its
intended use.
Depreciation is charged to profit or
loss (unless it is included in the car-
rying amount of another asset) on
a straight-line basis to write off the
depreciable amount of the assets
net of the estimated residual values
over their estimated useful lives of
between 3 and 5 years.
Intangible assets
Development expenditure
Development expenditure, where it
meets certain criteria (given below),
is capitalised and amortised on a
straight-line basis over its useful
life. Asset lives are subject to regu-
lar review and an impairment exer-
cise carried out at least once a year.
Where no internally-generated intan-
gible asset can be recognised, de-
velopment expenditure is written-off
in the period in which it is incurred.
An asset is recognised only if all of
the following conditions are met:
• The product is technically feasi-
ble and marketable;
• The Group has adequate resourc-
es to complete the development
of the product;
• It is probable that the asset creat-
ed will generate future economic
benefits; and
• The development cost of the as-
set can be measured reliably.
Development expenditure is amor-
tised on a straight-line basis over
4 years, such amortisation being
charged to profit or loss. Expendi-
ture on research activities is rec-
ognised as an expense in the period
in which it is incurred.
ANNUAL REPORT 2018 59
Customer relationships
Customer relationships acquired are recognised as in-
tangible assets at their fair values (see notes 17 and 26).
Customer relationships are amortised on a straight-line
basis over 10 years.
Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date, the Group reviews the carry-
ing amounts of its tangible and intangible assets to de-
termine whether there is any indication that those assets
have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss
(if any). Where the asset does not generate cash flows
that are independent from other assets, the Group esti-
mates the recoverable amount of the cash-generating
unit to which the asset belongs. An intangible asset with
an indefinite useful life is tested for impairment annually
and whenever there is an indication that the asset may
be impaired.
Recoverable amount is the higher of fair value less costs
to sell and value in use. If the recoverable amount of an
asset (or cash-generating unit) is estimated to be less
than its carrying amount, the carrying amount of the as-
set (cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognised as an expense
through profit and loss.
Financial assets
The Group’s financial assets consist of cash, loans, de-
posits, and receivables and related contract assets. The
classification of financial assets at initial recognition
depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for man-
aging them.
With the exception of trade receivables that do not con-
tain a significant financing component or for which the
Group has applied the practical expedient, the Group
initially measures a financial asset at its fair value plus,
in the case of a financial asset not at fair value through
profit or loss, transaction costs. Trade receivables that
do not contain a significant financing component or for
which the Group has applied the practical expedient are
measured at the transaction price determined under IFRS
15 as described in the revenue accounting policy above.
The Group always recognises lifetime expected credit
losses (“ECL”) for trade receivables and contract assets.
The expected credit losses on these financial assets are
estimated using a provision matrix based on the Group’s
historical credit loss experience, adjusted for factors that
are specific to the debtors, general economic conditions
and an assessment of both the current as well as the
forecast conditions at the reporting date, including time
value of money where appropriate.
For all other financial instruments, the Group recognises
lifetime ECL when there has been a significant increase in
credit risk since initial recognition. However, if the credit
risk on the financial instrument has not increased signifi-
cantly since initial recognition, the Group measures the
loss allowance for that financial instrument at an amount
equal to 12-month ECL.
Trade and other receivables and contract assets
Trade receivables are amounts due from customers for
goods sold or services performed in the ordinary course
of business. They are generally due for settlement be-
tween 30 and 90 days and therefore are all classified as
current. Trade receivables are recognised initially at the
amount of consideration that is unconditional unless
they contain significant financing components, when
they are recognised at fair value. The Group holds the
trade receivables with the objective to collect the con-
tractual cash flows and therefore measures them sub-
sequently at amortised cost using the effective interest
method.
The timing of revenue recognition, invoicing and cash
collections results in both invoiced accounts receivable
and uninvoiced receivables. Invoicing may be implement-
ed (depending on the contract with the end customer)
according to usage or upon achievement of contractual
milestones. Generally, invoicing occurs subsequent to
revenue recognition, resulting in contract assets arising
until invoicing.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and
demand deposits, and other short-term highly liquid in-
vestments with an original maturity date of fewer than
three months that are readily convertible to a known
amount of cash and are subject to an insignificant risk of
changes in value.
Financial liabilities and equity instruments
Equity and debt instruments are classified as either fi-
nancial liabilities or as equity in accordance with the sub-
stance of the contractual arrangements and the defini-
tions of a financial liability and an equity instrument. The
Group’s financial liabilities include trade and other pay-
ables and borrowings which are measured at amortised
cost using the effective interest rate method. An equity
instrument is any contract which evidences a residual in-
terest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group, such
as share capital and share premium, are recognised at
the proceeds received net of direct issue costs.
Borrowings
Interest-bearing loans are recorded initially at fair value,
net of direct issue costs. Finance charges, including pre-
miums payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis in
profit or loss using the effective interest rate method and
are added to the carrying amount of the instrument to
the extent that they are not settled in the period in which
they arise.
ANNUAL REPORT 2018
60
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effec-
tive interest rate method.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that
the Group will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the
expenditure required to settle the obligation at the balance sheet date and are discounted to present value where the
effect is material.
Segmental information
For management purposes, the Group’s activities are principally related to the provision of data analytics services to
customers, and all other activities performed by the Pelatro Group are solely to support its primary revenue generation
activities. All the processes are primarily subject to the same risks and returns and the Directors therefore consider that
there are no identifiable business segments that are subject to risks and returns different to the core business. As such,
internal reporting provided to the chief operating decision-maker (“CODM”), which has been determined to be the Board
of Directors for making decisions about resource allocations and performance assessment relates to the consolidated
operating results of the Pelatro Group.
Accordingly, the Directors have determined that there is only one reportable segment under IFRS 8 and the financial
information therefore presents entity-wide information. The results and assets for this segment can be determined by
reference to the statement of comprehensive income and statement of financial position.
The Pelatro Group primarily serves customers in Africa and Asia, with a developing presence in Europe.
Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further
understanding of the financial performance of the Company or the Group. They are material items of income or ex-
pense that have been shown separately due to the significance of their nature or amount.
4. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements requires management to make judgements, estimates and assumptions that
affect the amounts reported for assets, liabilities, revenues and expenses. However, the nature of estimation means
that actual outcomes could differ from those estimates. The key assumptions and critical accounting judgements
concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
discussed below:
Business combinations and related intangible assets
Business combinations may result in acquired technology assets and customer relationships being recognised as
separable intangible assets at their fair value at the date of acquisition. These are valued using discounted cash flow
methodology, taking into account a number of key assumptions such as retention and net income. In applying this
methodology, certain key judgements and estimates are required to be made in respect of future cash flows together
with an appropriate discount factor for the purpose of determining the present value of those cash flows. The key
sources of estimation uncertainty with respect to customer relationships are the future retention rate and the income
per customer generated from those customers; the key sources of estimation uncertainty with respect to technology
assets are the merits of the software in comparison to other similar products which may be available (and hence the
Group’s ability to valorise it by onward sale to customers) and its likely useful economic life.
Accounting for acquisition-related contingent consideration is based on estimates of future performance of the ac-
quired business over the contractual earn-out period, as measured against the contractually agreed performance tar-
gets. If the future results of these businesses differ from the forecasts used for these calculations, there may be a
material change in the value of these deferred liabilities which would be recorded in the consolidated statement of
profit and loss.
ANNUAL REPORT 2018 61
Management judgement is also required in assessing the useful economic lives of these assets for the purposes of
amortisation. Notes 17, 22 and 26 gives further details of the assumptions used.
Capitalised development costs
Development costs are accounted for in accordance with IAS 38 Intangible Assets, and costs that meet the qualifying
criteria are capitalised and systematically amortised over the useful economic life of the intangible asset. Determining
whether development costs qualify for capitalisation as intangible assets requires judgement, including assessments
of the nature of the work underlying the costs carried out by relevant employees, estimates of the technical and com-
mercial viability of the asset created, and its applicable useful economic life. These estimates are continually reviewed
and updated based on past experience and reviews of competitor products available in the market.
Impairment reviews
The Group uses long-term forecasts of cash flow and estimates of future growth both to value acquired intangible as-
sets and goodwill and to assess whether goodwill and intangible assets are impaired, and to determine the useful eco-
nomic lives of its intangible assets. If the results of operations in a future period are adverse to the estimates used, an
impairment may be triggered at that point, or a reduction in useful economic life may be required. The Group assesses
the carrying value of goodwill and intangible assets annually, or whenever there is an indication of impairment: identi-
fying indicators of impairment requires judgements to be made as to the prospects and value drivers of the individual
assets. Note 17 discloses the assumptions used.
