B e R elevant
A N N U A L
R E P O R T
20
19
D E E P E N I N G T H E C O N N E C T I O N S
UK | USA | Singapore | Russia | India | Malaysia | Philippines | Brazil
OU R PRE SENCE
Bahamas
USA
Morocco
Sudan
Cyprus
Brazil
Bulgaria
Kazakhstan
Nepal
UK
Russia
Bangladesh
Thailand
Phillippines
Myanmar
Phillippines
India
India
Malaysia
Singapore
Cambodia
Sri Lanka
Maldives
Vietnam
- Office Locations
2
NOMINATED
ADVISERS AND
STOCKBROKERS
Cenkos Securities Plc
6.7.8 Tokenhouse Yard
London, EC2R 7AS
SOLICITORS
Memery Crystal LLP
165 Fleet Street
London EC4A 2DY
COMPANY INFORMATION
DIRECTORS
Subash Menon
Sudeesh Yezhuvath
Richard Day
Nic Hellyer
Pieter Verkade
AUDITOR
Crowe U.K. LLP
St Bride’s House
10 Salisbury Square
London EC4Y 8EH
REGISTRARS
Equiniti Limited
Aspect House , Spencer Road
Lancing
West Sussex
BN99 6DA
SHARE CAPITAL
BANKERS
ICICI Bank UK PLC
One Thomas More Street
London E1W 1YN
Bank of America, N.A.
P.O. Box 25118
Tampa, FL 33622-5118
DBS Bank Ltd
12 Marina Boulevard, Marina Bay
Financial Centre, Tower 3,
Singapore 018982
Kotak Mahindra Bank
4m-411 – S.K.L.N.S Complex,
3rd Block, Kammanahalli
Bangalore 560043, India
ICICI Bank Ltd
Kalyan Nagar, No.4 M-417, 80 Feet
Road, HRBR 3rd Block, Kammanahalli,
Kalyan Nagar, Bangalore 560043, India
The ordinary share capital of Pelatro 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.
The ISIN number is GB00BYXH8F66 and the SEDOL number is BYXH8F6.
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
http://www.pelatro.com/investors/
3
FIV E Y EA R TRACK
RE CO RD
Year to/as at 31 December
2019
2018
2017
2016
2015
Revenue
$'000
6,667
6,123
3,146
1,205
353
Revenue growth
%
9%
95%
161%
241%
n/a
Adjusted EBITDA
$'000
2,893
3,776
2,004
498
77
EBITDA margin
%
43%
61%
64%
41%
22%
Operating profit (before exceptional costs)
$'000
883
2,861
1,801
360
30
Operating margin
%
13%
47%
57%
30%
8%
Statutory profit before tax
$'000
1,009
2,513
1,096
360
30
Adjusted earnings per share (basic and diluted)
Statutory earnings per share (basic and diluted)1
¢
¢
4.2¢
10.2¢
8.9¢
2.0¢
0.2¢
2.5¢
8.0¢
4.8¢
2.0¢
0.2¢
Net cash flow from operating activities
(pre-exceptional items)
$'000
1,361
881
(33
)
447
56
Net cash used in investing activities
$'000
(2,393)
(9,092
)
(744
)
(401
)
(149
)
Net cash used in/(from) financing activities
$'000
)
(246
6,814
4,707
54
214
Net cash at year end
$'000
484
1,823
3,086
196
119
1: from continuing operations
4
T A B L E O F C O N T E N T S
S T R A T E G I C R E P O R T
About Pelatro
Highlights of 2019
mViva: A Comprehensive Suite of Solutions
Chairman's Statement
Managing Director and CEO's Report
Pelatro and mViva: A Unique Combination
The Stateless State-Flows
Assessment and Development Centre Initiative at Pelatro
Key Performance Indicators
Principal Risks and Uncertainties
Strategic Report - Financial Review
C O R P O R A T E G O V E R N A N C E
Board of Directors
Corporate Governance Review
S.172 Statement
Key Managerial Personnel
Report of the Directors
F I N A N C I A L S T A T E M E N T S
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
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10
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109
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5
01
ABOUT PELATRO
Pelatro is a focused and specialised player in the telecom marketing space. We provide enterprise-class software
solutions that help our customers, the telecom operators, to increase revenue and reduce churn. This is achieved by
analysing the behaviour of each subscriber in the telecom network, creating their profile and suggesting appropriate
products and promotions to each subscriber in a segment of one manner to enable higher consumption and an increased
level of customer satisfaction.
Given the extremely high volume of data that is generated in each telecom network, our solutions employ Big Data
technology to collect and process all the data in real time. Our technologically advanced products are telco-grade with
significant scalability, security and high availability. As data is processed in real time, the output from our solutions is also
in real time and is relevant and contextual. This output leads to relevant, contextual and personalised interventions in real
time, in the form of marketing campaigns and promotions to subscribers, resulting in improved results as compared to
legacy solutions. In order to provide high quality marketing campaigns and promotions, our solutions employ AI/ML
techniques coupled with various algorithms, models etc. This has resulted in a high level of predictive and prescriptive
analytics in our solutions.
We have offices in five countries and serve large telco groups (including Telenor, SingTel, Axiata etc.) in 17 countries. The
largest single network that we serve has about 350 million subscribers, one of the largest globally. As all telcos will have
some solution for campaigning purposes, we aim to replace the incumbents to win customers. Given the advanced
nature and uniqueness of our products and the fact that we have successfully replaced legacy solutions from IBM, SAS,
Oracle, FlyTxt, Evolving Systems etc. in multiple telcos, the market opportunity is huge with over 300 telcos to be
addressed around the world.
6
02
HIGHLIGHTS OF 2019
Won our largest contract to date, from
one of the largest global telcos
Added 5 customers organically, the highest
number of customers in any year to date
Won the first customer for our
Data Monetisation Platform (Tele2, Kazakhstan)
More than doubled the number of subscribers
being processed by our solutions from 350m to 800m
Launched the next version of mViva Contextual
Marketing Solution: v.6
Established sales presence in Latin America
and Central America
Enhanced sales presence in Asia
Set up a dedicated team to focus on
Customer Engagement
7
03
mViva: A COMPREHENSIVE SUITE OF SOLUTIONS
After decades of unprecedented growth, telecommunications is starting to mature as a business. The old days of
guaranteed growth are gone and network coverage has become ubiquitous, leading to commoditisation: thus
differentiation is becoming more and more of a challenge with customers tending to look at telecommunications service
as a utility with a corresponding decrease in margins for telcos. To add to this, the emergence of Over-The-Top (OTT)
players has accelerated the pace of commoditisation and customer disintermediation. Further, the industry has almost
reached saturation with respect to customer base with penetration in excess of 100% in most markets.
Hence the need is to grow revenue from existing customers. In essence, the lever for managing revenue growth has
changed from customer acquisition to maximizing value from existing customers. To derive increased value from
customers, it is also important to deliver increased value. Interactions with customers should be based on this new
paradigm and this means individualized and personalized attention.
This calls for a three - pronged strategy:
Increase Average Revenue Per User
Increase retention
Increase share of wallet
Pelatro’s mViva suite of solutions is designed to help telcos achieve these objectives. The suite consists of the
following solutions:
mViva CONTEXTUAL MARKETING SOLUTION (CMS)
Customer centricity is the new watchword for telcos, and deep understanding of each individual customer is needed for
telcos to be able to provide relevant offers that customers can appreciate and take advantage of. mViva CMS is
integrated with various different network elements and consumes data regarding all transactions that each customer
generates. This information is then converted into a multi-dimensional profile for each individual customer. This profile
information is then utilized to generate micro-segments and offers targeted at N=1 granularity. mViva CMS also provides
cutting edge AI/ML features in the form of Descriptive, Predictive and Prescriptive Analytics. The solution is fully
integrated into the telco ecosystem and provides end-to-end capability of segmentation, campaign design, configuration,
execution, fulfilment, provisioning, reporting and analytics.
mViva LOYALTY MANAGEMENT SYSTEM (LMS)
Retaining customers is an important requirement for telcos, as new customers are extremely difficult and expensive to
sign on. mViva LMS rewards each customer with points based on various activities such as revenue generation, early bill
payment, referral etc. and these points can then be exchanged for various rewards. This ensures continuous
engagement with customers and quick cycles of gratification that leads to customer satisfaction. The LMS also provides
for various tiers and badges and differentiated benefits based on the value that each customer represents to the telco. It
is a comprehensive solution that provides for points earning, redemption, segmentation, tiering, campaigning, fulfilment,
provisioning and reporting.
8
mViva DATA MONETIZATION PLATFORM (DMP)
Telcos generate a great volume of contextual and relevant data about their customers. This is an industry that enjoys very
frequent customer activity and thus very rich data. mViva DMP organizes this data into customer-centric profiles and this
means that there is in-depth information available about the behaviour and demography of each individual customer. This
provides an opportunity for telcos to monetise this rich asset through targeted advertisement, after taking into account
anonymisation and such necessary data privacy requirements. For enterprises that partner with telcos, this is of great
interest as they now have reach to the exact profile of customers that they want to advertise to and thus the value for
money is far better than the traditional “spray-and-pray” approach. The DMP offers a complete solution with partner
management, portal, offer design, execution and reporting.
mViva UNIFIED COMMUNICATION MANAGER (UCM)
Today, telco customers are inundated with various messages from a large number of organisations. This means that the
telco itself has to be very careful about the quantity of messages they send to their customers to ensure that they do not
antagonise them. Messages could be of various types like emergency messages (say in case of a natural disaster),
informational messages, offers for telco products, reminders, offers for third party products etc. Given this complexity, it
is essential that the telco has a policy governing the maximum number of such messages that may be sent to customers
with priority for each type of message, control of verbiage etc. In many telcos, this is managed by various individual
solutions that generate such messages and hence there is often conflict or violation of the corporate policy. mViva UCM
ensures that telcos have centralised control of their messaging policy and privacy settings of customers and thus custom-
ers are disturbed with messages they do not want. This is an important requirement in these days of zealously guarded
privacy concerns of customers. The UCM provides for message policy monitoring, store-and-forward, whitelisting,
blacklisting, DND, pre-crafted message patterns and reporting.
B e R ele va nt
9
04
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
DEAR SHAREHOLDER,
Significant progress has been made by Pelatro this year in developing our product suite, expanding our customer base
and broadening our business offering. Our software is now handling and processing the data for over 800 million
subscribers of our various telco customers, reflecting a step change in our capacity and a clear validation by the industry
of the quality of our mViva system.
2017 subscriber base: 138m
2018 subscriber base: 325m
2019 subscriber base: 800m
In our early days, notwithstanding that between them our team had many
years of experience in the telecoms industry, building a business to sales
of over $100m, we were obliged to pursue a licence fee-based business
offering to help establish our operations. This course has been lucrative
and successful to date but has meant that historically we were focused
on converting opportunities for an initial, up front reward. As we have
grown and developed, we have consciously moved towards a recurring
revenue model which can be aligned with a gain share participation in
the upside we generate for our customers. I am pleased to say that with
their support, we have made significant progress in realigning our
earnings more in line with this model, and we were delighted to be able
to announce in December last year a significant contract win with one of
the largest global telcos. This is on a managed service basis for an initial
period of five years, with a significant proportion of the revenue on a fixed
Richard Day
Chairman
basis as well as an element of gain share. The overall returns to Pelatro over the life of the contract are expected to be
significantly more than we could have earned from an initial licence fee alone. It also ensures we are entrenched with our
customer over the longer term, as well as providing us with better quality and higher visibility of our future revenues,
which in turn allows us to invest confidently in our product offering, our business and our people. So far this year, we have
taken on over 70 new employees.
We operate in a competitive market, serving the telcos who need to retain their customers. Through our mViva system,
we are able to gather data from each caller and construct marketing campaigns focussed on the usage and requirements
of each person. The marketing they then receive is relevant and appropriate for that person; they like it and the telco is
providing added value. For example, an individual who makes international calls at random times, can be offered cheaper
international calls in a time window which coincides with a cheaper rate time for the telco, so increasing profitability for
the telco in an otherwise downtime trough period.
We are winning new business with the telcos and expect to be able to announce further contract wins over the coming
months. In February this year, we announced the launch of the new version of our flagship mViva Platform. This has
various new advanced features compared to the previous version, which itself was only launched in 2018, reflecting the
10
rapid evolution of our software products. We currently operate in 18 countries around the world serving 19 telco
customers with over 800m subscribers, with plenty more opportunity to grow and expand. Although it is still early in our
year, revenue visibility1 already stands at $4.1m, with an encouraging pipeline of around $18m; despite some
uncertainties introduced by the current coronavirus pandemic (which is discussed further below), we are maintaining our
momentum in moving towards a revenue sharing business model alongside our licence offering, which gives us every
confidence in the coming year and our future.
1: Revenue visibility comprises revenue contractually due or reasonably expected under contract in the following 12 months
RICHARD DAY
Chairman
11
05
MANAGING DIRECTOR AND CEO’S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
DEAR SHAREHOLDER,
“Deepening connections” is a very powerful theme in our industry. We serve telcos who, in turn, serve tens of millions of
people. The telecom market has reached saturation point and has also become highly commoditised. In such a scenario,
growth depends entirely on engaging with the subscribers in a very deep manner to understand them thoroughly with the
objective of providing a superior customer experience leading to higher revenue and lower churn for the telcos.
Your company empowers the marketers to achieve this.
DEEPENING THE CONNECTIONS
While empowering the telcos to deepen their relationships, Pelatro too has been forging deeper relationships with its
customers, the telcos. This has meant a strategic shift in our revenue model leading to a more stable, sustainable
and predictable future.
In its infancy, Pelatro depended mainly on a license model for
various reasons, not least an initial lack of credibility to win
multi-year contracts and a pressing need to win customers as
quickly as possible. Telcos run extremely complex networks with a
variety of dependencies and as a result are highly risk averse. Given
this, Pelatro could not win large contracts from leading telcos
without first building credibility. That in turn, called for customers
who could be showcased, thus leading to a “Catch 22” situation.
Pelatro opted to pursue one-time license contracts to break out of
this situation and, as has been well demonstrated over the past few
years, this strategy bore fruit resulting in several large customers.
The advanced nature of our products, coupled with superior
customer engagement, stood us in good stead in those initial stages.
The growth in customer base, from inception to date, shown in the
graph given below, is evidence of the success of this strategy.
Subash Menon
Managing Director, CEO & Co-Founder
12
Number of Customers
at the end of each Year
02
01
20
18
16
14
12
10
08
06
04
02
00
19
years. Pelatro's management opted for the long term
future upside against the short term and the Board is
14
confident this strategy will prove to be correct and the
benefits are starting to show.
07
Managed services being provided by Pelatro can be
categorized as:
Business Operations – configuring campaigns,
executing campaigns, provisioning and reporting
2015
2016
2017
2018
2019
Business Consultancy – defining strategy and
Winning these customers and serving them well helped
designing campaigns
establish Pelatro as a credible player in the industry.
IT Operations – monitoring the application on
Furthermore, our products kept evolving in keeping with
a 24 x 7 basis
our vision which was well aligned with that of the telcos.
Progressively, Pelatro invested in other capabilities to
slowly build a market-leading suite of services to make its
offering complete. By the start of 2019, Pelatro was ready
to embark on a new strategy – to deepen its connections.
STRATEGIC SHIFT
This revenue model, which results in a gross margin of
about 50%, is either a fixed monthly fee or a combination
of a fixed monthly fee and revenue gain share. Contracts
typically have an initial term of 3 to 5 years and are
renewable at the end of the term. Given the nature of
such contracts, the Group benefits from a cumulative
Investing in an excellent product offering alone does not
effect with every passing year. Thus, the exit "run rate" of
help telcos to meet their objectives. Proper, consistent and
recurring and repeat revenue in each year will be higher
continued utilisation of the product is equally critical. This
than the entry level in that particular year - in 2019, the
has been a major challenge for telcos for a number of
Group won recurring and repeat revenue contracts worth
reasons, such as inability to attract and retain talent, and
about $15-17m over their term, resulting in the exit level
to keep up with the evolution of the industry and its
in 2019 being more than twice the entry level. The graph
practices etc. Consequently, telcos have always relied on
given below charts this growth.
specialists to help leverage acquired technology and
products. We therefore decided to pursue a strategy of
transitioning to such a specialist offering, and offering our
products primarily on revenue models other than licensing.
This shift in focus towards recurring and repeat revenue
was the highlight of last year.
Contracts of a recurring and repeat revenue nature lead
to deeper engagement between Pelatro and our
customers, as we are able to deliver higher value over
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
Contracted Recurring and Repeat Revenue at
the start of each Year US$ Million.
1.5
2019
4
2020
several years. Owing to the very nature of the model,
As can be seen from the graph, while the Group at the
cash flow improves along with visibility. However, this
start of 2019 had $1.5m of recurring and repeat revenue
shift impacts revenue in the near term as large license
to be recognised in that year; we started 2020 with $4m.
contracts that bring in spikes in revenue will be
With the increasing success of our new strategy, we
absent resulting in a shortfall in revenue in the initial
expect this figure to climb steadily each year directly
13
resulting
in visibility
for each year
improving.
the phone, the offer has to be sent at that moment. A
Consequently, the proportion of recurring and repeat
delay in such intervention will not help. Hence the need
revenue in the total revenue of a particular year will keep
for real time. This requirement means that the solution
rising as time progresses.
has to have “high availability”. Glue is a proprietary and
PRODUCT DIFFERENTIATION
The mViva Platform comprises a number of products and
modules relating
to Contextual Marketing, Loyalty
Management and Data Monetisation. The platform has
always been advanced, in comparison to similar products
from other vendors and we endeavour constantly to
maintain the differentiation of mViva and launched
patent pending technology from Pelatro to achieve this.
EXPANDING FOOTPRINT
The growth in the number of customers has resulted in
expansion of the geographic footprint. mViva currently
handles the data of over 800 million subscribers. The
map given below has the locations of our 19 customers.
version 6
recently. This updated version
further
Bulgaria
Kazakhstan
Nepal
differentiates mViva from competing products. Some of
the key benefits that the new features in mViva V6
will deliver
to our customers are detailed below:
Bahamas
State Flows
Managing and
influencing
the
journey of every
subscriber is increasingly critical. mViva V6 delivers a
brand new campaign orchestration framework called
State Flows. State Flows can be used to manage a
USA
Morocco
Sudan
Cyprus
Brazil
UK
Russia
Bangladesh
Thailand
Phillippines
Myanmar
Phillippines
India
India
Malaysia
Singapore
Cambodia
Sri Lanka
Maldives
Vietnam
complex journey for any customer over a long period of
I thank every one of our stakeholders for the support
time resulting in higher revenue, improved customer
extended during the last year while the Group was
experience and lower churn.
DPeU
deepening our connections. We will continue to build
Pelatro into a global leader in our chosen space.
Telcos are experiencing an explosion in transaction
volume due to increasing consumption of data and a
significant increase in online transactions. In large
telcos, streaming data
for such
transactions by
subscribers results in billions of transactions each day.
mViva V6 employs various new concepts and
technologies including DPeU (Distributed Partitioned
Execution Unit), which facilitates its application to
collect and process such transactions.
Glue
Real time interventions by the telcos, with respect
to their subscribers, is a key element in Contextual
Marketing. For example, if a special offer is to be sent to
a subscriber when near a particular retail outlet or when
the subscriber has just performed a specific action on
SUBASH MENON
Managing Director,
CEO & Co-Founder
14
06
PELATRO AND mViva: A UNIQUE COMBINATION
Customer Experience is the most important lever that telcos have today for gaining competitive advantage. Consistent,
positive experiences can ensure continuity with the customer and provides protection against price pressures. Telecoms
is truly a VUCA ("volatility, uncertainty, complexity and ambiguity") world and the volume, velocity and veracity of the data
involved makes it even more complex. Telco products are largely customised and differentiation on products is near
impossible. In this scenario, revenue increase is possible only through a truly customer-centric approach which is
contextual, relevant and in real time.
The product-vendor combination is thus very important to deliver a
successful project. The product has to be comprehensive, dynamic
and futuristic while the vendor has to be a thought leader with the
ability to envision the future and the challenges that will come up,
while having diligent focus on customer support and an attitude to
support that. Pelatro is one such unique combination, as is obvious
from the sizeable number of deployments that we have added in a
short time. Here are a few factors that cause telcos to prefer Pelatro
over its competition:
DEEP TELECOM EXPERTISE
The core team at Pelatro boasts of hundreds of years of cumulative
experience delivering business critical solutions to telecom solution
providers across the world. This team has experience in different
sizes of telcos (Vodafone, BT, AT&T, Verizon, Bharti etc.) and all
telecom business models (post-paid, prepaid, quad play etc.).
Hence there is in-depth understanding and appreciation of the
complexities and issues that telecom operators face and the type of
solutions they need. Telecoms is an industry that is very different
from others like banking or retail because of the sheer volume of
transactions (running to billions) that happen each day. This scale
itself poses a challenge of a different magnitude and not many
Sudeesh Yezhuvath
COO and Co-Founder
vendors can provide solutions that can scale to handle hundreds of millions of customers generating 60-70 billion
transactions a day, as Pelatro does.
DOMAIN EXPERTISE
With the deep telecom experience as mentioned above, comes a very comprehensive understanding of the domain; this
has resulted in Pelatro coming up with a suite of solutions that address the needs of the telco very well. We have
experience with all types of telecom business models and developed and developing markets and thus mViva has
features and functionalities designed to meet these needs.
15
COMPREHENSIVE SUITE
The mViva suite comprises four solutions that address the two most important priorities of telcos: ARPU increase and
churn reduction. Telcos benefit significantly from the availability of all these solutions in an integrated suite as this leads
to cost synergies on implementation and maintenance. Further, the interplay between these solutions can also result in
several business benefits. These products present in the mViva suite are:
Contextual Marketing Solution
Loyalty Management Solution
Data Monetization Platform
Unified Communication Manager
SOLUTION STRENGTH
mViva facilitates telcos to change orbits in business maturity. Increased business velocity, enhanced customer-centricity,
empowered users, agile methodologies are all benefits telcos derive from the use of the mViva suite. In today’s world of
instant gratification and compressed business cycles, these are very important differentiators. mViva bridges the gap
between business and technology and provides a unique combination of AI/ML based Analytics with strong customer
segmentation and workflow capabilities. This is a very unusual combination in the industry, which is matched by very few
competitors.
CUSTOMER FACILITATION
It is an old adage in the industry that even the best solution will fail if not supported by a capable vendor. This is where
Pelatro makes a big difference. Armed with deep knowledge of telecoms and the experience of having built a large
company from scratch, the core team at Pelatro fully understands the value of customer support and how that becomes
a core differentiator. Customer support is an attitude and success in being able to win contracts from large telcos
(including some of the largest globally) itself is a testament of our attitude. This is a very significant advantage that Pelatro
offers to customers and, in many cases, is the prime reason for telcos to select Pelatro over its competition.
SUDEESH YEZHUVATH
COO and Co-Founder
16
07
THE STATELESS STATE-FLOWS
The dynamics of customer targeting change by the hour
complex flows with hundreds of symbols and connectors
and the ability to quickly adapt to those nuances using
depicting a typical customer journey with branches,
flexible yet robust campaigning mechanics is at the
conditional logic, splits and regrouping including timers
heart of modern-day marketing. Customers go through
and waits
for customer events
in
isolation or
in
various micro-moments of experience during their
combination.
engagement with the telco and it is important to track
such journeys closely so as to latch on those moments
AUTOMATA THEORY
before
they are
lost, also suggesting
to
them
appropriate offers that can shape their future journeys.
To this end Pelatro has implemented a stateless
Journey Management Framework (JMF)
that can
simultaneously accommodate millions of state flows,
each catering
to
tailored customer needs. This
framework is inspired by proven, classical instruction set
and instruction queue based computer architecture that
Combinational Logic
Finite-State Machine
Pushdown Automation
is extremely robust, inherently stateless yet powerful
Turing Machine
enough to model all stateful computing needs.
