ANNUAL
REPORT 2020
Recurring Value Delivery
UK | USA | Singapore | Russia | India | Malaysia | Philippines | Brazil
Our Presence
ANNUAL REPORT
3
Company Information
Directors
Registrars
Subash Menon (Managing Director and CEO)
Equiniti Limited
Sudeesh Yezhuvath (COO)
Aspect House , Spencer Road
Richard Day (Chairman – Non-executive)
Nic Hellyer (Finance Director)
Pieter Verkade (Non-executive)
Lancing
West Sussex
BN99 6DA
Auditor
Crowe U.K. LLP
55 Ludgate Hill
London EC4M 7JW
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
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
Nominated Advisers and Stockbrokers
Cenkos Securities plc
6-8 Tokenhouse Yard
London, EC2R 7AS
Solicitors
Memery Crystal LLP
165 Fleet Street
London EC4A 2DY
Share Capital
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
Kotak Mahindra Bank
trading ticker PTRO.
4m-411 – S.K.L.N.S Complex, 3rd Block, Kam-
manahalli
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 ISIN number is GB00BYXH8F66 and the SEDOL
number is BYXH8F6.
Website
http://www.pelatro.com/investors/
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ANNUAL REPORT
Five Year Track Record
Year to/as at 31 December
2020
2019
2018
2017
2016
Revenue
Revenue growth
$’000
4,020
6,667
6,123
3,146
1,205
%
(40%)
9%
95%
161%
241%
Adjusted EBITDA (see Note 7)
$'000
441
2,893
3,776
2,004
498
Adjusted EBITDA margin
%
11%
43%
61%
64%
41%
Operating profit/(loss) (before exceptional items)
$'000
(2,055)
883
2,861
1,801
360
Operating margin
%
n/a
13%
47%
57%
30%
Reported profit/(loss) before tax
$'000
(2,082)
1,009
2,513
1,096
360
Adjusted earnings/(loss) per share (basic and diluted)
Statutory earnings/(loss) per share (basic and diluted)1
¢
¢
(5.5¢)
4.2¢
10.2¢
8.9¢
2.0¢
(7.2¢)
2.5¢
8.0¢
4.8¢
2.0¢
Net cash flow from operating activities
$'000
2,262
1,412
881
(33)
447
Net cash used in investing activities
$'000
(4,569)
(2,393)
(9,092)
(744)
(401)
Net cash used in/(from) financing activities
$'000
3,071
(289)
6,814
4,707
54
Net cash at year end
$'000
365
484
1,823
3,086
196
ANNUAL REPORT
5
Highlights of 2020
Completed successful transition from license to
recurring revenue model
Completed roll out of mViva for our largest
customer – over 400m subscribers spread
across 23 markets
Launched new version of mViva - V6
TABLE OF CONTENTS
A. Strategic Report
About Pelatro
Chairman’s Statement
Managing Director and CEO’s Report
Relevance – the key consideration
Analytics in mViva
Vein - connecting them all!
Proactively managing human capital during the pandemic
Environmental, Social and Governance report (“ESG”)
Key Performance Indicators
Principal Risks and Uncertainties
Financial Review
B. Corporate Governance
Corporate Governance Review
s.172 statement
Audit Committee Report
Director’s Report
C. Financial Statements
Independent Auditor’s Report
Group Statement of Comprehensive Income
Group Statement of Financial Position
Group Statement of Cash Flows
Group Statement of Changes in Equity
Notes to Group Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
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9
11
16
18
21
23
25
27
28
32
38
47
50
54
60
66
67
69
71
72
116
118
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Strategic Report
For the year ended 31 December 2020
About Pelatro
Pelatro is a focused and specialised player in the
in real time, in the form of marketing campaigns and
telecom marketing space. We provide enterprise
promotions to subscribers, resulting in improved results
class software solutions that help our customers,
as compared to legacy solutions. In order to provide
the telecom operators, to increase revenue and re-
high quality marketing campaigns and promotions, our
duce churn. This is achieved by analysing the be-
solutions employ AI/ML techniques coupled with various
haviour of each subscriber in the telecom network,
algorithms, models etc. This has resulted in a high level
creating
their profile and suggesting appropriate
of predictive, descriptive and prescriptive analytics in
products and promotions to each subscriber in a
our solutions.
“segment of one” manner to enable higher consump-
tion and an increased level of customer satisfaction.
Products
Technology
The mViva Customer Engagement Hub is a suite of
solutions designed for deep engagement between tel-
cos and its customers to increase revenue and reduce
Given the extremely high volume of data that is
churn. The mViva suite offers solutions for Contextual
generated in each telecom network, our solutions
Campaign Management, Loyalty Management, Data
employ Big Data technology to collect and process
Monetisation and Unified Communication Management
all the data in real time. Our technologically advanced
in a single integrated tool that enables teams to deliver
products are telco-grade with significant scalability,
effective customer interactions that maximize value, at
security and high availability. As data is processed in
high work velocity. Its ready-to-use propensity models
real time, the output from our solutions is also in real
and data analytics functionality is optimised for Cam-
time and is relevant and contextual. This output leads
paign Analysts to anatomise customer data, to launch
to relevant, contextual and personalised interventions
precisely targeted campaigns not just to micro-seg-
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ANNUAL REPORT
-ments but to segments-of-one. The seamless, intuitive, and concise campaign management workflow enables
teams to easily extend campaign management services to enterprise customers and monetize subscriber data.
The mViva suite empowers Customer Value Man-
agement (“CVM”) teams to rapidly design and deploy
campaigns, launch loyalty programs to reduce churn
of customers and provide omni-channel communica-
tion. The mViva Customer Engagement Hub offers
four key solutions tailor-made for CVM Teams:
mViva Contextual Campaign
Management Solution
A comprehensive tool to design, configure
and run campaigns to manage the entire life-
cycle for subscribers, retailers and enterprises
mViva Loyalty Management
Solution
Enables design and launch of loyalty pro-
grams to reward and retain customers
mViva Data Monetisation Platform
Solution
Enables teams to easily extend campaign
management services to other B2C enter-
prises and brands in order for the telco to
monetise subscriber data
mViva Unified Communication
Management Solution
Makes it possible to manage all messaging to
customers from a central platform and thus en-
sure that all contact policies are honoured
Presence
We have offices in five countries and serve large telco groups (including Telenor, Vodafone, SingTel, Axiata etc.) in
17 countries. The largest single network that we serve has about 400 million subscribers, one of the largest globally.
As all telcos have some solution for campaign management, our aim is 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, our market opportunity is huge with
over 300 telcos to be addressed around the world.
ANNUAL REPORT
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Chairman’s Statement
For the year ended 31 December 2020
Dear Stakeholder
Overview
This past year always promised to be one of continuing development
at Pelatro, and significant progress has been made notwithstanding the
COVID-19 pandemic and its effect on social and business interaction. There
is still a long way to go but there is clearly light at the end of the tunnel, with
the increasing roll-out of effective vaccines around the world and effective
steps being taken to help keep the virus in check. Most of our employees
have been working from home, with an increasing though limited number
working from our offices in India as the lockdown restrictions are being lift-
ed there. We currently have 20-30% of our staff safely attending our offices
for work and we expect that to rise steadily over the coming months.
Our customers, the telcos, have continued to rely on our support and our mViva software platform to help them with
dedicated and appropriate customer engagement across their networks. We started the year with 18 telco customers
and increased that to 19; we have focused this year on extending our reach across our managed networks systems
services. Our shareholders will be aware that we have, over the last two years been gradually moving our business
model from a predominantly licence fee one to one based on annual recurring revenues. Subash in his CEO’s report
covers this more fully. I will simply say that this has been a process which we knew would take some time and we
very much appreciate the support we have had from all our stakeholders in going through this process. We already
have visibility of c. $6m of revenues for this current year, which is a much stronger position than we have been in
before; furthermore, our earnings from predominantly licence fee income historically tended to be more back-end
weighted, whereas we are now seeing with our annual recurring revenues model a much more even income stream
throughout the year. The collection cycle for trade debtors also tends to be shorter.
Operations
From an operational point of view, the roll-out of our upgraded version of mViva to the current V6 has been well re-
ceived, with three existing customers placing contracts to upgrade. We are also seeing numerous Change Requests
coming in as well as customers taking up the Group’s new modules. Importantly, this demonstrates Pelatro’s ability
to enhance our mViva platform to ensure we continue to satisfy the changing and evolving needs of our industry.
In August, we took the opportunity to raise $2.6m net of expenses by way of an equity placing. The funds were raised
to invest in growing the business, as well as to fund working capital to ensure we were well placed to look for larger
contracts. Marketing for new business is still being impacted due to the pandemic, allowing us to focus more on sell-
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ANNUAL REPORT
-ing our services to our existing customers. We have taken on two new salespeople, for Latin America and also for
Africa, the Middle East and Asia. We were also able to expand our relationship with two separate large telco groups
which were already customers of Pelatro, by winning from each a new contract from other operating companies in
other territories respectively within those groups.
We continue to develop and look at new applications for our mViva platform. By way of example, during the year we
collaborated closely with one of our large telco group customers which is seeing us develop with them advanced
analytical capabilities for four operating companies in their group in different countries.
In February 2021, we were delighted to be able to announce the final implementation of mViva had been completed
in the network of our largest customer under our five-year Managed Services contract with them. The network has
over 400 million individual subscribers and the roll-out was achieved in several tranches, with a smooth and success-
ful implementation. It was executed during the pandemic remotely without any on-site activity being required. This is
a significant validation of the scalability of our mViva product.
Environmental, Social and Governance
We present in these accounts our Environmental, Social and Governance report. As a support service company
to the telco industry, we are not engaged in any manufacturing process directly producing harmful substances or
products. However, we are mindful of the sustainable conservation of natural resources and monitor and control our
energy and water consumption as well as our waste production. All employees are valued members of the team and
we seek to implement provisions to retain and incentivise them in a fair and open way. We have adopted the Quoted
Companies Alliance Corporate Governance Code and believe that strong and transparent governance policies are
a key ingredient of our success.
Outlook
We ended 2020 in a much stronger position, with a substantial order book and good visibility over revenues for the
coming year. Our mViva platform has been successfully stress-tested to the extreme in being implemented across
a network of over 400m subscribers without any losses or fall out. We have been successfully selling our enhanced
offering out across our customer base and reaching out to new customers. The start of the second phase of our
journey into the mobile advertising space is particularly exciting as an area complementary to our existing operations.
We have every confidence in meeting our customers’ requirements, growing our business and meeting financial
expectations for the year.
Richard Day
Chairman
ANNUAL REPORT
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Managing Director and CEO’s Report
For the year ended 31 December 2020
Dear Shareholder
Relationships between organisations are heavily dependent on the val-
ue delivered by one organisation to the other. The higher the value, the
deeper and stronger the relationship. As a reliable partner to the tele-
com industry, your company endeavours to consistently deliver value
in every area of engagement covering all aspects of our business like
provisioning of software, implementation, support, consulting and re-
lated services. This leads to the concept of recurring delivery of value.
Recurring Value Delivery
Pelatro has been morphing from a company that relies on one-time revenue engagements with telcos to a company
that derives most of its revenue from recurring engagements. Such recurring engagements result in higher revenue
at a lower cost of obtaining that sale and also leads to a deep relationship with our customers. It enables us to be-
come an integral and almost indispensable part of their business process and system architecture. Attaining such a
position is very valuable and will ensure zero or minimal churn in our customer base.
When your company embarked on this journey of strategic change in the nature and quality of our revenue, most of
our revenues were “one off” in nature. Over a three year period the scenario has changed significantly with Annual
Recurring Revenue (“ARR”)1 run rate moving from zero to $5.4 million. The graph given below shows the trajectory
of growth:
5.4
4.0
1.5
0
Dec 17
Dec 18
Dec 19
Dec 20
Recurring Revenue Run Rate in US$M
1 ARR is calculated by reference to the full annualised value of a contract; the total ARR thus calculated may not all accrue in the 12 months
following due to (for example) implementation periods and other timing differences between signing a contract and the “Go Live” or similar date
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ANNUAL REPORT
This metamorphosis is the result of various new products being accepted by our customers and a marked change
in the underlying activities that are part of the engagement model. The most fundamental shift is the addition of sev-
eral customers for our Managed Services offering. While the scope and size of the operations for each customer is
different, the general offering is by and large the same - Pelatro handles the operations of the mViva Campaign Man-
agement Solution on behalf of the telco, including configuration of campaigns, execution of campaigns, reporting,
support and business consulting.