5. Revenue and segmental analysis
The Directors consider that the Group has a single business segment, being the sale of information management
software to providers of telecommunication services. 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 four key revenue models, being (1) contracts based on the sale of perpetual licenses for use of the
Group’s proprietary enterprise software; (2) contracts for the use of the Group’s software on a regular (usually monthly)
basis, which may also provide for Group employees to provide related services the customer and/or for the Group to
take a share of the revenue gain achieved through use of the software; (3) provision of bespoke modifications to Group
software (“change requests”); and (4) provision of maintenance and support of the software. In addition, the Group
may provide certain consulting and training services and, if required by the customer, appropriate hardware on which
to host the software.
At 31 December
Repeat software sales and services
Maintenance and support
Total Repeat Revenues
Software – new licenses
Consulting
Resale of hardware
2018
$’000
2,288
809
3,097
2,511
515
-
6,123
2017
$’000
618
-
618
2,264
9
255
3,146
ANNUAL REPORT 2018 62
As explained further in Note 28, no adjustment has been made to 2017 comparative figures in respect of the change
in accounting policy for revenue recognition as a result of the implementation of IFRS 15. In order to aid comparison,
2017 revenue under IFRS 15 for license fees would have been approximately $2,162,000 and for maintenance and
support approximately $119,000.
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
Caribbean
Central Asia
Eastern Europe
North Africa
South Asia
South East Asia
Sub - Saharan Africa
2018
$’000
357
1,653
380
314
819
2,207
393
6,123
2017
$’000
331
-
-
756
1,214
690
155
3,146
Management makes no allocation of costs, assets or liabilities between these segments since all trading activities are
operated as a single business unit.
An analysis of revenue by status of invoicing is as follows:
Year to 31 December
(i) Revenue invoiced to customers under contractual terms
(ii) Revenue recognised under terms of contract but unbilled at
period end (“UBR”)
(iii) Revenue recognised other than (ii) (i.e. on the completion of
performance obligations but before any billing milestone is reached)
Less: net revenue deferred under IFRS 15
Less: revenue recognised or to be recognised as
interest under IFRS 15
2018
$’000
3,694
2,325
271
(80)
(87)
2017
$’000
3,089
57
-
-
-
Total revenue recognised in the year
6,123
3,146
ANNUAL REPORT 2018 63
Customer concentration
The Group has two customers representing individually
over 10% of revenue each and in aggregate approximate-
ly 48% of total revenue at $2,912,000 (2017: six custom-
ers representing individually over 10% each and in ag-
gregate approximately 95% of revenue at $2,991,000).
The two customers accounted for revenue of $1,653,000
and $1,259,000 respectively (2017: $756,000, $628,000,
$586,000, $350,000, $340,000 and $331,000).
Further impacts of the adoption of IFRS 15
The Group has applied IFRS 15 using the cumulative ef-
fect of initially applying the effects of the new revenue
standard as an adjustment to the opening balance of eq-
uity at 1 January 2018. Therefore, the relevant compara-
tive information has not been restated and continues to
be reported under IAS 11 and IAS 18.
License revenue
As explained in Note 2, the Group now recognises reve-
nue 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 ac-
tivities are reported as one. The effect of this revised
revenue recognition policy has had no material effect
on prior years or this year, as all contracts were either
complete at the year end or the contractual amount due
on completion of implementation was broadly similar to
the deemed value of the implementation subsequently
carried out.
Irrespective of the split between license and implemen-
tation recognition, some contracts provide for fixed pay-
ments to be made by customers (usually monthly) over
a given term (e.g. three or five years). Under IFRS 15, in
order to reflect the time value of money, such contracts
have been recognised as (i) a capitalisation of the income
stream less (ii) an amount relating to the notional interest
accruing and to be accrued on the credit deemed to be
extended to the customer (on a reducing balance basis).
For the financial year 2018 this figure amounts to (i)
$131,000 less (ii) $65,000 (net of $23,000 of contractual
revenue recognised instead as interest in 2018).
PCS
Related to a license sale, the Group typically provides five
years of PCS but does not charge for the first year; simi-
larly in certain contracts may provide the PCS at less than
a notional market rate. For revenue recognition purposes
this is treated as income accruing over the full term of
the service provision (whether paid or otherwise) and, as
far as is estimable, at a deemed market rate. Accordingly,
the financial statements reflect adjustments to income
(i) to accelerate the recognition of revenue for initial
years for which no contractual payment is due; and (ii)
to defer the recognition of revenue in cases where the
contractual PCS charge is lower than a market rate (the
difference being set against the revenue recognised in
respect of the license fee). For the financial year 2018
revenue therefore includes (i) an amount of $141,000
representing revenue from PCS recognised ahead of its
contractually due dates, less (ii) an amount of $80,000
representing revenue deferred from license income and
allocated to PCS.
Summary
The net effect of such adjustments is (i) a retrospective
adjustment of $18,000 (credit) to reserves to take into
account the financial effects of its implementation for
periods prior to the current year (i.e. revenue would have
been $18,000 greater than reported); and (ii) a net accel-
eration of income recognised of $104,000 plus a further
$23,000 recognised as interest income which would oth-
erwise have been recognised as revenue. Accordingly at
31 December 2018, the Group would have recognised a
reduced profit of $127,000 if it had continued to apply IAS
11 and IAS 18 in 2018.
The total transaction price allocated to partly unsatis-
fied performance obligations is approximately $200,000.
This will be recognised as revenue over the next 45-60
months. There is no other impact on the Group’s consoli-
dated income statement for the year as a result of apply-
ing previous revenue accounting standards.
Non-current assets
Information about the Group’s non-current assets by location of assets are as follows:
At 31 December
Singapore
UK
India
2018
$’000
2,295
8,300
14
2017
$’000
908
287
159
10,609
1,354
ANNUAL REPORT 2018 64
Non-current assets comprise intangible assets, goodwill, deferred tax assets and plant, property and equipment.
6. Operating Expenses
Profit for the year has been arrived at after charging:
Year to 31 December
Staff costs (see note 11)
Amortisation of intangible non-current assets
Depreciation of tangible non-current assets
Auditor’s remuneration (see note 10)
Operating lease charges - land and buildings
Realised foreign exchange (gains)/losses
7. Finance Income
Interest receivable on interest-bearing deposits
Notional interest accruing on contracts with a
significant financing component
Total finance income
8. Finance Expense
Interest and finance charges paid or payable on borrowings
Acquisition-related financing expense - unwinding of
discount on financial liabilities
Total finance expense
2018
$’000
2017
$’000
582
843
46
45
45
(69)
14
202
1
124
6
(15)
2018
$’000
2017
$’000
10
23
33
-
-
-
2018
$’000
2017
$’000
62
9
71
4
-
4
ANNUAL REPORT 2018 65
9. Non-GAAP profit measures and exceptional items
Reconciliation of operating profit to earnings before interest, taxation, depreciation and amortisation (“EBITDA”)
Year to 31 December
Operating profit
Adjusted for:
Amortisation and depreciation
Exceptional items within operating expenses
2018
$’000
2,551
889
310
2017
$’000
1,100
203
701
Adjusted EBITDA
3,750
2,004
Exceptional items in 2018 comprise legal and other costs relating to the Danateq Acquisition. Exceptional items in
2017 comprise financial advisory, legal, accounting and other costs relating to the admission to trading of the Compa-
ny’s shares in December, the associated placing of new Ordinary shares (other than amounts allocated directly to share
premium), and the Group reconstruction and acquisition of PSPL carried out to facilitate this. Exceptional items are
treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted EBITDA and
adjusted earnings per ordinary share 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 consisten-
cy with the Group’s internal management reporting.
The calculation of adjusted earnings per share is shown in Note 14.
10. Auditor’s remuneration
Year to 31 December
Charged in the financial year:
Audit of the financial statements of Pelatro Plc
Amounts receivable by auditor in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Tax compliance
Advisory work in respect of IPO
Other advisory work
To be charged in respect of audit services relating to the financial year:
Audit of the financial statements of Pelatro Plc
Audit of financial statements of subsidiaries pursuant to legislation
Tax compliance
Accountancy work
2018
$’000
2017
$’000
42
-
3
-
-
45
41
-
3
-
44
-
-
3
119
2
124
n/a
n/a
n/a
n/a
ANNUAL REPORT 2018 66
11. Staff Costs
Year to 31 December
Wages and salaries
Social security contributions
Benefits
Less: amounts capitalised
2018
$’000
1,975
40
-
(1,433)
582
2017
$’000
60
2
-
(48)
14
The average number of persons employed by the Company during the period was:
Year to 31 December
Sales
Software development
Support
Marketing
Administration
2018
2017
2
70
18
2
13
105
2
36
8
1
11
56
12. Director’s remuneration and transactions
The Directors’ emoluments in the year ended 31 December 2018 were:
Executive Directors
S. Menon
S. Yezhuvath
N. Hellyer
Non-Executive Directors
R. Day
P. Verkade
Basic
Salary
2018
$’000
Benefits in
kind
2018
$’000
Pension
2018
$’000
Total
2018
$’000
Total
2017
$’000
192
192
79
52
30
545
31
18
-
-
-
49
-
-
1
1
-
2
223
210
80
53
30
78
78
33
53
7
596
248
ANNUAL REPORT 2018 67
In addition to the above, Pieter Verkade was paid $30,000 during the year in respect of marketing consultancy services.