JMF comprises of an instruction set with around a
In computability theory, a system of data-manipulation
dozen symbols
that
includes states, connectors,
rules such as a computer's instruction set, a programming
branches, splits, asynchronous jumps and joins. These
language, or a cellular automaton is said to be Turing
instructions are modelled on CISC (Complex Instruction
complete or computationally universal if it can be used to
Set Computer) and take up fairly sophisticated, complex
simulate any Turing Machine. JMF is Turing Complete. As
yet well detailed units of work. A JMF processor that
such, any structured business flow can be realized using
fully implements the JMF instruction set leveraging on
JMF and this is complemented with an easy to use GUI.
the services of a Data Bus for fetching state data and
Message Waiting Hall for capture and relay of events.
There is also an Instruction Queue with the Instruction
Pointer at its head which serves as the marker for the
next instruction to be executed.
Instruction Execution starts with the first instruction on the
queue and as part of its execution further instructions may
be added to the same queue. The queue itself is common
whereas flows may be executed on behalf of different
customers in line with their definitions. It is quite possible
Business Logic and Flows, no matter how complex they
that adjacent instructions in the queue may belong to
are, are modelled using a simple GUI based state flow
unrelated customers and could have landed there from
configuration engine. Depending on the skillset, end
distinct customer flows. JMF can be deployed using
users may configure seemingly simple business flows
various schemes such as single execution unit with single
such as do-this-and-get-that as well as
innately
instruction queue
resembling an older generation
17
computer, multiple execution units with single instruction queue or even multiple execution units with multiple
instruction queues resembling a hyper threaded, hyper core computer.
JMF is built using open scalable microservices model and deployed using mViva Containers. The Instruction Set is
extensible to support future business needs and is not constrained to any particular programming language. This
effectively allows adding newer symbols encapsulating domain intelligence with higher levels of abstraction as and when
needed. Pelatro JMF scales out seamlessly to handle deep journeys involving several tens of decision-making points
yielding hundreds of potential paths with their own tailored offer and communication constructs. It scales smoothly
without a glitch handling around a three hundred and fifty million concurrent journeys spanning over sixty million
subscribers and nearly a billion symbols in one of our existing installations.
ARUN KUMAR KRISHNA
Head of Engineering
PRAMOD KP
Chief Architect
AUTO
100
$
$
18
08
ASSESSMENT AND DEVELOPMENT CENTRE
INITIATIVE AT PELATRO
Organisations grow when the individuals who are part
generally the focus is on development and growth of skills.
of the organisation grow as leaders and managers;
accordingly the Group identified a need for its potential
leaders to go through an Assessment and Development
programme, with
the objective of
"Leadership
Development".
LEADERSHIP DEVELOPMENT
Eighty two percent of managers, peers and direct
reports of trained people witness positive behaviors
among leaders after they have been through a
Feedback from assessment centres help organizations
identify if the person can handle the challenges they will
face in their next higher position. They act as a catalyst for
change, as leaders learn about the gap between their
mindsets and skills and what is required of them to lead
effectively. At an organizational level, this information can
target specific growth and development programmes.
This can lead to important information for succession
planning by allowing the organization to see if it has the
number of employees required to move into key roles in
leadership development programme. Top talent and
effective leaders are required to address a myriad of
the future.
challenges
to position
the organization
towards
PARTNER FOR THE PROGRAMME
success. When a company improves their approach to
training and developing managers and leaders, the
results are astounding, and organizations that use
assessment centers to develop their managers report
The Pegasus Institute of Learning was identified as
partner for this program, with the programme to be
carried out in their Outbound Center.
higher sales, lower staff turnover, higher customer
Methodology
satisfaction and lower absenteeism.
Pelatro identified the competencies required for all
WHAT IS AN ASSESSMENT CENTRE?
individuals.
Assessment centers are a combination of various tasks
18 individuals with potential across various functions
and exercises (e.g. outbound challenging situations,
and roles up to middle management were identified
role plays, group discussions, presentations, interviews,
as participants.
etc.) which are designed to examine the extent to which
A programme design was agreed, consisting of
your skills, personality and
interests match with
Individual interviews, 16PF psychometric profiling,
organization needs.
WHAT IS A DEVELOPMENT CENTRE?
identification of outbound activities, role plays,
reflection on tasks, interviews and feedback. Two
Pelatrans were observed by each senior faculty of
A development centre is similar to an assessment
Pegasus.
centre in content but is instead a method to provide an
The assessment was carried out in two batches
insight into strengths and development areas with the
of 9 individuals each. One senior member of
help of trained assessors. Any development areas
management was present for observations for each
identified are then usually targeted with suggestions for
batch. Each assessment in the Out Bound location
development activities. The approach can vary, but
was for two days.
19
Each individual was interviewed before the start of the programme and was given feedback on each area of
competency at the end of the programme.
After the outbound activity, the observations from their 16PF assessment were also shared individually by a senior
psychologist.
Based on the observations from outbound program and 16 PF assessments, a comprehensive assessment was
prepared and shared with each individual in person at the end of the program.
A development plan was identified and common development needs are being planned for further actions by Pegasus.
List of competencies Identified and assessed
NO.
WORK BEHAVIOURS
1.
COMMUNICATION SKILLS
Speaks clearly and concisely to get point across
Listens to people without interruption
Clarifies what people say to ensure understanding
2.
INTERPERSONAL SKILLS
Treats people with respect
Can be approached easily
Expresses disagreements
Works towards win-win solutions whenever possible
3.
LEADERSHIP
PROVIDES DIRECTION
Provides clear direction and defines priorities for the team
Clarifies roles and responsibilities with team members
LEADS COURAGEOUSLY
Takes a stand and resolves important issues
Confronts problems early, before they get out of hand
INFLUENCES OTHERS
Readily commands attention and respect in groups
Gives compelling reasons for ideas
Influences and shapes the decisions of peers
FOSTERS TEAM WORK
Involves others in shaping plans and decisions that affect them
Uses team approach to solve problems when appropriate
Fosters collaboration among groups - discourages "we" vs "they"
20
MOTIVATES OTHERS
Inspires people to excel
COACHES AND DEVELOPS
Gives specific and constructive feedback
CHAMPIONS CHANGE
Champions new initiatives within and beyond the scope of own job
Prepares people to understand change
Sets up systems and structures to support changes
4.
SELF - MOTIVATION
Demonstrates a sense of urgency
Persists in the face of obstacles
Initiates activities without being asked to do so
5.
MANAGEMENT FACTOR
ESTABLISHES PLANS
Translates business strategies in to clear objectives and tactics
Prepares realistic estimates of budgets
Anticipates problems and develops contingency plans
MANAGES EXECUTIONS
Monitors progress and redirects efforts when goals are not met
6.
THINKING FACTOR
ANALYSES ISSUES
Understands complex concepts and relationships
Focuses on important information without getting bogged down in unnecessary details
Analyses problems from different points of view
USES SOUND JUDGEMENT
Makes timely decisions in the face of uncertainty
Makes sound decisions based on adequate information
7.
CUSTOMER ORIENTATION
Understands client needs
Works with clients to define problems and desired outcomes
Follows up with clients to make sure that results meet or exceed expectations
ANURADHA
Chief Mentor
21
09
KEY PERFORMANCE INDICATORS
FOR THE YEAR ENDED 31 DECEMBER 2019
INTRODUCTION
The Directors consider that revenue, adjusted EBITDA (Earnings Before Interest, Depreciation and Amortisation) and
profit before tax, and the related margins as a percentage of revenue, are key performance indicators ("KPIs") in
measuring Group financial performance. We track revenue as it is an indicator of the Group’s overall size and complexity,
and adjusted EBITDA as it is a key measure of the Group’s effectiveness in converting revenue to earnings, excluding
the effects of certain non-operational and/or exceptional transactions.
With an increasing focus on repeating and contractually recurring revenue, the proportion of such revenue to total
revenue is also a KPI for the Group. This KPI provides a forward-looking view of the minimum expected revenues in the
next twelve months, which gives confidence to business planning and investment decisions. In addition, the Directors
believe that further important KPIs are the Group’s cash flows, including operating cash flow and expenditure on
investing activities (principally on capitalised development costs). Performance of these KPIs is discussed within the
Chairman’s Statement, CEO’s Statement and Financial Review.
NON- FINANCIAL PERFORMANCE INDICATORS
The Group monitors certain non-financial performance indicators at an operational level, including the number of new
customers in the year, Requests for Proposal received, movement of sales pipeline and Change Requests. However,
none of these are currently considered to be individually appropriate as a measure of overall strategy execution success.
All KPIs are reviewed annually and this includes consideration of appropriate non-financial KPIs.
In a growing business with a high proportion of well qualified and experienced staff the rate of staff retention is seen as
an important KPI: in 2019 we recruited 75 new members of staff and 20 left the business (2018: 30 joined and 11 left, with
33 new members of staff joining as a result of the Danateq Acquisition).
As the business develops the Board will consider adding, as appropriate, further KPIs to monitor progress against a
broader range of objectives.
22
10
PRINCIPAL RISKS AND UNCERTAINTIES
FOR THE YEAR ENDED 31 DECEMBER 2019
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
generally, 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 continually assesses 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, steps are taken to mitigate risks.
PRINCIPAL RISK
MITIGATION
TECHNOLOGY
The industry in which Pelatro operates is in the process
The Group employs highly qualified software
of continual change reflecting technical developments
engineers and senior management who monitor
as industry and government standards and practices
closely developments in technology that might affect
change and emerge.
its research capability and product evolution.
The markets in which Pelatro operates are competitive
New products and features are assessed against their
and rapidly evolving. The Group’s existing products
target markets and in response to customer feedback
may become less competitive or even obsolete if
prior to development. As Pelatro engages with more
competitors introduce new products and/or customer
customers with an increased product portfolio, a
behaviour or requirements change.
broader spread of feedback is obtained enabling the
business to engage with customers more quickly and
effectively.
23
PRINCIPAL RISK
MITIGATION
BUILDING SALES
Central to our strategic growth plan is winning new
We have strengthened our sales and marketing
mViva contracts, increasingly those which deliver
operations in order to build greater pipeline visibility
recurring revenue over a period of years. Failure to do
and grow revenues faster. In addition to existing efforts
so would directly impact our achievement of overall
(particularly in South and South-East Asia) we are
objectives or lengthen the period taken to achieve them.
concentrating new sales investment in Latin America
where we see significant opportunity for new business
Sales cycles are often very lengthy and may sometimes
and rapid growth. We continue to develop and extend
be delayed or restructured late in the process.
the mViva offering across a number of products as a
Multichannel Marketing Hub to extend market reach,
including the release of v.6 early in 2020.
MISDIRECTED PRODUCT, OPERATIONAL OR STRATEGIC INVESTMENTS
We are continually investing in product development
Strong communication
lines between
relevant
and operational requirements to support mViva-led
stakeholders are ensured through regular formal
growth. Failure to achieve meaningful returns on
meetings and monthly reporting. The Board reviews
investments would hinder the Group’s strategic growth
and challenges all strategic investments.
plan and potentially jeopardise the Group’s position in
the market and its prospects.
IP, DATA AND CYBER RISKS
A significant IP loss, third party IP challenge, data loss,
We implement robust processes across IP and IT
security breach or cyber-attack could significantly
systems, which are overseen by
the Head of
threaten Pelatro's ability to do business, particularly in
Engineering.
the short term, and could result in significant financial
loss.
REPUTATIONAL RISK
Maintaining a strong reputation is vital to the Group's
Strong corporate governance and dedicated senior
success as a business. A loss of confidence in the
management remain the key elements of effective
Group's ability to undertake new client opportunities
reputational management. Senior management
may be caused by an adverse impact to the Group's
provide a model of best practice and guidance to
reputation which may, in turn significantly affect our
ensure the Group's values and expected behaviours
financial
performance
and
growth
prospects.
are clear and understood by everyone. As our
business continues to grow and develop, we will
Significant impact to the Group's reputation could be
remain strongly focused on protecting the strength of
caused by an incident involving major harm to one of
the Group's reputation through effective governance,
24
PRINCIPAL RISK
MITIGATION
of our people or customers, inadequate financial control
leadership, and
through cultivating open and
processes or
failure
to comply with
regulatory
transparent relationships with all stakeholders.
requirements. Impact of this type would potentially
result in financial penalties, losses of key contracts,
inability to win new business and challenges in
retaining key staff and recruiting new staff.
PRODUCT AND SERVICE DELIVERY FAILURES
Issues or failures with our software products or services
Pelatro mitigates inherent product and service risks
could lead to failed implementations, project delays,
through
robust quality assurance and project
cost overruns, data loss, security issues, customer
governance processes. Product releases are unit
dissatisfaction, early
termination, service
level
tested prior to delivery and subjected to further
breaches and contractual claims, all of which could
customer testing prior to first use. Customer testing
adversely impact the Group’s revenues, earnings and
and acceptance sign-offs are required prior to go-live.
reputation.
The risks of servicing large telcos are significant but
generally stable and well understood, and the Group
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 provides clarity as to requirements
and expectations.
ATTRACTING AND RETAINING SKILLED PEOPLE
Attracting and retaining the best skilled people at all
Our business model has created a pipeline of
levels of the business is critical. This is particularly the
opportunities for staff at every level of the business.
case in ensuring we have access to a diverse range of
This will continue to be the case as the Group
views and experience and
in attracting specific
develops. The Group's focus on competency at all
expertise at both managerial and operational levels
levels of the business continues to ensure that we
where the market may be highly competitive. Failure to
develop the Group's people and enable them to
attract new talent, or to develop and retain the Group's
successfully manage the changing profile of the
existing employees, could impact the Group's ability to
Group's business. Incentive programmes are also in
achieve the Group's strategic growth objectives. As we
place to ensure that key individuals are retained.
continue to grow and diversify into new areas, this risk
will continue to be a focus for the Board.
25
PRINCIPAL RISK
MITIGATION
ECONOMIC, INTERNATIONAL TRADE AND MARKET CONDITIONS
The Group is generally exposed to economic, trade
Mitigation against the short-term impact of such risks
and market risk factors, such as global or localised
is provided
through an
increasing spread of
economic downturn, changing
international
trade
geographies and customers. Pelatro monitors political
relationships,
foreign
exchange
fluctuations,
developments and will seek to mitigate emerging risks
consolidation or insolvency of existing or prospective
where possible. Pelatro's high margin revenues
customers or competitor products, all of which could
provide a level of protection against volatile economic
significantly
threaten Pelatro’s performance and
or market conditions and our policy of ongoing product
prospects. Pelatro's current
focus on emerging
development helps us to maintain our competitive
markets customers may
increase such
risks.
advantage.
CREDIT RISKS
The Group is exposed to the credit risk of an
The Group’s principal financial assets comprise cash
increasing range of counterparties with whom it does
and cash equivalents and trade and other receivables.
business, often in respect of considerable amounts.
As these instruments are conventional risks, they are
Extended delivery, installation and sales cycles may
managed on the simple basis of credit terms, credit
cause the Group to be so exposed for considerable
worthiness and cash collection or settlement. The
periods of time.
Group only contracts with major (often regional or
global)
telcos who have sound credit
ratings.
The Group did not enter into derivative transactions
during the year. It is the Group’s policy that no
speculative trading in financial instruments will be
undertaken.
LIQUIDITY RISKS
Fluctuations in working capital may leave the Group
Group cash balances are monitored on a weekly basis
with inadequate cash resources to fund its operations.
to ensure that the Group has sufficient funds to meet its
needs. Cash
flow
forecasts are generated and
reviewed regularly by management.
The Directors have prepared projected cash flow
information for the coming year. The projections take
into account the new business opportunities highlighted
in the Chief Executive’s Statement, the timing and
quantum of which will affect
the Group’s cash
requirements, which are continually monitored by the
26
PRINCIPAL RISK
MITIGATION
Board. The projections also include sensitivities for
risks arising from COVID-19 as discussed below. On
the basis of these projections, the Group has sufficient
working capital facilities for the foreseeable future.
IMPACT OF BREXIT
The United Kingdom ("UK") formally left the European
The Directors currently deem that the effects of the UK’s
Union ("EU") on 31 January 2020. The period of time
current transitional period outside the EU and the impact
from when the UK voted to exit the EU on 23 June 2016
of ongoing discussions with the EU will not have a
and the formal process initiated by the UK government
significant impact on the Group's operations due to the
to withdraw from the EU, or Brexit, created volatility in
global geographical footprint of the business and the
the global financial markets. The UK now enters a
nature of its operations. However, the Directors are
transition period, being an intermediary arrangement
constantly monitoring the situation to manage the risk of
covering matters like trade and border arrangements,
the return of any volatility in the global financial markets
citizens’ rights and jurisdiction on matters including
and impact on global economic performance.
dispute resolution, taking account of The EU (Withdraw-
al Agreement) Act 2020, which ratified the Withdrawal
Agreement, as agreed between the UK and the EU. The
transition period is currently due to end on 31 December
2020 and ahead of this date, negotiations are ongoing to
determine and conclude a formal agreement between
the UK and EU, on the aforementioned matters.
CORONAVIRUS/COVID-19
COVID-19 is a novel illness caused by a specific virus
As a software business, the Group's activities can
which is part of the coronavirus family. The World Health
continue to function efficiently even if most of the
Organization has announced that COVID-19 is a
employees are working from home. The Group has no
pandemic, and many countries have
imposed
supply chain dependencies and its software products
restrictions on travel and other day-to-day business and
continue
to be available without
interruption.
social interactions which are curtailing, in some cases
Furthermore,
the Directors
believe
that
the
severely, economic activity in those countries with
telecommunications industry is likely to be less affected
consequent impact on countries and companies trading
by any economic downturn, whether local or global, than
with them. Such consequences may adversely affect the
most, particularly as certain telecoms activities tend to
Group's operations and/or ability to sell or maintain its
increase in "stay at home" periods such as end of year
software.
holidays and festivals such as Christmas and Ramadan,
generating more user spending and more targeted
marketing.
27
PRINCIPAL RISK
MITIGATION
With regard to travel restrictions, whilst traveling is
generally helpful to progress sales opportunities, video
conferencing is effective as a tool to replace physical
meetings and customers are of course understanding
of the current situation; sales efforts are therefore
progressing as expected.
With respect to implementation and support, the
Group has always been keen to minimise the need for
on-site
activity
to minimise
costs,
hence
implementation
and
support
processes
lend
themselves very well to remote handling. The only
special requirement is additional VPNs which are
easily provided by customers. As almost all of them
are working
from home, protocols have been
established to ensure that work is not impacted. In
summary therefore, to date the situation for the Group
is broadly "business as usual".
Accordingly,
current COVID-19
related
travel
restrictions are having a relatively limited effect on our
business. However, the Directors are constantly
monitoring the situation and local developments to
manage this risk.
28
11
STRATEGIC REPORT - FINANCIAL REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2019
INTRODUCTION
For the year, total revenue increased by 9 per cent. to $6.67m, including some $4.51m repeat revenue (which comprises
gain share, change requests and managed services, as well as PCS) accounting for around 68% of the total. This result
highlights the pivot of the Group’s revenues towards a repeating revenue base, and increasingly a longer-term managed
services model which, with a maintenance and support base which builds with every new license, means that we benefit
from truly contractually recurring revenue as well ($2.96m of this was contractually recurring, compared to $1.82m in
2018). This shift has been enhanced by the contract win announced in December 2019 to deliver our Contextual
Marketing Platform and Unified Communication Manager software to a major global telco on a managed service basis
for an initial period of 5 years; as noted in that announcement, the timing of conversion of certain other pipeline
opportunities was impacted by the increasing focus on building such recurring and repeating revenue contracts in line
with
the Group's stated strategy, and hence
the result
for
the year was below original expectations.
KEY PERFORMANCE INDICATORS
2019
2018
Growth
Revenue
$6.67m
$6.12m
Repeat revenue
$4.51m
$3.10m
Repeat revenue as percentage of total
68%
51%
9%
45%
Adjusted EBITDA (see Note 7)
$2.89m
$3.78m
-23%
Adjusted EBITDA margin
43%
61%
Profit before tax (before exceptional items)
$0.77m
$2.82m
-73%
Cash generated from operating activities
(before exceptional items)
$1.37m
$0.88m
Contracted customers (at year end)
19
14
56%
36%
29
INCOME STATEMENT
Overheads
Revenue
Pre-exceptional overheads (excluding depreciation and
Out of the total revenue of $6.67m, approximately $1.9m
amortisation) increased to $2.8m (2018: $1.8m; the 2019
arose
from sales of
licenses and
the associated
figure reflects approximately $0.2m of lease costs
implementation (2018: $2.5m) and some $4.5m arose
allocated to depreciation and interest as a result of the
from repeat revenue, notably from gain share contracts
adoption of IFRS 16). This increase results largely from
and in particular change requests (2018: $3.1m) which
increases in salary costs concomitant with the growth of
are driven from the underlying license base – as we add
the number of employees in the Group, as well as travel
more licenses so the diversity and activity of the
and marketing costs which also reflect the Group's
customer base increases, resulting in more change
growth. We continue to target investment in our staff and
requests and continually improving the product suite. The
the infrastructure of the business to support a high level
geographic spread of income has also increased with
of customer service and to provide a strong, scalable
new customer acquisitions; however, for the reported
platform for continued organic growth.
year customer concentration
increased somewhat,
driven largely by a strong growth in repeat revenues from
Exceptional gains
one particular customer. We expect this trend to reverse
As previously notified to shareholders, certain contracts
as diverse contracts won in 2019 begin to generate
within the pipeline of potential revenue which was
revenue in 2020.
Whilst all the Group's revenue is currently in US Dollars
(and hence there is currently no impact on revenue
arising from foreign exchange movements) with recent
contract wins a proportion of future revenue will be in
Indian Rupees (“INR”) which will form a natural hedge
against the Group’s cost base, of which just over 50%
(in cash terms) is in INR.
Cost of sales
Cost of sales of $1.0m (2018: $0.56m) comprises
principally (i) the direct salary costs of providing
software support and maintenance, professional
services and consultancy; as well as (ii) sales
commissions payable;
(iii) expensed
customer
integration and software maintenance costs. The
increase reflects the diversification of revenue streams
into managed services and PCS, as an increasing
proportion of costs is allocated to cost of sales as the
direct costs of service and support for the relevant
contracts. However, as the constituents of cost of sales
acquired from Danateq took longer to complete than
originally expected; as a result the related revenue did
not fall within the first year earn out period (the 12 months
to end of July 2019), and hence the contingent cash
payment of $2m pursuant to the terms of the acquisition
was not payable in respect of that period. As the year
progressed, the forecast of revenue deemed likely to
arise from the pipeline on which the remaining earn-out
payment was contingent became more certain and hence
the Board was better able to assess the probable outturn
revenue for the year. Given the structure of the earn-out
terms (i.e. that a payout is fixed based on revenue
between certain thresholds rather than being directly
proportional) the Board is now able to predict with
confidence that the payout (which is due after the close of
the earn-out period on 31 July 2020) will be $1m. Given
this re-evaluation, the Group, recorded (i) a credit to
goodwill of $275,000 in the first half of the year as this
element of the liability was adjusted; and (ii) an
exceptional gain through profit and loss of $236,000
relating to the balance adjusted at the end of the financial
vary markedly depending on the product or service sold,
year.
this is not a KPI for the Group.
30
Profitability
Adjusted EBITDA
(Earnings Before
Interest, Tax,
amortisation for the year, the net book value of the
standalone intangible assets thus acquired (i.e. the
customer relationships) was approximately $5.9m at the
Depreciation, Amortisation and Exceptional
items)
year end.
decreased by 23% in the year to $2.89m (2018: $3.78m).
Profit before tax before exceptional items was $0.77m
(2018: $2.82m). Adjusted earnings per share ("EPS")
were 4.2¢ (2018: 10.2¢), and reported EPS were 2.5¢
(2018: 8.0¢). Reported profit before tax was $1.01m
(2018: $2.51m).