This change has led to increasing value addition from Pelatro to its customers. It is pertinent to note that this value
addition continues for a long period of time spread over several years. The period is generally between three to five
years and the contracts provide for further extension of this period. An important consequence of such long periods
of value creation is the embedding of Pelatro and its products and services within the business of our customers. We
will continue to endeavour to leverage the relationships thus built to further grow our business and revenue.
Quality of Revenue
One time revenues are both lumpy and unpredictable which leads to a high level of volatility in annual revenue and
profit. Further, new contracts need to be won each year to generate revenue for that particular year. In contrast, re-
curring revenue contracts ensure a stable predictable stream of revenue each year. New contracts will continue to
build on the existing base resulting in the power of compounding. Given the excellent visibility provided by recurring
revenue contracts, the Group can also plan investments well in advance and for a longer period of time. Thus, the
recurring revenue model tends to be more highly valuable to us compared new business from one-off contracts.
Our strategy to shift our business from reliance largely on one time revenues to predominantly recurring revenue
has led to an increasing proportion of recurring revenue in the overall revenue of the Group. This proportion has
increased steadily over the past four years to reach 71% in 2020. As the Group continues to win recurring revenue
contracts, we expect the proportion to tilt further in favour of this attractive and highly beneficial revenue model.
71%
44%
30%
15%
0
2016
2017
2018
2019
2020
Recurring Revenue as %of Total Revenue
ANNUAL REPORT
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2019 and 2021 – a study in contrast
As we have stated many times in recent years, your company started the shift from contracts with one time revenues
to contracts with recurring revenues in early 2019. The process gathered momentum, and was largely complete to-
wards the end of 2020. Consequently, 2021 will be our first full year of operation after this strategic shift. During the
2019-20 period, reported revenues experienced stagnation and decline, although the overall value of contracts over
a longer period is higher, as we are able to rely on dependable receipts over several years. The natural consequence
was lumpy revenue giving way to more dependable revenue spread over a longer period of time.
In view of this major shift, it is pertinent to compare the two relevant years (2019 and 2021) to appreciate the full
impact of the change. At the start of 2021, we had $5.6m of contracts in hand to be executed and the associated
revenue recognised in 2021 (and have since increased that figure to $6.0m). With the mix of potential contracts in
our current pipeline, we would expect the year end outturn to be broadly as follows:
The graph given below shows the significant change in the composition of revenue in 2019 and 2021.
120
100
80
60
40
20
0
2019A
2021P
Non Recurring Revenue %
Recurring Revenue %
Thus, while the level of revenues in 2019 and the anticipated revenues in 2021 are similar, the composition and
quality has changed dramatically with Recurring Revenue increasing in proportion from 44% to around 80%. This is
leading to a fundamental change in the quality of revenue and the underlying value of the business. As explained ear-
lier, we expect this trend to continue in the coming years with the proportion of recurring revenue increasing steadily.
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ANNUAL REPORT
Establishing scale
The year that passed has been one when the scalability of our platform mViva and that of our operations was estab-
lished. We rolled out mViva across 23 markets covering the entire country of India encompassing over 400 million
subscribers. This huge project was executed remotely without any onsite presence. The execution was flawless and
the migration from two incumbent campaign management solutions was completed without negatively impacting the
business of our customer. Consequent to this successful roll out, mViva now has one of the largest implementations
in the world and handles the data of over 800 million subscribers globally.
Entry into mobile advertising space
For some time, the Group has been reviewing opportunities in the fast-growing mobile advertising space, as an area
complementary to its existing operations. The global mobile advertising market, according to a survey by IMARC
Group, is expected to grow from $52 billion in 2018 to $221 billion in 2024 at a CAGR of 27%. Commenting on this
space as one of the key opportunities for telecom companies, Gartner identified entry into mobile advertising model
as given below and commented as follows:
“Market Trends: CSPs Must Transform Their Advertising Model”, Gartner
Formulate and prioritize investments to develop a position in data monetisation in the advertising market before other
advertising strategies. Focus should be on maximising Communication Service Provider (“CSP”) data usage and
availability, rather than on generating and selling ad inventory.
Develop a trusted data provider position with brands, agencies and the wider ecosystem on top of the media or
technology activities already developed. As a trusted source of data, CSPs will add transparency by reducing fraud
and waste.”
The Business
Mobile phones are ubiquitous and the significant penetration of smart phones (in developed countries as high as
80%, and in Asia for example currently about 50%) has opened up a new channel for advertising, namely mobile
advertising. This segment is growing at a frenetic pace and currently accounts for about $100 billion globally.
Communication Service Providers or CSPs are in a unique situation in this market as they hold the maximum amounts
of data about their customers (who may number tens of millions and even hundreds of millions in some countries).
This data, with appropriate consent and anonymity, can be shared with B2C players in financial services, retail,
travel & hospitality, FMCG and brands to enable the latter to engage in targeted marketing of their products across
advertising, campaigns, surveys, loyalty programmes etc. Such targeted campaigning will be contextual, relevant,
personalised and real time. Pelatro’s platform mViva, which handles such marketing for telcos using the vast quantity
of data that it collects and processes applying AI/ML and other analytical techniques, is uniquely positioned to provide
access to the segments mentioned earlier for mobile advertising and related activities.
ANNUAL REPORT
15
Pelatro’s strategy and readiness
Pelatro is now seeing various opportunities by partnering with its telco customers to enter this huge market. To
start with, we have already identified six large markets where we have several telco customers using our software
collecting and processing the data of about 700 million mobile subscribers. Out of these, about 350 million i.e. 50%,
have smart phones. Our technology can help brands and B2C companies to target these 350 million subscribers
and mViva’s AI/ML capabilities will help us to differentiate our offering from that of the competition by enriching the
data through deep analysis. Pelatro’s strategy is to partner with our telco customers and sell this access to data to ad
agencies who will in turn on-sell to their customers, who are the brands and B2C companies. These end customers
will pay based on their usage (i.e. number of campaigns sent, targeting parameters used, number of people targeted
etc.). This is then shared by the ad agency, Pelatro and the telco, with a large portion being retained by Pelatro. This
strategy therefore builds on our relationships with our telco customers, underpinned by the expansion of our existing
business and with clear synergies between the two.
Looking forward
Your company has come a long way since its inception in 2013 and the IPO in December 2017. Apart from winning
several Tier 1 telecom companies as customers in 17 countries, we have also built a strong foundation for the future.
We will continue to build on this strong foundation to deliver superior results and shareholder value in the coming
years.
I thank every one of our stakeholders for the support extended during the last year while the company was progressing
on the recurring revenue front. We will continue to build Pelatro into a global leader in our chosen space.
Subash Menon
Managing Director, CEO and Co-Founder
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ANNUAL REPORT
Relevance – the key
consideration
In 2007, Yankelovich, a market research firm, estimat-
ed that the average American was exposed to about
5,000 advertisements in a day. While there are no offi-
Objective
cial estimates as to what that number would be today,
Measure
Data
by some reckoning that figure is now probably around
10,000, with some variations likely depending on which
part of the planet they are in. The point is pretty clear
though – people are inundated with advertisements
and marketing messages. This would only have in-
creased with the arrival of the COVID-19 pandemic as
physical contact has reduced. It is obvious that the key
question facing marketers is about how to ensure that
their messages stand out and are seen and noticed by
customers.
This is where the concept of relevance becomes very
important. When people are faced with a deluge of mes-
sages, it is important that the message connects with
them if they have to notice it. They should feel that this
is meant for them or people like them. As Peter Drucker
said: ““The perfect advertisement is one of which the
reader can say, “This is for me, and me alone.” The
Lexico Dictionary defines the word “relevant” as “ap-
propriate to the current time, period, or circumstances;
of contemporary interest”. So, if a marketing message
has to be relevant to a potential customer, it has to
be squarely in the context of that particular individual.
Thankfully, in these days of abundant data, this is not
an impossible (though not easy) task for someone with
the right tools.
Deploy
Analyse
Strategise
A key requirement for successful adoption of this frame-
work is for the marketer to have access to a tool that
can help with all the steps mentioned in the framework.
Operationally, this means:
• Gather all relevant data
• Use AI/ML and rules to identify behaviour and con-
text of customers
•
Identify the right offer for each individual customer
• Communicate the offer through the right channel at
the right time
This is an approach completely in contrast with the
“spray-and-pray” approach taken by many marketers
even now. We can all relate to experiences of having
received offers which have left us wondering why such
This is especially true in the telecom world wherein a
an offer was sent to us at all. It is a pity that even today,
large telco may be faced with billions of records per
there are marketers who believe that their chance of
day, which pertain to customer transactions and be-
success is directly related to the number of messages
haviour. To sift through these in real time or near real
they send out in a given day. Needless to say, these
time to pin-point a customer and his or her context is
are the marketers who are losing the attention and trust
quite a daunting task indeed. In essence, what is re-
of their customers. Once this happens, customers will
quired is Precision Marketing. Given below is a frame-
likely not notice any offer from that marketer.
work that facilitates this.
ANNUAL REPORT
17
Pelatro facilitates Precision Marketing for its customers through its mViva Contextual Campaign Management Solu-
tion. It handles very large volumes of data – tens of billions of transactions a day – and churns through it in real time
to address each individual customer in his or her context.
Sudeesh Yezhuvath
COO and Co-Founder
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ANNUAL REPORT
Analytics in mViva
In the last year we added several AI/ML and analytics
components to mViva:
Analytics Workbench
mViva has added a GUI-driven Analytics Workbench
that has been designed to be used by Citizen Data
Scientists – business users with domain expertise but
without the deep knowledge in statistics and machine
learning required by data scientists. The motivation be-
hind the workbench is to enable these users to develop
models on their own with the aid of a “wizard”, thus per-
mitting the rapid development, testing and deployment
of different models for several classes of problems.
This approach has the advantage of freeing up the
data science team to work on more complex problems.
The Workbench supports several algorithms config-
ured with sensible defaults that work out of the box
on different problems. More knowledgeable users can
modify these defaults within the wizard to improve per-
The Workbench includes all the standard stages pres-
ent in model building – definition of data sets, labelling
for supervised problems, pre-processing pipelines,
splitting data into train/test and validation sets and so
on. The Workbench supports an iterative approach to-
wards building models for a specific problem – differ-
ent algorithms, parameters and pre-processing can be
tried. The performance of different models can then be
compared and the best performer deployed into pro-
duction.
Next Best Offer Module
Subscribers are often eligible for multiple offers. The
Next Best Offer (“NBO”) module automatically suggests
the best offer for a subscriber. The module works for
both push (configured by the campaign manager) as
well as pull offers (initiated by the user or on request by
a CRM system).
One of the difficulties is, of course, deciding what should
be regarded as best – it is sometimes a retention cam-
paign and at other times an upsell offer. This is handled
by permitting the user to modify or define a set of rules
that is used by the NBO module while determining the
best campaign. Ideally, these rules should align to the
business objectives. For example, one may want to
specify that if subscribers have been on the network for
6 months, to try to send an offer that maximises upsell.
It is important to note that the rules are only guidance
formance. Several algorithms are included for both
and not absolute.
supervised and unsupervised learning models. After a
model has been trained, its performance can be as-
sessed using automatically generated reports that in-
clude recommendations and explanatory text. Once
performance is assessed as sufficient, the model can
be deployed into production directly from the GUI and
have its predictions populated into the subscriber pro-
file, enabling immediate usage in campaigns without
any support from engineering or data science teams.