The remuneration of the executive Directors is decided by the Remuneration Committee. Save as disclosed above no
Director had a material interest in any contract of significance with the Group in either year.
13. Taxation
Tax on profit on ordinary activities
Year to 31 December
Current tax
UK corporation tax charge/(credit) on profit for the current year
Overseas income tax charge/(credit)
Total current income tax
Deferred tax
(Recognition)/reversal of deferred tax asset
Total deferred income tax
Total income tax expense recognised in the year
2018
$’000
2017
$’000
225
117
342
(8)
(8)
334
-
247
247
5
5
252
Pelatro LLC is a US Limited Liability Company and, for the period from its incorporation to 7 September 2017 was treat-
ed as a flow-through entity for both US federal and state income tax purposes. As such, its then members were taxed
on their distributable share of the profits of the business, and Pelatro LLC itself was not subject to US federal or state
income tax. Hence no provision or liability (including deferred tax) for federal or state income taxes relating to Pelatro
LLC is included in the tax charge for those periods and accordingly no tax charge arose in the Group accounts for the
period when Pelatro LLC was the sole constituent of the Group. From 8 September 2017 Pelatro LLC elected to be taxed
as a C Corporation and hence tax arising at the corporate level within Pelatro LLC is accounted for accordingly in the
consolidated tax expense and liability.
Reconciliation of the total tax charge
The effective tax rate in the income statement for the year is lower than the standard rate of corporation tax in the UK of
19%. 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
Profit before taxation
Tax at the applicable rate of 19%
2018
$’000
2,513
477
2017
$’000
1,108
211
ANNUAL REPORT 2018 68
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income:
Effect of tax chargeable to underlying members
Expenses not deductible for tax purposes and other permanent items
Income not taxable and other permanent items
Movement in fair value of contingent consideration not taxable
Tax exemptions, allowances and rebates
Foreign tax credits
Overseas taxation at different rates
Overseas withholding tax expenses
Derecognition of deferred tax asset
Income tax expense recognised for the current year
-
279
(395)
2
(27)
(30)
36
-
(8)
334
4
176
(154)
-
(29)
6
(10)
48
-
252
The tax effect of exchange differences recorded within the Group Statement of Comprehensive Income is a charge of
$10,000 (2017: nil).
Temporary differences associated with Group investments
At 31 December 2018, there was no recognised deferred tax liability (2017: $nil) for taxes that would be payable on the
unremitted earnings of certain of the Group’s subsidiaries as the Group has determined that undistributed profits of its
subsidiaries will not be distributed in the foreseeable future.
Deferred tax
Recognised deferred tax
At 1 January
Movement in the period:
- acquired on acquisition of subsidiary undertaking
- other timing differences
At 31 December
Comprising:
Timing differences
Tax losses
2018
$’000
(5)
-
8
3
3
-
3
2017
$’000
-
118
(5)
113
(7)
120
113
ANNUAL REPORT 2018 69
During the period, further evidence was obtained in respect of the deferred tax asset of $118,000 that was recognised
as part of the acquisition of PSPL in December 2017. As this related to the conditions existing at the date of acquisition
and was obtained within one year of the acquisition date, IFRS 3 allows for the acquisition accounting to be revised.
Consequently, the deferred tax asset has been derecognised and a corresponding increase has been made to goodwill.
Factors affecting future tax charges
The Finance Act 2017, which was approved on 15 September 2017, will reduce the UK corporation tax rate by 2% from
the current 19% to 17% from 1 April 2020.
The Group’s recognised and unrecognised deferred tax assets in its Indian subsidiary have been shown at 28%, being
the effective rate in that country.
14. 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 (such calculation for
2017 having been adjusted to reflect the issue of ordinary shares by the Company for the acquisition of Pelatro LLC
as if these shares had been issued on incorporation of Pelatro LLC). A calculation of diluted earnings per share is not
presented as the number of dilutive potential shares outstanding at the end of the reporting period was not material.
The following reflects the earnings and share data used in the basic earnings per share computations:
Year to 31 December
Profit attributable to equity holders of the parent:
Continuing operations
Profit attributable to ordinary equity holders of the parent for basic earnings
2018
$’000
2,179
2,179
2017
$’000
830
830
Weighted number of ordinary shares in issue
27,375,741
17,273,968
Basic earnings per share attributable to shareholders
8.0¢
Basic earnings per share for continuing operations attributable to shareholders
8.0¢
Adjusted earnings per share
Adjusted earnings per share is calculated as follows:
Year to 31 December
2018
$’000
Profit attributable to ordinary equity holders of the parent for basic earnings
2,179
Adjusting items:
- exceptional items
310
4.8¢
4.8¢
2017
$’000
830
701
ANNUAL REPORT 2018 70
- amortisation of acquisition-related intangibles
Adjusted earnings attributable to owners of the Parent
286
2,775
-
1,531
Weighted number of ordinary shares in issue
27,375,741
17,273,968
Adjusted earnings per share attributable to shareholders
10.1¢
8.9¢
15. Dividends paid and proposed
No dividends were declared or paid during the year and no dividends will be proposed for approval at the AGM (2017:
none).
16. Principal Group investments
The Company has investments in the following subsidiary undertakings, which contribute to the net assets of the
Group:
Principal subsidiary
undertakings
Country of
incorporation
and operation
Registered
office
Principal
activity
Description and
proportion of shares
held by the Company
Pelatro LLC
USA
110 Summit Avenue Montvale, NJ
07645, USA
Sales
100% of members’
capital
Pelatro Pte Limited
Singapore
One Raffles Place,
#10-62, Tower 2, Singapore
048616
Pelatro Solutions
Private Limited
India
403, 7th A Main, HRBR Layout,
Bangalore 560043, India
Ownership of
intellectual
property
Research,
development
and support
100% ordinary shares
100% ordinary shares
17. 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, customer rela-
tionships and goodwill.
Financial Year 2018
Cost
At 1 January 2018
Additions
Fair value adjustment
Created as part of a business
combination
Development
costs
$’000
Third party
software
$’000
Customer
relationships
$’000
Goodwill
$’000
1,290
1,604
-
-
32
69
-
-
-
-
-
-
287
-
140
318
Total
$’000
1,609
1,673
140
318
ANNUAL REPORT 2018 71
Acquired as part of a business
combination
Foreign exchange
At 31 December 2018
Amortisation or impairment
At 1 January 2018
Acquired as part of a
business combination
Charge for the year
Foreign exchange
At 31 December 2018
Net carrying amount
At 31 December 2018
At 1 January 2018
1,250
-
4,144
(382)
-
(553)
-
(935)
3,209
908
-
(3)
98
(16)
-
(4)
1
(19)
79
16
6,862
-
-
-
8,112
(3)
6,862
745
11,849
-
-
(286)
-
(286)
-
-
-
-
-
(398)
-
(843)
1
(1,240)
6,576
745
10,609
-
287
1,211
During the year, further evidence was obtained in respect of the eligibility of certain tax losses giving rise to the deferred
tax asset of $118,000 that was recognised as part of the acquisition of PSPL in December 2017, and it is now consid-
ered that these tax losses are unavailable for use. As this related to the conditions existing at the date of acquisition
and was obtained within one year of the acquisition date, IFRS 3 allows for the acquisition accounting to be revised.
Consequently, the deferred tax asset has been derecognised (and a similar adjustment made in respect of an amount
of $22,000 relating to current tax liabilities acquired) and a corresponding increase has been made to goodwill.
Financial Year 2017
Cost
At 1 January 2017
Additions
Created as part of a business
combination
Acquired as part of a business
combination
At 31 December 2017
Amortisation or impairment
At 1 January 2017
Acquired as part of a
business combination
Charge for the year
At 31 December 2017
Development
costs
$’000
Third party
software
$’000
Customer
relationships
$’000
Goodwill
$’000
538
752
-
-
1,290
(181)
-
(201)
(382)
-
-
-
32
32
-
(15)
(1)
(16)
-
-
-
-
-
-
-
-
-
-
-
287
-
287
-
-
-
-
Total
$’000
538
752
287
32
1,609
(181)
(15)
(202)
(398)
ANNUAL REPORT 2018 72
Net carrying amount
At 31 December 2017
At 1 January 2017
908
357
16
-
-
-
287
-
1,211
357
Development Costs
Development costs are either internally generated or
acquired and are capitalised at cost or fair value on ac-
quisition. Such costs comprise capitalised staff costs
(and allocable related direct costs) associated with the
development of new products and services which will be
saleable to more than one customer.