Taxation
The taxation charge for the year comprises a charge of
$0.25m relating to current tax (2018: $0.34m) and a
credit of $0.05m relating to the recognition of deferred
tax assets (2018: $8,000). Deferred tax assets have
arisen in certain Group subsidiaries in which taxable
losses arose in the year, which can be carried forward
and offset against future profits.
Development costs
The Group is committed to the continuous enhancement
of its core software suite, and we aim to offer a
market-leading platform which addresses the needs of
our telco customers. During the year therefore the Group
continued to invest in the development of the software
suite, leading to the release of mViva v.6 in January 2020,
and has capitalised relevant costs of around $2.1m
(2018: $1.6m) out of a total of underlying costs of
approximately $4.0m ($2.6m in Bangalore, where the
Group employs around 90 developers and the balance in
the Group's other development centre
in Nizhny
Novgorod).
Amortisation on the standalone and acquired costs
STATEMENT OF FINANCIAL POSITION
increased to $1.0m (2018: $0.6m) accordingly, and net of
Goodwill and other intangible assets
Goodwill
such amortisation,
this capitalisation
resulted
in
intangible assets relating to development costs in the
statement of financial position of approximately $4.4m
The goodwill in the Group balance sheet arises from the
(2018:$3.2m).
acquisitions of PSPL in December 2017 and the
Danateq Acquisition in August 2018. As noted above, an
Property, plant and equipment
adjustment of an element of the contingent liability
Expenditure of $256,000 on property, plant and
relating to the potential payment to the vendors of the
equipment relates principally to $106,000 spend on IT
Danateq business led to a concomitant adjustment to
equipment to support the needs of the business. In
goodwill during the year of $275,000.
addition, some $94,000 was spent on fixtures, fittings
Customer relationships and acquired software
for resale
Assets acquired pursuant to the Danateq Acquisition
comprised principally customer
relationships and
enterprise software for resale to third parties; the
customer relationships acquired are being amortised
over 10 years. The software acquired has now been
fully integrated into the Group’s existing mViva suite and
is no longer considered separately. Net of accumulated
and leasehold improvements due to the continued
expansion of the Group’s office space. Also during the
year, in line with common remuneration practice in India,
a car was provided for the use of the Head of
Development at a capital cost of $56,000 (representing
an annual cost to the Group of approximately $8,000).
Depreciation
in
the year amounted
to $93,000
(excluding amounts relating to Right-to-Use assets now
recognised under IFRS 16, and gross of amounts
31
capitalised as intangible assets) (2018: $47,000), and the
to reverse in less than one year) increased to $0.29m
aggregate net book value of property, plant and
(2018: $0.07m) largely due to three significant contracts
equipment
rose
from
$362,000
to
$515,000.
signed in the year which had invoicing terms that
differed significantly from the underlying performance
Trade receivables and contract assets
obligations. Long-term contract assets (i.e.
those
Trade receivables
At 31 December 2019
total
trade
receivables
(i.e. including long-term receivables) stood at $5.5m
which are expected to reverse after more than one
year) increased similarly to $0.52m (2018: $0.31m).
Trade and other payables and contract liabilities
(2018: $4.1m). The increase reflects a significant last
Trade and other payables
quarter weighting of revenues, with over 61% of the total
contractual revenue accounted for in the last quarter. Of
these receivables, approximately $1.4m has been
received since the year end to date.
The trade receivables balance at the year end is
analysed as follows:
At the year end, trade payables stood at $82,000 (2018:
$118,000). Other payables of $441,000 (2018: $463,000)
comprise accrued
tax
liabilities and provisions of
$149,000 and sundry creditors and accruals.
Contract liabilities
Contract
liabilities
represent customer payments
2019
$’000
Total
Excluding UBR
2018
$’000
Total
Excluding UBR
Short term
receivables
Associated
revenue
"Debtor days"
received
in advance of satisfying performance
5,283
967
6,566
2,619
294
135
obligations, which are expected to be recognised as
revenue in 2020 and beyond. Short-term contract
liabilities increased to $0.66m (2018: $0.06m) and
Short term
receivables
Associated
revenue
"Debtor days"
long-term contract liabilities to $0.27m (2018: $0.11m)
3,752
1,453
6,019
3,694
228
144
largely as the result of one particular contract entered into
in the year.
The above figures have been adjusted where appropriate for balance sheet
reallocations, and exclude contract assets and the associated incremental revenue.
STATEMENT OF CASH FLOWS
Given the wide variety and bespoke nature of the Group's
Cash flow and financing
contracts, figures shown for debtor days are illustrative
only. UBR receivables have increased as two significant
contracts were completed in December 2019 and had not
been invoiced at the year end (as invoicing milestones
had not been reached). UBR receivables also include
approximately $0.6m relating to contracts on term
payment structures which are invoiced over the relevant
periods.
Contract assets
Cash collection has continued to be a key strategic focus
for the Group - cash generated by operations, as
adjusted for exceptional items, and before tax payments
amounted to $1.70m (2018: $1.17m), largely as a result
of continued improvement in timing of collection of trade
receivables (operating cash inflow of $0.34m in the first
half compared to approximately $1.36m in the second);
this trend is expected to continue with an increasing
proportion of repeat or recurring contracts in the revenue
mix (e.g. from revenue share or managed services).
Contract assets are recognised relating to support and
maintenance revenue and license fees as payments
During the year the Group refinanced certain term loans
are received in arrears of the services being provided.
and took out a further term loan of c. $56,000 in order to
Short-term contract assets (i.e. those which are expected-
finance the purchase of a motor vehicle for employee use.
32
In addition an overdraft facility used during the year had
The increased product range in the now integrated mViva
an outstanding balance of $167,000 at the year end. As a
product suite enables us to target both existing customers
result of the above, the Group had closing gross cash of
with new products and new customers, especially within
$1.1m (2018: $2.2m) and net cash of $0.5m (2018:
multi-national groups. With a substantially enlarged
$1.8m) (excluding amounts relating to lease liabilities).
customer base of now 19 telcos, we expect an increasing
Since the year end, the Group has secured financing of
volume of change requests which, combined with a greater
approximately $0.8m (on a term basis over 6 years) in
proportion of managed services and other repeat income,
order to match fund the cost of hardware associated with
gives us a solid foundation for the year ahead. As noted
the major managed services contract announced in
below, it remains unclear as to how long the current
December 2019. Gross cash at 6th April stood at $1.59m;
coronavirus pandemic will last and what the short to medium
however, this figure includes approximately $0.65m
term effects of this pandemic will be on consumer and
remaining from this financing and relating to capital
corporate behaviour; however, the Directors believe that the
expenditure expected
to be paid out
in April.
telecommunications industry is likely to be less affected by
CONTINGENT LIABILITIES
As explained in further detail above and 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 was payable in respect of this
acquisition, based on revenue realised against a defined
pipeline of actual or target contracts. Due to the
adjustment of previously provided contingent amounts,
the contingent
liability recognised now stands at
$975,000, representing the expected payout of $1m
discounted to the balance sheet date (with the amount
shown on
the balance sheet net of a $27,000
post-acquisition adjustment due
from
the vendors).
SUMMARY
The significant contract win announced in December
2019 clearly validated the quality of our software, espe-
cially in the context of its relevance to Tier 1 telcos, and
marked a major shift for our business in terms of moving
towards a recurring revenue model, thus enhancing the
quality and visibility of our earnings. Furthermore, the
any economic downturn, whether local or global, than most,
particularly as certain telecoms activities tend to increase in
"stay at home" periods such as end of year holidays and
festivals such as Christmas and Ramadan, generating more
user spending and more targeted marketing. This is
supported by our experience to date, with customers
maintaining a broadly "business as usual" approach despite
the logistical disruption of working from home (to which any
software based business is well suited). Accordingly, our
overall (12 month) pipeline remains strong and notably we
have started 2020 with a material proportion of the expected
revenues for the year underpinned by recurring and
repeating revenue, including the contracts referenced above
as well as support and maintenance income built up from
previous years' license sales and regular change request
income. Together this will deliver higher quality, sustainable
and visible revenues that will significantly enhance the value
of the Group over the longer term.
NIC HELLYER
Finance Director
7 April 2020
The Strategic Report was approved by the Board of Directors on 7 April 2020
On behalf of the Board
winning of a consultancy contract, also in December
2019, demonstrated our ability to monetise our domain
Subash Menon
7 April 2020
Nic Hellyer
7 April 2020
expertise to analyse data, devise campaigning strategies
and design appropriate campaigns to enable customers
further
to
increase
revenue and
reduce churn.
33
12
BOARD OF DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2019
EXECUTIVE DIRECTORS
Subash Menon
Managing Director, CEO and 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 integrator 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
revenues to in excess of US$100m, prior to leaving
Subex in 2012.
Sudeesh Yezhuvath
COO and 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 Hellyer
Finance Director
Nic is a Chartered Accountant who brings extensive
board level experience from his 25 years in investment
banking. Nic spent the majority of his banking career at
UBS and HSBC, advising on a wide range of
transactions including public takeovers, private M&A,
IPOs and other equity fund raisings. Nic joined Pelatro
in 2017 prior to the IPO of the Group in December that
year. He is also a part-time CFO of Byotrol plc, a
chemical supply company which is also quoted on AIM.
34
NON-EXECUTIVE DIRECTORS
Richard Day(i)(ii)(iii)
Chairman
Richard has significant board and business experience
from a number of companies, both publicly quoted and
private. He is a qualified solicitor and a Chartered
Member of the Securities Institute. Richard co-founded
institutional brokers Arden Partners in 2002 and was
instrumental in growing their corporate offering as well
as their admission to AIM in 2006. Richard is currently a
director of EGS Energy Limited and sits on the board of
their special purpose vehicle Eden Geothermal Limited
which has secured funding to develop and operate their
deep geothermal site in Cornwall. He is also Chairman
of Alchemac Limited, a UK company with an
aggregates quarrying business
in Southern
India.
Pieter Christiaan Verkade(i)(ii)(iii)
Non-executive Director
Pieter was the Chief Commercial Officer for Unitel in
Angola from August 2017 to August 2019 and is
Chairman and Co-Founder of Viva Africa, an African
content aggregator and producer for 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 numerous board level roles, varying from
CFO, CMO, CCO to CEO for various companies within
the
telecommunications
industry. These
included
Telenor International, Orange and MTN, where he was
Group Chief Commercial Officer, working across both
Europe and Africa.
(i) Member of Audit Committee
(ii) Member of Remuneration Committee
(iii) Member of Nomination Committee
35
13
CORPORATE GOVERNANCE REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2019
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 QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers
to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they
are meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the
extent that the Board judges these to be appropriate in the circumstances, and below we provide an explanation of the
approach taken in relation to each. The Board considers that it has complied with the principles of the QCA Code.
Richard Day
Non-Execu�ve Chairman
36
QCA PRINCIPLES
SECTION 1: DELIVER GROWTH
Principle 1: Establish a strategy and business
model which promote long-term value for
shareholders
investors think about us, and in turn, helping these
audiences understand our business, is a key part of
driving our business forward and we actively seek
dialogue with the market. We do so via investor
roadshows, attending
investor conferences, hosting
capital markets days and our regular reporting.
Our strategy is discussed further in the Managing
Director's statement. As evidenced by continuing
Institutional shareholders
progress in winning contracts from new customers 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:
The Directors actively seek to build a relationship with
institutional shareholders. Shareholder relations are
managed 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 Chairman and Non-executive
Director are also available to meet investors, whenever
required.
Sales strategy, which encompasses all critical areas
Private shareholders
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
services
Shareholders are encouraged to attend the annual
general 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
Acquisition-led growth strategy where and when
Meeting is sent to shareholders at least 21 days before
appropriate to expand the business model
the meeting. The chairs of the Board and all committees,
A fuller explanation of how the strategy and business
model are executed is contained in both the Company's
Admission Document dated 13th December 2018 and
Placing Circular dated 30th July 2019. Both documents
are available to download in full of the Group website.
Principle 2: Seek to understand and meet
shareholder needs and expectations
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.
Introduction
Analyst research
The Company remains committed to listening and
The Board is aware that following the introduction of the
communicating openly with its shareholders to ensure
Markets in Financial Instruments Directive II (MiFID II)
that its strategy, business model and performance are
regulations at the start of 2018, private investor access
clearly understood. Understanding what analysts and
to research on public companies has been restricted.
37
We have not yet commissioned any “paid for” research
from third party analysts and have no current intention
Principle 3: Take into account wider stakeholder
and social responsibilities and their implications
for longer-term success
of doing so. The Company’s broker Cenkos produces
Engaging with our stakeholders strengthens our
research on the Group which is generally available free
relationships and helps us make better business
of charge from their internet portal, linked via the
decisions to deliver on our commitments. The Board is
"Investors" section of the Group website.
Report and accounts
The Board has ultimate responsibility for reviewing and
approving the Annual Report and Accounts and it has
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 decision-making.
considered and endorsed the arrangements for their
Employees
preparation, under the guidance of its audit committee.
The Directors confirm that the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s position and
performance, business model and strategy.
The Board
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 brokers’ and analysts’ reports when
published. This process enables the Chairman and the
Aside from our shareholders, suppliers and customers,
our employees are one of our most important stakeholder
groups and the Board therefore closely monitors and
reviews
the performance and satisfaction of our
employees through regular dialogue and a regular
appraisal programme as well as other feedback it
receives to ensure alignment of interests.
A new Employee Share Option scheme was established
at the beginning of the financial year, 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-related issues.
other Non-executive Director to be kept informed of
The Group believes that by having empowered and
major shareholders’ opinions on strategy and
responsible employees who display sound judgment and
governance, and for them to understand any issues or
awareness of the consequences of their decisions or
concerns.
actions, and who act in an ethical and responsible way, is
The non-executive Directors are available to discuss
key to the success of the business.
any matter stakeholders might wish to raise, and the
Chairman attends meetings with investors and analysts,
as well as professional advisers, as required.
Investors may also make contact requests through the
Company’s broker.
Corporate Social Responsibility
The Group recognises the increasing importance of
corporate social responsibility and endeavours to take it
into account when operating its business in the interests
38
of its stakeholders, including its investors, employees,
Health and Safety
customers, suppliers, business partners and
the
communities where it conducts its activities.
The Directors are committed to ensuring the highest
standards of health and safety, both for employees and
The operation of a profitable business is a priority and
for the communities within which the Group operates.
that means investing for growth as well as providing
The Group seeks to exceed legal requirements aimed at
returns to its shareholders. To achieve this, the Group
providing a healthy and secure working environment to
recognises that it needs to operate in a sustainable
all employees and understands that successful health
manner and therefore has adopted core principles to its
and safety management involves integrating sound
business operations which provide a framework for both
principles and practice into its day-to-day management
managing risk and maintaining its position as a good
arrangements and requires the collaborative effort of all
"corporate citizen", and also facilitate the setting of
employees. All employees are positively encouraged to
goals to achieve continuous improvement.
be involved in consultation and communication on health
The Group aims to conduct its business with integrity,
respecting the different cultures and the dignity and
Environment
and safety matters that affect their work.
rights of individuals in the countries where it operates.
The Directors are committed to minimising the impact of
The Group supports the UN Universal Declaration of
the Group’s operations on the environment. The Group
Human Rights and recognises the obligation to promote
recognises that its business activities have an influence
universal respect for and observance of human rights
on the local, regional and global environment and
and fundamental freedoms for all, without distinction as
accepts that it has a duty to carry these out in an
to race, religion, gender, language or disability.
environmentally responsible manner. It is the Group’s
Customers
policy to endeavour to meet relevant legal requirements
and codes of practice on environmental issues so as to
Our success and competitive advantage are dependent
ensure that any adverse effects on the environment are
upon fulfilling customer requirements. The longevity of
minimised. It strives to provide and maintain safe and
customer relationships is a key part of our strategy, and
healthy working conditions, and to keep its entire staff
an understanding of current and emerging requirements
informed of its environmental policy whilst encouraging
of customers enables us to develop new and enhanced
them to consider environmental issues as an everyday
services, together with software to support the fulfilment
part of their role.
of those services. The Group encourages feedback
from its customers through engagement with individual
customers throughout a project. Despite the number of
Principle 4: Embed effective risk management,
considering both opportunities and threats,
throughout the organisation
customers having more than doubled in the past year,
The Board has overall responsibility for the Group’s
the overall number of customers means that there is
internal control systems and
for monitoring
their
regular interface with customers and their needs are
effectiveness. The Board, with the assistance of the Audit
appreciated. The team holds periodic meetings with
Committee, maintains a system of internal controls to
every customer to understand and resolve their "pain
safeguard shareholders’ investment and the Group’s
points" while collecting valuable feedback on all aspects
assets, and has established a continuous process for
of business such as product features, quality of delivery,
identifying, evaluating and managing the significant risks
support and so on.
the Group faces.
39
The Board currently takes the view that an internal audit
The Board consists of five directors of which three are
function is not considered necessary or practical due to
executive and two are independent non-executives. The
the size of the Group and the close day to day control
Board
is supported by
three committees: audit,
exercised by the executive directors. However, the
remuneration and nominations. Non-executive Directors
Board will continue to monitor the need for an internal
are required to attend all Board meetings (usually in
audit function.
London) and to be available at other times as required for
face-to-face and telephone meetings with the executive
Further details of the principal risks faced by the Group,
team and investors. In addition, they attend Board
together with their potential impact and the mitigation
committee meetings as required. Meetings held during
measures in place, are set out in the section titled
2019 and the attendance of Directors is summarised
"Principal Risks and Uncertainties" in this Annual
below:
Report. The Board believe these risks to be currently
the most significant 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
senior management are responsible for reviewing and
evaluating 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.
Director
Board
Audit
Remuneration
Subash Menon
Sudeesh Yezhuvath
Richard Day
Nic Hellyer
Pieter Verkade
5
3
6
6
6
n/a
n/a
2
2
2
n/a
n/a
2
n/a
2
To enable the Board to discharge its duties, all Directors
receive appropriate and timely information. Briefing
papers 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
Company Secretary, who is responsible for ensuring that
the Board procedures are followed, and that applicable
SECTION 2: MAINTAIN A DYNAMIC MANAGEMENT
rules and regulations are complied with. In addition,
FRAMEWORK
Principle 5: Maintain the Board as a
well-functioning balanced team led by the Chair
The members of the Board have a collective responsibility
procedures are in place to enable the Directors to obtain
independent professional advice in the furtherance of
their duties, if necessary, at the Company’s expense.
and legal obligation to promote the interests of the Group
The Board is responsible to the shareholders and sets
and are collectively responsible for defining corporate
the Group’s strategy for achieving long-term success. It is
governance arrangements. Ultimate responsibility for the
ultimately responsible for the management, governance,
quality of, and approach to, corporate governance lies with
controls, risk management, direction and performance of
the chairman of the Board, Richard Day. The Chairman
the Group.
also ensures effective communication with shareholders
and facilitates the effective contribution of the other
non-executive Director.
40
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 above. 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
Articles 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
The Board meets at least 6 times a year. It has
established an Audit Committee, Nominations Committee
and a Remuneration Committee. Throughout their period
in office the Directors are continually updated on the
Group’s business,
the
industry and competitive
environment 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 governance requirements of the
Group, and upon themselves as Directors, on an ongoing
and timely basis.
The Company has adopted a code for directors’ and
employees’ 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.
Principle 7: Evaluate board performance based
on clear and relevant objectives, seeking
continuous improvement
of Nic Hellyer. The non-executive director and
the
The Board
is committed
to
formal annual Board
Chairman receive payments under appointment letters
evaluations: in 2019 this was conducted by way of a
which are terminable on three months' notice.
questionnaire
and Chairman
interviews.
The
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-executive
Directors as a positive alignment of their interest with
performance of the Board, its Committees and that of the
individual Directors is monitored by the Chairman on an
ongoing basis. The Chairman is assessed by the rest of
the directors through the other non-executive Director.
We will consider the use of external facilitators in future
board evaluations.
shareholders. The Board will periodically review the
The Nomination Committee is responsible for succession
shareholdings of the non-executive Directors and will seek
planning of the executive leadership team and makes
guidance from its advisers if, at any time, it is concerned
recommendations to the Board for the re-appointment of
that the shareholding of any non-executive Director may, or
any non-executive Directors if and when necessary.
could appear
to, conflict with
their duties as an
Succession planning is reviewed on an ongoing basis
independent non-executive Director of the Company or
alongside the capability of the senior management and
their independence itself. Directors’ emoluments, including
Directors. Pieter Verkade is the Chairman of the
Directors’
interest
in shares and options over
the
Nominations Committee.
Company’s share capital, are set out in the Report of the
Directors.
41
Principle 8: Promote a corporate culture that is
based on ethical values and behaviours
business strategy and management, financial reporting
(including the approval of the annual budget), Group
The Group adopts a policy of equal opportunities in the
policies, corporate governance matters, major capital
recruitment and engagement of staff as well as during the
expenditure
projects, material
acquisitions
and
course of their employment. It endeavours to promote the
divestments and the establishment and monitoring of
best use of its human resources on the basis of individual
internal controls.
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 opportunities
for training and personal development and encourages the
involvement of employees in the planning and direction of
their work. These values are applied regardless of age,
The appropriateness of the Board’s composition and
corporate governance structures are reviewed through
the ongoing Board evaluation process and on an ad hoc
basis 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.
race, religion, gender, sexual orientation or disability.
Board committees
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
favourable working conditions
that are
free
from
unnecessary 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 Board has established Audit, Nomination and
Remuneration 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
The Chairman, Richard Day, is responsible for leadership
Audit Committee meets at least twice a year. Pieter
of the Board, ensuring its effectiveness on all aspects of its
Verkade is the other member of the Audit Committee. A
role, setting its agenda and ensuring that the Directors
report on the duties of the Audit Committee and how it
receive accurate,
timely and clear
information. The
discharges its responsibilities is set out below.
Chairman also ensures effective communication with
shareholders and facilitates the effective contribution of the
The Remuneration Committee has Richard Day as
other non-executive Director. Subash Menon, as Chief
Chairman, and reviews the performance of the Executive
Executive Officer, is responsible for the operational
Directors, and determines their terms and conditions of
management of the Group and the implementation of
service, including their remuneration and the grant of
Board strategy and policy. By dividing responsibilities in
options, having due
regard
to
the
interests of
this way, no one individual has unfettered powers of
shareholders. The Remuneration Committee meets at
decision-making.
least twice a year. Pieter Verkade is the other member of
There is a formal schedule of matters reserved for decision
the Remuneration Committee. Details of the activities
by the Board in place which enables the Board to provide
and responsibilities of the Remuneration Committee are
leadership and ensure effectiveness. Such matters include
set out below.
42
The Nomination Committee has Pieter Verkade as Chairman, 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 did not
meet in the financial year 2019 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 downloaded from www.pelatro.com
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.
43
14
S.172 STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
COMPANIES ACT 2006 S. 172 STATEMENT
(a) The likely consequences of any decision in
the long term
The Board acknowledges its responsibilities under the
Companies Act 2006 (the "Act") and below sets out the
requirements of the Act and in particular section 172(1),
and
the key processes and considerations
that
demonstrate how the Directors discharge their duties
and promote the success of the Company. References
to the Company include the wider Group where relevant.
As noted in the Corporate Governance Report, the
Board meet 6 times a year with papers circulated in
advance to allow the Directors to fully understand the
Supporting each key decision, the Board are given
access to management papers which set out the
potential outcome of decisions. The papers include
diligence on the financial impact via forecasts, as well as
non-financial factors and how the decision fits with the
strategy of the Company. Strategy is reviewed in detail
each year at a Board "Away Day" and this strategic
thinking is intrinsic to future decision-making processes.
Where appropriate, the Board will delegate responsibility
to a sub-committee of Directors for areas such as M&A,
performance and position of the Company, alongside
investor relations and so on.
matters arising for decision. Each decision that is made
by the Directors is supported by analyses of the
possible outcomes so that an educated decision can be
made based upon the likely impact on the Company, so
a decision can be made which best promotes the
success of the Company and what impact there may be
on the wider stakeholder group.