ANNUAL REPORT
19
This approach requires an accurate estimation of offer
and-dice”. However, this approach has several practical
performance. This is achieved by:
limitations:
•
recording the outcome of offers on several differ-
•
it requires the user to band/create bins for each of
ent criteria, for example: uptake, uplift, success at
the continuous features. These bands will often fail
cross-selling, popularity etc.
to reveal distinctive behaviour
•
recording offer performance criteria for different
•
If many dimensions are used, the ensuing combina-
subscribers with regards to both their short-term
torial explosion makes analysis difficult. In addition,
state (e.g. current balance) and long-term charac-
many of the resulting segments may be too small to
teristics (e.g. ARPU).
target to be worth targeting with a campaign
The module uses several different algorithms to de-
ments may not contain enough information of rel-
•
If too few dimensions are used, the ensuing seg-
cide on the best offer, mixing clustering and variations
evance.
of expectation maximisation.
Recency-Frequency-Monetary
Modelling
A new component to support Recency-Frequen-
cy-Monetary (“RFM”) modelling and analysis has
been added into mViva. This is a popular marketing
approach qualitatively to understand a base in terms
of the recency, frequency and quantum of some key
metrics such as top-ups or purchases.
The component permits building RFM segments on
any ordinal field that has a time component associat-
ed with it. These segments can then be overlaid onto
other aggregable metrics such as counts, revenue,
data usage etc. and analysed using different interac-
tive visualizations. As the analysis proceeds, users
can allocate the segments into larger, more meaning-
ful groups (for example, users at risk of churn, can-
didates for up-sell etc.). Appropriate campaigns can
then be built for each of these segments.
Segment Shattering
The traditional technique used to analyse the be-
haviour of a subscriber base (or segment) is “slice-
Segment Shattering is an approach specifically de-
signed to overcome these shortcomings. It can work
with a large number of dimensions and automatically
identifies a few, manageable and relevant segments.
In addition, the identified segments are automatically
described in terms of their distinguishing features. For
example, Segment A contains subscribers with very
high age in network and low data usage, whereas Seg-
ment B contains subscribers that recharge three times
a week or more. This description makes it easier for
the user to develop a campaign to encourage desirable
behaviour, or to head off undesirable tendencies.
The Shattering component displays the different seg-
ments using an interactive visualisation that permits
further analysis as well as directly creating a campaign
for the segment. The number of segments can also
be increased and decreased by the user at any point.
20
ANNUAL REPORT
While the default parameters are usually sufficient, the module also supports configurability for more complex analy-
sis. An advantage in using a visualisation is that subscribers in bordering segments are in fact very close together in
behaviour. This makes it easier to design campaigns to encourage subscribers to move from one segment to another
neighbouring segment that exhibits more desirable behaviour.
Segment shattering uses a neural network to identify patterns in high-dimensional data. Intuitively, the network can
be thought of like a cloth laid over a rough and uneven object. It is in a sense a dimensionality reduction algorithm but
unlike techniques like Principal Component Analysis it is dimension preserving.
Customer Lifetime Value
mViva has also introduced a component that estimates Customer Lifetime Value using Markov chains. Using this
module, the Customer Lifetime Value (“CLV”) values for each subscriber are added to the subscriber profile, making
it simple to design campaigns that take a long-term view. While this component is most frequently used for lifetime
value, it can also be repurposed to predict other metrics such as data usage.
The following graph shows the performance of this module over 10 months of real-world data. Notice how much
closer it is to estimating the aggregated value than a campaign that is based off a subscriber’s ARPU (the simple
baseline estimate).
Actual Network Revenue
Baseline estimate using ARPU
Revenue predicted by the CLV
Component
P T George
Principal Architect - Analytics
ANNUAL REPORT
21
Vein - connecting them all!
The ability to ingest billions of records at real time into mViva and stream them reliably in parallel to a number of real
time analytical engines holds the key to solving the contextual marketing puzzle. Pelatro achieves streaming at that
scale using an indigenously designed messaging framework called Vein, built on top of a high speed Zero MQ mes-
saging library. Vein is a cross-over between four fundamental messaging patterns – Request Reply, Service Oriented
Reliable Queuing, Push Pull and Publish Subscribe, carefully curated to achieve the best of both worlds, reliability
and accuracy, while maintaining very high transfer rates.
Client
Client
Client
“Give me coffee”
“Give me tea”
Client
REQ
Broker
Hello
World
“Water”
Worker
“Tea”
Worker
“Coffee”
Worker
REP
Server
Publisher
PUB
REP
(3) (1) (2)
SUB
REQ
Subscriber
PUSH
PUSH
PUSH
R1, R2, R3 R4 R5, R6
fair
queuing
R1, R4, R5
R2, R6, R3
PULL
22
ANNUAL REPORT
Vein data services are made available to clients using agents backed service discovery with negotiable QoS pa-
rameters. Vein is modelled on a real life Post Box metaphor where rightful owners seamlessly relocate with their
postboxes to newer container addresses as and when engines hop from one node to another as part of transparent
failovers and failbacks that are the norm with elastic services.
CAGE is Pelatro’s proprietary, patent pending real time aggregation and event check framework leveraging on in-
place 2s complement algebra on user-managed-heaps for high-speed addition with low memory access overheads.
Vein feeds into CAGE and facilitates consumption of Telco Grade Deep Packet Inspection data at real time and
aggregates them on the fly. Labelling rules perform traffic categorization and CAGE aggregates them on the fly to
different levels of granularity like last 1m, 2m, 5m, 10m, 30m, 60m across different traffic types such as YouTube,
Facebook, Twitter, gaming etc.
Vein and CAGE complement each other enabling mViva to ingest diverse streaming data at rates in excess of One
Million Events Per Second, build real time contextual profiles using a multitude of dimensions spanning across IP
traffic, Geo Location and various time-aware business datasets and then target subscribers using real-time con-
text-aware campaigns. mViva Contextual targeting uses a mix of Rule based Decisioning and Machine Learning to
arrive at the right offer for the subscriber riding on insights drawn from ongoing-browsing-sessions and sends them
an actionable notification to activate the right offer through an interactive channel like web-push from where they can
avail the benefits instantly.
We are proud to be able to claim that mViva Vein seamlessly ingests data from over two dozen sources for 400m
subscribers in one of our largest installations whereas CAGE continues to stream records in excess of 800k records
processing over 63 billion transactions with ease every-day at one of our other customer installations.
Pramod K P
Chief Architect
ANNUAL REPORT
23
Proactively managing human
capital during pandemic
Amid the changes of a still-unfolding COVID-19 crisis,
Post on boarding, an elaborate training plan was imple-
employees are increasingly seen by Pelatro as vital
mented to integrate the new joiners, with all activities
stakeholders. At Pelatro, human capital governance
happening remotely. Induction talks by both the CEO
has a renewed focus.
and COO as well as “open house” meetings were con-
Future of work: fast-tracked
While the debate on the “future of work” was well un-
derway before the pandemic, COVID-19 has clearly
hastened its arrival. For example, in the era of so-
cial distancing and increased remote working, it was
very easy for Pelatro to move to a remote model. As
all employees get a laptop and internet connectivity
on joining, the transition to working from home was
seamless, we simply had to add more bandwidth to
our leased line and VPN connections. With applica-
tions such as Microsoft Teams, we were easily able to
achieve work portability quite quickly.
Prioritise talent acquisition and
management
This was also the year in which we achieved one of
our largest product deployments at an operator with
400m+ subscribers. This required procurement and
deployment of hardware, software deployment and,
since the contract was for Managed Services, we also
needed to hire about 50 new people with different
functions and skill sets. Hiring was done remotely and
HR used the following tools to ensure that the expe-
rience of hiring “in person” was not diluted. We used:
•
•
tools for incorporating tests remotely
video calls in all rounds with the shortlisted can-
didates
•
“on boarding” remotely by HR
ducted remotely.
Communication is key
Communication is a low-cost way to reduce turnover
and effectively manage the workforce. The normal dai-
ly “stand up” meetings went virtual and all tasks were
allocated and tracked in Jira, a specialised agile project
management software, with managers stepping in to
help as needed. Getting the right message to the right
people at the right time can be critical to help quell anxi-
ety and instil confidence in the Group’s future, especial-
ly during an economic downturn.
Employee pay: a focus on fairness
At Pelatro, we continued with business as usual with
regard to pay, with increases given in line with the nor-
mal timetable even though many organisations were
not increasing pay or were even reducing variable pay
or postponing rises.
Well-being: critical to sustaining
operations
Change and uncertainty have strained employees
physically, emotionally and financially. Even before
COVID-19, employee emotional and financial well-be-
ing were top concerns for businesses. Now, as com-
panies continue to adapt to changing pandemic con-
ditions, workforce health, resilience and well-being are
even more critical to sustaining operations.
24
ANNUAL REPORT
With widespread stay-at-home orders, employers
physical modifications or take the workplace entirely
have adjusted and shifted workforces online, all of
online. With this transformation, Pelatro has promoted
which have affected overall employee well-being. At
a culture for physical and psychological safety, all while
Pelatro, we ran many programmes remotely. These
delivering business results.
included:
•
ergonomics during work from home – conducted
by a physiotherapist
•
nutrition during Work from Home, guided by a nu-
trition expert
•
nutrition for women for common health issues,
•
•
guided by a nutrition expert
6 mental wellbeing webinars
confidential free counselling by certified coun-
sellors for any issue that employees might face
whether personal or work.
Leadership: promoting a culture
that encourages well-being
Since the physical workplace has become a potential
health hazard, companies have been quick to make
Culture: values and purpose move
to the forefront
Pelatro has remained committed to its employees, or-
ganisational purpose and values in these difficult times.
We have used our purpose and cultural values to make
fast decisions and create as much certainty as possible
for employees.
Bringing it together
Pelatro has prioritised human capital as part of its
broader sustainability strategy and to be able to miti-
gate risk and support value creation more broadly in
the coming years.
Anuradha
Chief Mentor
ANNUAL REPORT
25
Environmental, Social and
Governance report (“ESG”)
Social
With the increasing focus on environmental, social and
A key ethos at Pelatro is encouraging our talented peo-
governance (“ESG”) issues around the world and the
ple to do well with us and giving them every opportu-
widespread concern over sustainable conservation of
nity to succeed. Our main research and development
natural resources, we present below our key ESG met-
operations is at our sites in Bangalore, India and, by
rics. In reporting these metrics, we have carefully not-
the nature of our business, most of our intake of new
ed the message from the stakeholders in our business
employees are graduates. There is a wide talent pool
that they do not feel one size fits all: they would rather
available from the major cities in India; however, we
have a relevant review with the right metrics, appropri-
also have an active recruitment drive of approximate-
ate to the company. We also consider that a responsi-
ly 30% of our intake from the second-tier villages as
ble corporate outlook helps us demonstrate the quality
well, where opportunities to progress in an international
of our management, identify how we are mitigating ex-
technology company such as Pelatro can be more limit-
posure to any business risks and work on areas where
ed. As such, we are able to make a major contribution
we can leverage business opportunities.
to the overall quality of lives of our employees which
Environmental
may otherwise be out of their reach.
Pelatro recognises the importance of investing in its
employees and provides opportunities for training and
Being a provider of services to telcos, we are not di-
personal development, as well as encouraging the in-
rectly involved in the direct manufacture of harmful
volvement of employees in the planning and direction
substances or products. In more normal times, our
of their work.
operations are predominantly office-based or deliv-
ered from the offices of our customers, where we can
Employee turnover
6%
monitor and control our energy and water consumption
Tax paid (% of turnover)
8%
as well as waste production more effectively. Howev-
Male/female employee ratio
er, with the widespread lockdowns as a result of the
Health & Safety events in year
3/1
None
COVID-19 pandemic, our teams have been predomi-
Employees participating in share scheme
32%
nantly working from home. As such, these measures
are not currently relevant, but are set out below for
The pandemic this year has seen a necessary change
more normal working times.
Energy consumption (MWh/$m)
18
in working practices, with national lockdowns in various
countries. Mindful of our overall employee well-being,
we have sought to be flexible and supportive of their
needs, as well as those of our business. We have run
various support programmes open to our employees to
Water consumption (m3/$m)
32
attend remotely, such as: ergonomics during working
from home, run by a physiotherapist; nutrition during
work and also nutrition for women’s common health
problems, run by a nutrition expert; mental well-being;
and free counselling by certified counsellors.
26
Governance
ANNUAL REPORT
We have a diversity on our Board of various skill sets, experience and qualities, with members from Asia, the Neth-
erlands and the United Kingdom. We believe that good governance is also good business, with transparency helping
to build trust and confidence with our stakeholders.