These intangible assets have been assessed as having a
finite life and are amortised on a straight-line basis over
their useful life, which is estimated at four years. The
amortisation charge on intangible assets is included in
administrative expenses in the consolidated statement
of comprehensive income. These assets are tested for
impairment when an indicator of impairment arises and
annually prior to them being made available for use.
Software
Software assets represent purchased licences and dis-
tribution rights for third party software which are capital-
ised at cost and amortised on a straight-line basis over
the relevant estimated useful life. The estimated useful
life of these intangible assets ranges between three
and nine years depending on their nature. Amortisation
charges in respect of intangible assets are included in
administrative expenses.
Customer relationships
Customer relationships were acquired as part of a busi-
ness combination (see Note 26). They are recognised at
their fair value at the date of acquisition and are subse-
quently amortised on a straight-line based over their esti-
mated useful life of 10 years.
Goodwill
Goodwill arose on the acquisition of the Danateq As-
sets and PSPL. It is assessed as having an indefinite life
but the Group tests whether goodwill has suffered any
impairment on an annual basis. For the 2017 and 2018
reporting periods, the recoverable amount of the cash
generating units (“CGUs”) was determined based on val-
ue-in-use calculations which require the use of assump-
tions. The calculations use cash flow projections based
on financial budgets approved by management covering
a five-year period. Cash flows beyond the five-year period
are extrapolated using the estimated growth rates stated
below.
Danateq cash-generating unit
The Danateq CGU comprises the contracts and custom-
er relationships acquired as part of the Danateq Acquisi-
tion (further detailed in Note 26), the enterprise software
acquired for resale and the related workforce. Given the
opportunity to leverage this expertise across Pelatro’s ex-
isting business and the ability to exploit the Group’s thus
enlarged customer base, the 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.
This goodwill was tested for impairment at 31 December
2018 by comparing the carrying value of the CGU with
the recoverable amount. The recoverable amount was
determined using a value in use methodology based on
discounted cash flow projections. The key assumptions
used in the value in use calculations were as follows:
(i) The operating cash flows for this business for the
year to 31 December 2019 are taken from the budget
approved by the Board which is closely linked with
recent historical performance and current expected
levels of activity. The operating cash flow budget is
most sensitive to sales of software and services to
third parties;
(ii) Growth has been assumed in operating cash flows
for the remainder of the value in use in line with short
term pipeline expectations as well as longer-term
growth expectations for the software products in the
market. Revenue growth after 5 years is forecast at
-20% in US Dollars terms to reflect the integration of
the products into those of the Group overall;
(iii) A post-tax discount rate of approximately 10% has
been used (being the Weighted Average Cost of Cap-
ital in US Dollars); and
(iv) The use of cash flow projections over longer than a
5-year period is considered appropriate as the Group
has an increasing recurring revenue base and the
Group continues to invest in the development of the
products via this CGU
ANNUAL REPORT 2018 73
PSPL cash-generating unit
Sensitivity to changes in assumptions
A change in a key assumption in respect to operating
cash flows could cause the carrying value of the goodwill
to exceed the recoverable amount, resulting in an impair-
ment charge. The Board is confident that the assump-
tions in respect of operating cash flows remain appropri-
ate. Where the operating cash flows incorporate products
or solutions that will be sold in an existing known market,
past experience is used as a guide to the level of sales
achievable, growth rates and associated margins. Where
the operating cash flows relate to products or solutions
that will be sold into a new or emerging market, past ex-
perience with similar products or solutions is combined
with relevant information from external market sources,
such as competitor pricing and discussions with poten-
tial customers, in arriving at the level of sales achievable,
growth rates and associated margins.
Conclusion
The Directors have concluded that, based on the above,
recoverable value exceeds the carrying value of the good-
will at 31 December 2018.
The PSPL CGU comprises the Group’s software develop-
ment centre in Bangalore which was acquired in Decem-
ber 2017, and whose principal activity is to develop the
Group’s software and provide administrative support for
the rest of the Group. The goodwill relating to this CGU
was tested for impairment at 31 December 2018 by com-
paring the carrying value of the CGU with the recoverable
amount. The recoverable amount was determined using
a value in use methodology based on discounted cash
flow projections. The key assumptions used in the value
in use calculations were as follows:
(i) The operating cash flows for this business for the
year to 31 December 2019 are taken from the budget
approved by the Board which is closely linked with
recent historical performance and current expected
levels of activity. The operating cash flow budget is
most sensitive to the number of employees, partic-
ularly the more highly-skilled developers; revenue for
the CGU is all intra-Group and is thus dependent on
other Group companies making third-party sales;
(ii) Growth has been assumed in operating cash flows
for the remainder of the value in use such that a con-
sistent post-tax margin is maintained over the calcu-
lation period (which is how the business is managed
within the Group). Revenue growth after 5 years is
forecast at 15% in local currency terms;
(iii) A post-tax discount rate of approximately 14% has
been used (being the Weighted Average Cost of Cap-
ital in local currency); and
(iv) The use of cash flow projections over longer than a
5-year period is considered appropriate as the busi-
ness is expected to continue to support the Group
for the period of the projections, the Group has an
increasing recurring revenue base and the Group con-
tinues to invest in the development of the products
via this CGU
ANNUAL REPORT 2018 74
18. Tangible assets
Financial Year 2018
Cost
At 1 January 2018
Additions
Foreign exchange differences
At 31 December 2018
Depreciation
At 1 January 2018
Charge for the year
Foreign exchange differences
At 31 December 2018
Net carrying amount
At 31 December 2018
At 1 January 2018
Financial Year 2017
Cost
At 1 January 2017
Additions
Acquired as part of a business
combination
Foreign exchange differences
At 31 December 2017
Depreciation
At 1 January 2017
Acquired as part of a business
combination
Charge for the year
Foreign exchange differences
Leasehold
improvements
$’000
Computer
equipment
$’000
Office
equipment
$’000
Vehicles
$’000
Total
$’000
-
49
-
49
-
-
-
-
49
-
56
44
(7)
93
(29)
(20)
3
(46)
47
27
4
23
3
30
(1)
-
(1)
(2)
28
3
-
270
(6)
264
-
(27)
1
(26)
238
-
60
386
(10)
436
(30)
(47)
3
(74)
362
30
Leasehold
improvements
$’000
Computer
equipment
$’000
Office
equipment
$’000
Vehicles
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
56
-
56
-
(28)
(1)
-
-
1
3
-
4
-
(1)
-
-
-
-
-
-
-
-
-
-
-
-
1
59
-
60
-
(29)
(1)
-
ANNUAL REPORT 2018 75
At 31 December 2017
Net carrying amount
At 31 December 2017
At 1 January 2017
-
-
-
(29)
(1)
27
-
3
-
-
-
-
(30)
30
-
The Group entered into a new lease on 1 September 2018 in Bangalore, India over premises which required substantial
improvement and modernisation, which costs have been capitalised as leasehold improvements and depreciated over
5-10 years.
19. 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) “trade
receivables”); and
(iii) as required by IFRS 15, amounts relating to revenue recognised at the date of the statement of financial position
but not invoiceable under the terms of the contract (“contract assets”)
Amounts recognised under (iii) “Contract assets” represent assets resulting from balance sheet reclassifications aris-
ing from the adoption of IFRS 15. The balance of $384,000 (which includes amounts arising from balances brought
forward from 2017) relates to license and PCS income recognised but not yet invoiceable.
Aged analysis of trade receivables
At 31 December
2018
Trade receivables
2017
Trade receivables
Carrying
amount
Neither
impaired or
past due
Past due but not impaired
61-90 days
91-120 days
$’000
$’000
$’000
$’000
4,138
3,636
1,778
1,022
-
-
-
-
More than
121 days
$’000
502
756
Trade terms and impairments
Unless specific agreement has been reached with individual customers, sales invoices are usually due for payment be-
tween 60 and 90 days after the date of the invoice. If customers delay making payment, an assessment of the potential
loss of customer goodwill arising from the enforcement of contractual payment terms may take place when consider-
ing actions to be taken to secure payment. Furthermore, interest is not typically charged on overdue debts although it
is provided for in some contracts.
As explained in Note 2, the Group was required to revise its impairment methodology under IFRS 9 for relevant classes
of assets. In adopting IFRS 9, the only change made from the previous reporting period was in relation to the impair-
ment of financial assets. The Group now reviews the amount of credit loss associated with its trade receivables based
on forward looking estimates that take into account current and forecast credit conditions as opposed to relying on
ANNUAL REPORT 2018 76
past historical default rates. In adopting IFRS 9 the Group
has applied the Simplified Approach applying a provision
matrix to measure lifetime expected credit losses and
after taking into account customers with different credit
risk profiles and current and forecast trading conditions.