(b) The interests of the Company’s employees
The Directors actively consider the interest of employees
in all major decisions. The Directors’ Report and
Corporate Governance report set out in greater detail
Pelatro’s policy towards its employees. Value is created
through innovation and customer service, which is a
Decisions of the Board take into account not just
product of motivated employees. They are of central
short-term, but also medium- and
long-term
important to Pelatro success, and the Directors believe
consequences, which are carefully considered and
that the Pelatro culture and core values create an
balanced, having regard to the needs and priorities of
environment for engaged and successful employees. Our
the business, its customers, partners, employees and
Chief Mentor, Anuradha, supports managers to look after
other stakeholders. For example, the decision to
employee needs, and was instrumental in setting up the
prioritise recurring/ repeating revenue contracts this
Assessment and Development Centre initiative referred
year as opposed to license contracts, leading to a
to in the Strategic Report.
reduction in short-term revenue, was based on the view
that this strengthens customer relationships, creates a
more stable revenue stream and boosts the value of the
business in the long-term.
The Group also operates an option scheme for around 70
of the Group’s employees to encourage employee
engagement in promoting the success of the Company
and maximising shareholder return.
Factors (a) to (e) below, are all taken into account during
the decision-making process.
The health of the Group's employees is of course
paramount, and the Directors have made every effort to
44
facilitate a working from home policy and other practices
backs its employees’ interests in community activities,
to ensure continuing good health
in
the current
supporting them in terms of time to attend to these
coronavirus pandemic.
commitments and financial backing. Further details on
(c) The need to foster the Company’s business
relationships with suppliers, customers and others
practical steps Pelatro has taken can be found in the
Directors’ Report and Corporate governance report. The
Board’s adoption and application of the QCA Corporate
Pelatro's success also depends on strategic relationships
Governance Code further supports these principles, with
with key partners, customers and suppliers, so the Board
more detail of the steps Pelatro has taken set out in the
maintains ongoing oversight of these. Management
disclosures against Principles 3 and 9 to the Code, which
packs report to the Board on the status of key
can be found in the section on Corporate Governance
relationships, which have Board-level engagement from
below and on the Pelatro website at
https://www.pelatro.com/investors/corporate-governance.
(e) The need to act fairly between members of
the Company
The Directors regularly meet with investors and strive to
give equal access to all investors and potential investors.
Through its advisers, the Directors seek and obtain
feedback from meeting with the investors and incorporate
such feedback into its decision-making processes where
appropriate. Where conflicting needs arise, advice is
sought from the wider Board and, as necessary, from
advisers. Through the careful balancing of stakeholder
needs, Pelatro seeks to promote success for the
long-term benefit of shareholders.
an operational perspective through the CEO and the
COO. Product performance is constantly monitored, and
customer
feedback continuously captured
through
regular
account meetings, which
are
always
attended by management-level, and often director-level
representatives.
(d) The impact of the Company’s operations on
the community and environment
The Company
takes
its
responsibility within
the
community and wider environment seriously and
acknowledge that more can be done. Pelatro is a global
company and has based itself in strategic locations for
the long term. The Company has a relatively low carbon
footprint in terms of its operations, but acknowledges
improvements can always be made, particularly as travel
schedules can be extensive. Employees may travel for
three activities – sales, implementation and support. With
regard to sales, whilst traveling is generally helpful to
progress various cases, video conferencing is effective
as a tool to replace physical meetings. With respect to
implementation and support, the Company has always
been keen to minimise the need for on-site activity to
minimise costs, hence implementation and support
processes lend themselves very well to remote handling.
Pelatro seeks to make a positive contribution to its
community, at local and global levels, and to minimize as
far as possible its impact on the environment. Pelatro
45
AUDIT COMMITTEE
FOR THE YEAR ENDED 31 DECEMBER 2019
AUDIT COMMITTEE REPORT
Dear Shareholder,
As Chairman of Pelatro’s Audit Committee, I present the Audit Committee Report for the year ended 31 December 2019,
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 Crowe U.K. LLP ("Crowe"),
considering material issues 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. 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; and
keep the need for an internal audit function under review, having regard to the Company’s strategy and resources.
46
AUDIT COMMITTEE 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
to review and monitor the external auditors’
independence and objectivity,
taking
into
consideration
relevant UK professional and
regulatory requirements;
Committee given that he has worked for more than 25
to develop and implement policy on the engagement
years in corporate finance, first at Cazenove & Co (now
of the external auditors to supply non-audit services,
JP Morgan Cazenove) and
then at
institutional
taking
into account relevant ethical guidance
stockbrokers Arden Partners plc, where he was Head of
regarding the provision of non-audit services by the
Corporate Finance for most of his time there. He is a
external auditors; and
qualified solicitor and was chief financial officer from 2015
to 2019 at iEnergizer Limited which is admitted to trading
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, attended both Committee meetings by invitation.
to report to the Board, identifying any matters in
respect of which
it considers
that action or
improvement
is
needed,
and
to make
recommendations as to steps to be taken.
The terms of reference are reviewed annually and
are available on the Company’s website at:
https://www.pelatro.com/investors/
OBJECTIVES AND RESPONSIBILITIES
The Committee is responsible for monitoring the integrity
SIGNIFICANT ISSUES CONSIDERED DURING
THE YEAR
of the Group’s financial statements, including its Annual
During the year, the Committee:
and Interim Reports, preliminary results announcements
and any other formal announcements relating to its
financial performance prior to release.
The Committee’s main
responsibilities can be
summarised as follows:
to review the Company’s internal financial controls
and risk management systems;
reviewed and approved the annual 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
impact on
the
financial statements,
including
impairments of
the Group’s
investments and
to monitor the integrity of the financial statements
technologies;
and any formal announcements relating to the
Group’s financial performance, reviewing significant
judgements contained in them;
considered the integrity of the published financial
information and whether the Annual Report and
Accounts taken as a whole are fair, balanced and
to make recommendations to the Board in relation to
understandable and provide
the
information
the appointment of the external auditors and to
necessary to assess the Group’s position and
recommend to the Board the approval of the
performance, business model and strategy; and
remuneration and terms of engagement of the
external auditors;
reviewed and approved the interim and year end
results and accounts.
47
The significant accounting areas and
judgements
measures which are not in accordance with the reporting
considered by the Committee were:
requirements of IFRS. The audit committee has reviewed
Recoverability of trade receivables
The Committee continued to review the track record of
receipts from slow-paying debtors and sought regular
updates from management as to the status of trade
receivables. In light of this, the Committee reviewed and
these during the year ended 31 December 2019 to
ensure they are appropriate and that in each case the
reason for their use is clearly explained; they are
reconciled to the equivalent IFRS figure; and they are not
given prominence over the equivalent IFRS figure.
accepted management proposals that no impairment of
Risk review process
trade receivables were required (other than a general
The Audit Committee is responsible for reviewing the
provision as required by IFRS 9) and was satisfied that
financial risks and the internal controls relating there to
the
trade
receivables balance were
fairly stated.
the Board as a whole and has responsibility for reviewing
Carrying value of goodwill and other intangible
assets
The Audit Committee reviewed the judgements taken in
the impairment review performed for each of the Group’s
two cash generating units to determine whether there
was any indication that those assets had suffered any
impairment. The Audit Committee consider the key
the overall business
risks and
risk management
framework. The Group’s principal risks and uncertainties
are set out in the Strategic Report together with mitigating
actions and the internal controls and risk management
procedures are
summarised
in
the Corporate
Governance Report.
External auditor
judgements to be the discount rate and growth rates used
The Committee reviewed the effectiveness of the audit
in the value in use calculations. Following a review of the
process in respect of the year ended 31 December 2018.
impact of the sensitivities performed by management on
In doing so, the Committee considered the reports
the discount rate and growth rate in the value in use
produced by Crowe, met the audit engagement partner
calculations, the Audit Committee considered that the
and discussed the audit with the Finance Director. The
rates used were reasonable and indicated no impairment.
Committee continues to be satisfied that the external
The Committee also reviewed the basis of capitalisation
auditors are delivering the necessary scrutiny and robust
and considered the intangible value attributed to its
challenge in their work. Accordingly, the Committee
intangible software development costs. The Committee
recommended to the Board that it is appropriate to
was satisfied that the resultant net book values were
re-appoint Crowe as the Group’s external auditors for the
appropriately prepared on a reasonable basis.
next financial year.
Going Concern
External audit and non-audit services
The Committee reviewed the cash flow forecasts for the
During the year, Crowe provided tax advisory services.
Group and discussed the key assumptions and risks
An analysis of the audit and non-audit fees is provided in
relevant to their achievement. The Committee was
note 8 to the financial statements. The Audit Committee
satisfied that the basis for adopting the going concern
considered the independence and objectivity of Crowe in
basis in preparing the Group and Company financial
carrying out both tax and audit services.
statements, set out in note 3, was reasonable.
Alternative performance measures
The Group reports a number of additional performance
RICHARD DAY
Chairman of the Audit Commi�ee
7 April 2020
48
REMUNERATION COMMITTEE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
Dear Shareholder,
As Chairman of Pelatro’s Remuneration Committee, I present the Remuneration Committee Report for the year ended
31 December 2019, which has been prepared by the Committee and approved by the Board. 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 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-executive
Directors’ remuneration.
In setting the Group’s remuneration policy, the Remuneration Committee considers a number of factors including the
following:
salaries and benefits available to executive directors of comparable companies;
the need to both attract and retain executives of appropriate calibre; and
the continued commitment of executives to the Group’s development through appropriate incentive scheme.
Consistent with this policy, benefit packages awarded to executive directors comprise a mix of basic salary and
performance-related remuneration that is designed as an incentive. The remuneration packages comprise the following
elements:
base salary: the Remuneration Committee sets base salaries to reflect responsibilities and the skills, knowledge
and experience of the individual;
bonus scheme: the executive directors are eligible to receive a bonus dependent on both individual and Group
performance as determined by the Remuneration Committee;
equity: share options (for non-founder executive directors); and
provision of car (leased or purchased), and company contribution into a personal pension scheme (in the UK only).
Purchased cars remain the property of the Group and the annual benefit to the individual comprises
(i)
the interest cost on the loan taken to fund the purchase;
(ii)
the depreciation on the vehicle; and
(iii)
sundry expenses defrayed by the Group.
The Committee will continue to monitor market trends and developments in order to assess those relevant for the Group’s
future remuneration policy.
49
REMUNERATION DECISIONS FOR 2019
Subash Menon and Sudeesh Yezhuvath were awarded bonuses of £35,000 ($49,000) each in respect of performance
against certain targets. Nic Hellyer was provided with the use of a car in February 2019 (on a leased basis), with an
annual benefit to him of approximately $12,000.
A new long-term share option-based incentive plan was set up in January, with awards made to 70 employees, being over
50% of our team. An award of options over 50,000 shares (subject to vesting conditions) in the Company was awarded
to Nic Hellyer under this plan.
RICHARD DAY
Chairman of the Remunera�on Commi�ee
7 April 2020
AWARDS AND REWARDS
50
15
KEY MANAGERIAL PERSONNEL
Subash Menon
Managing Director, CEO & Co-Founder
Sudeesh Yezhuvath
COO and Co-founder
Nic Hellyer
Finance Director
Arun Kumar Krishna
Head of Engineering
Anuradha
Chief Mentor
51
16
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2019
The Directors present their annual report on the affairs of
DIRECTORS’ RESPONSIBILITIES
the Group, together with the consolidated financial
statements and independent auditor’s report, for the year
ended 31 December 2019.
PRINCIPAL ACTIVITIES
The Pelatro Group provides specialised, enterprise class
software solutions, principally
through
its
flagship
software suite mViva, to telecommunication companies
The Directors are responsible for preparing the annual
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
Directors have elected
to prepare
the
financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU and
("telcos"), who face a series of challenges including
market maturity, saturation and customer churn. Pelatro's
applicable law.
software enhances the telco's understanding of its
Under company law the Directors must not approve the
customers and hence
its engagement with
them,
financial statements unless they are satisfied that they
increasing revenue enhancement, enabling smart pricing
give a true and fair view of the state of affairs of the
bundling, predicting churn and plugging
revenue
Company and the Group and of the profit or loss of the
leakages. The software can be extended further to
Group for that period.
enable data monetisation.
Pelatro is well positioned in the Multichannel Marketing
required to:
Hub space (MMH) - this is technology that orchestrates a
select suitable accounting policies and then apply
customer's communications and offers to customer
them consistently;
In preparing these financial statements, the Directors are
segments across multiple channels to include websites,
social media, apps, SMS, USSD and others. Pelatro
launched v.6 of mViva in February 2020, the new version
offering several new advanced features compared to the
previous version launched in 2018, reflecting the rapid
evolution of the Group's software products.
Further
information on
the Group's activities,
its
prospects and likely future developments is given in the
sections
titled
"Strategic Report" and
"Financial
Statements".
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.
52
The Directors are responsible for keeping adequate
In accordance with the Company's articles Subash
accounting records that are sufficient to show and
Menon will retire by rotation at the Annual General
explain the Company’s transactions and disclose with
Meeting and, being eligible, will offer himself
for
reasonable accuracy at any time the financial position of
re-election.
the Company and enable them to ensure that the
The Directors at 31 December 2019 and their beneficial
financial statements comply with the requirements of the
interests in the share capital of the Company were as
Companies Act 2006. They are also responsible for
follows:
safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention 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
responsibility of the Directors; the work carried out by the
Name of Director
Subash Menon 1
Sudeesh Yezhuvath 1
Nic Hellyer 2
Richard Day
Pieter Verkade
Number of Ordinary
Shares of 2.5p each
Options over
Ordinary shares
9,684,244
3,309,309
105,000
19,457
-
-
-
17,000
-
-
1 held in the name of Bannix Management LLP
2 52,600 Ordinary shares held by his wife, Dr Fawzia Ali; a further 84,000 options over
ordinary shares are unvested
No changes took place in the beneficial interests of the
Directors between 31 December 2019 and 7 April 2020.
auditor does not involve the consideration of these
The market price of the Ordinary Shares at 31 December
matters and, accordingly,
the auditor accepts no
2019 was 70.5p and the range during the year was 40.0p
responsibility for any changes that may have occurred in
to 97.0p.
the accounts since they were initially presented on the
SUBSTANTIAL SHAREHOLDINGS
website.
FINANCIAL INSTRUMENTS AND LIQUIDITY
RISKS
Information about the use of financial instruments by the
As at 7 April 2020, the Company had received notification
of the following significant interests in the ordinary share
capital of the Company*:
Company and its subsidiaries and the Group’s financial
Name of Holder
Number of
Ordinary Shares
Percentage of Issued
Share Capital
risk management policies are given in note 28 of the
financial statements.
Bannix Management
LLP**
12,993,553
39.9%
DIRECTORS AND THEIR INTERESTS
The Directors who served during the year are as shown
below:
Richard Day
Nic Hellyer
Subash Menon
Pieter Verkade
Chairman
Finance Director
Managing Director
Non-Executive Director
Sudeesh Yezhuvath
Executive Director
Killik & Co. LLP
2,780,476
Chelverton Asset
Management
Rathbones Investment
Management
Herald Investment
Management
2,121,872
1,663,335
1,154,035
Maven Capital Partners
902,397
8.5%
6.5%
5.1%
3.5%
2.8%
* As adjusted for other known but undisclosed movements in the shareholder register
** Bannix Management LLP (“Bannix”) is the investment vehicle of Kiran Menon, Varun Menon and Sudeesh Yezhuvath, who hold shares
in Bannix proportional to the interests shown in “Directors’ interests” above
53
CORPORATE GOVERNANCE
main control procedures, which include the setting of
The Company has formalised the following matters by
Board resolution:
a formal schedule of Board responsibilities;
annual and longer-term budgets and the monthly
reporting of performance against them, agreed
treasury management and physical security
procedures,
formal capital expenditure and
the procedure for Directors to take independent
investment appraisal approval procedures and the
professional advice if necessary, at the Company’s
definition of authorisation limits (both financial and
expense;
otherwise).
the procedure for the nomination and appointment of
non-executive Directors, for specified periods and
without automatic re-appointment; and
monitoring, particularly through the regular review of
performance against budgets and the progress of
development and sales undertaken by the Board.
establishment of and written terms of reference for
The Board reviews the operation and effectiveness of this
an audit, nominations and remuneration committees.
framework on a regular basis. The Directors consider that
INTERNAL CONTROL
there have been no weaknesses in internal controls that
have
resulted
in any
losses, contingencies or
The Board has overall responsibility for ensuring that the
uncertainties requiring disclosures
in
the
financial
Group maintains a system of internal control to provide
statements.
its members with reasonable assurance regarding the
reliability of financial information used within the business
GOING CONCERN
and for publication, and that assets are safeguarded.
The Group’s business activities, together with the factors
There are inherent limitations in any system of internal
likely to affect its future development, performance and
control and accordingly even the most effective system
position are set out in the Strategic Report; the financial
can provide only
reasonable, and not absolute,
position of the Group, its cash flows, liquidity position and
assurance with respect to the preparation of accurate
borrowing facilities are described in the notes to the
financial information and the safeguarding of assets.
financial statements, in particular in the consolidated
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
cash flow statement, in Note 23 "Loans and borrowings"
and Note 28 "Financial instruments".
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
financial statements.
control objectives - particularly through a formal
EVENTS AFTER THE REPORTING DATE
process of consideration and documentation of risks
and controls which is periodically undertaken by the
Board.
There have been no significant events which have
occurred subsequent to the reporting date.
54
RESEARCH AND DEVELOPMENT
Details of the Group’s activities on research and
development during the year are set out in the Financial
Review.
AUDITOR
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
relevant audit
information
(as defined
in
the
restrictions, whilst
traveling
is generally helpful
to
progress sales opportunities, video conferencing is
effective as a tool to replace physical meetings and
customers are of course understanding of the current
situation; sales efforts are therefore progressing as
expected.
With respect to implementation and support, the Group
has always been keen to minimise the need for on-site
activity to minimise costs, hence implementation and
support processes lend themselves very well to remote
handling. The only special requirement is additional
VPNs which are easily provided by customers. As almost
all of them are working from home, protocols have been
established to ensure that work is not impacted. In
summary therefore, to date the situation for the Group is
Companies Act 2006) and to establish that the
broadly "business as usual".
Company’s auditor is aware of that information.
Cash resources
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
Annual General Meeting to appoint Crowe U.K. LLP as
auditor for the following year.
LIABILITY INSURANCE FOR COMPANY
OFFICERS
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.
CORONAVIRUS/COVID-19
Introduction
As at 6 April the Group had gross cash of approximately
$0.94m (as adjusted for committed short-term capital
expenditure), and a drawn overdraft facility of $0.16m,
out of a total facility of $0.43m. Of the cash, around
two-thirds is held in USD and the balance mainly in INR
with some GBP. The current portion of term loans due in
the next 12 months is approximately $0.08m. There are
no restrictions in transfer of cash intra-Group, and no
liabilities arise from any such transfer.
Management of short-term expenditure
The Group has no material short-term capital expenditure
requirements other than the c. $0.8m on hardware for the
managed services contract, which as noted above has
been match-funded with a 6 year term loan.
As a software business, the Group can continue to
In terms of expenditure, for reference cash expenditure in
function efficiently even if most of its employees are
2019 was approximately $6m. Whilst in the ordinary
working from home. The Group has no supply chain
course of events we would expect this to increase in
dependencies and its software products continue to be
2020, because of both general investment for growth as
available without interruption. With regard to travel
well as specific projects such as the large managed
55
services contract announced in December, on a pro
around 10% (as measured by the time spent on various
forma basis this is well covered by the brought forward
tasks). As the world gets more used to WFH, we expect
trade debtor balance of $5.5m as well as the recurring
this efficiency to improve, and while it may never reach
revenue contracted to date of c. $4.1m. Given this, the
the pre-COVID level, we expect any drop would be
Group is not dependent on generation of new revenue for
immaterial. The only real casualty seems to be the
its short-term cash flows and risks are principally due to
camaraderie of people working together in one location.
either non-payments by customers or a delay in the
The Group has taken adequate steps to mitigate this
timing. Given the quality of the debtor base (all of whom
issue by having regular video conference calls among
are major telco groups for whom Pelatro's software is an
small groups, and as we have always had an adequate
integral and vital part of their customer proposition), the
number of subscriptions to video links, this activity is
Board views the possibility of any material default as
progressing well. Russia is not under lock down, but our
remote. In addition, we note the following:
staff there are working from home in any case. In
just over 50% of the cash costs in 2019 were incurred
in INR, another 20% in RUB, and a further 15% in
summary therefore all customer-related activities like
implementation, support etc. are progressing as per plan.
GBP. INR has weakened by approximately 6% since
Revenue and cost scenarios
the beginning of 2020 (and approximately 3% since
11 March (when the WHO declared COVID-19 as a
pandemic). Similarly, RUB has weakened by 22% and
15%, and GBP by 7% and 3%. If these currencies
were to remain at these levels until the end of 2020,
the Group's cash expenditure on a pro forma basis
would reduce by around 7%. All of the Group's
income is currently in USD (with approximately $1m
of income expected this year in INR);
approximately $0.6m of costs in 2019 were travel
related; clearly such costs in 2020 will be minimal so
long as COVID-19 restrictions remain in place; and
to the extent that the Board foresees any delay to
incoming payments, it is able to defer or eliminate
certain expenditure, notably on recruitment and
related salary and other costs.
Country restrictions
In the short to medium term, for the reasons stated above
the Group is largely unaffected in cash terms by any
downturn in revenue generation as new contracts taken
on now would be unlikely to produce cash for at least six
months and even longer in the case of managed service
contracts. As a base case,
the Board's
financial
projections for the Group are based on a broadly
"business as usual" scenario, other than a 75% reduction
in travel costs for Q2 and Q3.
However, in the light of potential COVID-19 challenges
and taking into account the factors noted above in
Management of short-term cash expenditure", the Board
has sensitised its forecasts and projections for the next
12 months to take account of possible changes in cash
flow and performance in order to determine when and to
what extent additional measures may be necessary. The
Board's downside projections are based on a scenario
whereby income from receivables is reduced by up to
India and Philippines have been in lock down for the past
10% in 2020 and 20% in 2021 and only 50% of expected
few weeks and are expected to be so for the next few
new contracts are won (albeit this latter factor only affects
weeks. This period has enabled us to experience and
cash flows towards the end of the projected period)
understand the real life scenario with respect to total
- under this scenario, the Group would still have sufficient
Working from Home ("WFH"). We are pleased to note
funding to pay planned overheads (including investment
that efficiency is only marginally down by a maximum of
for growth) for the period of the projections. The Board's
56
severe downside projections are based on a scenario where income from receivables is reduced by up to 20% in 2020
and 20% in 2021 (and likewise 50% of new contracts) - cost reductions can be made to offset this reduction in cash
receipts, principally with a c. 15% reduction in staff costs which would result in the Group having sufficient cash for the
period of the projections.
By order of the Board
NIC HELLYER
Company Secretary
49 Queen Victoria Street
London
EC4N 4SA
7 April 2020
57
17
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
OPINION
We have audited the financial statements of Pelatro Plc
(the “Parent Company”) and its subsidiaries (the
“Group”) for the year ended 31 December 2019, which
comprise:
the Group statement of comprehensive income for
the year ended 31 December 2019;
the Group and Parent Company statements of
financial position as at 31 December 2019;
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
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 financial 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
applicable law and International Financial Reporting
opinion.
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 applicable law and United Kingdom
Accounting Standards, including Financial Reporting
Standard 101 Reduced Disclosures Framework
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:
(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 2019 and of
the Group’s profit for the period then ended;
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 significant doubt about the Group’s or the
Parent Company’s ability to continue to adopt the
the Group financial statements have been properly
going concern basis of accounting for a period of at
prepared in accordance with IFRSs as adopted by
least twelve months from the date when the financial
the European Union;
statements are authorised for issue.
58
However, because not all future events or conditions can
Overview of the scope of our audit
be predicted, this statement is not a guarantee as to the
Group and Company’s ability to continue as a going
concern. In particular, the full extent of the impact of the
COVID-19 infection is not yet known and it is difficult to
evaluate all of
the potential
implications on
the
Company’s trade, customers, suppliers and the wider
economy.