Pelatro aims to conduct its business with integrity, respecting the different cultures and the dignity and rights of
individuals in the countries where it operates. The Group supports the UN Universal Declaration of Human Rights
and recognises the obligation to promote universal respect for and observance of human rights and fundamental
freedoms for all, without distinction as to race, religion, gender, language or disability.
Independent board members
40%
CEO cash compensation v UK median earning
5.9x
Chairman/CEO role split
Yes
Adheres to Corporate Governance Code
Yes - QCA
Our Chairman’s statement on corporate governance with fuller details and information on the way the Board oper-
ates and the various committees of our Board is set out in the separate corporate governance section in this report.
ANNUAL REPORT
27
Key Performance
Indicators
For the year ended 31 December 2020
Introduction
of overall strategy execution success. All KPIs are re-
viewed annually, including consideration of appropriate
The Directors consider that revenue, recurring rev-
non-financial KPIs.
enue, adjusted EBITDA (Earnings Before Interest,
Depreciation and Amortisation) and profit before tax,
In a growing business with a high proportion of well
and the related margins as a percentage of revenue,
qualified and experienced staff the rate of staff reten-
are key performance indicators (“KPIs”) in measuring
tion is seen as an important KPI: in 2020 we recruit-
ed 81 new members of staff and 24 left the business
(2019: 75 joined and 20 left). Some 40 of these joiners
were staff taken on specifically to implement various
managed services contracts started in the year.
As the business develops the Board will consider add-
ing, as appropriate, further KPIs to monitor progress
against a broader range of objectives.
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 con-
verting revenue to earnings, excluding the effects of
certain non-operational and/or exceptional transac-
tions. We track contractually recurring revenue as 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 (prin-
cipally on software development and where relevant,
third-party hardware installations).
Performance of these KPIs is discussed further in the
Managing Director’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 Propos-
al received, movement of sales pipeline and Change
Requests. However, none of these are currently con-
sidered to be individually appropriate as a measure
28
ANNUAL REPORT
Principal Risks and Uncertainties
For the year ended 31 December 2020
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
Technology
Mitigation
The Group employs highly qualified software engineers and
senior management who monitor closely developments in
The industry in which Pelatro operates is in the process
technology that might affect its research capability and
of continual change reflecting technical developments as
product evolution.
industry and government standards and practices change and
emerge.
New products and features are assessed against their
target markets and in response to customer feedback prior
The markets in which Pelatro operates are competitive and
to development. As Pelatro engages with more customers
rapidly evolving. The Group’s existing products may become
with an increased product portfolio, a broader spread of
less competitive or even obsolete if competitors introduce new
feedback is obtained enabling the business to engage with
products and/or customer behaviour or requirements change.
customers more quickly and effectively.
Building sales
We have been investing in our sales and marketing
operations by working closely with specialist consultants
Central to our strategic growth plan is winning new mViva
and have sales capability covering most global regions,
contracts, increasingly those which deliver recurring revenue
enhanced by partners in various other countries to
over a period of years. Failure to do so would directly impact
assist us. Following the release of the advanced version
our achievement of overall objectives or lengthen the period
of our core software in early 2020, we are continuing to
taken to achieve them.
add features and functionalities to ensure technological
advantage over competing products.
Sales cycles are often very lengthy and may sometimes be
delayed or restructured late in the process. Whilst the impact
The Group (along with the telco industry generally)
of COVID-19 is diminishing, a worsening of the situation in
has evolved systems and processes to work remotely
any of the areas in which the Group is seeking to sell products
where necessary and otherwise to mitigate the effect of
to new or existing customers could further lengthen the sales
COVID-19, and continues to do so in line with changing
cycle.
circumstances.
ANNUAL REPORT
29
Principal risk
Mitigation
Misdirected product, operational or strategic investments
We are continually investing in product development and
Strong communication lines between relevant stakeholders
operational requirements to support mViva-led growth. Failure
are ensured through regular formal meetings and monthly
to achieve meaningful returns on investments would hinder
reporting. The Board reviews and challenges all strategic
the Group’s strategic growth plan and potentially jeopardise
investments.
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 systems,
security breach or cyber-attack could significantly threaten
which are overseen by the Head of Engineering.
Pelatro’s ability to do business, particularly in the short term,
and could result in significant financial loss.
Reputational risk
Maintaining a strong reputation is vital to the Group’s success
Strong corporate governance and dedicated senior
as a business. A loss of confidence in the Group’s ability to
management remain
the key elements of effective
undertake new client opportunities may be caused by an
reputational management. Senior management provide a
adverse impact to the Group’s reputation which may, in turn
model of best practice and guidance to ensure the Group’s
significantly affect our financial performance and growth
values and expected behaviours are clear and understood
prospects.
by everyone.
Significant impact to the Group’s reputation could be caused
As our business continues to grow and develop, we will
by an incident involving major harm to one of our people or
remain strongly focused on protecting the strength of
customers, inadequate financial control processes or failure
the Group’s reputation through effective governance,
to comply with regulatory requirements. Impact of this type
leadership, and through cultivating open and transparent
would potentially result in financial penalties, losses of key
relationships with all stakeholders.
contracts, an 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 could
Pelatro mitigates inherent product and service risks
lead to failed implementations, project delays, cost overruns,
through robust quality assurance and project governance
data loss, security issues, customer dissatisfaction, early
processes. Product releases are unit tested prior to delivery
termination, service level breaches and contractual claims,
and subjected to further customer testing prior to first use.
all of which could adversely impact the Group’s revenues,
Customer testing and acceptance sign-offs are required
earnings and reputation.
prior to go-live.
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.
30
ANNUAL REPORT
Principal risk
Mitigation
Attracting and retaining skilled people
Attracting and retaining the best skilled people at all levels of the
Our business model has created a pipeline of opportunities
business is critical. This is particularly the case in ensuring we
for staff at every level of the business. This will continue to
have access to a diverse range of views and experience and in
be the case as the Group develops. The Group’s focus on
attracting specific expertise at both managerial and operational
competency at all levels of the business continues to ensure
levels where the market may be highly competitive.
that we develop the Group’s people and enable them to
Failure to attract new talent, or to develop and retain the Group’s
business. Incentive programmes are also in place to ensure
successfully manage the changing profile of the Group’s
existing employees, could impact the Group’s ability to achieve
that key individuals are retained.
the Group’s strategic growth objectives. As we continue to grow
and diversify into new areas, this risk will continue to be a focus
Pelatro recognises
the
importance of investing
in
its
for the Board.
employees and provides opportunities for training and
personal development, as well as encouraging
the
involvement of employees in the planning and direction of
their work.
Economic, international trade and market conditions
The Group is generally exposed to economic, trade and market
Mitigation against the short-term impact of such risks is
risk factors, such as global or localised economic downturn,
provided through an increasing spread of geographies and
changing international trade relationships, foreign exchange
customers. Pelatro monitors political developments and will
fluctuations, consolidation or insolvency of existing or prospective
seek to mitigate emerging risks where possible. Pelatro’s high
customers or competitor products, all of which could significantly
margin revenues provide a level of protection against volatile
threaten Pelatro’s performance and prospects. Pelatro’s current
economic or market conditions and our policy of ongoing
focus on emerging markets customers may increase such risks.
product development helps us to maintain our competitive
advantage.
Credit risks
The Group is exposed to the credit risk of an increasing range
The Group’s principal financial assets comprise cash and
of counterparties with whom it does business, often in respect of
cash equivalents, deposits, trade and other receivables
considerable amounts. Extended delivery, installation and sales
and contract assets. As these instruments are exposed to
cycles may cause the Group to be so exposed for considerable
conventional risks, they are managed on the simple basis
periods of time.
of credit terms, credit worthiness and cash collection or
settlement. The Group only contracts with major (often
regional or global) telcos who have sound credit ratings.
Increasingly the Group is entering into longer-term managed
service/recurring revenue contracts, where billing is monthly
or quarterly, thus shortening the billing cycle and reducing the
overall credit risk per customer.
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.
ANNUAL REPORT
Principal risk
Liquidity risks
31
Mitigation
Fluctuations in working capital may leave the Group with
Group cash balances are monitored on a weekly basis to
inadequate cash resources to fund its operations.
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 Managing
Director’s Statement, the timing and quantum of which will
affect the Group’s cash requirements, which are continually
monitored by the Board. On the basis of these projections,
the Group has sufficient working capital facilities for the
foreseeable future.
32
ANNUAL REPORT
Financial Review
For the year ended 31 December 2020
Introduction
For the year, total revenue decreased by 40 per cent, to $4.02m. This included $2.85m of recurring revenue (which
comprises gain share, managed services and post-contract support (“PCS”)) accounting for around 71% of the total;
together with around $0.4m of change request revenue this resulted in repeating revenue of $3.3m. The decline in
revenue year on year arose principally from a significant reduction in “one off” type revenue (typically license fees)
which was not unexpected as our sales efforts were targeted towards the pivot of the Group’s revenues towards a
recurring revenue base; however, in addition and as announced in November 2020, whilst the coronavirus pandemic
had a relatively limited impact on high-level decision making at our customers, other than them necessarily needing
to focus more on their day-to-day operations, by Q4 COVID-19 had started to affect some of the employees and
immediate relatives of both Pelatro and our customers. This led to a slower than scheduled implementation of certain
projects (principally change requests), and as this revenue is recognised only on completion of the relevant project,
certain revenue which was visible and expected in 2020 was deferred to the first half of 2021.
Key Performance Indicators
Revenue
Recurring revenue
2020
2019
Growth
$4.02m
$6.67m
(40)%
$2.85m
$2.96m
(4)%
Recurring revenue as percentage of total
71%
44%
Adjusted EBITDA (see Note 7)
$0.44m
$2.89m
(85)%
Adjusted EBITDA margin
11%
43%
Profit/(loss) before tax (before exceptional items)
$(2.23)m
$0.77m
Cash generated from operating activities
$2.26m
$1.41m
Contracted customers (at year end)
20
19
n/a
60%
1
ANNUAL REPORT
33
Income Statement
Revenue
Out of the total revenue of $4.02m, approximately
Additionally, whilst net staff numbers grew in the year,
$0.7m arose from sales of licenses and associated
leavers were all employees whose cost was charged to
implementation (2019: $1.9m) and some $2.9m arose
overheads, whilst the majority of new joiners were re-
from recurring revenue, comprising approximately
cruited for specific customer contract roles (and hence
$1.5m from managed service and gain share contracts
are charged to cost of sales); accordingly the net cost of
and the balance from post-contract support. Change
staff charged to overheads reduced. There was also a
request income fell from $1.5m to just over $0.4m, prin-
general reduction in other costs including plc costs and
cipally due to the effect of COVID-19 which affected the
certain consultancy contracts.
scheduled implementation of certain projects as noted
above.
Exceptional gains
The second stage earn-out payment due to the vendors
One new customer was added during the year; this,
of Danateq was agreed in the year at $1m gross under
together with the number of recurring revenue custom-
the terms of the SPA. The net amount paid was some
ers, further reduced customer concentration with now
$193,000 lower, being reduced by sums relating either
only three customers accounting for more than 10% of
to amounts paid by customers in advance to the former
revenue. As noted last year, a proportion of the Group’s
Danateq business but due to Pelatro, or amounts de-
revenue is now invoiced in Indian Rupees (“INR”) which
ductible under the terms of the SPA due to differences
forms a natural hedge against the Group’s cost base,
in outturn in disclosure items. The difference between
of which around 60% (in cash terms) is in INR.
the estimated value of the liability brought forward and
Cost of sales
the amount paid (as adjusted for the imputed discount
due to the time value of money to the date of payment)
resulted in the exceptional gain shown of $149,000.
Cost of sales increased by 71% to $1.71m (2019:
$1.00m). These costs comprise principally (i) the di-
Profitability
rect salary costs of providing software support and
Adjusted EBITDA (earnings before interest, tax, de-
maintenance, professional services and consultancy;
preciation, amortisation and exceptional items) fell by
(ii) expensed customer implementation; (iii) third-par-
85% in the year to $0.44m (2019: $2.89m). Loss before
ty software maintenance and licensing costs; and (iv)
tax before exceptional items was $(2.22)m (2019: prof-
sales commissions. The increase in FY20 results al-
it $0.77m). Adjusted loss per share was (5.5)¢ (2019:
most entirely from the cost of extra staff taken on to
positive 4.2¢), and reported loss per share was (7.2)¢
service several managed service and similar contracts
(2019: positive 2.5¢). The reported loss before tax was
implemented during the year.