The Group has elected to adopt the initial application
date of 1 Jan 2018 and therefore has chosen not to re-
state comparatives. The Directors applied a percentage
“probability of default” to the receivables balance related
to the underlying credit rating of the customer (many of
whom have investment grade credit ratings provided by
well-known ratings agencies), which resulted in a hypo-
thetical expected default amount which was not mate-
rial to the Group’s financial statements. Given this, and
the fact that the Group has no history of trade receivable
write offs, the Directors concluded that no provision is
required and therefore no allowance for doubtful debts
was recognised in 2018 (2017: nil).
Credit risk
Management has a credit policy in place and the expo-
sure to credit risk is monitored on an ongoing basis. Cred-
it evaluations are performed on customers as deemed
necessary based on, inter alia, the nature of the prospect
and size of order. The Group does not require collateral in
respect of financial assets.
At the reporting date, the largest exposure was repre-
sented by the carrying value of trade and other receiv-
ables, against which no provision is carried at 31 De-
cember 2018 (2017: nil) as detailed above. The largest
individual counterparty to a receivable included in trade
and other receivables at 31 December 2018 owed the
Group $884,000 (of which some $747,000 was unbilled
revenue) (2017: $756,000). Based on invoiced receiv-
ables, the largest individual counterparty owed the Group
$449,000 (2017: $756,000). The Group’s customers are
spread across a broad range of geographies and conse-
quently it is not otherwise exposed to significant concen-
trations of credit risk on its trade receivables.
ANNUAL REPORT 2018 77
20. Trade and other payables and contract liabilities
At 31 December
Due within a year
Trade payables
Other payables
Amounts due to related parties
Total trade and other payables
2018
$’000
2017
$’000
118
463
28
609
53
320
101
474
The average credit period taken for trade purchases is between 30 and 60 days. Most suppliers do not charge interest
on trade payables for the first 30 days from the date of the invoice. The Group has risk management policies in place
to ensure that all payables are paid within the appropriate credit time frame. The Directors consider that the carrying
amount of trade payables approximates to their fair value.
“Other payables” principally comprise provisions for taxation liabilities and other costs.
“Contract liabilities” represent liabilities resulting from balance sheet reclassifications arising from the adoption of
IFRS 15. The balance of $238,000 (which includes amounts arising from balances brought forward from 2017) relates
to income invoiced but yet to be recognised as PCS or interest receivable.
21. Loans and borrowings
At 31 December
Non-current liabilities
Secured term loans
Current liabilities
Current portion of term loan
Unsecured borrowings
Total loans and borrowings
2018
$’000
2017
$’000
382
382
69
-
69
451
266
266
30
744
744
1,040
During 2018, PSPL secured two new loans: in January it entered into a vehicle loan agreement with Kotak Mahindra
Prime Ltd to fund a vehicle purchase. The loan amount granted was INR 5.9m (c. $92,000) with a term of 5 years,
secured on the vehicle. In March a term loan of INR 10.0m (c. $154,000) was secured from Kotak Mahindra Bank for
a term of 5 years, also in relation to a vehicle purchase at an interest rate of 9.25%. The loan is repayable in 60 equal
monthly instalments. During the year unsecured borrowings (PSPL’s overdraft) and directors’ loans were repaid in full.
ANNUAL REPORT 2018 78
Reconciliation between opening and closing balances for liabilities resulting in financing cash flows
1 January
2018
Non-cash
changes
– foreign
exchange
movements
Interest
accruals
included in
cash flow
Transfer
from
non-current
to current
Cash flows -
net (repay-
ments) and
drawdowns
31 Decem-
ber 2018
$’000
$’000
$’000
$’000
$’000
$’000
Non-current liabilities
Secured term loans
Current liabilities
Current portion of secured term loan
Unsecured borrowings
Directors’ loans
266
(26)
30
316
428
-
(20)
1
Total
1,040
(45)
3
-
-
-
3
(69)
208
382
69
-
-
-
(30)
(296)
(429)
69
-
-
(547)
451
The Directors consider that the carrying amount of borrowings approximates to their fair value.
22. Contingent consideration on business combinations
As at 31 December
Contingent consideration on the acquisition of Danateq assets
- potentially due within one year
- potentially due after one year
2018
$’000
298
1,141
1,439
2017
$’000
-
-
-
Part of the consideration for the Danateq Acquisition in August 2018 was contingent on the achievement of certain
revenue targets in the two years following the acquisition. The contingent amounts payable under these arrangements
was between $nil and $5,000,000. At the date of acquisition, the Directors assessed the fair value of the contingent
consideration payable under this arrangement at $1,430,000, based on a probability-weighted analysis of the likely
outturn payments. Other than as a result of the unwinding of the discount attributable to the time value of money, there
has been no change in the fair value of the contingent consideration since the acquisition date.
ANNUAL REPORT 2018 79
23. Share capital and reserves
Share capital and share premium
Ordinary shares of 2.5p each (issued and fully paid)
$’000
Number
At 1 January 2017
Issued for cash during the year
Issued in exchange for shares during the year
At 31 December 2017
Issued for cash during the year
At 31 December 2018
-
270
531
801
264
24,313,252
1,065
32,532,431
The Company was incorporated on 21 February 2017 with 100 Ordinary shares of £1 each in issue. A further 49,900
shares were issued on 31 July. On 7 September these shares were split on the basis of 39 new shares for every old
share such that there were then 2,000,000 Ordinary shares of 2.5 pence each in issue. Also on 7 September, 16,211,040
shares of 2.5 pence each were issued in connection with the acquisition of Pelatro LLC.
On 19 December 2017 the Company’s shares were admitted to trading on the AIM market of the London Stock Ex-
change (“Admission”). In conjunction with Admission, the Company made an initial public offering of 6,102,212 new 2.5
pence ordinary shares at a price of 62.5 pence per ordinary share (the “IPO”). On 17 August 2018 the Company issued
a further 8,219,179 2.5 pence Ordinary shares at a price of 73.0 pence per share by way of a placing to institutional and
other investors to fund the acquisition of the Danateq Assets (the “Placing”) (see note 26).
The Company incurred incremental costs totalling $319,000 in respect of the Placing in 2018 and $1,129,000 in respect
of the IPO in 2017. IAS 32 Financial Instruments: Presentation requires the costs of issuing new shares to be charged
against the share premium account. Management has reviewed the incremental costs to identify those solely incurred
in issuing new shares, those incurred in connection with the entire share capital, and those not associated with issuing
new shares.
All of the costs relating to the Placing in 2018 were deemed to relate directly to the issue of new shares and thus re-
sulted in a debit to share premium of $319,000. In respect of costs relating to the IPO in 2017, those costs incurred in
connection with the entire share capital were apportioned to the issue of new shares by reference to the number of new
shares compared to the entire share capital. As a consequence, costs relating directly to the issue of new shares in
connection with the IPO, plus attributable IPO costs allocated between the share premium account and profit and loss
account in proportion to the number of primary and secondary shares admitted to trading on Admission, resulted in a
debit of $428,000 against share premium and a charge of the remaining $701,000 to administrative expenses.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of amounts arising
other than in the presentation currency of the Group (i.e. US dollars) which are recognised either through Other Com-
prehensive Income or directly through the reserve.
Merger reserve
As noted in Note 3, the acquisition by Pelatro Plc of Pelatro LLC on 7 September 2017 was accounted for as a reverse
asset acquisition. Consequently, the previously recognised book values and assets and liabilities were retained and the
consolidated financial information for the period from the date of acquisition has been presented as a continuation
of the Pelatro business which was previously wholly owned by Pelatro LLC. The difference between the nominal value
of the shares issued pursuant to the above share arrangement and the nominal value of the Pelatro LLC capital at the
time of the acquisition was transferred to the merger reserve, together with certain other items relating to investments
in subsidiaries.
ANNUAL REPORT 2018 80
24. Operating leases
Total payments under non-cancellable operating leases will be made as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
2018
$’000
123
17
-
140
2017
$’000
97
62
-
159
PSPL entered into a five-year lease in November 2014 for its premises at 1st Block, HRBR Layout, Bangalore. The
Company entered into a short-term lease in September 2017 for its premises at Queen Victoria Street, London, UK.
Furthermore, PSPL entered into a lease on 1 September 2018 for additional office space at 7th Main Road, 2nd Block,
HRBR Layout, Bangalore, for an initial term of two years with a rollover option.
IFRS 16 Leases (effective for the year ending 31 December 2019), which supersedes IAS 17 Leases and related inter-
pretations, will require all leases to be recognised on the balance sheet, eliminating the distinction between operating
and finance leases. The Group has two operating lease arrangements which would require recognition under IFRS 16
and will consider the financial impact of IFRS 16 in due course. If adopted as at 31 December 2018, the impact would
be to recognise lease liabilities of approximately $123,000 and corresponding assets relating to the right to use the
properties which are the subject of the current leases.