OVERVIEW OF OUR AUDIT APPROACH
Materiality
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
undertaken 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 functions were carried out in India work was
performed by a local audit team in India under our
In planning and performing our audit we applied the
direction. The local audit team were from a Crowe Global
concept of materiality. An item is considered material if it
network firm. We determined the appropriate level of
could reasonably be expected to change the economic
involvement to enable us to determine that sufficient audit
decisions of a user of the financial statements. We used
evidence had been obtained as a basis for our opinion on
the concept of materiality to both focus our testing and
the Group as a whole. We discussed the risks of material
to evaluate the impact of misstatements identified.
misstatement with the subcontracting auditor.
Based on our professional judgement, we determined
overall materiality for the Group financial statements as a
whole to be $90,000, based on approximately 5% of
group adjusted operating profit, a key reporting metric
(2018: $140,000 based on 5.5% of group profit before
tax).
We use a different level of materiality ("performance
materiality") to determine the extent of our testing for the
audit of the financial statements. Performance materiality
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.
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
process. As part of the audit the Senior Statutory Auditor
visited India and met with both local management and the
local audit team. This, together with the additional
procedures performed at Group
level, gave us
appropriate evidence for our opinion on the Group
financial statements.
Key audit matters
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
We agreed with the Audit Committee to report to it all
misstatement (whether or not due to fraud) that we
identified errors in excess of $3,000. Errors below that
identified. These matters included those which had the
threshold would also be reported to it if, in our opinion as
greatest effect on:
the overall audit strategy,
the
auditor, disclosure was required on qualitative grounds.
allocation of resources in the audit; and directing the
59
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
Revenue recognition
How the scope of our audit
addressed the key audit matter
The Group’s operating revenue arises from mViva
We selected a sample of contracts to ensure that
products. Customer contracts can contain multiple
the performance obligations had been correctly
different performance obligations with different
identified,
the
transaction
price
allocated
revenue recognition points. We considered the risk
appropriately and evidence existed of
the
that the incorrect application of the policy could
satisfaction of
those performance obligations
result in material error.
before revenue was recognised. For support and
maintenance revenue recognised over time we
reperformed the calculation on the recognition of
revenue for a sample of contracts.
Capitalisation of development costs
As disclosed in note 18, the Group has capitalised
We obtained an understanding of the processes
approximately $2.2 million of development costs
and controls over the recognition of research and
relating to the development of the mViva product.
development expenses.
We have focussed on this because research and
We have evaluated the appropriateness of the
development represents a significant part of this
capitalisation of the development expenditure by:
business and judgement is required in determining
the appropriate accounting treatment.
discussing with management and obtaining a
technical overview of the developments made
The Directors use judgement to determine whether
to
the mViva software
in
the year, we
research and development costs should be
challenged management to ensure that the
expensed or whether they meet the criteria for
developments were capital in nature and did
capitalisation. This criteria includes assessing
not relate to routine software maintenance. As
whether
the product being developed
is
part of this work we met with the Head of
commercially feasible, whether the Group has
Technology and had samples of the new
adequate technical, financial and other required
functionality demonstrated to us;
resources
to complete
the development and
testing
the
allocation
of
overhead
whether the costs will be fully recovered through
costs to capitalised development costs for
60
Key audit matter
How the scope of our audit
addressed the key audit matter
future sale or licensing of the product. The
mathematical accuracy and reasonableness
Directors determined that the development costs
including challenging whether the overheads
meet the criteria for capitalisation.
were directly attributable
to
the software
The capitalisation of intangibles is included within
note 4 as an area of critical accounting estimate
development and agreeing underlying data to
head count information;
and
judgement. The accounting policy
for
On a sample basis, we tested the amounts
intangibles is outlined in note 3.
allocated to development costs to underlying
payroll records and invoices; and
Reviewing the pipeline of potential work to
assess whether
the software still has
commercial potential.
Going concern
We considered the risk that the current situation
We obtained updated cash flow forecasts from
concerning COVID-19 could give rise to a material
Management with key assumptions updated for
uncertainty over going concern.
COVID-19
risks. The updated assumptions
included reducing the expected level of new
business, cutting discretionary spend and the
impact of customers extending credit terms. We
also discussed with Management the ability of the
Group to continue to provide client service in the
event of a closure of their offices. These forecasts
continued to indicate the Group operating within
existing banking facilities.
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
61
in the audit or otherwise appears to be materially
certain disclosures of Directors'
remuneration
misstated. If we identify such material inconsistencies or
specified by law are not made; 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
we have not received all the information and
explanations we require for our audit.
RESPONSIBILITIES OF THE DIRECTORS FOR
THE FINANCIAL STATEMENTS
misstatement of this other information, we are required to
As explained more fully in the Directors’ responsibilities
report that fact.
We have nothing to report in this regard.
OPINION ON OTHER MATTERS PRESCRIBED
BY THE COMPANIES ACT 2006
statement set out on page 52, 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
In our opinion based on the work undertaken in the
preparation of financial statements that are free from
course of our audit:
material misstatement, whether due to fraud or error.
the information given in the strategic report and the
In preparing the financial statements, the Directors are
Directors' Report for the financial year for which the
responsible for assessing the Group’s and Parent
financial statements are prepared is consistent with
Company’s ability to continue as a going concern,
the financial statements; and
disclosing, as applicable, matters related to going
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
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
and the Parent Company and their environment obtained
Our objectives are to obtain reasonable assurance about
in the course of the audit, we have not identified material
whether the financial statements as a whole are free from
misstatements in the strategic report or the Directors’
material misstatement, whether due to fraud or error, and
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
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.
agreement with the accounting records and returns;
A further description of our responsibilities for the audit of
or
the financial statements is located on the Financial
62
Reporting 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
Companies 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
7 April 2020
63
18
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Note
2019
$’000
(audited)
2018
$’000
(audited)
5
6
7
18
11
12
13
14
Revenue
Cost of sales and provision of services
Gross profit
Adjusted administrative expenses
Adjusted operating profit
Exceptional items
Amortisation of acquisition-related intangibles
Share-based payments
Operating profit
Finance income
Finance expense
Profit before taxation
Income tax expense
PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive income, net of tax
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Earnings per share
6,667
(999)
5,668
)
(4,048
1,620
236
)
(686
)
(52
1,118
54
)
(164
1,008
)
(194
814
)
(25
)
(25
789
6,123
(555
)
5,568
)
(2,421
3,147
)
(310
)
(286
-
2,551
33
)
(71
2,513
)
(334
2,179
78
78
2,257
Attributable to the owners of the Pelatro Group (basic and diluted)
15
2.5¢
8.0¢
The accompanying notes 1 to 31 are an integral part of these financial statements.
64
19
GROUP STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2019
Assets
Non-current assets
Intangible assets
Tangible assets
Right-of-use assets
Deferred tax assets
Contract assets
Trade and other receivables
Current assets
Contract assets
Trade receivables
Other assets
Cash and cash equivalents
TOTAL ASSETS
Liabilities
Non-current liabilities
Borrowings
Lease liabilities
Contract liabilities
Long-term provisions
Other financial liabilities
Current liabilities
Trade and other payables
Short term borrowings
Lease liabilities
Contract liabilities
Other financial liabilities
TOTAL LIABILITIES
NET ASSETS
Note
2019
$’000
(audited)
2018
$’000
(audited, restated)
18
19
20
14
21
21
21
21
22
23
24
25
26
25
23
24
25
26
10,891
515
339
63
519
231
10,609
362
-
-
312
321
12,558
11,604
293
5,283
501
1,101
7,178
19,736
362
187
274
124
-
947
523
246
205
665
948
2,587
3,534
16,202
72
3,752
382
2,224
6,430
18,034
382
-
112
-
1,141
1,635
609
69
-
61
298
1,037
2,672
15,362
6565
Issued share capital and reserves
attributable to owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
TOTAL EQUITY
Note
27
27
27
2019
$’000
(audited)
2018
$’000
(audited, restated)
1,065
11,603
(643)
4,177
16,202
1,065
11,603
(721
)
3,415
15,362
The financial statements of Pelatro Plc, registered number 10630166, were approved by the board of Directors and
authorised for issue on 7 April 2020. They were signed on its behalf by:
Subash Menon
(Director)
Nic Hellyer
(Director)
The accompanying notes 1 to 31 are an integral part of the financial statements.
66
20 FOR THE YEAR ENDED 31 DECEMBER 2019
GROUP STATEMENT OF CASH FLOWS
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
(Recognition of) deferred tax assets
Fair value adjustment on contingent consideration
Share-based payments
Foreign exchange (gains)
Operating cash flows before movements in
working capital
(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
Development of intangible assets
Purchase of intangible assets
Acquisition of property, plant and equipment
Cash outflow on acquisition of businesses net
of cash acquired
Net cash used in investing activities
2019
$’000
(audited)
2018
$’000
(audited)
814
2,179
247
(54)
160
188
1,726
(53
)
(236
)
52
(8
)
2,836
)
(1,509
)
(428
103
701
1,703
)
(334
1,369
(2,102
)
(35
)
(256
)
-
)
(2,393
342
)
(33
71
46
843
)
(8
-
-
)
(69
3,371
)
(2,438
)
(273
57
146
863
)
(292
571
(1,604
)
)
(69
(384
)
(7,035
)
(9,092
)
67
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs
Repayments to related parties
Proceeds from borrowings
Repayment of borrowings
Repayments of principal on lease liabilities
Finance income
Finance costs
Less interest accrued but not paid
Interest expense on lease liabilities
Net cash generated by/(used in) financing activities
Net increase/(decrease) in cash and cash
equivalents
Foreign exchange differences
Cash and equivalent at beginning of period
Cash and cash equivalents at end of period
Comprising:
Cash at bank and in hand
Overdraft
2019
$’000
(audited)
2018
$’000
(audited)
-
-
317
(313
)
(171
)
54
(93
)
-
(40
)
(246
)
7,395
(436
)
394
(513
)
-
33
(62
)
3
-
6,814
(1,270
)
(1,707
)
(20
)
2,224
934
1,101
(167
)
934
(195
)
4,126
2,224
2,224
-
2,224
68
21
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
Share
premium
Exchange
reserve
Merger
reserve
Share-based
payments
reserve
Retained
profits
Total
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 January 2018 as
previously reported
Effect of change of accounting
policy (IFRS 15)
Balance at 1 January 2018 as
restated
801
4,472
-
-
801
4,472
Profit after taxation for the period
Other comprehensive income:
Exchange differences
Transactions with owners:
-
-
Shares issued by Pelatro Plc for cash
264
Issue costs
-
-
-
7,450
(319)
(2)
-
(2
)
-
(191
)
-
-
(527)
-
(527
)
-
-
-
-
Balance at 31 December 2018
1,065
11,603
(193
)
(527
)
Effect of change of accounting policy
(IFRS 16)
Balance at 1 January 2019 as
restated
-
-
-
-
1,065
11,603
(193
)
(527
)
Profit after taxation for the period
Share-based payments
Other comprehensive income:
Exchange differences
-
-
-
-
-
-
-
-
(23
)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
-
1,217
5,961
18
18
1,235
5,979
2,179
2,179
-
-
-
(191)
7,714
(319
)
3,414
15,362
(51)
(51
)
3,363
15,311
814
-
-
814
100
(23
)
Balance at 31 December 2019
1,065
11,603
(216
)
(527
)
100
4,177
16,202
69
Reserve
Description and purpose
Share capital
Nominal value of issued shares
Share premium
Exchange reserve
Merger reserve
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 Group
Amounts arising on the elimination of the members’ capital in
Pelatro LLC and its subsidiary on presentation of the Group results
under merger accounting principles
Share-based payments reserve
Cumulative amounts charged in respect of unsettled options issued
Retained earnings
All other net gains and losses not recognised elsewhere
The accompanying notes 1 to 31 are an integral part of these financial statements.
70
22
NOTES TO GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. GENERAL INFORMATION
changes to lessee accounting by removing the distinction
Pelatro Plc (“Pelatro” or the “Company”) is a public
limited company incorporated and domiciled in England.
The Company's ordinary shares are traded on the AIM
market of the London Stock Exchange. These financial
between operating and finance leases and requiring the
recognition of a right-of-use asset and a lease liability at
the lease commencement for all leases, except for
short-term leases and leases of low value assets.
statements are the consolidated financial statements of
The Group has applied the definition of a lease and
Pelatro Plc and its subsidiaries (“the Pelatro Group” or
related guidance set out in IFRS 16 to all lease contracts
the “Group”) and the company financial statements for
entered into or modified on or after 1 January 2014, with
Pelatro Plc. The financial statements are presented in US
the date of initial application as 1 January 2019. The
dollars as
the currency of
the primary economic
Group has applied
IFRS 16 using
the modified
environment in which the Group operates.
retrospective approach, with no
restatement of
Pelatro's registered office is at 49 Queen Victoria Street,
comparative information.
London EC4N 4SA and its principal place of business is
at 403, 7th A Main, 1st Block, HRBR Layout, Bangalore
560043, India.
2. ADOPTION OF NEW AND REVISED
STANDARDS
Certain new standards and amendments to existing
standards that have been published and are mandatory
for the first time for the financial year beginning 1 January
2019 have been adopted and their impact on the Group
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 is effective for periods beginning on or after 1
January 2019 and sets out how to determine the
accounting tax position when there is uncertainty over
income tax treatments. IFRIC 23 requires an entity to:
determine whether uncertain tax treatments should
be considered separately, or together as a group,
based on which approach provides better predictions
and Company is explained below. New standards,
of the resolution;
amendments to standards and interpretations which
assess if it is probable that the tax authorities will
have been issued but are not yet effective (and in some
accept the uncertain tax treatment; and
cases had not been adopted by the EU) for the financial
year beginning 1 January 2019 have not been adopted
early in preparing these financial statements. The main
new accounting standards which are relevant to the
Group are set out below:
IFRS 16 Leases
If it is not probable that the uncertain tax treatment will
be accepted, measure the tax uncertainty based on
the most likely amount or expected value, depending
on whichever method better predicts the resolution of
the uncertainty.
The Board acknowledges the Group’s responsibility to
In 2019 the Group applied IFRS 16 Leases (as issued by
pay all tax which is due under law and recognises the
the IASB in January 2016, "IFRS 16") for the first time.
importance of corporate
tax payments
to society.
IFRS 16 introduces new or amended requirements with
However,
the Board also acknowledges
its
legal
respect to lease accounting, resulting in significant
responsibility to act in shareholders’ best interests, which
71
includes not paying more tax than is legally due. The
The concept of the location and control of the Group’s
Board applies this strategy across all forms of taxes
active businesses is related to the highest level of control
including, but not limited to, corporation tax, payroll and
of the Group. The Group intends to continue to manage
employment taxes and value added tax.
its affairs so that none of its constituents (other than
Pelatro’s corporate tax policy
The principal features of Pelatro’s corporate tax policy
are to:
not seek to avoid or evade tax by using inappropriate
accounting or other means;
pay all amounts of tax due in full and on time to the tax
authorities;
PSPL) are deemed to be an active business in India for
tax purposes. Whilst the Group is not aware of any
challenge to its current status under POEM (and there is
no complete definition of the activities that constitute
whether the Group would be deemed to be active in
India) the Indian tax authorities may contend that other
Group companies (particularly Pelatro Plc) are so
resident, in particular as two of the Company’s executive
structure
the business
to
take advantage of
Directors reside in India. Given the Group’s current
allowances and reliefs offered and intended by law or
understanding of the applicability of POEM (and noting
the tax authorities;
the threshold of revenue of INR 500m, or approximately
act with integrity and honesty in all dealings with tax
$7m, below which companies will not fall under the scruti-
authorities; and
take reasonable measures and have reasonable
procedures in place to prevent any and all persons
associated with the Group from facilitating the
evasion of tax whether in the UK or overseas.
Thus the Group seeks to manage its tax affairs in full
compliance with relevant local legislation and, whilst
seeking to minimise its tax exposure where practical, it
does not engage in aggressive tax avoidance measures.
Tax risks - Place of Effective Management
Notwithstanding the above, certain matters are outside
the control of the Group: in particular, the Government of
India introduced legislation relating to a company’s “place
ny of POEM legislation) the Group believes that it is
currently and historically unaffected by POEM. Were
such a challenge to be effective and POEM was deemed
applicable to a Group company, that company might
become liable to pay additional tax, and thus this could
materially impact the tax payable by the Group.
Tax risks - Permanent Establishments
The concept of a "Permanent Establishment" is used in
bilateral tax treaties to determine the right of a state to tax
the profits of an enterprise of another state: specifically
the profits of an enterprise of one state may be taxable in
the other state if the enterprise maintains a Permanent
Establishment in the latter state to the extent that profits
are attributable to that establishment.
of effective management” or “POEM” in its domestic law
Based on a review of the Group's global operations in the
in the Finance Bill of 2015 (subsequently deferred to April
context of relevant provisions of the Double Taxation
1, 2017). POEM operates on the concept of the location
Avoidance Agreements of countries in which it does
of management control of any entity: if the location of
business, the Board has concluded that some activities of
management control of any entity, including those that
the Group (e.g. provision of services or implementation of
are registered in other countries, is established to be in
software) are sufficient to have constituted places of
India, then the active business of that entity is deemed to
Permanent Establishment in a small number of countries
be in India and the profit of that entity will be taxed per
where appropriate registration and filings have not yet
Indian tax regulations.
been made. Based on an analysis of the likely value of
72
profits which may be taxable, the Board has concluded
The results of subsidiaries or businesses acquired during
that the impact on these financial statements is not
the year are included in the consolidated income
material; however, an appropriate provision has been
statement from the effective date of acquisition. Where
made in respect of these activities in 2019.
necessary, adjustments are made
to
the
financial
Conclusion
In the absence of other uncertain tax treatments, the
Group believes that it is not further impacted by IFRIC 23
and
therefore opening
retained earnings
remain
statements of subsidiaries to bring the accounting
policies used into line with those used by the Group. All
intra-group
transactions, balances,
income and
expenses are eliminated on consolidation.
unaffected.
Going concern
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The financial statements have been prepared on a
historical cost basis
(except
for certain
financial
instruments and share-based payments that have been
measured at fair value), and in accordance with the AIM
Rules,
International Financial Reporting Standards
(“IFRS”) as adopted by the European Union that are
applicable to the Group’s statutory accounts, and the
applicable provisions of
the Companies Act 2006.
These financial statements have been prepared on a
going concern basis. The Directors have reviewed the
Company’s and the Group’s going concern position
taking account of its current business activities, budgeted
performance and the factors likely to affect its future
development, set out in this Annual Report, and including
the Group’s objectives, policies and processes for
managing its capital, its financial risk management
objectives and its exposure to credit and liquidity risks. In
particular, the Directors have taken into account the
potential impact of the COVID-19 pandemic on business
Basis of consolidation
activity and hence cash inflows: in the case of a
The consolidated financial statements incorporate the
financial statements of
the Company and entities
controlled by the Company (its subsidiaries) made up to
31 December each year. Pelatro Solutions Private
Limited (“PSPL”, the Group’s Indian subsidiary) 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 2019 on the
same accounting principles as for the rest of the Group.
prolonged downturn in revenue-generating activities, the
Directors have plans in place to reduce cash outflows to
mitigate the impact on the Group, and have already
negotiated further bank facilities to give greater financial
headroom in case of need. Details of the management of
short-term expenditure, and revenue, cost and cash flow
scenarios which the Board has taken into account in
coming to its conclusions on going concern, are detailed
above in the Directors' Report above.
The Company controls an investee if, and only if, the
Following such review, the Directors are of the view that
Company has the following:
the Group has adequate financing to be able to meet its
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
involvement with the investee; and
The ability to use its power over the investee to affect
its returns.
financial obligations for a period of at least 12 months
from the date of approval of the Annual Report and
financial statements. Accordingly
the Group and
Company continue to adopt the going concern basis in
preparing these financial statements.
73
Business combinations, goodwill and contingent
more frequently when there is an indication that the unit
consideration
Business combinations
may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of
The acquisition method of accounting is used to account
the unit, the impairment loss is allocated first to reduce
for all business combinations, regardless of whether
the carrying amount of any goodwill allocated to the unit
equity instruments or other assets are acquired. The
and then to the other assets of the unit pro-rata on the
consideration transferred for the acquisition of a business
basis of the carrying amount of each asset in the unit. Any
(whether as a subsidiary or an asset purchase)
impairment is recognised immediately in the income
comprises the:
statement and is not subsequently reversed.
fair values of the assets transferred;
Where settlement of any part of cash consideration is
liabilities to the former owners of the acquired
deferred (whether because it is contingent or otherwise),
business incurred;
the amounts payable in the future are discounted to their
equity interests issued by the Group;
present value as at the date of exchange. The discount
fair value of any asset or liability resulting from a
rate used is the Group’s incremental borrowing rate,
contingent consideration arrangement; and
fair value of any pre-existing equity interest in the
being the rate at which a similar borrowing could be
obtained
from an
independent
financier under
subsidiary.
When the consideration transferred by the Group in a
business combination
includes assets or
liabilities
resulting from a contingent consideration arrangement,
the contingent consideration is measured at its fair value
on the acquisition date and included as part of the
consideration transferred in a business combination.
Acquisition-related costs are expensed as incurred.
Goodwill
The excess of the:
consideration transferred;
amount of any non-controlling interest in the acquired
entity; and
acquisition-date fair value of any previous equity
interest in the acquired entity
over the fair value of the net identifiable assets acquired
is recorded as goodwill, which is initially recognised as an
asset at cost and is subsequently measured at cost less
comparable terms and conditions.
Contingent consideration
Contingent consideration is initially measured at fair
value 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 depends
on how
the contingent consideration
is classified:
amounts classified as a
financial
liability are
subsequently remeasured to fair value at subsequent
reporting dates and the corresponding gain or loss is
recognised 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
any accumulated
impairment. For
the purpose of
Revenue is measured based on the consideration to
impairment
testing, goodwill
is allocated
to
the
which the Group expects to be entitled in a contract with
cash-generating units expected to benefit from the
a customer and excludes amounts collected on behalf of
combination. Cash-generating units to which goodwill
third parties. Each element of revenue (described below)
has been allocated are tested for impairment annually, or
is recognised only when:
74
provision of the goods or services has occurred;
Professional services
consideration receivable is fixed or determinable; and
Revenue and profits from the provision of professional
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/or services
such as post-contract support, and usually include
installation services - typically, software installation could
be performed by another party and
is
therefore
accounted for as a separate performance obligation.
Where
contracts
include multiple
performance
obligations, the transaction price is allocated to each
performance obligation based on the Group’s best
estimate of their Standalone Selling Price (“SSP”) not
withstanding any absence or contrary allocation of total
cost within a contract. Where this is not directly
observable, it is estimated based on the best available
evidence, for example expected cost plus margin.
Software licenses
Revenue in respect of the sale of 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
services such as managed services,
training and
consultancy are delivered under a “time and materials”
type contract and are therefore recognised rateably over
time and based upon number of days worked. Revenue
from this revenue stream may create “Unbilled Revenue”
receivables through yet to be billed time input and
expenses at the reporting date.
Annual support and maintenance (also known as
Post-Contract Support or “PCS”)
Revenue from support and maintenance services is
recognised rateably over the period of the contract.
Revenue is recognised when the provision of support and
maintenance and completion of
the performance
obligations are carried out which is deemed to be evenly
throughout the term of the contract. Revenue from this
revenue stream may create a contract
liability
if
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 may be recognised if PCS income is
recognised even though it is not contractually due and
payable (for example when the first year of PCS is
deemed as “free” to the customer).
by that customer from use of the software, the amount
Hardware
being based on a pre-agreed share of that incremental
Revenue in respect of sales of third-party hardware is
revenue which is recognised at the end of each month (a
recognised when goods are delivered.