$(2.08)m (2019: profit $1.01m).
Overheads
Taxation
Pre-exceptional overheads (excluding depreciation
The Group suffers a tax charge despite a reported con-
and amortisation) decreased to $1.9m (2019: $2.8m),
solidated loss before tax as (i) the Group’s operating
largely due to a substantial reduction in travel costs.
subsidiary in India is necessarily profitable on a stand-
34
ANNUAL REPORT
-alone basis in order to comply with local tax laws; and
Development costs
(ii) customer payments in respect of sales to certain ju-
risdictions suffer Withholding Tax (“WHT”) deductions:
subject to various restrictions this may be offsetable
against other profits but, in the absence of such profits,
the WHT is treated as tax suffered.
The taxation charge for the year comprises a charge
of $0.30m relating to current tax (2019: $0.25m), which
is net of a credit of $18,000 relating to the reassess-
ment of prior year Group tax liabilities and WHT assets,
principally in the UK and the US. Partly as a result of
that reassessment, the Group is due a tax refund of
approximately $42,000. WHT also accounts for the ma-
jority of the “Income tax paid” of $0.34m in the Group
Statement of Cash Flows.
The Group is committed to the continuous enhance-
ment of its software suite, and we aim to offer a mar-
ket-leading platform which addresses the needs of our
telco customers. The Group now employs around 95
developers in Bangalore and around 20 in the Group’s
other development centre in Nizhny Novgorod. In addi-
tion to the release of the advanced V6 of our proprietary
mViva software, the Group released various add-on
modules (as detailed above), thus further expanding the
scope, functionality and optionality of the software suite.
Costs incurred of around $2.9m (2019: $2.1m) were
capitalised accordingly. Amortisation on development
cost assets increased to $1.4m (2019: $1.0m) and, net
of amortisation, this capitalisation resulted in a net book
value of intangible assets relating to development costs
in the statement of financial position of approximately
The tax charge also reflects a charge of $72,000 relat-
ing to the derecognition of deferred tax assets (2019:
$5.9m (2019: $4.4m).
$53,000 credit) due to uncertainty over the timing of
Property, plant and equipment
when the previously recognised deferred tax assets
could be offset against future profits.
Statement of Financial Position
Intangible assets
Customer relationships and acquired software for re-
sale
Expenditure of $0.90m on property, plant and equip-
ment relates principally to $0.87m spend on IT equip-
ment placed on site at a customer’s premises to im-
plement the related managed services contract. The
balance related mainly to spend on fixtures, fittings and
leasehold improvements due to the continued expan-
sion of the Group’s office space.
Depreciation in the year amounted to $0.20m (exclud-
ing amounts relating to Right-to-Use assets now rec-
Assets acquired pursuant to the Danateq Acquisition
ognised under IFRS 16, and gross of amounts capi-
comprised principally customer relationships and en-
talised as intangible assets) (2019: $93,000), and the
terprise software for resale to third parties; the custom-
aggregate net book value of property, plant and equip-
er relationships acquired are being amortised over 10
ment rose from $0.52m to $1.22m.
years. Net of accumulated amortisation for the year,
the net book value of the standalone intangible assets
Trade receivables and contract assets
acquired (i.e. the customer relationships) was approxi-
mately $5.2m at the year end.
Trade receivables
At 31 December 2020 total trade receivables (i.e. in-
cluding long-term receivables) stood at $3.5m (2019:
ANNUAL REPORT
35
$5.5m). Of these receivables, approximately $1.4m
-pected to reverse after more than one year) decreased
has been received since the year end to date.
to $0.31m (2019: $0.51m), reflecting the invoicing pro-
The short-term trade receivables balance at the year
end is analysed as follows:
file of various products and services, principally on PCS.
Fulfilment assets included in contract assets total
$0.15m (2019: $9,000) in respect of short-term assets
(representing costs directly relating to certain con-
tracts to be recognised in profit and loss in the next 12
months); and $0.44m (2019: $nil) in respect of long-
term assets (representing costs directly relating to cer-
tain contracts to be recognised in profit and loss after
one year).
Trade and other payables, provisions and
contract liabilities
The above figures have been adjusted where appropriate for balance
Trade and other payables
sheet reallocations, and exclude contract assets and the associated
incremental revenue.
At the year end, short-term trade payables stood
at $1.1m (2019: $82,000) principally comprising an
Given the wide variety and bespoke nature of the
amount of $0.72m due in respect of sales commissions
Group’s contracts, figures shown for debtor days are
payable. Other short-term payables of $0.28m (2019:
pro forma for illustration only.
Contract assets
$0.44m), were due principally to $0.22m in respect of
staff bonuses and the balance for sundry creditors.
Provisions
Contract assets are recognised relating to support and
maintenance revenue and license fees as invoices are
Short-term provisions include amounts estimated in re-
raised in arrears of the revenue recognition relating to
spect of leave encashment and “gratuity” payments (in
the services being provided. In addition, contract as-
respect of staff leavers in the Group’s Indian subsidiary),
sets include contract fulfilment assets relating to sales
plus sundry expense provisions, in total $79,000 (2019:
commission provisions, the cost of which is amortised
$53,000). Tax provisions of $84,000 (2019: $149,000)
over the life of the corresponding contract.
comprise $60,000 relating to current tax payable and a
deferred tax liability of $24,000.
Short-term contract assets deriving from revenue (i.e.
those which are expected to reverse in less than one
Long-term provisions of $0.17m (2019: $0.12m) relate
year) increased to $0.46m (2019: $0.29m) largely due
solely to amounts estimated in respect of leave encash-
to one license contract signed in the year which had
ment and gratuity payments.
invoicing terms which differed significantly from the un-
derlying performance obligations. Long-term contract
assets deriving from revenue (i.e. those which are ex-
36
ANNUAL REPORT
Contract liabilities
Summary
Contract liabilities represent customer payments re-
Our performance this year represents a year of transi-
ceived in advance of satisfying performance obliga-
tion: the change in the quality of revenue, which now
tions, which are expected to be recognised as revenue
includes major long-term managed service contracts, a
in 2021 and beyond. Short-term contract liabilities de-
solid base of support revenue as well as valuable high
creased to $0.50m (2019: $0.66m) and long-term con-
margin training and other consultancy income, gives us
tract liabilities to $0.21m (2019: $0.27m) as the per-
a sound platform from which to build. Given the geo-
formance conditions in the underlying contracts were
graphic spread of the Group, Brexit had little or no ef-
fect and, whilst we continue to stay abreast of any de-
velopments, we do not anticipate any material impact
arising from the EU-UK Trade and Cooperation Agree-
ment. Whilst COVID-19 provides a continuing cause
for caution across the world, the Group has made an
excellent start to the year, with a material proportion
of the expected revenues for the year underpinned by
recurring and repeating revenue with significant further
change request and other contracts added in the first
quarter. The Board therefore remains optimistic that the
Group is on track to deliver a strong year of growth.
Nic Hellyer
Finance Director
11 April 2021
satisfied.
Statement of Cash Flows
Cash flow and financing
Cash generated by operations before tax payments
amounted to $2.60m (2019: $1.75m), largely resulting
from the realisation of trade receivables (net working
capital inflow of c. $2.2m). As the Group transitions to
a recurring revenue model, more contracts and hence
revenue will be on a quarterly or even monthly billing
cycle and hence we would expect this trend to contin-
ue.
During the year the Group secured financing of ap-
proximately $0.8m (on a term basis over 6 years) in
order to match fund the cost of hardware associated
with the major managed services contract announced
in December 2019. In addition, the FY19 year end
overdraft of $0.17m was repaid. In August the Group
raised c. $2.6m net of expenses by way of an equity
placing. This has supported the Group’s expansion,
both in terms of recruitment (in particular in sales) and
working capital generally.
Net of expenditure on intangibles (principally devel-
opment costs of $2.8m) and the hardware referred
to above, the Group had closing gross cash of $1.8m
(2019: $1.1m). Borrowings amounted to $1.4m (2019:
$0.6m) excluding amounts relating to lease liabilities.
ANNUAL REPORT
37
The s172 Statement that is required to be covered in the Strategic Report is included in the Corporate Governance
review on pages 47 and 49 and is hereby incorporated within the Strategic Report by reference.
The Strategic Report was approved by the Board of Directors on 11 April 2021
On behalf of the Board
Subash Menon
11 April 2021
Nic Hellyer
11 April 2021
38
ANNUAL REPORT
Corporate Governance Review
For the year ended 31 December 2020
Executive Directors
Non-executive Directors
Subash Menon - Managing Director,
CEO and Co-Founder
Richard Day – Chairman (i)(ii)(iii)
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 glob-
al 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 acqui-
sitions 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
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 current-
ly a director of EGS Energy Limited and Chairman of
their special purpose vehicle Eden Geothermal Limit-
ed, which has secured funding to develop and operate
their deep geothermal site in Cornwall. He is also a
director of Alchemac Limited, a UK company with an
aggregates quarrying business in Southern India.
Sudeesh co-founded the Group with Subash in 2013.
Pieter Christiaan Verkade (i)(ii)(iii)
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, FCA
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 trans-
actions including public takeovers, private M&A, IPOs
Pieter serves as an executive director on the board of
Discover Digital International, responsible for Market-
ing and Sales, 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. In addi-
tion, he is Chairman for Andocure (Mobile Advertising)
and UNBOX (behavioural solutions). He was the Chief
Commercial Officer for Unitel in Angola from August
2017 to August 2019. 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 includ-
ed Telenor International, Orange and MTN, where he
was Group Chief Commercial Officer, working across
and other equity fund raisings. Nic joined Pelatro in
both Europe and Africa.
2017 prior to the IPO of the Group in December that
(i) Member of Audit Committee
year. He is also part-time CFO of Byotrol plc, a biocidal
(ii) Member of Remuneration Committee
products company which is also quoted on AIM.
(iii) Member of Nomination Committee
ANNUAL REPORT
39
Statement of compliance with the
2018 QCA Corporate Governance
Code
QCA principles
SECTION 1: DELIVER GROWTH
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 com-
ply with a recognised corporate governance code, the
Board has adopted the 2019 Quoted Companies Alli-
ance 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 sharehold-
ers and stakeholders, with effective and efficient de-
cision-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 prin-
ciples 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 consid-
ered how we apply each principle to the extent that the
Board judges these to be appropriate in the circum-
stances, and below we provide an explanation of the
approach taken in relation to each. The Board consid-
ers that it has complied with the principles of the QCA
Code.
Richard Day
Non-Executive Chairman
Principle 1: Establish a strategy and business mod-
el which promote long-term value for shareholders
As evidenced by continuing progress in winning con-
tracts from new customers as well as new business
from existing customers, Pelatro has an increasing rep-
utation in the MultiChannel Marketing software space.
To deliver this growth and hence promote long-term
value for shareholders, the Board established a clear
three-pronged strategy and business model when the
Group floated on the AIM market in 2017 and identified
the following key areas of operation to focus on improv-
ing on the Group’s performance:
Sales strategy, which encompasses all critical areas
progressively to open up new vistas and enable the
Group to address larger market opportunities while
positioning it as a key player in its chosen space
Diversification strategy to offer complementary ser-
vices
Acquisition-led growth strategy where and when ap-
propriate to expand the business model.
A fuller explanation of how the strategy and business
model have been executed is contained in both the
Company’s Admission Document dated 13th December
2017 and Placing Circular dated 30th July 2018 (which
documents are available to download from the Group
website). As discussed further in the Managing Direc-
tor’s statement this strategy has been evolving, in line
with our growing business and changing operational
landscape and we have moved from a predominantly
licence fee model to one now of more annual recurring
revenues. This helps us work more closely in partner-
ship with our telco customers and is giving us greater
financial visibility over the longer term.