The Company does not intend to apply the standard retrospectively and so any difference between the carrying value
of the assets created and the corresponding liabilities will be applied as an adjustment to opening equity at the date
of initial application
25. Financial instruments
Financial risk management
The Group’s principal financial instruments are cash, trade receivables, borrowings, trade payables and contingent
consideration payable in respect of certain acquisitions. The Group therefore has exposure to certain risks from its use
of financial instruments unrelated to the performance of the Group itself. The Group’s overall risk management pro-
gramme seeks to minimise potential adverse effects on the Group’s financial performance and such risk management
is carried out by the Directors.
The Group’s activities expose it to certain financial risks: market risk, credit risk and liquidity risk, as explained below.
• Market risk is the risk of loss that may arise from changes in market factors such as interest rates and foreign cur-
rency movements
• Credit risk is the financial loss to the Group if a customer or counterparty to financial instruments fails to meet
a contractual obligation. Credit risk arises from the Group’s cash and cash equivalents and receivables balanc-
es. Cash is held predominantly with ICICI, an institution P3 (short term) and a Baa2 (long-term) credit rating from
Moody’s, and Kotak Mahindra Bank, which has an A-3 (short term) and BBB- (long term) credit rating from Standard
and Poors. Given the stage of development of the Group, over the period under review it has contracted with a rel-
atively small number of customers and hence trade receivables are concentrated amongst those customers. The
credit quality of customers is assessed by taking into account their financial position, past experience and other
factors, and the Group minimises credit risk by dealing exclusively with those customers who it believes have a high
credit rating
• Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk re-
lates to the Group’s liquidity risk management and implies maintaining sufficient cash and/or committed borrowing
facilities. The Directors monitor rolling forecasts of liquidity, cash and cash equivalents based on expected cash
flows.
ANNUAL REPORT 2018 81
The Group is not subject to any externally imposed capital requirements. The objective when managing capital is to
maintain adequate financial flexibility to preserve the ability to meet financial obligations, both current and long term.
The Group is funded by both debt and equity and the resulting capital structure is managed and adjusted to reflect
changes in economic conditions and with a view to maximising the return to shareholders through optimisation of
the balance of debt and equity. Financing decisions are made based on forecasts of the expected timing and level of
capital and operating expenditure required to meet commitments and development plans.
The capital structure of the Group consists of debt, which includes borrowings as disclosed in note 21, cash and cash
equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained
earnings as disclosed in the Group statement of changes in equity. There was no change in the Group’s approach to
capital management during the financial period under review.
Classification of financial instruments
Financial assets
Cash
Trade receivables
Financial liabilities
Other payables and accruals
Trade payables
Short-term borrowings
Long-term borrowings
Other financial liabilities - contingent consideration
All trade receivables are due from customers outside the UK.
Foreign currency risk management and sensitivity analysis
Group
2018
$’000
2,224
4,138
220
118
69
382
1,439
Group
2017
$’000
4,126
1,778
220
53
266
774
-
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate
fluctuations arise. The Group is mainly exposed to the currencies of the UK, (Great British Pounds or GBP), the US (US
dollars or USD) and India (Indian Rupees or INR), with some exposure to the currency of certain states of the Europe-
an Union (“EUR”), Philippines (Philippine peso or PHP) and of Russia (rouble or RUB) and a modest exposure to the
currency of Singapore (Singapore Dollars or SGD). In 2017 the Group also had exposure to modest amounts in Emirati
Dirhams (AED) which currency is pegged to the US Dollar. Foreign currency risk is monitored closely on an ongoing
basis to ensure that the net exposure is at an acceptable level.
The following table shows the denomination of the year end cash, cash equivalents and borrowings, and trade receiv-
ables and payables balances:
As at 31 December 2018
Cash and cash equivalents
Trade receivables
Borrowings
Trade payables
Net currency exposure
USD
’000
1,382
4,138
-
(83)
5,437
GBP
’000
277
-
-
(28)
249
SGD
’000
26
-
-
-
EUR
’000
23
-
-
-
INR
’000
24,797
-
(31,366)
-
26
23
(6,569)
ANNUAL REPORT 2018 82
As at 31 December 2017
Cash and cash equivalents
Trade receivables
Borrowings
Trade payables
USD
’000
48
2,237
-
(38)
GBP
’000
2,606
-
-
(7)
Net currency exposure
2,247
2,599
SGD
’000
61
-
-
(6)
55
AED
’000
-
533
-
-
INR
’000
32,437
-
(66,379)
-
533
(33,942)
Had the foreign exchange rate between the US dollar and the other Group currencies changed by 5%, this would have
affected the profit for the year and the net assets of the Group by $14,000 (2017: $151,000).
Limitations of sensitivity analysis
The sensitivity analysis above demonstrates the effect of a change in one of the key assumptions while other assump-
tions remain unchanged. In reality, such an occurrence is very unlikely due to correlation between the factors. Further-
more, these sensitivities are non-linear, and larger or smaller impacts cannot easily be derived from the results. The
sensitivity analysis does not take into consideration that the Group’s assets and liabilities are actively managed and
may vary at the time that any actual market movement occurs.
Interest rate risk management and sensitivity analysis
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. At the year end the Group had no exposure to interest rate risks as all of its borrowings
were fixed rate.
Liquidity risk management and interest risk tables
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding and li-
quidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and borrowing
facilities and by continuously monitoring forecast and actual cash flows.
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The
table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the Group can be required to pay.
The table includes both interest and principal cash flows.
As at 31 December 2018
Weighted aver-
age effective
interest rate
Less than 1
year
$’000
2-5 years
More than 5
years
$’000
$’000
Fixed rate instruments - borrowings
Related party borrowings
12.5%
nil
Total
69
28
97
299
-
299
83
-
83
Total
$’000
451
28
479
ANNUAL REPORT 2018 83
As at 31 December 2017
Weighted aver-
age effective
interest rate
Less than 1
year
$’000
2-5 years
More than 5
years
$’000
$’000
Non-interest bearing liabilities
Variable interest rate instruments -
borrowings
Fixed rate instruments - borrowings
Related party borrowings
nil
10.5%
12.5%
nil
Total
421
316
30
428
1,195
-
-
105
-
105
-
-
161
-
161
Total
$’000
421
316
296
428
1,461
The related party borrowings in 2017 had no formal terms and were hence treated as repayable on demand.
Fair values of financial assets and financial liabilities
As at 31 December 2018 and 31 December 2017 there were no material differences between the book value and fair
value of the Group’s financial assets and liabilities.
The fair value of contingent consideration arising on acquisitions is estimated by discounting the possible future cash
flows using probability adjusted forecasts for the acquired company or assets, and represents a level 3 measurement
in the fair value hierarchy under IFRS 7. The fair value is sensitive to the weighting assigned to the expected future cash
flows. A change in weighting of 10 percentage points towards the higher expectations would result in an increase in
the undiscounted estimate of future cash flows of $200,000.
ANNUAL REPORT 2018 84
26. Business combinations
Danateq
The Company and the Danateq Group entered into a sale
and purchase agreement (“SPA”) on 30 July 2018 to ac-
quire certain assets of Danateq Pte and Danateq Limited
(together “the Danateq Group” or where appropriate “Da-
nateq”) for an initial consideration of $7.0 million with po-
tential further payments of up to $5.0 million, depending
on certain targets being met (the “Danateq Acquisition”).
The Danateq Group was founded by entrepreneurs with
backgrounds in robotics, telecom control systems and
defence who came together to develop LINK™, a real-time
self-learning “cognitive” analytics platform, with the vi-
sion of enabling enterprises to implement continuously
improving automated business processes through cog-
nitive loops. The Danateq Group used data analytics to
provide campaign management solutions to telcos over
a range of geographies. In addition to its campaign man-
agement solution, the Danateq Group also offered two
additional products complementary to Pelatro’s product:
loyalty management and a notification platform.
that time the Danateq Group had entered into con-
tracts with 3 OpCos of Telenor in Bulgaria, Myanmar
and Bangladesh (where it trades as Grameenphone).