"gain share" contract). Certain contracts may provide for
Interest income on contracts with a Significant
both a guaranteed (usually monthly) payment over a
Financing Component
period (typically 2-3 years) as well as a gain share
Interest income is recognised on contracts with a
component, in which case the present value of the
Significant Financing Component as interest accrues
guaranteed payments is recognised on the later of grant
using the effective interest method. The effective interest
of the license or delivery of the software, and a notional
rate is the rate that exactly discounts estimated future
finance income recognised on the reducing balance of
cash receipts through the expected life of the financial
the notional balance outstanding (which is recognised as
instrument to its net carrying amount.
a contract asset).
Implementation services
Cost of sales and provision of services
Revenue in respect of implementation of on-premise
The cost of provision of services includes the direct costs
software
is
recognised on completion of
the
of consultants and employees who provide services,
implementation.
support or maintenance to customers, direct sales
75
commissions paid to third parties, and certain third-party
Where lease-related expenses are directly attributable to
software licenses which are integral to the performance
the cost of development of the Group’s proprietary
of contracts. Cost of sales also includes the acquisition
software (as further detailed in Note 18), such expenses
cost of hardware resold to end customers.
are capitalised in accordance with the Group’s accounting
Leases
policy relating to such development expenditure.
Applying IFRS 16, for all leases (except as noted below),
Foreign currencies
the Group:
(i)
recognises right-of-use assets and lease liabilities in
the consolidated statement of
financial position,
initially measured at the present value of future lease
payments;
The
individual
financial statements of each Group
company are prepared in the currency of the primary
economic environment in which it operates (its functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of each
Group company are expressed in US Dollars, which is the
(ii)
recognises depreciation of right-of-use assets, and
functional currency of the Company and the presentation
interest on lease liabilities, in the consolidated
currency for the consolidated financial statements.
statement of comprehensive income; and
In preparing the financial statements of the individual
(iii)
separates the total amount of cash paid in respect of
lease obligations into a principal portion and interest
(both presented within financing activities) in the
consolidated statement of cash flows.
Lease payments under (i) are discounted using the
interest rate implicit in the lease, if that rate can be
determined, or
the Group's estimated
incremental
borrowing rate. The finance expense is charged to the
Consolidated Statement of Comprehensive Income over
the lease period so as to produce a constant periodic rate
of interest on the remaining balance of the liability for
each period. The right-of-use asset is depreciated over
the shorter of the asset's useful life and the lease term on
a straight-line basis. Additionally under
IFRS 16,
right-of-use assets are
tested
for
impairment
in
accordance with IAS 36 Impairment of Assets. This
replaces the previous requirement to recognise a
provision for onerous lease contracts.
companies, transactions 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 liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the
balance sheet date. Non-monetary
items
that are
measured in terms of historical 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 period
except for differences arising on the retranslation of
non-monetary 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 consolidated financial
statements, the assets and liabilities of the Group’s foreign
operations are translated at exchange rates prevailing on
For short-term leases (lease term of 12 months or less)
the balance sheet date. Income and expense items are
and leases of low-value assets the Group has opted to
translated at the average exchange rates for the period
recognise a lease expense on a straight-line basis as
where it approximates the rates on the dates of the
permitted by the Standard. This expense is presented
underlying transactions. Exchange differences arising, if
within other expenses in the consolidated statement of
any, are classified as equity and transferred to the Group’s
profit or loss.
translation reserve.
76
Share-based payments
The Group has applied the requirements of IFRS 2
Share-based payments in respect of options granted under
a share option plan for senior employees dated 15 January
2019 (the "Plan") and certain options issued at the time of
proprietary software (as further detailed in Note 18), such
expenses are capitalised in accordance with the Group’s
accounting policy
relating
to such development
expenditure.
Borrowing costs
the Company’s IPO. Under the terms of both the Plan and
All borrowing costs are recognised in profit or loss in the
the options issued at IPO, the Group is able to make
period in which they are incurred.
equity-settled share-based payments to certain employees
and a Director by way of issue of options over ordinary
Taxation
shares. Such equity-settled share-based payments are
Any tax payable is based on taxable profit for the year.
measured at fair value at the date of grant. This fair value is
Taxable profit differs from net profit as reported in the
determined as at the grant date of the options and is
income statement because it excludes items of income or
expensed on a straight-line basis over the vesting period,
expense that are taxable or deductible in other years and
based on the Group’s estimate of the number of options
it further excludes items that are never taxable or
that will eventually vest. A corresponding amount is
deductible. The Group’s
liability
for current
tax
is
credited to equity reserves.
calculated using tax rates that have been enacted or
Fair value is measured by use of a Black-Scholes model
substantively enacted by the reporting date.
and key inputs to that model have been assessed as
follows:
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amounts
expected volatility was based upon historical volatility
of assets and liabilities in the financial statements and the
and applied over the expected life of the schemes;
corresponding tax bases used in the computation of
expected life was based upon historical data and was
adjusted based on management’s best estimates for
the effects of non-transferability, exercise restrictions
and behavioural considerations; and
risk-free rate was taken as the two-, three- and 4-year
UK gilt yields as appropriate for the expected life of
the options concerned.
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 temporary
differences; deferred tax assets are recognised to the
extent that it is probable that taxable profits will be
available against which deductible temporary differences
can be utilised. Deferred tax is calculated at the tax rates
that are expected to apply in the period when the liability
Proceeds received on exercise of share options and
is settled or the asset is realised. Deferred tax is charged
warrants are credited to share capital (in respect of nominal
or credited in the income statement, except when it
value) and share premium account (in respect of the
relates to items charged or credited directly to equity, in
excess over nominal value). Cancelled options are
which case the deferred tax is also dealt with in equity.
accounted
for as an acceleration of vesting. The
unrecognised grant date fair value is recognised in the
consolidated statement of comprehensive income in the
year that the options are cancelled.
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 assets and liabilities in a
Where share-based payment expenses are directly
transaction that affects neither the tax profit nor the
attributable to the cost of development of the Group’s
accounting profit.
77
The carrying amount of deferred tax assets is reviewed at
asset, less its estimated residual value, over the useful
each reporting date and reduced to the extent that it is no
economic life of that asset as follows:
longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to
income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and
liabilities on a net basis.
Intangible assets
Intellectual property/patents
Licenses
over 10 years on a straight-line basis
over 5 years on a straight-line basis
Customer relationships
Customer relationships acquired are recognised as
intangible assets at their fair values (see note 18).
Customer relationships are amortised on a straight-line
basis over 10 years.
Impairment of tangible and intangible assets
excluding goodwill
At each reporting date, the Group reviews the carrying
Development expenditure
amounts of
its
tangible and
intangible assets
to
Expenditure on
the development of
the Group’s
determine whether there is any indication that those
proprietary enterprise software where it meets certain
assets have suffered an impairment loss. If any such
criteria (given below), is capitalised and subsequently
indication exists, the recoverable amount of the asset is
amortised on a straight-line basis over its useful life.
estimated in order to determine the extent of the
Where no internally generated intangible asset can be
impairment loss (if any). Where the asset does not
recognised, development expenditure is written-off in the
generate cash flows that are independent from other
period in which it is incurred.
An asset is recognised only if all of the following
conditions are met:
the product is technically feasible and marketable;
assets, the Group estimates 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.
the Group has adequate resources to complete the
development of the product;
Recoverable amount is the higher of fair value less costs
to sell and value in use. If the recoverable amount of an
it is probable that the asset created will generate
asset (or cash-generating unit) is estimated to be less
future economic benefits; and
the development cost of the asset can be measured
reliably.
Development expenditure is amortised on a straight-line
basis over 4 years, such amortisation being charged to
profit or loss. Expenditure on research activities is
recognised as an expense in the period in which it is
incurred.
Patents and licenses
than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable
amount. Any impairment loss is recognised as an
expense through profit and loss.
Property, plant and equipment
Items of property, plant and equipment are stated at cost
less accumulated depreciation and accumulated
impairment losses, if any. The cost of an asset comprises
its purchase price and any directly attributable costs of
bringing the asset to the location and condition for its
The costs
incurred
in purchasing
licenses and
intended use. Depreciation is charged to profit or loss
establishing patents are measured at cost, net of any
(unless it is included in the carrying amount of another
amortisation and any provision
for
impairment.
asset) on a straight-line basis to write off the depreciable
78
amount of the assets net of the estimated residual values
customers in the ordinary course of business. They are
over their estimated useful lives as follows:
generally due for settlement between 30 and 90 days and
Computer equipment
Leasehold improvements
Office equipment
Vehicles
over 3 years on a straight-line basis
over 5 years on a straight-line basis
over 5 years on a straight-line basis
over 8 years on a straight-line basis
therefore are generally classified as current other than
where the terms of the contract provide for payment over
an extended period of time (in which case the relevant
The assets’ residual values and useful lives are reviewed,
element of the receivable is classified as current and the
and adjusted if appropriate, at each reporting date. An
balance is classified as non-current, net of an allowance
asset’s carrying amount is written down immediately to
for the time value of money). The timing of revenue
its recoverable amount if the asset’s carrying amount is
recognition, invoicing and cash collections results in both
greater than its estimated recoverable amount.
invoiced accounts receivable and uninvoiced receivables,
Financial assets
Financial assets are recognised on the consolidated
statement of financial position when the Group has
become a party to the contractual provisions of the
instrument. The Group’s financial assets consist of cash,
loans, deposits, and receivables and 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
managing them. The Group has reviewed its business
model for its financial assets and has concluded that they
as well as contract assets. Invoicing may be implemented
(depending on the contract with the end customer)
according to usage or upon achievement of contractual
milestones.
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 contractual
cash flows and therefore measures them subsequently at
amortised cost using the effective interest method, less
are held for collecting contractual associated cash flows.
provision for impairment.
Under IFRS 9 receivables and contract assets (other
Contract assets represent amounts relating to revenue
than
those which contain a significant
financing
recognised at the date of the statement of financial
component) are initially recognised at fair value and will
position but not yet due or invoiceable under the terms of
subsequently be measured at amortised cost.
the contract. These arise most typically for the Group
The Group 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.
Trade and other receivables and contract assets
either in (i) licenses of software where the consideration
is structured as an upfront payment followed by a series
of additional payments, which may comprise fixed sums
or fixed sums plus sums relating to some measure of (for
example) sales made by the purchaser of the license; or
(ii) licenses of software where payment for the aggregate
consideration may be structured such that the initial
consideration does not fully reflect the SSP of the license.
Such payments may extend over several years. Under
IFRS 15, if the contract is a “right to use” contract, then
These assets arise principally from the provision of sales
the upfront and fixed payments are recognised on
of software and services and support and maintenance to
transfer of the license at their aggregate present value
79
using an imputed cost of funds.
An equity instrument is any contract which evidences a
Impairment provisions for current and non-current trade
residual interest in the assets of an entity after deducting
receivables and contract assets are recognised based on
all of its liabilities. Equity instruments issued by the Group,
the simplified approach within IFRS 9 using a provision
such as share capital and share premium, are recognised
matrix for the determination of lifetime expected credit
at the proceeds received net of direct issue costs.
losses, which assesses
the probability of
the
non-payment of the trade receivables, which probability
is multiplied by the amount of the expected loss arising
from default to determine the lifetime expected credit loss
for the trade receivables. In the absence of any historic
credit losses and the expectation of no specific losses in
the
foreseeable
future,
the Directors assessed a
hypothetical
likely default amount by applying a
percentage "probability of default" to the receivables
balance, such probability being related to the underlying
credit rating of the customer or country of origin. Trade
receivables and contract assets are reported net, with
such provisions recorded in a separate provision account
with the loss being recognised within cost of sales in the
consolidated statement of comprehensive income.
Cash and cash equivalents
Cash and cash equivalents include cash in hand,
deposits held at call with banks, other short term highly
liquid investments with original maturities of three months
Borrowings
Interest-bearing loans are recorded initially at fair value,
net of direct issue costs. Finance charges, including
premiums 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.
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
reporting date and are discounted to present value where
the effect is material.
or less, and – for the purpose of the statement of cash
Segmental information
flows - bank overdrafts. Bank overdrafts are shown within
loans and borrowings
in current
liabilities on
the
consolidated statement.
For management purposes, the Group’s activities are
principally related to the provision of data analytics
services to customers, and all other activities performed
Financial liabilities and equity instruments
by the Pelatro Group are solely to support its primary
Equity and debt instruments are classified as either
financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the
definitions of a financial liability and an equity instrument.
The Group’s financial liabilities include trade and other
payables and borrowings which are measured at
amortised cost using the effective interest rate method.
Financial liabilities are recognised on the consolidated
statement of financial position when the Group has
become a party to the contractual provisions of the
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.
instrument.
Accordingly, the Directors have determined that there is
80
only one reportable segment under IFRS 8 and the
financial year, are discussed below:
financial
information
therefore presents entity-wide
Revenue
information. The results and assets for this segment can
be determined by reference
to
the statement of
comprehensive
income and statement of
financial
position.
Revenue and the associated profit are recognised from
sale of software licences, rendering of services, and
maintenance and support. When software licences are
sold, the Board must exercise judgement as to when the
The Pelatro Group primarily serves customers in south
appropriate point in time has passed at which all
and south-east Asia and Africa, with a developing
performance obligations for that software licence have
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 expense that have been
shown separately due to their nature.
4. CRITICAL ACCOUNTING JUDGEMENTS AND
KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of financial information in conformity with
IFRS
requires management
to make
judgements,
estimates and assumptions that affect the application of
policies and the reported amounts of assets and liabilities,
and
income and expenses. The estimates and
associated assumptions are based on historical
experience and various other factors that are believed to
be reasonable under the circumstances. However, the
nature of estimation means that actual outcomes could
differ from those estimates. Estimates and underlying
assumptions are
reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision
affects only that period or in the period of the revision and
future periods if the revision affects both current and
future periods.
been performed, at which point revenue in relation to the
stand-alone sales price of the software licence is
recognised. In many cases performance obligations do
not simply
follow
the commercial and contractual
arrangement agreed with the customer, in some cases
the revenue streams are combined within an overall
commercial arrangement. Such combined circumstances
require judgement to assess performance obligations
associated with each revenue stream and
further
judgement as to when and how such performance
obligations have been discharged in order to recognise
the associated revenue. Furthermore, agreements with
customers may include multiple performance obligations.
Determination of the appropriate revenue recognition is
therefore considered a critical judgement. The critical
judgement includes, but is not limited to, assessment as
to whether a performance obligation has been satisfied
and allocation of revenue where such agreements
involve more
than one performance obligation.
Assessment of performance obligations also involves
determining whether a set of contractual obligations
represent distinct performance obligations or whether
they are highly dependent on, or highly interrelated with
one another, and hence fall to be treated as one single
performance obligation under IFRS 15.
A number of contracts entered into by the Group during
the year are recognised for revenue in a manner which
The key assumptions and critical accounting judgements
differs materially from the contractual terms; in certain
concerning
the
future and other key sources of
cases this resulted in revenue being recognised earlier
estimation uncertainty at the reporting date that have a
than contractually due; in others it deferred revenue after
significant risk of causing a material adjustment to the
the date at which it was contractually due. The effect of
carrying amounts of assets and liabilities within the next
this is shown in Note 5.
81
Business combinations and related intangible
assets
for capitalisation as intangible assets requires judgement,
including assessments of
the nature of
the work
Business combinations may
result
in acquired
underlying the costs carried out by relevant employees,
technology assets and customer relationships being
estimates of the technical and commercial viability of the
recognised as separable intangible assets at their fair
asset created, and its applicable useful economic life.
value at the date of acquisition. These are valued using
These estimates are continually reviewed and updated
discounted cash flow methodology, taking into account a
based on past experience and reviews of competitor
number of key assumptions such as retention and net
products available in the market.
income. In applying this methodology, certain key
judgements and estimates are required to be made in
Trade and other receivables
respect of future cash flows together with an appropriate
Management judgement is required in considering the
discount factor for the purpose of determining the present
recoverability of debts and in the estimation of expected
value of those cash flows. The key sources of estimation
credit losses which may be incurred. Further information
uncertainty with respect to customer relationships are the
is provided in note 21.
future retention rate and the income per customer
Impairment reviews
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 consider-
ation is based on estimates of future performance of the
acquired business over the contractual earn-out period,
as measured against
the contractually agreed
performance targets. 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.
Management judgement is also required in assessing the
useful economic lives of these assets for the purposes of
The Group uses long-term forecasts of cash flow and
estimates of future growth both to value acquired
intangible assets and goodwill and to assess whether
goodwill or intangible assets are impaired, and to
determine the useful economic 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 annually, and
intangible assets
whenever there is an indication of impairment: identifying
indicators of impairment requires judgements to be made
as to the prospects and value drivers of the individual
assets, and hence an estimation of the level of future
growth, cash flows as well as an appropriate discount
rate to support their carrying value.
amortisation. Note 18 gives further details of the
Going concern
assumptions used.
The Group uses medium-term forecasts of cash flow and
Capitalised development costs
estimates of future growth, alongside the judgements
Development costs are accounted for in accordance with
referred to above with regard to trade and other
IAS 38 Intangible Assets, and costs that meet the
receivables, to assess whether the preparation of the
qualifying criteria are capitalised and systematically
financial statements on a going concern basis is
amortised over the useful economic life of the intangible
appropriate. Management
judgement
is
therefore
asset. Determining whether development costs qualify
required in assessing the appropriateness of these
82
forecasts and estimates, particularly in the light of current
An analysis of revenue by type is as follows:
uncertainty caused by the COVID-19 pandemic. Further
information on this is given in Note 3 and in the section on
At 31 December
"Principal risks and uncertainties".
Repeat software sales and services
5. REVENUE AND SEGMENTAL ANALYSIS
The Directors consider that the Group has a single
business segment, being
the sale of
information
management software and related services to providers of
telecommunication services (“telcos”). The operations of
the Group are managed centrally with Group-wide
functions covering sales and marketing, development,
professional services, customer support and finance and
administration.
An analysis of revenue by product or service and by
geography is given below.
Revenue by type
The Group has five principal revenue models, being:
1.
contracts based on the sale of perpetual licenses for
Maintenance and support
Total repeat revenues
Software – new licenses
Consulting
Resale of hardware
Revenue by geography
At 31 December
Caribbean
Central Asia
Eastern Europe
North Africa
South Asia
The Group recognises revenue in seven geographical
regions based on the location of customers, as set out in
the following table:
2019
$’000
3,114
1,399
4,513
1,887
258
9
2018
$’000
2,288
809
3,097
2,511
515
-
6,667
6,123
2019
$’000
133
256
91
135
1,791
2018
$’000
357
1,653
380
314
819
4,181
2,207
80
393
6,667
6,123
use of the Group's proprietary enterprise software.
South East Asia
2.
contracts for the use of the Group's software on a
Sub-Saharan Africa
regular (usually monthly) basis, which may also provide
for Group employees to provide related services the
customer (“managed services”) and/or for the Group to
take a share of the revenue gain achieved through use
of the software.
3.
provision of specific customer-requested modifications
to Group software ("change requests”).
4.
5.
provision of maintenance and support of the software.
provision of consultancy services and/or
training
relating to the use of the software.
In addition, the Group may, if required by the customer,
supply appropriate hardware on which to host the software,
either for the account of the customer or (particularly in the
case of managed services) retained in the ownership of
the Group.
Management makes no allocation of costs, assets or
liabilities between these segments since all trading
activities are operated as a single business unit.
An analysis of revenue by status of invoicing is as follows:
Year to 31 December
2019
$’000
2018
$’000
(i)
Revenue invoiced to customers under contractual
terms
2,619
3,694
(ii)
Revenue recognised under terms of contract but
unbilled at period end (“UBR”)
3,947
2,325
(iii) Net revenue recognised other than
(ii)
144
191
Less: revenue recognised or to be recognised as
interest under IFRS 15
(43)
(87
)
Total revenue recognised in the year
6,667
6,123
83
Customer concentration
The Group has 4 customers representing individually over
10% of revenue each and in aggregate approximately 67%
of total revenue at $4.48m (2018: two such customers, in
aggregate approximately 48% of revenue at $2.91m). The
4 customers accounted for revenue of $2.02m, $0.82m,
$0.81m and $0.79m respectively (2018: $1.65m and
$1.26m).
Revenue recognition
License revenue
As explained in Note 2, the Group recognises revenue
financial statements reflect adjustments to income (i) to
accelerate the recognition of revenue for initial years for
which no contractual payment is due; and (ii) to
accelerate or defer the recognition of revenue in cases
where the contractual PCS charge is lower (or higher)
than a market rate (the difference being netted off or
added to the revenue recognised in respect of the license
fee). For the financial year 2019 revenue therefore
includes (i) an amount of $104,000 representing revenue
from PCS recognised ahead of its contractually due
dates (2018: $141,000), and (ii) an amount of $248,000
(2018: $80,000) representing revenue netted off license
from the sale of licenses and the implementation of the
income and allocated to PCS.
software so licensed separately, as the two activities
Remaining performance obligations
represent distinct performance obligations. However, as
implementation to date has always been carried out by
Group personnel and is usually viewed by the customer as
an integral part of the license purchase, the two activities
are reported as one.
Irrespective of the split between license and implementa-
tion
recognition, some contracts provide
for
fixed
payments to be made by customers (usually monthly) over
a given term (e.g. three or five years). Under IFRS 15, in
order to reflect the time value of money, such contracts
have been recognised as the capitalised value of the
There are certain software support, professional service,
maintenance and licences contracts that have been
entered into for which both:
the original contract period was greater than 12
months; and
the Group's right to consideration does not correspond
directly with performance.
The amount of revenue that will be recognised in future
periods on these contracts when those remaining
performance obligations will be satisfied is shown below.
income stream plus interest accruing for the year on the
Year to 31 December
2020
$’000
2021
$’000
2022-5
$’000
credit deemed to be extended to the customer (on a
Revenue expected to be recognised on
reducing balance basis). For the financial year 2019 this
software and service contracts
595
461
522
figure amounts to license revenue of $0.45m and related
interest income of $7,000 (2018: $0.13m and $2,000).
Comparative figures for the year ended 31 December
2018 were as follows:
PCS
Ancillary to a license sale, the Group typically provides five
years of PCS but does not charge for the first year;
Year to 31 December
2019
$’000
2020
$’000
2021-4
$’000
Revenue expected to be recognised on
software and service contracts
419
420
476
similarly in certain contracts the Group may provide PCS
Costs of obtaining and fulfilling contracts of $9,000 have
at other than a standalone selling price ("SSP"). For
been recorded in 2019 (2018: nil).
revenue recognition purposes this is treated as income
accruing over the full term of the service provision
Non-current assets
(whether paid or otherwise) and, as far as is estimable, at
Information about the Group’s non-current assets by
a deemed market rate (i.e. the SSP). Accordingly, the
location of assets is as follows:
84
At 31 December
Singapore
UK
India
2019
$’000
3,825
7,835
834
2018
$’000
1,933
8,300
376
Certain lease expenses are deemed to be directly
attributable overheads for the purposes of capitalising
relevant expenditure on developing intangible assets
(see Note 18); accordingly, under
IFRS 16
the
12,494
10,609
corresponding depreciation and interest expense is
Non-current assets comprise intangible assets, goodwill,
capitalised instead. Figures above are shown gross
deferred tax assets, plant, property and equipment, and
before capitalisation.
long-term contract assets and trade receivables.
Impact on earnings per share for the period
6. OPERATING EXPENSES
The impact on earnings per share is too small to be
Profit for the year has been arrived at after charging:
reflected in disclosure to the nearest 0.1c.
2019
$’000
2018
$’000
Amortisation of intangible non-current assets
1,726
Depreciation of tangible non-current assets
Staff costs (see note 9)
Auditor’s remuneration (see note 8)
Short-term lease expenses
189
1,503
41
23
843
47
582
45
24
Realised foreign exchange (gains)/losses
(14)
(69)
Financial effect of initial application of IFRS 16
The tables below show the amount of adjustment for each
financial statement line item affected by the application of
IFRS 16 for the current period. As noted above, where
lease-related expenses are directly attributable to the cost
of development of the Group’s proprietary software such
expenses are capitalised in accordance with the Group’s
accounting policy
relating
to such development
expenditure. The amounts shown in this note are gross of
such capitalisation unless otherwise noted.