40
ANNUAL REPORT
Principle 2: Seek to understand and meet share-
encouraged to contact the company directly with any
holder needs and expectations
enquiries they may have. Private shareholder events
are usually attended by the CEO and Finance Director,
Introduction
as well as the Chairman.
The Company remains committed to listening and
Analyst research
communicating openly with its shareholders to ensure
that its strategy, business model and performance are
The Group has not commissioned any “paid for” re-
clearly understood. Understanding what analysts and
search from third party analysts and have no current in-
investors think about us, and in turn, helping these
tention of doing so. The Company’s broker Cenkos and
audiences understand our business, is a key part of
equity data distributor Proquote produce research on
driving our business forward and we actively seek di-
the Group which is freely available from their internet
alogue with the market. We do so via investor road-
portal, linked via the “Investors” section of the Pelatro
shows, attending investor conferences, hosting capital
website.
markets days and our regular reporting, remotely when
necessary.
Report and accounts
Institutional shareholders
The Board has ultimate responsibility for reviewing and
approving the Annual Report and Accounts and it has
The Directors actively seek to build a relationship with
considered and endorsed the arrangements for their
institutional shareholders. Shareholder relations are
preparation, under the guidance of its audit committee.
managed by the Chief Executive Officer and Finance
The Directors confirm that the Annual Report and Ac-
Director who make presentations to institutional share-
counts, taken as a whole, is fair, balanced and under-
holders and analysts regularly following the release of
standable and provides the information necessary for
the full-year and half-year results, as well as for any
shareholders to assess the Group’s position and per-
significant strategic developments. The non-executive
formance, business model and strategy.
Chairman and non-executive Director are also avail-
able to meet investors, whenever required.
The Board
Private shareholders
At every Board meeting, the Chief Executive Officer
and the Finance Director provide a summary of the
In normal times private shareholders have had ac-
content of any engagement they have had with inves-
cess to Pelatro presentations through various inves-
tors to ensure that major shareholders’ views are com-
tor events throughout the year which they can attend;
municated to the Board as a whole. The Board is also
whilst this has been curtailed in the last year because
provided with brokers’ and analysts’ reports when pub-
of restrictions on group events, the Directors plan to
lished. This process enables the Chairman and the oth-
address this in the coming year through online events.
er Non-executive Director to be kept informed of major
Private shareholders also have access to selected an-
shareholders’ opinions on strategy and governance,
alysts’ research which is made available to them by
and for them to understand any issues or concerns.
Pelatro through the Group’s website. They are also
ANNUAL REPORT
41
The non-executive Directors are available to discuss
The Group believes that having empowered and re-
any matter stakeholders might wish to raise, and the
sponsible employees who display sound judgment and
Chairman attends meetings with investors and ana-
awareness of the consequences of their decisions or
lysts, as well as professional advisers, as required.
actions, and who act in an ethical and responsible way,
Investors may also make contact requests through the
Company’s broker.
Corporate Social Responsibility
is key to the success of the business.
Principle 3: Take into account wider stakeholder
The Group recognises the increasing importance of
and social responsibilities and their implications
corporate social responsibility and endeavours to take
for longer-term success
it into account when operating its business in the inter-
ests of its stakeholders, including its investors, employ-
Our wider stakeholder group includes our employees,
ees, customers, suppliers, business partners and the
customers, advisers and investors. Engaging with our
communities where it conducts its activities.
stakeholder base strengthens our relationships across
our stakeholder base and helps us make better busi-
The operation of a profitable business is a priority and
ness decisions to deliver on our commitments. The
that means investing for growth as well as providing
Board is regularly updated on wider stakeholder en-
returns to its shareholders. To achieve this, the Group
gagement feedback to stay abreast of stakeholder in-
recognises that it needs to operate in a sustainable
sights into the issues that matter most to them and our
manner and therefore has adopted core principles to
business, and to enable the Board to understand and
its business operations which provide a framework for
consider these issues in decision-making.
both managing risk and maintaining its position as a
Employees
good “corporate citizen”, and also facilitate the setting
of goals to achieve continuous improvement.
Alongside our shareholders, suppliers and customers,
The Group aims to conduct its business with integri-
our employees are important stakeholders in our busi-
ty, respecting the different cultures and the dignity and
ness and the Board therefore closely monitors and re-
rights of individuals in the countries where it operates.
views the performance and satisfaction of our employ-
The Group supports the UN Universal Declaration of
ees through regular dialogue and a regular appraisal
Human Rights and recognises the obligation to pro-
programme as well as other feedback it receives to
mote universal respect for and observance of human
ensure alignment of interests.
rights and fundamental freedoms for all, without dis-
tinction as to race, religion, gender, language or dis-
Pelatro operates an Employee Share Option scheme,
ability.
with options having been granted to some 70 employ-
ees. The Group is still a young, dynamic business and
Customers
is small enough to ensure that each employee is able
to meet with management at any time to discuss busi-
Our success and competitive advantage are dependent
ness-related issues.
upon fulfilling customer requirements. The longevity of
customer relationships is a key part of our strategy, and
an understanding of current and emerging
42
ANNUAL REPORT
requirements of customers enables us to develop new
issues so as to ensure that any adverse effects on the
and enhanced services, together with software to sup-
environment are minimised. It strives to provide and
port the fulfilment of those services. The Group encour-
maintain safe and healthy working conditions, and to
ages feedback from its customers through engagement
keep its entire staff informed of its environmental policy
with individual customers throughout a project. The
whilst encouraging them to consider environmental is-
number of customers has been growing significantly
sues as an everyday part of their role.
over recent years, but the overall number of customers
still allows us to have regular interface with custom-
The Group presents an Environmental, Social and
ers and ensure their needs are appreciated. The team
Governance Report elsewhere in this Annual Report.
holds periodic meetings with every customer to under-
stand and resolve their “pain points” while collecting
Principle 4: Embed effective risk management, con-
valuable feedback on all aspects of business such as
sidering both opportunities and threats, through-
product features, quality of delivery, support and so on.
out the organisation
Health and Safety
The Board has overall responsibility for the Group’s
internal control systems and for monitoring their effec-
The Directors are committed to ensuring the highest
tiveness. The Board, with the assistance of the Audit
standards of health and safety, both for employees and
Committee, maintains a system of internal controls to
for the communities within which the Group operates.
safeguard shareholders’ investment and the Group’s
The Group seeks to exceed legal requirements aimed
assets, and has established a continuous process for
at providing a healthy and secure working environ-
identifying, evaluating and managing the significant
ment to all employees and understands that success-
risks the Group faces.
ful health and safety management involves integrating
sound principles and practice into its day-to-day man-
The Board currently takes the view that an internal au-
agement arrangements and requires the collaborative
dit function is not considered necessary or practical due
effort of all employees. All employees are positively
to the size of the Group and the close day to day con-
encouraged to be involved in consultation and commu-
trol exercised by the executive directors. However, the
nication on health and safety matters that affect their
Board will continue to monitor the need for an internal
work.
Environment
audit function.
Further details of the principal risks faced by the Group,
together with their potential impact and the mitigation
The Directors are committed to minimising the impact
measures in place, are set out in the section titled “Prin-
of the Group’s operations on the environment. The
cipal risks and uncertainties” in this Annual Report. The
Group recognises that its business activities have an
Board believes these risks to be currently the most sig-
influence on the local, regional and global environment
nificant with the potential to impact the Group’s strate-
and accepts that it has a duty to carry these out in an
gy, financial and operational performance and ultimate-
environmentally responsible manner. It is the Group’s
ly, its reputation.
policy to endeavour to meet relevant legal require-
ments and codes of practice on environmental
The Board considers risk to the business on an ongoing
basis and the Group formally reviews and
ANNUAL REPORT
43
documents the principal risks at least annually. Both
is summarised below:
the Board and senior management are responsible for
reviewing and evaluating risk and the executive Direc-
Director
Board
Audit
Remuneration
tors meet on a regular basis to review ongoing trading
Richard Day
performance, discuss budgets and forecasts and any
Nic Hellyer
new risks associated with ongoing trading, the out-
come of which is reported to the Board.
SECTION 2: MAINTAIN A DYNAMIC
MANAGEMENT FRAMEWORK
Principle 5: Maintain the Board as a well-function-
ing balanced team led by the Chair
The Board is responsible to the shareholders and sets
the Group’s strategy for achieving long-term success.
It is ultimately responsible for the management, gov-
ernance, controls, risk management, direction and
performance of the Group. The members of the Board
have a collective responsibility and legal obligation to
promote the interests of the Group and are collective-
ly responsible for defining corporate governance ar-
rangements. Ultimate responsibility for the quality of,
and approach to, corporate governance lies with the
chairman of the Board, Richard Day. The Chairman
also ensures effective communication with sharehold-
ers and facilitates the effective contribution of the other
non-executive Director.
The Board consists of five directors of which three are
executive and two are independent non-executives.
The Board is supported by three committees: audit,
remuneration and nomination. Non-executive directors
are required to attend all Board meetings (usually in
London, although with current COVID-19 restrictions
these have mainly been via video conferencing host-
ed from London) and to be available at other times as
required for face-to-face and telephone meetings with
the executive team and investors. In addition, they at-
tend Board committee meetings as required. Meetings
held during 2020 and the attendance of Directors
6
6
5
5
4
2
2
n/a
2
n/a
1
n/a
n/a
1
n/a
Subash Menon
Pieter Verkade
Sudeesh Yezhuvath
To enable the Board to discharge its duties, all Direc-
tors receive appropriate and timely information. Brief-
ing 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 Direc-
tor (who is also Company Secretary): he is responsible
for ensuring that the Board procedures are followed,
and that applicable rules and regulations are complied
with. In addition, 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.
The Board encourages the ownership of shares in the
Company by executive and non-executive Directors
alike and in normal circumstances does not expect Di-
rectors 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 shareholders. The Board will period-
ically review the shareholdings of the non-executive
Directors and will seek guidance from its advisers if, at
any time, it is concerned that the shareholding of any
non-executive Director may, or could appear to, con-
flict with their duties as an independent non-executive
Director of the Company or their independence itself.
Directors’ emoluments, including Directors’ interests in
shares and options over the Company’s share capital,
are set out in the Report of the Directors.
44
ANNUAL REPORT
The Company has adopted a code for directors’ and
Principle 7: Evaluate board performance based on
employees’ dealings in securities which is appropriate
clear and relevant objectives, seeking continuous
for a company whose securities are traded on AIM and
improvement
which is in accordance with Rule 21 of the AIM Rules
and the Market Abuse Regulations.
The effectiveness of the Board is reviewed by the
Chairman on an annual basis. As a quoted company,
Principle 6: Ensure that between them the Direc-
we have an obligation to keep the market informed
tors have the necessary up-to-date experience,
of material developments and hence we are in regu-
skills and capabilities
lar contact with our Nomad and Broker. As part of this
The Board currently comprises three executive and
on the effectiveness of the Board which they confirmed
two non-executive Directors with an appropriate bal-
was satisfactory. We asked the same of our UK law-
ance of sector, financial and public market skills and
yers Memery Crystal and received similar confirmation.
yearly review, we specifically asked them their opinion
experience. The skills and experience of the Board are
set out in their biographical details above. The expe-
As an AIM company, we are required to adopt a rec-
rience and knowledge of each of the Directors gives
ognised corporate governance code and we have ad-
them the ability constructively to challenge the strate-
opted ours from the Quoted Companies Alliance. As
gy and to scrutinise performance. The Board also has
a Board, we have also recently conducted an annual
access to a network of external advisers and receive
evaluation of the Board, led by the Chairman, in accor-
regular briefings on legal, accounting and regulatory
dance with the recommendation from the FRC and with
matters from these advisers where necessary to keep
reference to the FRC guidance on the list of questions
their skills and knowledge base up to date.
a board should be asking of themselves.