These contracts cover 90 million subscribers, and
the GFA provided the potential to win 8 further OpCo
contracts across Central Europe and Asia, covering
a further 85 million subscribers. The Danateq Group
has also provided software and services since 2013
to Globe through a re-seller agreement. This contract,
which renews automatically on an annual basis, is a
maintenance and managed services contract cover-
ing 75 million subscribers across the Philippines;
(iv) two re-seller agreements with Ericsson and Wireless
Services Asia which were originally signed on 3-year
terms; and
(v) sundry other intellectual property
(together the “Danateq Assets”)
The key terms and provisions of the SPA are as follows:
Through the Acquisition, Pelatro acquired or had trans-
ferred:
• an initial cash consideration of $7.0 million to the ven-
dors at completion;
(i) certain assets from the Danateq Group, including
contracts and sales staff;
(ii) certain employees of the Danateq Group, including
staff in a development centre in Nizhny Novgorod;
(iii) contracts from the Danateq Group pursuant to which
it provided software and services to Globe Telecom
Inc. of the Philippines (“Globe”) and certain operat-
ing companies (“OpCos”) within the Telenor group of
companies (“Telenor”) pursuant to a Global Frame-
work Agreement (“GFA”) with Telenor ASA of Norway.
The GFA was signed in 2016 for 5 years and since
• a further $2.0 million payable should the Danateq
Assets generate revenue of $2.25 million in the first
twelve-month period following completion, with an
additional $1.0 million payable should the Danateq
Assets generate in excess of $4.5 million during the
same period; and
• $1.0 million payable should the Danateq Assets gener-
ate revenue of $2.9 million in the second twelve-month
period following Completion, with an additional $1.0
million payable should the Danateq Assets generate in
excess of $5.8 million during the same period.
The amounts recognised in respect of identifiable assets acquired is set out in the table below.
Book value
$’000
Adjustment
$’000
Fair value
$’000
-
-
-
6,862
1,250
8,112
Customer relationships
Enterprise software for sale to third parties
Net assets acquired
Goodwill on acquisition
Fair value of assets acquired
Initial cash consideration paid
Contingent purchase consideration estimated to be paid
Consideration payable in cash
6,862
1,250
8,112
318
8,430
7,000
1,430
8,430
ANNUAL REPORT 2018 85
The goodwill represents:
• the technical expertise of the acquired workforce
• the opportunity to leverage this expertise across Pelatro’s existing business; and
• the ability to exploit the Group’s enlarged customer base.
The fair value of contingent consideration payable of $1,430,000 at acquisition was estimated based on performance
observed to date and the expectation of likely future cash flows and is discounted at the Group’s notional cost of
borrowing over the earn-out period. The Danateq Assets contributed approximately $1.3m of revenue and $456,000
of profit after tax for the year ended 31 December 2018. As the acquisition was for certain assets and contracts only
and not the corporate entity which controlled them up to the point of sale, it is impractical to state what would have
been the Group’s reported revenue and profit after tax if the acquisition had been made at the start of the financial year.
Pelatro Solutions Private Limited
On 13 December 2017 the Group completed the acquisition of Pelatro Solutions Private Limited (“PSPL”), the company
with which the Group has an agreement for software development, implementation and support. The amounts rec-
ognised in respect of identifiable assets acquired and liabilities assumed are set out in the table below.
Book value
$’000
Adjustment
$’000
Fair value
$’000
Property, plant and equipment
Intangible assets
Deferred tax asset
Trade and other receivables
Cash and bank balances
Long-term borrowings
Trade and other payables
Short-term borrowings
Net identifiable assets and liabilities
Goodwill on acquisition
Consideration payable in cash
Analysis of cash flows on acquisition
Net cash acquired with subsidiary
Cash paid
Net cash inflow
31
16
-
802
11
(272)
(117)
(808)
(337)
-
-
118
-
-
-
(33)
-
85
31
16
118
802
11
(272)
(150)
(808)
(252)
287
35
11
-
11
The goodwill recognised above is attributable to intangible assets from PSPL that cannot be individually separated and
reliably measured due to their nature. These items include the expected value of synergies and assembled workforce.
The cash consideration for PSPL of $34,644 was paid to the former shareholders of PSPL in January 2018.
ANNUAL REPORT 2018 86
27. Related party transactions
Amounts outstanding at the end of the year in respect of transactions with related parties were as follows:
Amount outstanding - (debtor)/creditor
Key management personnel - net loans outstanding
Key management personnel - outstanding reimbursements in
respect of expenses incurred on behalf of Group companies
2018
$’000
-
28
Details of unsecured loan transactions with key management personnel are as follows:
Related party and nature of transaction
Outstanding at the beginning of the year
Acquired as part of a business combination
Loan taken during the year
Loan repaid during the year
Foreign exchange movements
Loans outstanding at the end of the year
2018
$’000
428
-
-
(429)
1
-
2017
$’000
428
101
2017
$’000
-
431
2
(9)
4
428
The remuneration of the Directors, who are deemed to be the only key management personnel of the Group, is set out
below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
Wages and salaries
Payments in respect of other services
Pension cost
2018
$’000
594
30
2
626
2017
$’000
248
-
-
248
To comply with local legislation regarding resident directors, Hamish Christie is a director of Pelatro Pte Ltd. Mr Christie
is also the proprietor of H.A. Christie & Co., which firm provides accountancy and tax advisory services to that company.
During the year payments of approximately $5,000 were made to H.A. Christie & Co., and a further $4,000 was outstand-
ing at the year end in relation to 2018 expenses.
Other than disclosed in this note or elsewhere in this financial information as appropriate, no related party transactions
have taken place during the year that have materially affected the financial position or performance of the Group.
ANNUAL REPORT 2018 87
28. Impact of IFRS 15 on opening balance sheet at 1 January 2018
The Group has applied IFRS 15 using the cumulative effect of initially applying the effects of the new revenue standard
as an adjustment to the opening balance of equity at 1 January 2018. Therefore, relevant comparative information has
not been restated and continues to be reported under IAS 11 and IAS 18. The details of the significant changes and the
quantitative impact of the changes are as follows:
• A net $18,000 credit to retained profits brought forward relating to the recognition of the impact on transition to IFRS
15 at 1 January 2018. The adjustment relates to the unbundling of certain contracts according to the Group’s assess-
ment of each contract’s performance obligation to be delivered to its customers, and comprises:
(i) a creditor balance of $93,000 in contract liabilities relating principally to PCS income invoiced (as part of an overall
license fee) but not yet performed; and
(ii) a debtor balance of $111,000 relating to PCS income recognised but not invoiceable
A summary of these changes is as follows:
Income statement
Revenue
Balance sheet
Current assets
Trade receivables
Accrued income - UBR
Accrued income - contract assets
Total trade and related receivables
Current liabilities
Contract liabilities
Equity
Accumulated profits
Earnings per share
Basic
Adjusted (non IFRS)
31 December
2017
As reported
$’000
(audited)
31 December
2017
Effect of IFRS
$’000
(unaudited)
31 December
2017
As adjusted
$’000
(unaudited)
3,146
18
3,164
1,721
57
-
1,778
-
1,217
4.8¢
8.9¢
-
-
111
111
(93)
18
0.1¢
0.1¢
1,721
57
111
1,889
(93)
1,235
4.9¢
9.0¢
29. Capital commitments and contingent liabilities
Other than as disclosed above, as at 31 December 2018 the Group had no material capital commitments (2017: nil) nor
any contingent liabilities (2017: nil).
30. Events after the balance sheet date
There have been no events subsequent to the reporting date which would have a material impact on the financial
statements.
ANNUAL REPORT 2018
88
COMPANY STATEMENT OF
FINANCIAL POSITION
For the year ended 31 December 2018
Assets
Non-current assets
Investments in subsidiaries
Intangible assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilites
Non-current liabilities
Other financial liabilities
Current liabilities
Trade and other receivables
Other financial liabilities
Total liabilities
NET ASSETS
Issued share capital and reserves attributable
to owners of the parent
Share capital
Share premium
Translation reserve
Retained earnings
TOTAL EQUITY
Note
6
7
8
9
9
9
2018
$’000
654
8,300
8,954
4,096
1,684
5,780
14,734
1,141
1,141
307
289
596
1,737
12,997
1,065
11,603
(211)
540
12,997
2017
$’000
654
-
654
1,108
3,524
4,632
5,286
-
-
406
-
406
406
4,880
801
4,472
-
(393)
4,880
For the period ended 31 December 2018, the Company recorded a profit of $933,000 (2017: $393,000 loss).
The financial statements of Pelatro Plc, registered number 10630166, were approved by the board of Directors and
authorised for issue on 25 March 2019. They were signed on its behalf by:
S. Menon (Director)
N. Hellyer (Director)
The accompanying notes 1 to 10 are an integral part of these financial statements.