The Group has adopted the modified retrospective
approach to the application of IFRS 16 and accordingly the
prior year is not restated and hence there is no effect
shown.
Impact on profit/(loss) for the period
Year to 31 December
(Increase) in depreciation
(Increase) in finance costs
Decrease in administrative expenses
Effects of foreign exchange
(Decrease) in profit for the period
2019
$’000
(173)
(40
)
210
1
(2
)
Impact on consolidated statement of cash flows
The application of IFRS 16 has an impact on the
consolidated statement of cash flows of the Group as
under the Standard lessees must present:
Short-term lease payments, payments for leases of
low-value assets and variable lease payments not
included in the measurement of the lease liability as
part of operating activities (such payments have no
material effect on these financial statements);
Cash paid for the interest portion of lease liabilities as
part of financing activities; and
Cash payments for the repayment of the principal
portions of leases liabilities as part of financing
activities.
Under IAS 17, all lease payments on operating leases
were presented as part of cash flows from operating
activities. Consequently, for the year ended 31 December
2019, the net cash generated by operating activities has
increased by $210,000 and net cash used in financing
activities increased by the same amount.
Extension and termination options
Extension and termination options are included in a
number of property leases across the Group. These
terms are used to maximise operational flexibility in terms
of managing contracts. All of
the extension and
termination options held are exercisable only by the
Group and not by the respective lessor. In determining
the lease term, management considers all facts and
85
circumstances that create an economic incentive to
Group’s internal management reporting. Exceptional
exercise an extension option, or not exercise a termination
items in 2019 comprise the gain on the adjustment of
option. Extension options (or periods after termination
contingent liabilities relating to the potential earnout
options) are only included in the lease term if the lease is
payment in respect of the Danateq Acquisition (see Note
reasonably certain to be extended (or not terminated).
26). Exceptional items in 2018 comprise legal and other
For lease liabilities on balance sheet at 31 December 2019
costs relating to the Danateq Acquisition.
the Group has used a weighted average interest rate of
Adjustment for share-based payment expense is made
9.6% in relation to INR liabilities, 9.7% in relation to RUB
because, once the cost has been calculated for a given
liabilities and 2.7%
in
respect of GBP
liabilities.
grant of options, the Directors cannot influence the
7. NON-GAAP PROFIT MEASURES AND
EXCEPTIONAL ITEMS
Reconciliation of operating profit to adjusted earnings
before interest, taxation, depreciation and amortisation
(“EBITDA”)
Year to 31 December
Operating profit
Adjusted for:
2019
$’000
2018
$’000
1,118
2,551
Amortisation and depreciation
1,915
Revenue recognised as interest under IFRS 15
43
Exceptional items:
- acquisition expenses
- gain on adjustment of contingent liability
Expensed share-based payments
-
(236)
52
889
26
310
-
-
Adjusted EBITDA
2,892
3,776
share-based payment charge incurred in subsequent
years relating to that grant; also the value of the share
option to the employee differs considerably in value and
timing from the actual cash cost to the Group.
Elements of depreciation on
right-to-use assets
recognised under IFRS 16 and share-based payment
expense are deemed
to be directly attributable
overheads for the purposes of capitalising relevant
expenditure on developing intangible assets (see Note
18). The figures above are shown net of amounts so
capitalised.
The calculation of adjusted earnings per share is shown
in Note 15.
8. AUDITOR’S REMUNERATION
The criteria for adjusting operating income or expenses in
the calculation of adjusted EBITDA are that they are
Year to 31 December
2019
$’000
2018
$’000
material and either (i) arise from an irregular and
Charged in the financial year:
significant event or (ii) are such that the income/cost is
Audit of the financial statements of Pelatro Plc
Amounts receivable by auditor in respect of:
recognised in a pattern that is unrelated to the resulting
Audit of financial statements of subsidiaries
operational performance. Materiality is defined as an
amount which, to a user, would influence decision-making
based on, and understandability of,
the
financial
pursuant to legislation
Tax compliance
9. STAFF COSTS
statements.
Exceptional items are treated as exceptional by reason of
Year to 31 December
their nature and are excluded from the calculation of
adjusted EBITDA (and adjusted earnings per share below)
Wages and salaries
Social security contributions
41
-
3
44
42
-
3
45
2019
$’000
2018
$’000
3,495
1,975
65
40
to allow a better understanding of comparable
Less: amounts capitalised as intangible assets
(2,057)
(1,433
)
year-on-year trading and thereby an assessment of the
underlying trends in the Group’s financial performance.
These measures also provide consistency with the .
1,503
582
86
The average number of persons employed by the Company during the period was:
Year to 31 December
2019
2018
Sales
Software development
Support
Marketing
Administration
4
88
40
3
15
2
70
18
2
13
150
105
10. DIRECTORS’ REMUNERATION AND TRANSACTIONS
The Directors’ emoluments in the year ended 31 December 2019 were:
Executive Directors
S. Menon
S. Yezhuvath
N. Hellyer
Non-Executive Directors
R. Day
P. Verkade
Basic
salary
2019
$’000
Bonus
Benefits
in kind
Share-based
payments
Pension
Total
Total
2019
$’000
2019
$’000
2019
$’000
2019
$’000
2019
$’000
2018
$’000
189
189
85
70
38
49
49
-
-
-
24
15
17
-
-
571
98
56
-
-
7
-
-
7
-
-
2
2
-
4
262
253
111
72
38
223
210
80
53
30
736
596
The remuneration of the executive Directors is decided by the Remuneration Committee. Save as disclosed above no
Director had a material interest in any contract of significance with the Group in either year.
11. SHARE-BASED PAYMENTS
In addition to the 50,000 options granted to a director at the time of the IPO, the Group introduced a share option plan for
senior employees on 15 January 2019 (the "Plan"). Each share option converts into one ordinary share of the Company
on exercise. No amounts are paid or payable by the recipient on receipt of the option and the Company has no legal
obligation to repurchase or settle the options in cash. The options carry neither rights to dividends nor voting rights prior
to the date on which the options are exercised. Options may be exercised at any time from the date of vesting to the date
of expiry.
A charge of $52,000 (net of amounts capitalised of $48,000) (2018: nil) has been recognised during the year for
share-based payments over the vesting period. This share-based payment expense comprises the charge in the current
period relating to the expensing of the fair value of (a) the 1,640,000 options granted under the Plan and (b) the 50,000
options issued at the time of the Company’s IPO. The options issued under the terms of the Plan were granted with an
87
exercise price of 73p, vesting in tranches as follows: 25% after one year, 25% after two years and 50% after three years.
There are no conditions attaching to the vesting of the options other than continued employment. Of this amount, $45,000
net (2018: nil) relates to costs of share options issued to subsidiary employees.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
No. of options
Average exercise price
2019
2018
2019
2018
Outstanding at the beginning of the year
50,000
50,000
62.5p
62.5p
Granted during the year
Forfeited/cancelled during the year
Exchanged for shares
1,640,000
(
91,500)
-
-
-
-
-
73.0p
-
-
-
-
Outstanding at the end of the year
1,598,500
50,000
72.7p
62.5p
The fair values of the share options issued in the year was derived using a Black Scholes model. The following key
assumptions were used in the calculations:
Grant date
Exercise price
Share price at grant date
Risk free rate
Volatility
Expected life
Fair Value
17 January 2019
73p
73p
0.86 - 0.92%
35%
4.5 - 5.5 years
19.0 - 20.8p
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations. The share price per share at 31 December 2019
was £0.705 (31 December 2018: £0.710) and hence no deferred tax is provided in respect of the potential exercise of
options currently extant.
12. FINANCE INCOME
Interest receivable on interest-bearing deposits
Notional interest accruing on contracts with a significant financing component
Total finance income
13. FINANCE EXPENSE
Interest and finance charges paid or payable on borrowings
Interest on lease liabilities under IFRS 16
Less: amounts capitalised as intangible assets
Acquisition-related financing expense (unwinding of discount on financial liabilities)
Total finance expense
2019
$’000
11
43
54
2019
$’000
96
40
(19)
47
164
2018
$’000
10
23
33
2018
$’000
62
-
-
9
71
An element of interest on lease liabilities is deemed to be directly attributable overheads for the purposes of capitalising
relevant expenditure on developing intangible assets (see Note 18).
88
14. 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)
Adjustments in respect of prior periods
Deferred tax
(Recognition)/reversal of deferred tax asset
Total deferred income tax
Total income tax expense recognised in the year
2019
$’000
2018
$’000
(32)
286
(7
)
247
(53
)
(53
)
194
136
206
-
342
(8)
(8
)
334
Reconciliation of the total tax charge
The effective tax rate in the income statement for the year is higher than the standard rate of corporation tax in the UK of
19% (2018: lower). 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%
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Fixed asset differences
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
Adjustments recognised in current year tax in respect of prior years
Income tax expense recognised for the current year
2019
$’000
1,009
192
(113)
179
(118
)
(45
)
(22
)
109
51
21
(53
)
(7
)
194
2018
$’000
2,513
477
(146)
120
(90
)
2
(27
)
(30
)
36
-
(8
)
-
334
The tax effect of exchange differences recorded within the Group Statement of Comprehensive Income is a credit of
$5,000 (2018: $10,000 charge).
Temporary differences associated with Group investments
At 31 December 2019, there was no recognised deferred tax liability (2018: $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.
89
Deferred tax
Recognised deferred tax asset
At 1 January
Recognised in profit and loss
At 31 December
Comprising:
Timing differences
Tax losses
2019
$’000
2018
$’000
10
53
63
8
55
63
2
8
10
10
-
10
The deferred income tax assets at 31 December 2019 above are expected to be utilised in less than one year.
The deferred income tax assets have only been recognised to the extent that it is considered probable that they can be
recovered against future taxable profits based on profit forecasts for the foreseeable future.
Factors affecting future tax charges
The Finance Act 2018, which was approved on 15 September 2018, 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.
15. EARNINGS
Reported earnings per share
Basic earnings per share (“EPS”) amounts are calculated by dividing net profit or loss for the year attributable to owners
of the Company by the weighted average number of ordinary shares outstanding during the year.
The following reflects the earnings and share data used in the basic earnings per share computations:
Year to 31 December
Profit attributable to equity holders of the parent:
2019
$’000
2018
$’000
Profit attributable to ordinary equity holders of the parent for basic earnings
814
2,179
Weighted number of ordinary shares in issue
32,532,431
27,375,741
Basic earnings per share attributable to shareholders
2.5¢
8.0¢
Adjusted earnings per share
Adjusted earnings per share is calculated as follows:
Year to 31 December
Profit attributable to ordinary equity holders of the parent for basic earnings
Adjusting items:
- exceptional items (see note 7)
- share-based payments
- finance expense on liabilities relating to contingent consideration
- amortisation of acquisition-related intangibles
- prior year adjustments to tax charge
Adjusted earnings attributable to owners of the Parent
Weighted number of ordinary shares in issue
Adjusted earnings per share attributable to shareholders
2019
$’000
814
(236 )
52
47
686
(7
)
2018
$’000
2,179
310
-
9
286
7
1,356
2,791
32,532,431
27,375,741
4.2¢
10.2¢
90
The criteria for inclusion of adjusting items in the calculation of adjusted EPS are the same as those relating to the
calculation of adjusted EBITDA as set out in Note 7. Additionally, finance expense on liabilities relating to contingent
consideration are non-cash costs reflecting the time value of money in arriving at the fair value of such liabilities and the
effluxion of time over the period for which they are outstanding; and amortisation of acquisition-related intangibles relates
to the amortisation of intangible assets in respect of customer relationships and brands which are recognised on a
business combination and are non-cash in nature.
16. DIVIDENDS PAID AND PROPOSED
No dividends were declared or paid during the year and no dividends will be proposed for approval at the AGM (2018:
none).
17. GROUP INVESTMENTS
The Company has investments in the following subsidiary undertakings, which contribute to the net assets of the Group:
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
Sales
100% of members’ capital
Montvale, NJ 07645, USA
Pelatro Pte Limited
Singapore
One Raffles Place,
Ownership of IP;
100% ordinary shares
#10-62, Tower 2, Singapore
operation of branch in
048616
Russia
Pelatro Solutions Private
India
403, 7th A Main, HRBR
Research,
100% ordinary shares
Limited
Layout, Bangalore 560043,
development and
India
support
Pelatro Sdn Bhd
Malaysia
Employment of
100% ordinary shares
Malaysian national
Suite 21.02, Level 21,
Centerpoint South, Mid
Valley City, Lingakaran
Syed Putra, 59200 Kuala
Lumpur W.P., Kuala Lumpur,
Malaysia
18. INTANGIBLE ASSETS
Intangible assets comprise capitalised development costs (in relation to internally generated software and software
acquired through business combinations), software acquired from third parties for use in the business, patents, customer
relationships and goodwill.
An analysis of goodwill and other intangible assets is as follows:
Financial year 2019
Development
costs
Third party
software
Patents
Customer
relationships
Goodwill
Total
$’000
$’000
$’000
$’000
$’000
$’000
Cost
At 1 January 2019
Additions
Fair value adjustment
Foreign exchange
4,144
2,247
-
-
98
12
-
(2)
At 31 December 2019
6,391
108
-
23
-
-
23
6,862
745
11,849
-
-
-
-
(275)
-
2,282
(275)
(2
)
6,862
470
13,854
91
Amortisation or impairment
At 1 January 2019
Charge for the year
Foreign exchange
At 31 December 2019
Net carrying amount
At 31 December 2019
At 1 January 2019
(935)
(1,022
)
-
(1,957
)
4,434
3,209
(19)
(18
)
3
(34
)
74
79
-
-
-
-
(286)
)
(686
-
(972
)
-
-
-
-
(1,240)
(1,726
)
3
(2,963
)
23
5,890
470
10,891
-
6,576
745
10,609
The Company and the Danateq Group entered into a sale and purchase agreement ("SPA") on 30 July 2018 to acquire
certain assets of Danateq Pte and Danateq Limited. Further consideration for the Danateq Acquisition of up to
$5,000,000 was contingent on the achievement of certain revenue targets ("pipeline revenue") in the two years following
the acquisition. On acquisition these liabilities were provisionally assessed at an aggregate fair value of $1.43m (as
discounted to the present value at the time of acquisition) based on a probability-weighted analysis of revenue
expectations at the time and hence the likely outturn payments; this valuation was unchanged at end of the first
measurement period (i.e. as at 31 December 2018) other than as due to the finance expense relating to the unwinding of
the time-value discount.
At the end of the 6 months to 30 June 2019 the Directors reassessed this fair value due to the deferral of certain potential
pipeline revenue from the first year relevant to earnout calculation to the second; the reassessed value was $1.19m and
the difference of $275,000 (gross of finance expense) reflecting the net of (i) the derecognition of the then short-term
liability in respect of the first year earnout and (ii) a corresponding increase to the then long-term liability in respect of the
second. The difference thus arising during the measurement period was credited to goodwill arising on acquisition.
Financial year 2018
Development
costs
Third party
software
Patents
Customer
relationships
Goodwill
Total
$’000
$’000
$’000
$’000
$’000
$’000
Cost
At 1 January 2018
Additions
Fair value adjustment
Created as part of a business
combination
Acquired as part of a business
combination
Foreign exchange
At 31 December 2018
1,290
1,604
-
-
1,250
-
4,144
32
69
-
-
-
(3)
98
-
-
-
-
-
-
-
-
-
-
-
6,862
-
287
-
140
318
-
-
1,609
1,673
140
318
8,112
(3)
6,862
745
11,849
92
Amortisation or impairment
At 1 January 2018
(382)
(16)
Acquired as part of a business
combination
Charge for the year
Foreign exchange
-
(553
)
-
-
)
(4
1
At 31 December 2018
(935
)
(19
)
Net carrying amount
At 31 December 2018
At 1 January 2018
3,209
908
79
16
-
-
-
-
-
-
-
-
-
(286)
-
(286
)
-
-
-
-
-
(398)
-
(843
)
1
(1,240
)
6,576
745
10,609
-
287
1,211
In 2018, further evidence was obtained in respect of the eligibility of certain tax losses giving rise to a deferred tax asset
of $118,000 that was recognised as part of fair value determined at the time of the acquisition of PSPL, at which time it
was considered that these tax losses were unavailable for use. As this reassessment 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 was derecognised (and a similar adjustment made in
respect of an amount of $22,000 relating to current tax liabilities acquired) and a corresponding increase was made to
goodwill.
Development costs
Development costs comprise capitalised staff costs (and allocable related direct costs, including depreciation and interest
charges relating to property leases held by the Group and accounted for under IFRS 16) associated with the development
of new products and services which will be saleable to more than one customer.
Software
Software assets represent purchased licences and distribution rights for third party software which are capitalised at cost
and amortised on a straight-line basis over the relevant estimated useful life.
Patents
Patent costs represent the capitalised value of work undertaken (either internally or externally by appropriate legal or
other consultants) to develop and protect patents, know-how and other similar assets.
Customer relationships
Customer relationships as stated were acquired as part of a business combination.
93
Goodwill
Goodwill arose on the acquisition of (i) the Danateq Assets and (ii) PSPL. It is assessed as having an indefinite life but
the Group tests whether goodwill has suffered any impairment on an annual basis.
Danateq
The Danateq Acquisition in 2018 comprised various contracts and customer relationships, certain enterprise software
and the related workforce. Given the opportunity to leverage this expertise across Pelatro's existing business and the
ability to exploit the Group’s thus enlarged customer base, the fair value of the Danateq assets acquired was deemed to
be greater than the assessed book value of the assets as recognised in the financial statements of Pelatro, thus leading
to the recognition of an amount of goodwill. The amount recognised on acquisition was subsequently reduced because
of a derecognition of part of the contingent liability recognised in relation to potential further payments to the vendors of
the business, leaving an amount of $43,000 of goodwill recognised at the year end in respect of those assets.
Given that the software acquired has been subsumed into the Group's mViva product suite, the contracts acquired have
been transitioned onto and/or are being fulfilled (for example in the case of the Telenor framework agreement) by the
mViva product, and the workforce are employed by a branch of Pelatro in Singapore and work across the product suite,
the former Danateq cash-generating unit ("CGU") no longer has a separable identity. The goodwill relating to this former
CGU was tested for impairment at 31 December 2019 by comparing its carrying value with the recoverable amount,
which was determined using a value in use methodology based on discounted cash flow projections, comparing the
estimated implicit values of the Group cum and ex the acquisition.
PSPL cash-generating unit
The PSPL CGU comprises the Group’s software development and administrative centre in Bangalore which was
acquired in December 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 2019 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:
The operating cash flows for this business for the years to 31 December 2020 and 2021 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, particularly the more highly
skilled developers, and the related costs of employment; revenue for the CGU is all intra-Group and is thus dependent
on other Group companies making third-party sales;
Growth has been assumed in operating cash flows for the remainder of the value in use such that a consistent
post-tax margin is maintained over the calculation period (which is how the business is managed within the Group).
Revenue growth after 5 years is forecast at nil% in local currency terms;
A pre-tax discount rate of approximately 18% has been used (being the Weighted Average Cost of Capital in local
currency); and
94
The use of cash flow projections over longer than a 5-year period is considered appropriate as the business 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 continues to invest in the development of the products via this CGU.
Sensitivity to changes in assumptions
The key assumptions for the value in use calculations are those regarding growth rates, discount rates and expected
changes to selling prices and direct costs during the period. Changes in selling prices and direct costs, if any, are based
on expectations of future changes in the market. Management estimates discount rates using pre-tax rates that reflect
current market assessments of the time value of money. 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 impairment charge. The
Board is confident that the assumptions in respect of operating cash flows remain appropriate.
The Group has conducted sensitivity analysis on the impairment test of the goodwill’s carrying value which reflects the
risk profile of the Danateq and PSPL CGUs. The Group believes that there are no reasonably possible changes to the
key assumptions in the next year which would result in the carrying amount of goodwill exceeding the recoverable
amount. This view is based upon inherently judgemental assumptions; however, it takes account of the headroom in the
Value-in-Use calculation versus the current carrying value.
Conclusion
The Directors have concluded that, based on the above, recoverable value exceeds the carrying value of the goodwill at
31 December 2019.
19. TANGIBLE ASSETS
Financial year 2019
Leasehold
improvements
Computer
equipment
Office
equipment
Vehicles
Total
$’000
$’000
$’000
$’000
$’000
Cost
At 1 January 2019
Additions
Foreign exchange differences
At 31 December 2019
Depreciation
At 1 January 2019
Charge for the year
Foreign exchange differences
At 31 December 2019
49
63
(3)
109
-
(7
)
-
(7
)
93
106
(2)
197
(46
)
(44
)
3
(87
)
30
31
)
(2
59
)
(2
)
(8
1
)
(9
264
56
(8)
312
)
(26
)
(34
1
436
256
(15
)
677
(74
)
(93
)
5
(59)
(162
)
95
Net carrying amount
At 31 December 2019
At 1 January 2019
102
49
110
47
50
28
253
238
515
362
Financial year 2018
Leasehold
improvements
Computer
equipment
Office
equipment
Vehicles
Total
$’000
$’000
$’000
$’000
$’000
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
20. RIGHT-OF-USE ASSETS
-
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
As disclosed further in Note 2, the Group has adopted IFRS 16 in the year. The following sets out the Impact on assets,
liabilities and equity as at 1 January 2019 (the corresponding impact on profit and loss is set out in Note 6):
Right-of-use assets
Net impact on total assets
Lease liabilities
Net impact on total liabilities
As previously
reported
IFRS 16
adjustments
As restated
$’000
$’000
$’000
-
-
-
-
346
346
(397)
(397)
346
346
(397)
(397)
96
Retained earnings
Net impact on total liabilities and equity
-
-
51
346
51
346
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had
always been applied. There were no onerous lease contracts that would have required an adjustment to the right-of-use
assets at the date of initial application.
Right-of-use assets comprise leases over office buildings and vehicles as follows:
Cost
At 1 January 2019
Effect of change of accounting policy (IFRS 16)
Additions in the period
Effects of foreign exchange movements
At 31 December 2019
Depreciation
At 1 January 2019
Effect of change of accounting policy
Charge for the period
Effects of foreign exchange movements
At 31 December 2019
Net carrying amount
At 31 December 2019
At 1 January 2019
Office
buildings
$’000
Vehicles
Total
$’000
$’000
-
557
139
(6)
690
-
(212
)
(160
)
4
(368
)
322
-
-
-
30
1
31
-
-
(13)
(1
)
(14
)
17
-
-
557
169
(5
)
721
-
(212
)
(173
)
3
(382
)
339
-
21. TRADE AND OTHER RECEIVABLES AND CONTRACT ASSETS
The timing of revenue recognition, invoicing and cash collection results in the recognition of the following assets on the
Consolidated Statement of Financial Position:
(i)
invoiced accounts receivable;
(ii)
accounts invoiceable but uninvoiced at the period end (i.e. “unbilled revenue” or UBR) (collectively with (i) recognised
as “trade receivables”); and
(iii)
amounts relating to revenue recognised at the date of the statement of financial position but not invoiceable under the
terms of the contract (“contract assets”).
97
Aged analysis of trade receivables
At 31 December
2019
Carrying
amount
$’000
Neither impaired
or past due
$’000
Trade receivables
5,283
4,883
2018
Trade receivables
3,752
3,250
Contract assets
Due within one year
Contract assets at 1 January
Effect of change of accounting policy
Contract assets recognised in the period, net of releases to
receivables or cash
Transfer from non-current contract assets
Contract assets at 31 December
Due after one year
Contract assets at 1 January
Effect of change of accounting policy
Contract assets recognised in the period
Transfer to current contract assets
Contract assets at 31 December
Trade terms, credit risk and impairments
Past due (in days) but not impaired
61-90
More than 121
91-120
$’000
$’000
$’000
-
-
2019
$’000
72
-
108
113
293
2019
$’000
312
-
320
(113)
519
-
-
400
502
2018
$’000
-
-
72
-
72
2018
$’000
-
119
193
-
312
The Group’s exposure to credit risk equates to the carrying value of cash held on deposit and trade and other receivables
and contract assets. The Group’s credit risk is primarily attributable to trade receivables and contract assets, and
management has a credit policy in place to ensure exposure to credit risk is monitored on an ongoing basis. Credit
evaluations are performed on customers as deemed necessary based on, inter alia, the nature of the prospect and size
of order.