Executive and non-executive Directors are subject to
We have three committees, being Audit, Remuneration
re-election intervals as prescribed in the Company’s Ar-
and Nomination. Given the size of our board with only
ticles of Association. At each Annual General Meeting
two NEDs, the NEDs sit on each committee. Richard
one-third of the Directors, who are subject to retirement
Day is Chairman of Audit and Remuneration, and Pi-
by rotation shall retire from office. They can then offer
eter Verkade is Chairman of Nomination. The QCA
themselves for re-election. The executive directors are
consider it is unusual for the Chairman of an AIM com-
employed under service contracts requiring 12 months’
pany also to be Chairman of the Remco; however, this
notice (by either party) in the case of Subash Menon
was discussed with our Nomad and investors when we
and Sudeesh Yezhuvath, and three months’ notice in
floated in 2017. Richard Day is also a member of the
the case of Nic Hellyer. The non-executive director and
QCA group which recently produced the new version of
the Chairman receive payments under appointment
the QCA Remuneration Code.
letters which are terminable on three months’ notice.
These committees are required to act independently
of the executive of the Board and indeed may need
at times to be in conflict with the executive members.
Because of the respective experience and qualities of
the NEDs, they are considered by our Nomad to have
sufficient qualities to fulfil these roles.
ANNUAL REPORT
45
Principle 8: Promote a corporate culture that is
The Chairman, Richard Day, is responsible for lead-
based on ethical values and behaviours
ership of the Board, ensuring its effectiveness on all
aspects of its role, setting its agenda and ensuring that
The Group adopts a policy of equal opportunities in the
the Directors receive accurate, timely and clear infor-
recruitment and engagement of staff as well as during
mation. The Chairman also ensures effective commu-
the course of their employment. It endeavours to pro-
nication with shareholders and facilitates the effective
mote the best use of its human resources on the ba-
contribution of the other non-executive Director. Sub-
sis of individual skills and experience matched against
ash Menon, as Chief Executive Officer, is responsible
those required for the work to be performed.
for the operational management of the Group and the
implementation of Board strategy and policy. By divid-
The Group recognises the importance of investing in
ing responsibilities in this way, no one individual has
its employees and, as such, the Group provides op-
unfettered powers of decision-making.
portunities for training and personal development
and encourages the involvement of employees in the
There is a formal schedule of matters reserved for de-
planning and direction of their work. These values are
cision by the Board in place which enables the Board
applied regardless of age, race, religion, gender, sex-
to provide leadership and ensure effectiveness. Such
ual orientation or disability. The Group recognises that
matters include business strategy and management,
commercial success depends on the full commitment
financial reporting (including the approval of the annual
of all its employees and commits to respecting their
budget), Group policies, corporate governance mat-
human rights, to provide them with favourable working
ters, major capital expenditure projects, material ac-
conditions that are free from unnecessary risk and to
quisitions and divestments and the establishment and
maintain fair and competitive terms and conditions of
monitoring of internal controls.
service at all times.
The appropriateness of the Board’s composition and
In regard to how ethical values are recognised and
corporate governance structures are reviewed through
respected, we are this year for the first time includ-
the ongoing Board evaluation process and on an ad
ing a specific Environmental, Social and Governance
hoc basis by the Chairman together with the other
section in this Annual Report. We aim to conduct our
Directors, and these will evolve in parallel with the
business with integrity, respecting the different cultures
Group’s objectives, strategy and business model as
and the dignity and rights of individuals in the countries
the Group develops.
where we operate. We support the UN Universal Dec-
laration of Human Rights and recognise the obligation
Board committees
to promote universal respect for and observance of
human rights and fundamental freedoms for all, with-
The Board has established Audit, Nomination and Re-
out distinction as to race, religion, gender, language or
muneration Committees.
disability. All the board have a responsibility to ensure
we follow appropriate ethical values.
The Audit Committee has Richard Day as Chairman
and has primary responsibility for monitoring the quali-
Principle 9: Maintain governance structures and
ty of internal controls, ensuring that the financial perfor-
processes that are fit for purpose and support
mance of the Group is properly measured and reported
good decision-making by the Board
on, and for reviewing reports from the Group’s
46
ANNUAL REPORT
auditors relating to the Group’s accounting and internal controls, in all cases having due regard to the interests of
shareholders. The Audit Committee meets at least twice a year. Pieter Verkade is the other member of the Audit
Committee. A report on the duties of the Audit Committee and how it discharges its responsibilities is set out below.
The Remuneration Committee has Richard Day as Chairman, and reviews the performance of the Executive Direc-
tors, and determines their terms and conditions of service, including their remuneration and the grant of options, hav-
ing due regard to the interests of shareholders. The Remuneration Committee meets as necessary. Pieter Verkade is
the other member of the Remuneration Committee. Details of the activities and responsibilities of the Remuneration
Committee are set out below.
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 2020 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 frequent dialogue with all of its stakeholders, both in person and through formal channels
such as the Annual Report (which, inter alia, contains details of the work of the Board and the various committees
during the year) and the London Stock Exchange Regulatory News Service.
ANNUAL REPORT
47
s.172 statement
For the year ended 31 December 2020
Companies Act 2006 s. 172 statement
The Board acknowledges its responsibilities under the Companies Act 2006 (the “Act”) and below sets out the re-
quirements 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 performance and position of the Company, alongside 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.
Decisions of the Board take into account not just short-term, but also medium- and long-term consequences, which
are carefully considered and balanced, having regard to the needs and priorities of the business, its customers, part-
ners, employees and other stakeholders. For example, the decision to prioritise recurring revenue contracts as op-
posed to license contracts, leading to a 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.
Factors (a) to (f) below, are all taken into account during the decision-making process.
(a) The likely consequences of any decision in the long term
Supporting each key decision, the Board are given access to management papers which set out the potential out-
come 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” (travel restrictions permitting) 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, investor
relations and so on.
(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 innova-
tion and customer service, which is a product of motivated employees. This year in particular has been challenging
for all employees, both corporately and personally, and our efforts to address this are set out in the section entitled
“Proactively managing human capital during the pandemic”.
48
ANNUAL REPORT
(c) The need to foster the Company’s business relationships with suppliers, customers and others
Pelatro’s success also depends on strategic relationships with key partners, customers and suppliers, so the Board
maintains ongoing oversight of these. Management packs report to the Board on the status of key relationships,
which have Board-level engagement from an operational perspective through the CEO and the COO. Product per-
formance 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. In normal times employees typically would travel for three
activities – sales, implementation and support. With regard to sales, whilst traveling is essential and much more help-
ful to progress various cases, video conferencing as a tool can replace physical meetings to a limited extent. 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; in
fact the Group has managed successfully to transition almost entirely to remote implementation this year with a con-
sequent reduction of both costs and environmental impact. Further information on our environmental impact and the
steps being taken to mitigate it are set out in our Environmental, Social and Governance report.
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 backs its employees’ interests in community activities, supporting
them in terms of time to attend to these commitments and financial backing. Of particular note is the Group’s commit-
ment to employing graduates and others from local second-tier villages in India, hence enabling us to make a major
contribution to the overall quality of lives of our employees which may otherwise be out of their reach.
The Board’s adoption and application of the QCA Corporate Governance Code further supports these principles,
with more detail of the steps Pelatro has taken set out in the disclosures against the relevant Principles of the Code,
which can be found in the section on Corporate Governance and on the Pelatro website at https://www.pelatro.com/
investors/corporate-governance/.
(e) The desirability of the Group maintaining a reputation for high standards of business conduct
The Directors and the Group are committed to high standards of business conduct and governance. The Group has
fully adopted the QCA Corporate Governance Code. Additionally, where there is a need to seek advice on particular
issues, the Board will seek advice from its lawyers and/or nominated adviser to ensure the consideration of business
conduct, and its reputation is maintained.
ANNUAL REPORT
49
(f) 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. We
intend to enhance this contact this coming year by increasing use of online platforms giving private investors access
to the management team.
Through its advisers, the Directors seek and obtain feedback from meetings with 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.
50
ANNUAL REPORT
Audit Committee Report
For the year ended 31 December 2020
Dear Shareholder
As Chairman of Pelatro’s Audit Committee, I present the Audit Committee Report for the year ended 31 December
2020, 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;
•
keep the need for an internal audit function under review, having regard to the Company’s strategy and resources
ANNUAL REPORT
51
Audit committee and attendance
Objectives and responsibilities
The Audit Committee comprises Richard Day and Piet-
The Committee is responsible for monitoring the in-
er Verkade. The Board considers that Richard Day has
tegrity of the Group’s financial statements, including
sufficient relevant financial experience to chair the Au-
its Annual and Interim Reports, preliminary results an-
dit Committee given that he has worked for more than
nouncements and any other formal announcements
25 years in corporate finance, first at Cazenove & Co
relating to its financial performance prior to release.
(now JP Morgan Cazenove) and then at institutional
The Committee’s main responsibilities can be sum-
stockbrokers Arden Partners plc, where he was Head
marised as follows:
of Corporate Finance for most of his time there. He is
a qualified solicitor and was chief financial officer from
•
to review the Company’s internal financial controls
2015 to 2020 at iEnergizer Limited, quoted on the AIM
and risk management systems;
market of the London Stock Exchange. Pieter Verkade
•
to monitor the integrity of the financial statements
holds a Bachelor’s degree in business economics and
and any formal announcements relating to the
has held a number of controller and management ac-
Group’s financial performance, reviewing signifi-
countant roles in AT&T and Telenor, culminating in the
cant judgements contained in them;
CFO role for KPN Orange in Belgium.
•
to make recommendations to the Board in relation
to the appointment of the external auditors and to
The Committee is required by its terms of reference to
recommend to the Board the approval of the re-
meet at least twice a year. During the year, the Commit-
muneration and terms of engagement of the ex-
tee met twice. In addition, Nic Hellyer, Finance Direc-
ternal auditors;
tor, attended both Committee meetings by invitation.
•
to review and monitor the external auditors’ in-
dependence and objectivity, taking into consid-
eration relevant UK professional and regulatory
requirements;
•
to develop and implement policy on the engage-
ment of the external auditors to supply non-audit
services, taking into account relevant ethical guid-
ance regarding the provision of non-audit services
by the external auditors; and
•
to report to the Board, identifying any matters in
respect of which it considers that action or im-
provement is needed, and to make recommenda-
tions as to steps to be taken.
The terms of reference are reviewed annually and are
available on the Company’s website at pelatro.com/
investors.
52
ANNUAL REPORT
Significant issues considered during
the year
During the year, the Committee:
•
reviewed and approved the annual audit plan and
met with the external auditors to receive their find-
ings and report on the annual audit;
whether there was any indication that those assets had
suffered any impairment. The Audit Committee consider
the key judgements to be the discount rate and growth
rates used in the value in use calculations. Following a
review of the impact of the sensitivities performed by
management on the discount rate and growth rate in
the value in use calculations, the Audit Committee con-
sidered that the rates used were reasonable and indi-
•
considered significant issues and areas of judge-
cated no impairment.
ment with the potential to have a material impact
on the financial statements, including impairments
of the Group’s investments and technologies;
•
considered the integrity of the published financial
information and whether the Annual Report and
Accounts taken as a whole are fair, balanced and
understandable and provide the information nec-
essary to assess the Group’s position and perfor-
mance, business model and strategy; and
The Committee also reviewed the basis of capitalisa-
tion and considered the intangible value attributed to its
intangible software development costs. The Committee
was satisfied that the resultant net book values were
appropriately prepared on a reasonable basis.
Going Concern
•
reviewed and approved the interim and year end
The Committee reviewed the cash flow forecasts for
results and accounts.
the Group and discussed the key assumptions and
risks relevant to their achievement. The Committee was
The significant accounting areas and judgements con-
satisfied that the basis for adopting the going concern
sidered by the Committee were:
Recoverability of trade receivables
basis in preparing the Group and Company financial
statements, set out in note 3, was reasonable.
Alternative performance measures
The Committee continued to review the track record
of receipts from slow-paying debtors and sought regu-
The Group reports a number of performance measures
lar updates from management as to the status of trade
which are not in accordance with the reporting require-
receivables. In light of this, the Committee reviewed
ments of IFRS. The audit committee has reviewed these
and accepted management proposals that no impair-
during the year ended 31 December 2020 to ensure
ment of trade receivables was required (other than as
they are appropriate and that in each case the reason
required by IFRS 9) and was satisfied that the trade
for their use is clearly explained; they are reconciled
receivables balance was fairly stated.
to the equivalent IFRS figure; and they are not given
prominence over the equivalent IFRS figure.