ANNUAL REPORT 2018 89
COMPANY STATEMENT OF
CHANGES IN EQUITY
For the year ended 31 December 2018
Share
capital
$’000
Share
premium
$’000
Translation
reserve
$’000
Retained
profits
$’000
Balance at 21 February 2017
Profit after taxation for the year
Transactions with owners:
Shares issued by Pelatro Plc in
exchange for Pelatro LLC shares
Shares issued by Pelatro Plc for cash
Issue costs
Balance at 31 December 2017
Profit after taxation for the year
Other comprehensive income:
Exchange differences
Transactions with owners:
Shares issued by Pelatro Plc for cash
Issue costs
-
-
531
270
-
801
-
-
264
-
-
-
-
4,901
(429)
4,472
-
-
7,450
(319)
-
-
-
-
-
-
-
Total
equity
$’000
-
(393)
531
5,171
(429)
-
(393)
-
-
-
(393)
4,880
933
933
(211)
-
-
-
-
-
(211)
7,714
(319)
Balance at 31 December 2018
1,065
11,603
(211)
540
12,997
Reserve
Share capital
Share premium
Translation reserve
Description and purpose
Nominal value of issued shares
Amount subscribed for share capital in excess
of nominal value less associated costs
The difference arising on the translation of balances
denominated in currencies other than US Dollars into the
presentational currency of the Company
Retained earnings
All other net gains and losses not recognised elsewhere
The accompanying notes 1 to 10 are an integral part of these financial statements.
ANNUAL REPORT 2018 90
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
1. Accounting policies
Basis of preparation
The Parent Company financial statements of Pelatro Plc
(the “Company”) have been prepared in accordance with
Financial Reporting Standard 100 Application of Finan-
cial Reporting Requirements and Financial Reporting
Standard 101 Reduced Disclosure Framework and as re-
quired by the Companies Act 2006.
The financial statements have been prepared in US Dol-
lars, which is the currency of the primary economic envi-
ronment in which the Company operates (its functional
currency). The financial statements are prepared under
the historical cost convention and were approved for is-
sue on 25 March 2019.
No profit and loss account is presented by the Company
as permitted by section 408 of the Companies Act 2006.
Disclosure exemptions adopted
In preparing these financial statements the Company has
taken advantage of all disclosure exemptions conferred
by FRS 101. Therefore, these financial statements do not
include:
• certain disclosures regarding the Company’s capital;
• a statement of cash flows;
• the effect of future accounting standards not yet ad-
opted;
• the disclosure of the remuneration of key manage-
ment personnel; and
• disclosure of related party transactions with other
wholly-owned members of the Pelatro Group.
In addition, and in accordance with FRS 101, further
disclosure exemptions have been adopted because
equivalent disclosures are included in the consolidated
financial statements. These financial statements do not
include certain disclosures in respect of:
• business combinations;
• financial instruments (other than certain disclosures
required as a result of recording financial instruments
at fair value);
• fair value measurement (other than certain disclo-
sures required as a result of recording financial instru-
ments at fair value); and
• impairment of assets.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where
appropriate, provisions for impairment.
Trade receivables
Short term trade receivables are measured at transaction
price, less any impairment. The Company assesses at
each balance sheet date whether any trade receivables
or other assets or group of financial assets is impaired.
Taxation
Income taxes
Current tax assets and liabilities are measured at the
amount expected to be recovered from or paid to tax-
ation authorities, based on tax rates and laws that are
enacted or substantively enacted by the statement of fi-
nancial position date.
Deferred income tax is recognised on all temporary dif-
ferences arising between the tax bases of assets and li-
abilities and their carrying amounts in the financial state-
ments, with the following exceptions:
• where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at
the time of the transaction affects neither accounting
nor taxable profit or loss;
• in respect of taxable temporary differences associat-
ed within investments in subsidiaries, associates and
joint ventures, where the timing of the reversal of the
temporary differences can be controlled and it is prob-
able that the temporary differences will not reverse in
the foreseeable future; and
• deferred income tax assets are recognised only to
the extent that it is probable that taxable profit will be
available against which the deductible temporary dif-
ferences, carried forward tax credits or tax losses can
be utilised.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply when the re-
lated asset is realised, or liability is settled, based on tax
rates and laws enacted or substantively enacted at the
statement of financial position date.
The carrying amount of deferred income tax assets is
reviewed at each statement of financial position date.
Deferred income tax assets and liabilities are offset only
if a legally enforceable right exists to set off current tax
assets against current tax liabilities, the deferred income
taxes relate to the same taxation authority and that au-
thority permits the Group to make a single net payment.
ANNUAL REPORT 2018 91
Income tax is charged or credited to other comprehensive income or directly to equity if it relates to items that are
credited or charged to other comprehensive income or directly to equity. Otherwise, income tax is recognised in the
income statement.
Foreign currencies
Transactions denominated in foreign currencies are translated at an approximation of the exchange rate ruling on the
date of the transaction. Assets and liabilities denominated in foreign currencies are translated at the exchange rate
ruling on the balance sheet date. Resulting exchange gains and losses are taken to the profit and loss account.
Related party transactions
The Company has taken advantage of the exemption under FRS 101 from disclosing related party transactions with
entities that are wholly owned subsidiary undertakings of the Pelatro Group.
Leasing commitments
Rentals payable under operating leases are charged in the profit and loss account on a straight-line basis over the lease
term.
2. Critical accounting judgements and key sources of estimation uncertainty
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year, are as follows:
Investments in subsidiary companies
The carrying cost of the Company’s investments in subsidiary companies is reviewed at each balance sheet date by ref-
erence to the income that is projected to arise therefrom. From a review of these projections, the Directors have made
no provisions against their carrying values as shown in note 6 to the financial statements as the Directors believe that
the investments concerned will generate sufficient economic benefits to justify their carrying values.
3. Auditor’s remuneration
The figures within the auditors’ remuneration note in the Pelatro consolidated financial statements include fees charged
by the Company’s auditors to Pelatro plc in respect of audit and non-audit services. As such, no separate disclosure
has been given above.
4. Directors’ remuneration
Information concerning Directors’ remuneration can be found in note 12 to the Group financial statements.
5. Dividends paid and proposed
No dividends were declared or paid during the year and no dividends will be proposed for approval at the Annual Gen-
eral Meeting of the Company.
6. Investment in subsidiaries
At 21 April 2017
Investment in the period
At 31 December 2017
Investment in the period
At 31 December 2018
$’000
-
654
654
-
654
ANNUAL REPORT 2018 92
7. Trade and other receivables
Due within a year
Trade receivables
Other receivables
Prepayments
Intra-Group receivables
2018
$’000
3,676
1
49
370
2017
$’000
804
4
53
247
Total trade and other receivables
4,096
1,108
8. Trade and other payables
Due within a year
Trade payables
Other payables
Amounts due to related parties
Intra-Group payables
2018
$’000
2017
$’000
87
192
28
-
9
106
30
261
Total trade and other payables
307
406
9. Reserves
Share capital
The balance classified as share capital represents the nominal value arising from the issue of the Company’s equity
share capital, comprising 2.5 pence ordinary shares.
On 19 December 2017, the Company issued 6,102,212 new ordinary shares (ranking pari passu with existing shares
in issue) via a placing to institutional shareholders. The shares were issued at a placing price of 62.5 pence raising
$3,771,000 after expenses of $701,000 and direct issue costs of $429,000. On 17 August 2018 the Company issued
8,219,179 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional share-
holders in order to fund the Danateq Acquisition (see Note 26 “Business combinations”). The shares were issued at a
placing price of 73 pence raising $7,395,000 after direct issue costs of $319,000.
Share premium
The balance classified as share premium represents the premium arising from the issue of the Company’s equity share
capital, comprising 2.5 pence ordinary shares, net of share issue expenses. There are restrictions on the use of the
Share Premium Account. It can only be used for bonus issues, to provide for the premium payable on redemption of
debentures, or to write off preliminary expenses, or expenses of, or commissions paid on, or discounts allowed on, the
same issues of shares or debentures of the Company.
ANNUAL REPORT 2018 93
Retained earnings
All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
10. Capital commitments and contingent liabilities
Other than as disclosed in Note 26 of the Group financial statements, as at 31 December 2018 the Group had no mate-
rial capital commitments nor any contingent liabilities (2017: $nil)
11. Events after the balance sheet date
There have been no significant events which have occurred subsequent to the reporting date.
The Company is exempt from disclosing transactions within the wholly-owned subsidiaries in the group. Other related
party transactions are included within those given in note 27 of the consolidated financial statements.
ANNUAL REPORT 2018 94
Pelatro Plc
49 Queen Victoria Street
London EC4N 4SA
United Kingdom
Pelatro Solutions Pvt. Ltd.
403, 7th A Main, HRBR Layout
Kalyan Nagar, Bangalore – 560043
India
Pelatro Pte. Ltd.
One Raffles Place
#10-62, Tower 2
Singapore 048616
Pelatro LLC
110 Summit Avenue
Montvale, NJ 07645
United States Of America
Pelatro Pte. Ltd.
(Representative Office)
Office C201, Building B, Motalny Alley
Nizhny Novgrod City 603140
Russia
www.pelatro.com
ANNUAL REPORT 2018