98
Unless specific agreement has been reached with individual customers, sales invoices are typically due for payment
between 60 and 90 days after the date of the invoice; where 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
considering actions to be taken to secure payment. Trade receivables include amounts that are past due at the reporting
date for which no specific impairment provision has been recognised as these amounts are still considered to be
recoverable. The Group does not require collateral in respect of financial assets.
As outlined in Note 2, the Group recognises impairments under IFRS 9 for relevant classes of assets. The Group thus
reviews the amount of expected 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 past historical default rates. In the
absence of any historic credit losses and the expectation of no specific losses in the foreseeable future, the Directors
assess a hypothetical likely default amount by applying a percentage "probability of default" to the receivables balance,
such probability being related to the underlying credit rating of the customer or country of origin. Furthermore, taking into
account the time value of money when applied to contracts assets (which may unwind over a period of years following
their initial recognition), a loss allowance for expected credit losses has been recorded as follows:
Loss allowance at 1 January
Increase in loss allowance
Loss allowance at 31 December
2019
$’000
-
29
29
2018
$’000
-
-
-
The largest individual counterparty to a receivable included in trade and other receivables at 31 December 2019 was
$1,067,000 (of which some $1,022,000 related to unbilled revenue) (2018: $884,000). Based on invoiced receivables, the
largest individual counterparty owed the Group $210,000 (2018: $449,000). The Group’s customers are spread across a
broad range of geographies and consequently it is not otherwise exposed to significant concentrations of credit risk on
its trade receivables.
Restatement of 2018 Group statement of financial position
Adjustments have been made to the reported 31 December 2018 Group statement of financial position as follows: certain
contract assets and trade receivables have been reclassified to non-current assets from current assets better to reflect
the nature of the underlying assets. Net assets and profits are unaffected by this adjustment.
22. OTHER ASSETS
At 31 December
Prepayments
Deposits
Other assets (including withholding tax, GST and VAT refunds)
Total other assets
2019
$’000
109
131
261
501
2018
$’000
125
84
173
382
99
23. LOANS AND BORROWINGS
Loans and borrowings comprise:
At 31 December
Non-current liabilities
Secured term loans
Current liabilities
Current portion of term loans
Unsecured borrowings
Total loans and borrowings
2019
$’000
2018
$’000
362
362
79
167
246
608
382
382
69
-
69
451
The Group has four term loans, all in its operating subsidiary in India and denominated in INR. Each has an interest rate
of 10%; they are repayable over 5 years from their inception, between January and July 2024.
Reconciliation between opening and closing balances for liabilities resulting in financing cash flows
1 January
2019
Effect of
change of
accounting
policy
(IFRS 16)
Non-cash
changes –
foreign
exchange
movements
Interest
accruals
included
in
cash flow
Transfer
from
non-current
to current
$’000
$’000
$’000
$’000
Cash flows -
net
(repayments)
and
drawdowns
$’000
Non-current liabilities
Secured term loan
Lease liabilities
Current liabilities
Current portion of
secured term loan
Unsecured
borrowings
Lease liabilities
Total
382
-
69
-
-
451
-
273
-
-
124
397
(10)
(4
)
(2
)
(2
)
1
(17
)
-
-
5
-
-
5
(58)
(191
)
58
-
191
-
The Directors consider that the carrying amount of borrowings approximates to their fair value.
48
109
(51)
169
(111
)
31
December
2019
$’000
362
187
79
167
205
164
1,000
100
24. LEASE LIABILITIES
Lease liabilities comprise liabilities arising from the committed and expected payments on leases over office buildings
and vehicles.
Amounts due in less than one year
At 1 January 2019
Effect of change of accounting policy
Leases taken on in the period
Repayments of principal
Transfer from long-term to short-term
Effects of foreign exchange movements
At 31 December 2019
Amounts due in more than one year
At 1 January 2019
Effect of change of accounting policy
Leases taken on in the period
Transfer from long-term to short-term
Effects of foreign exchange movements
At 31 December 2019
Office
buildings
$’000
Vehicles
$’000
-
124
43
(155)
180
1
193
-
-
17
(16)
11
-
12
Office
buildings
$’000
Vehicles
$’000
-
273
97
(180)
(4
)
186
-
-
12
(11
)
-
1
Total
$’000
-
124
60
(171)
191
1
205
Total
$’000
-
273
109
(191
)
(4
)
187
PSPL, the Group's main operating subsidiary, has entered into various leases over office space in Bangalore, including
a five-year lease for its main office at 1st Block, HRBR Layout (renewed in February 2020), a lease dated 1 September
2018 for additional office space at 7th Main Road, 2nd Block, HRBR Layout (for an initial term of two years with a rollover
option) and a lease dated 1 June 2019 for additional office space at No.7M-406, 7th Main Road, 2nd Block, HRBR Layout,
also for an initial term of two years with a rollover option.
25. TRADE AND OTHER PAYABLES AND CONTRACT LIABILITIES
At 31 December
Due within a year
Trade payables
Other payables and provisions
Amounts due to related parties
Total trade and other payables
2019
$’000
82
441
-
523
2018
$’000
118
463
28
609
101
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
Contract liabilities represent consideration received in respect of unsatisfied performance obligations. Changes to the
Group’s contract liabilities are attributable solely to the satisfaction of performance obligations.
Due within one year
Contract liabilities at 1 January
Effect of change of accounting policy
Contract liabilities recognised/(released to revenue) in the period
Transfers from long-term liabilities
Contract liabilities at 31 December
Due after one year
Contract liabilities at 1 January
Effect of change of accounting policy
Contract liabilities recognised in the period
Transfers to short-term liabilities
Contract liabilities at 31 December
2019
$’000
61
-
564
40
665
2019
$’000
112
-
202
(40)
274
2018
$’000
-
20
1
40
61
2018
$’000
-
73
79
(40
)
112
Restatement of 2018 Group statement of financial position
Adjustments have been made to the reported 31 December 2018 Group statement of financial position as follows: certain
contract liabilities have been reclassified to non-current liabilities from current liabilities, to better reflect the nature of the
underlying liabilities. Net assets and profits are unaffected by this adjustment.
26. OTHER FINANCIAL LIABILITIES
As at 31 December
Contingent consideration on the acquisition of the Danateq Assets
- potentially due within one year
- potentially due after one year
2019
$’000
948
-
948
2018
$’000
298
1,141
1,439
102
Part of the consideration for the Danateq Acquisition in August 2018 was contingent on the achievement of certain stretch
targets for revenue pertaining to the assets acquired (“Danateq Revenue”), payable (if earned) in two tranches in respect
of the first year following completion of the acquisition (the “First Year Earnout”) and similarly the second (the “Second
Year Earnout”). The contingent amount payable under these arrangements was between $nil and $5m, with up to $3m
payable in respect of the First Year Earnout and a further $2m in respect of the Second Year Earnout.
On acquisition these liabilities were provisionally assessed at an aggregate fair value of $1.43m (as discounted to the
present value at the time of acquisition) based on a probability-weighted analysis of revenue expectations at the time and
hence the likely outturn payments; this valuation was unchanged at end of the first measurement period (i.e. as at 31
December 2018) other than as due to the finance expense relating to the unwinding of the time-value discount.
At the end of the 6 months to 30 June 2019 the Directors reassessed this fair value due to the deferral of certain potential
Danateq Revenue from the First Year Earnout to the Second Year Earnout; the reassessed value was $1.19m and the
difference of $275,000 (gross of finance expense) reflecting (i) the derecognition of the then short-term liability in respect
of the First Year Earnout and (ii) a corresponding increase to the then long-term liability in respect of the Second Year
Earnout. The difference thus arising during the measurement period was credited to goodwill arising on acquisition.
At the end of the 6 months to 31 December 2019 the Directors further reassessed this fair value based on updated
business projections and the likelihood of certain Danateq Revenue thus being either unlikely to be realised or to be
deferred into subsequent years which would therefore not fall to be recognised under the terms of the acquisition. The
resulting difference of $236,000 (gross of finance expense) arising on the reduction of this liability has been taken as an
exceptional gain through profit and loss. The carrying value of this liability will continue to be reassessed at future
reporting dates; in any event the liability is expected to be settled in or around October 2020.
27. SHARE CAPITAL AND RESERVES
Share capital and share premium
Ordinary shares of 2.5p each (issued and fully paid)
At 1 January 2018
Issued for cash during the year
At 31 December 2018
Issued for cash during the year
At 31 December 2019
$’000
801
264
1,065
-
1,065
Number
32,532,431
32,532,431
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").
The Company incurred incremental costs totalling $319,000 in respect of the Placing. IAS 32 Financial Instruments:
Presentation requires the costs of issuing new shares to be charged against the share premium account. Management
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 were
deemed to relate directly to the issue of new shares and thus resulted in a debit to share premium of $319,000.
103
Translation reserve
The translation reserve comprises 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 Comprehensive
Income or directly through the reserve.
Merger reserve
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.
28. 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
programme 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 currency
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 balances.
Cash is held predominantly with ICICI, an institution with a BAA3 bank deposit 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. 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 relates
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.
The capital structure of the Group consists of debt, which includes borrowings as disclosed in note 23, 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. The Group is not subject to any externally imposed
capital requirements and 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 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
104
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. 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 (short and long term)
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 2019
$’000
Group 2018
$’000
1,101
5,514
441
82
246
362
948
2,224
4,073
491
118
69
382
1,439
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 currencies of Singapore (Singapore Dollars
or SGD), Malaysia (Malaysian Ringgits or MYR) and certain states of the European Union (EUR). The Group has minor
exposures to the Philippines (Philippine peso or PHP) and of Russia (rouble or RUB). 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
receivables and payables balances in the principal currencies disclosed above:
GBP
’000
INR
’000
SGD
’000
EUR
’000
MYR
’000
As at 31 December 2019
Cash and cash equivalents
Trade receivables
Borrowings
Trade payables
USD
’000
498
5,541
-
(26)
8
-
-
41,358
-
(43,304)
(25
)
(2,508
)
Net currency exposure
6,013
(17
)
(4,454
)
2
-
-
(8)
(6
)
2
-
-
-
2
1
-
-
(68
)
(67
)
105
As at 31 December 2018
Cash and cash equivalents
Trade receivables
Borrowings
Trade payables
USD
’000
1,382
4,138
-
(83)
GBP
’000
INR
’000
SGD
’000
EUR
’000
MYR
’000
277
24,797
26
23
-
-
-
(31,366)
(28
)
-
-
-
-
-
-
-
Net currency exposure
5,437
249
(6,569
)
26
23
-
-
-
-
-
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 $11,000 (2018: $14,000).
Limitations of sensitivity analysis
The sensitivity analysis above demonstrates the effect of a change in one of the key assumptions while other
assumptions remain unchanged. In reality, such an occurrence is very unlikely due to correlation between the factors.
Furthermore, 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 (including the overdraft facility).
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
liquidity 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 2019
Weighted average
effective interest rate
Less than
1 year
$’000
2-5
years
$’000
More than
5 years
$’000
Fixed rate instruments - borrowings
10.0%
Total
246
246
283
283
79
79
Total
$’000
608
608
106
As at 31 December 2018
Weighted average
effective interest rate
Less than
1 year
$’000
2-5
years
$’000
More than
5 years
$’000
Fixed rate instruments - borrowings
Related party borrowings
12.5%
nil
Total
69
28
97
299
-
299
83
-
83
Total
$’000
451
28
479
The related party borrowings in 2018 had no formal terms and were hence treated as repayable on demand.
Fair values of financial assets and financial liabilities
As at 31 December 2019 and 31 December 2018 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 weightings assigned to the expected future cash flows;
however, given the terms of the contingent consideration the liability for 2020 is now practically certain and hence a
change in weighting of 10 percentage points towards the higher expectations would result in a nil increase in the
undiscounted estimate of future cash flows.
29. 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 - outstanding reimbursements in
respect of expenses incurred on behalf of Group companies
2019
$’000
14
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
2019
$’000
-
-
-
-
-
-
2018
$’000
28
2018
$’000
428
-
-
(429)
1
-
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.
107
Related party and nature of transaction
Wages and salaries
Bonuses
Share-based payments
Pension cost and other benefits in kind
Payments in respect of other services
2019
$’000
571
98
7
60
-
736
2018
$’000
594
-
-
2
30
626
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. and Christie Cosec Services Pvt. Ltd, which firms provide accountancy, tax
and other advisory services to that company. During the year payments of approximately $17,000 were made to those
two companies;
there was a nil balance outstanding at
the year end
in relation
to 2019 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.
30. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
Other than as disclosed above, as at 31 December 2019 the Group had no material capital commitments (2018: nil) nor
any contingent liabilities (2018: nil).
31. EVENTS AFTER THE REPORTING DATE
Excluding the impact of COVID-19 discussed above, there have been no events subsequent to the reporting date which
would have a material impact on the financial statements.
108
23
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
Assets
Non-current assets
Investments in subsidiaries
Intangible assets
Right-of-use assets
Trade and other receivables
Contract assets
Current assets
Trade and other receivables
Contract assets
Cash and cash equivalents
Note
2019
$’000
(audited)
2018
$’000
(audited, restated)
8
9
746
6,740
16
211
467
8,180
5,326
224
400
5,950
654
8,014
-
321
198
9,187
3,710
54
1,684
5,448
TOTAL ASSETS
14,130
14,635
Liabilities
Non-current liabilities
Lease liabilities
Contract liabilities
Other financial liabilities
Current liabilities
Lease liabilities
Contract liabilities
Trade and other payables
Other financial liabilities
TOTAL LIABILITIES
NET ASSETS
1
294
-
295
13
637
182
948
1,780
2,075
-
112
1,141
1,253
-
61
308
298
667
1,920
10
12,055
12,715
109
Issued share capital and reserves attributable to
owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
TOTAL EQUITY
11
11
11
1,065
11,603
(214)
(399
)
1,065
11,603
(211)
258
12,055
12,715
For the period ended 31 December 2019, the Company recorded a loss of $657,000 (2018: profit $633,000 restated).
The financial statements of Pelatro Plc, registered number 10630166, were approved by the board of Directors and
authrised for issue on 7 April 2020. They were signed on its behalf by:
Subash Menon
(Director)
Nic Hellyer
(Director)
The accompanying notes 1 to 14 are an integral part of these financial statements.
110
24
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
Share
premium
Exchange
reserve
Share-based
payments
reserve
Retained
profits
Total
Equity
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 January 2018
(as previously reported)
Effect of change of accounting
policy (IFRS 15)
801
4,472
-
-
Balance at 1 January 2018 as
restated
801
4,472
Profit after taxation for the year
(as previously reported)
Effect of prior year adjustment
Profit after taxation for the year
(as restated)
Other comprehensive income:
Exchange differences
Transactions with owners:
-
-
-
-
-
-
-
-
Shares issued by Pelatro Plc for cash
264
Issue costs
-
7,450
(319)
-
-
-
-
-
-
(211)
-
-
Balance at 31 December 2018
1,065
11,603
(211
)
Profit after taxation for the year
Share-based payments
Other comprehensive income:
Exchange differences
-
-
-
-
-
-
-
-
(103
)
-
-
-
-
-
-
-
-
-
-
-
-
100
(393)
4,880
18
18
(375
)
4,898
933
)
(300
633
-
-
-
933
(300)
633
)
(211
7,714
)
(319
258
12,715
)
(657
-
-
)
(657
100
)
(103
Balance at 31 December 2019
1,065
11,603
(314
)
100
(399
)
12,055
111
Reserve
Description and purpose
Share capital
Nominal value of issued shares
Share premium
Exchange reserve
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 Group
Share-based payments reserve
Cumulative amounts charged in respect of unsettled options issued
Retained earnings
All other net gains and losses not recognised elsewhere
The accompanying notes 1 to 14 are an integral part of these financial statements.
112
25
NOTES TO COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES
include certain disclosures in respect of:
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
Financial Reporting Requirements and Financial
Reporting Standard
101 Reduced Disclosure
Framework and as required by the Companies Act 2006.
The financial statements have been prepared in US
Dollars, which is the currency of the primary economic
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
disclosures required as a result of recording
financial
instruments
at
fair
value);
and
impairment of assets.
Investments in subsidiaries
environment in which the Company operates (its
Investments consist of
the Company’s subsidiary
functional currency). The financial statements are
undertakings. Investments are initially recorded at cost,
prepared under the historical cost convention and were
being the fair value of the consideration given and
approved for issue on 7 April 2020.
No profit and loss account is presented by the Company
as permitted by section 408 of the Companies Act 2006.
including directly attributable charges associated with the
investment. Subsequently
they are
reviewed
for
impairment if events or changes in circumstances
indicate the carrying value may not be recoverable.
Disclosure exemptions adopted
Trade receivables
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:
Short term trade receivables are measured at transaction
price, less any impairment. The Company assesses at
each reporting date whether any trade receivables or
other assets or group of financial assets is impaired.
certain disclosures regarding the Company’s capital;
a statement of cash flows;
the effect of future accounting standards not yet
Taxation
Income taxes
adopted;
Current tax assets and liabilities are measured at the
the disclosure of
the
remuneration of key
amount expected to be recovered from or paid to taxation
management personnel; and
authorities, based on tax rates and laws that are enacted
disclosure of related party transactions with other
or substantively enacted by the statement of financial
wholly-owned members of the Pelatro Group.
position date.
In addition, and in accordance with FRS 101, further
Deferred income tax is recognised on all temporary
disclosure exemptions have been adopted because
differences arising between the tax bases of assets and
equivalent disclosures are included in the consolidated
liabilities and their carrying amounts in the financial
financial statements. These financial statements do not
statements, with the following exceptions:
113
where the temporary difference arises from the initial
liabilities denominated
in
foreign currencies are
recognition of goodwill or of an asset or liability in a
translated at the exchange rate ruling on the balance
transaction that is not a business combination that at
sheet date. Resulting exchange gains and losses are
the time of the transaction affects neither accounting
taken to the profit and loss account.
nor taxable profit or loss;
Related party transactions
in
respect of
taxable
temporary differences
associated within
investments
in subsidiaries,
associates and joint ventures, where the timing of
the reversal of the temporary differences can be
controlled and it is probable that the temporary
differences will not reverse in the foreseeable
future; and
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.
2.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY
SOURCES OF ESTIMATION UNCERTAINTY
deferred income tax assets are recognised only to
Key sources of estimation uncertainty
the extent that it is probable that taxable profit will be
The key assumptions concerning the future and other key
available against which the deductible temporary
sources of estimation uncertainty at the reporting date
differences, carried forward tax credits or tax losses
that have a significant risk of causing a material
can be utilised.
adjustment to the carrying amounts of assets and
Deferred income tax assets and liabilities are measured
liabilities within the next financial year, are as follows:
at the tax rates that are expected to apply when the
Investments in subsidiary companies
related asset is realised, or liability is settled, based on
The carrying cost of the Company’s investments in
tax rates and laws enacted or substantively enacted at
subsidiary companies is reviewed at each reporting date
the statement of financial position date.
by reference to the income that is projected to arise
The carrying amount of deferred income tax assets is
therefrom. From a review of these projections, the
reviewed at each statement of financial position date.
Directors have made no provisions against their carrying
Deferred income tax assets and liabilities are offset only
values as the Directors believe that the investments
if a legally enforceable right exists to set off current tax
concerned will generate sufficient economic benefits to
assets against current tax liabilities, the deferred
justify their carrying values.
income taxes relate to the same taxation authority and
that authority permits the Group to make a single net
payment.
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.
3. RESTATEMENT DUE TO PRIOR YEAR
ADJUSTMENTS
In preparing these financial statements, management
identified a number of errors relating to the prior period.
Accordingly, prior year adjustments have been made.
Certain of the prior year adjustments reflect historical
errors relating to the recognition of contract assets and
contract liabilities under IFRS 15, and the amortisation of
Foreign currencies
intangible assets recognised under IFRS 3, as follows:
Transactions denominated in foreign currencies are
contract assets and contract liabilities, both short
translated at an approximation of the exchange rate
and long term, have been recognised in the
ruling on the date of the transaction. Assets and
Company statement of financial position. The effect
114
of this was to increase 2018 assets by $187,000,
company’s investment in the subsidiaries and is credited
and liabilities by $173,000, and reserves brought
to retained earnings.
forward as at 1 January 2018 by $18,000 (credit) to
7. DIVIDENDS PAID AND PROPOSED
reflect the cumulative effects of IFRS 15 to that date
No dividends were declared or paid during the year and
(as permitted by that standard). The net difference in
no dividends will be proposed for approval at the Annual
profit and loss has been recorded accordingly;
General Meeting of the Company.
in addition, a reallocation has been made between
8. INVESTMENT IN SUBSIDIARIES
short and long-term debtors, reducing short-term
debtors by $321,000 with a corresponding increase
in long-term debtors. This adjustment had no net
effect on profit and loss; and
an amount of $286,000 has been applied as
amortisation against the net carrying value of
At 1 January 2018
Investment in the period
At 31 December 2018
Investment in the period – share-based payments
in respect of subsidiaries
At 31 December 2019
$’000
654
-
654
92
746
intangible assets; with a corresponding reduction in
9. TRADE AND OTHER RECEIVABLES
profit and loss.
These adjustments have been recognised as prior
year errors in accordance with IAS 8 "Accounting
policies, changes in accounting estimates and errors"
with the financial statements for the Company
restated accordingly.
4. 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.
Due within a year
Trade receivables
Other receivables and prepayments
Intra-Group receivables
2019
$’000
2018
$’000
5,055
3,290
125
146
50
370
Total trade and other receivables
5,326
3,710
Due after more than one year
Trade receivables
211
321
10. TRADE AND OTHER PAYABLES
Due within a year
Trade payables
Other payables
Amounts due to related parties
Total trade and other payables
2019
$’000
2018
$’000
58
124
-
182
87
193
28
308
5. DIRECTORS’ REMUNERATION
Information concerning Directors’ remuneration can
be
found
in note 10
to
the Group
financial
11. RESERVES
Share capital
statements.
6. SHARE-BASED PAYMENTS
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
Share-based payments associated with share
shares. On 17 August 2018 the Company issued
options granted to employees of subsidiaries of the
8,219,179 new ordinary shares (ranking pari passu with
parent company are treated as an expense of the
existing shares in issue) via a placing to institutional
subsidiary company to be settled by equity of the
shareholders. The shares were issued at a placing price
parent company. The share-based payment
of 73 pence raising $7,395,000 after direct issue costs of
expense
increases
the value of
the parent
$319,000.
115
the Group. Other related party transactions are included
within those disclosed in the Group consolidated financial
statements.
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.
Share-based payments reserve
The balance classified as share-based payments
reserve
reflects
the aggregate charges
for
share-based payments which have not yet vested
and arising from the expense recorded in profit or
loss (or in the case of subsidiaries, added to the cost
of investments) to reflect services received and
consumed in return for equity in the Company to be
issued.
Retained earnings
All other net gains and losses and transactions with
owners (e.g. dividends) not recognised elsewhere.
12.
CAPITAL COMMITMENTS AND CONTINGENT
LIABILITIES
Other than as disclosed in the Group financial
statements, as at 31 December 2019 the Group had
no material capital commitments nor any contingent
liabilities (2018: $nil).
13. EVENTS AFTER THE REPORTING DATE
Excluding the impact of COVID-19 discussed above,
there have been no significant events which have
occurred subsequent
to
the
reporting date.
14. RELATED PARTIES
The Company
is exempt
from disclosing
transactions within the wholly owned subsidiaries in
116
B e R ele vant
https://www.pelatro.com/