Carrying value of goodwill and other intangible as-
sets
Risk review process
The Audit Committee reviewed the judgements taken
in the impairment review performed for each of the
Group’s two cash generating units to determine
The Audit Committee is responsible for reviewing the
financial risks and the internal controls relating thereto
but the Board as a whole has responsibility for reviewing
the overall business risks and risk management frame-
ANNUAL REPORT
53
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
The Committee reviewed the effectiveness of the audit process in respect of the year ended 31 December 2019.
In doing so, the Committee considered the reports produced by Crowe, met the audit engagement partner and dis-
cussed the audit with the Finance Director. The Committee continues to be satisfied that the external auditors are
delivering the necessary scrutiny and robust challenge in their work. Accordingly, the Committee recommended to
the Board that it is appropriate to re-appoint Crowe as the Group’s external auditors for the next financial year.
External audit and non-audit services
During the year, Crowe provided tax advisory services in respect of FY19. However, the Financial Reporting Coun-
cil’s Revised Ethical Standard 2019 became effective on 15 March 2020, and accordingly Crowe was precluded from
providing such services in respect of FY20 and another firm was engaged by the Group in respect of those services.
Richard Day
Chairman of the Audit Committee
11 April 2021
54
ANNUAL REPORT
Directors’ Report
For the year ended 31 December 2020
Remuneration Committee Report
Dear Shareholder
As Chairman of Pelatro’s Remuneration Committee, I present the Remuneration Committee Report for the year end-
ed 31 December 2020, 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 arrange-
ments.
Consistent with this policy, benefit packages awarded to executive directors comprise a mix of basic salary and per-
formance-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.
ANNUAL REPORT
55
Remuneration decisions for 2020
Notwithstanding the difficult trading conditions encountered this year from the COVID-19 pandemic, significant prog-
ress has still been made across the business. However, both Subash Menon and Sudeesh Yezhuvath declined to
take a bonus payment this year, until the trading conditions we face are on a more normalised footing. A bonus was
paid to Nic Hellyer in regard to significant progress made in aligning market expectations more in line with our evolv-
ing strategy of focussing more on annual recurring revenues. A payment was also made in respect of work undertak-
en outside the usual terms of his contract. No performance bonuses were granted during the year.
Richard Day
Chairman of the Remuneration Committee
11 April 2021
56
ANNUAL REPORT
Directors’ Report
The Directors present their annual report on the affairs
Reporting Standards (IFRSs) as adopted by the EU
of the Group, together with the consolidated financial
and applicable law.
statements and independent auditor’s report, for the
year ended 31 December 2020.
Under company law the Directors must not approve the
Principal activities
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Company and the Group and of the profit or loss of the
The Pelatro Group provides specialised, enterprise
Group for that period.
class software solutions, principally through its flagship
software suite mViva, to telecommunication companies
In preparing these financial statements, the Directors
(“telcos”), who face a series of challenges including
are required to:
market maturity, saturation and customer churn. Pela-
tro’s software enhances the telco’s understanding of
•
select suitable accounting policies and then apply
its customers and hence its engagement with them, in-
them consistently;
creasing revenue enhancement, enabling smart pricing
• make judgements and accounting estimates that
bundling, predicting churn and plugging revenue leak-
are reasonable and prudent.
ages. The software can be extended further to enable
•
state whether applicable accounting standards
data monetisation.
have been followed, subject to any material de-
partures disclosed and explained in the financial
Pelatro is well positioned in the Multichannel Marketing
statements; and
Hub space (MMH) - this is technology that orchestrates
•
prepare the financial statements on the going con-
a customer’s communications and offers to customer
cern basis unless it is inappropriate to presume
segments across multiple channels to include web-
that the Company will continue in business.
sites, social media, apps, SMS, USSD and others.
Further information on the Group’s activities, its pros-
accounting records that are sufficient to show and ex-
pects and likely future developments is given in the
plain the Company’s transactions and disclose with
sections titled “Strategic Report” and “Financial State-
reasonable accuracy at any time the financial posi-
The Directors are responsible for keeping adequate
ments”.
tion of the Company and enable them to ensure that
the financial statements comply with the requirements
Directors’ responsibilities
of the Companies Act 2006. They are also responsi-
ble for safeguarding the assets of the Company and
The Directors are responsible for preparing the annual
hence for taking reasonable steps for the prevention
report and the financial statements for each financial
and detection of fraud and other irregularities. They are
year in accordance with applicable law and regula-
further responsible for ensuring that the Report of the
tions. Company law requires the Directors to prepare
Directors and other information included in the Annual
financial statements for each financial year. Under that
Report and Financial Statements is prepared in accor-
law the Directors have elected to prepare the financial
dance with applicable law in the United Kingdom.
statements in accordance with International Financial
ANNUAL REPORT
Website publication
57
The Directors at 31 December 2020 and their beneficial
interests in the share capital of the Company were as
The maintenance and integrity of the Pelatro Plc web
follows:
site, which includes compliance with AIM Rule 26, is
the responsibility of the Directors; the work carried out
Name of Director
Number of Ordinary
Shares of 2.5p each
Options over Ordinary
shares
by the auditor does not involve the consideration of
these matters and, accordingly, the auditor accepts no
responsibility for any changes that may have occurred
Subash Menon 1
9,684,244
Sudeesh Yezhuvath 1
3,309,309
in the accounts since they were initially presented on
Richard Day
the website.
Financial instruments
Nic Hellyer 2
Pieter Verkade
19,457
105,000
-
-
-
-
17,000
-
Information about the use of financial instruments by
the Company and its subsidiaries and the Group’s fi-
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 op-
tions over ordinary shares are unvested
nancial risk management policies are given in note 28
No changes took place in the beneficial interests of
of the financial statements.
the Directors between 31 December 2020 and 11 April
Directors and their interests
2021.
The Directors who served during the year are as shown
ber 2020 was 38p and the range during the year was
below:
27p to 70p.
The market price of the Ordinary Shares at 31 Decem-
Subash Menon Managing Director
Sudeesh Yezhuvath
Executive Director
Substantial shareholdings
Richard Day
Chairman
As at 11 April 2021, the Company had received notifica-
Nic Hellyer
Finance Director
Pieter Verkade Non-Executive
tion of the following significant interests in the ordinary
share capital of the Company*:
In accordance with the Company’s articles Pieter Ver-
Name of Holder
Number of
Ordinary Shares
Percentage of Issued
Share Capital
kade will retire by rotation at the Annual General Meet-
Bannix Management LLP*
12,993,553
35.1%
ing and, being eligible, will offer himself for re-election.
Chelverton Asset
Management
Rathbones Investment
Management
Herald Investment
Management
1,725,000
1,615,626
1,561,986
4.7%
4.4%
4.2%
* Bannix Management LLP (“Bannix”) is the investment vehicle of Kiran Me-
non, Varun Menon and Sudeesh Yezhuvath, who hold shares in Bannix pro-
portional to the interests shown in “Directors’ interests” above
58
ANNUAL REPORT
Corporate governance
which is periodically undertaken by the Board
The Company has formalised the following matters by
• main control procedures, which include the setting
Board resolution:
•
•
a formal schedule of Board responsibilities;
the procedure for Directors to take independent
professional advice if necessary, at the Company’s
expense;
of annual and longer-term budgets and the month-
ly reporting of performance against them, agreed
treasury management and physical security proce-
dures, formal capital expenditure and investment
appraisal approval procedures and the definition of
authorisation limits (both financial and otherwise).
•
the procedure for the nomination and appointment
• monitoring, particularly through the regular review
of non-executive Directors, for specified periods
and without automatic re-appointment; and
•
establishment of and written terms of reference for
an audit, nomination and remuneration committees
Internal control
The Board has overall responsibility for ensuring that
of performance against budgets and the progress
of development and sales undertaken by the Board.
The Board reviews the operation and effectiveness of
this framework on a regular basis. The Directors con-
sider that there have been no weaknesses in internal
controls that have resulted in any losses, contingencies
or uncertainties requiring disclosures in the financial
the Group maintains a system of internal control to pro-
statements.
vide its members with reasonable assurance regard-
ing the reliability of financial information used within
Going concern
the business and for publication, and that assets are
safeguarded. There are inherent limitations in any sys-
tem of internal control and accordingly even the most
effective system can provide only reasonable, and not
absolute, assurance with respect to the preparation of
accurate financial information and the safeguarding of
assets.
The key features of the internal control system that
operated throughout the year are described under the
following headings:
•
control environment - particularly the definition
of the organisation structure and the appropriate
delegation of responsibility to operational manage-
ment
•
identification and evaluation of business risks and
control objectives - particularly through a formal
process of consideration and documentation of
risks and controls
The Group’s business activities, together with the fac-
tors likely to affect its future development, performance
and position are set out in the Strategic Report; the fi-
nancial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the
notes to the financial statements, in particular in the
consolidated cash flow statement, in Note 23 “Loans
and borrowings” and Note 28 “Financial instruments”.
The financial statements have been prepared on a go-
ing 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.
ANNUAL REPORT
59
Events after the reporting date
Coronavirus/COVID-19
There have been no significant events which have oc-
Whilst the Group suffered some impact of in-country
curred subsequent to the reporting date.
restrictions during the year due to the coronavirus pan-
Research and development
lifted in the principal countries in which the Group op-
Details of the Group’s activities on research and de-
the part of our customers and the global rollout of vac-
velopment during the year are set out in the Financial
cination programmes, means that the Directors consid-
erates. This, as well as a gradual “return to normal” on
demic, such restrictions have now been partly or fully
Review.
Auditor
er that coronavirus no longer presents a material risk
to the Group.
Each of the persons who are Directors of the Compa-
ny at the date when this report was approved confirms
that:
By order of the Board
•
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
Nic Hellyer
of any relevant audit information (as defined in
Company Secretary
the Companies Act 2006) and to establish that the
49 Queen Victoria Street
Company’s auditor is aware of that information.
London
EC4N 4SA
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
11 April 2021
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 rela-
tion to the Group.
60
ANNUAL REPORT
Independent Auditors’ Report
For the year ended 31 December 2020
Opinion
• the financial statements have been prepared in
accordance with the requirements of the Companies
We have audited the financial statements of Pelatro
Plc (the “Parent Company”) and its subsidiaries (the
“Group”) for the year ended 31 December 2020, which
Act 2006.
Basis for opinion
comprise:
•
the Group statement of comprehensive income for
the year ended 31 December 2020;
•
the Group and Parent Company statements of fi-
nancial position as at 31 December 2020;
•
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
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
The financial reporting framework that has been applied
in the preparation of the parent company financial state-
ments is applicable law and United Kingdom Account-
ing Standards, including Financial Reporting Standard
101 Reduced Disclosures Framework (UKGAAP).
In our opinion:
•
the financial statements give a true and fair view
of the state of the Group’s and of the Parent Com-
pany’s affairs as at 31 December 2020 and of the
Group’s loss for the year then ended;
•
the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by
the European Union;
•
the Parent Company financial statements have
been properly prepared in accordance with UK-
GAAP; and
We conducted our audit in accordance with Internation-
al Standards on Auditing (UK) (ISAs (UK)) and appli-
cable law. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for
the audit of the financial statements section of our re-
port. We are independent of the Group in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including
the FRC’s Ethical Standard, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a
basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have conclud-
ed that the directors’ use of the going concern basis
of accounting in the preparation of the financial state-
ments is appropriate. Our evaluation of the directors’
assessment of the ability of the Group and Parent
Company to continue to adopt the going concern basis
of accounting included the following procedures:
• Obtaining the directors’ assessment of going con-
cern which covered the period to 31 December
2022 and included a range of scenarios
• Evaluating the reasonableness of the assumptions
used in the assessment including obtaining details
of the latest sales pipeline and the current cash
position
• Considering the plausibility of potential actions
that the directors could take to preserve cash in a
‘worst case scenario’ position.
ANNUAL REPORT
61
Based on the work we have performed, we have not
We agreed with the Audit Committee to report to it all
identified any material uncertainties relating to events
identified errors in excess of $2,400. Errors below that
or conditions that, individually or collectively, may cast
threshold would also be reported to it if, in our opin-
significant doubt on the group and parent company’s
ion as auditor, disclosure was required on qualitative
ability to continue as a going concern for a period of
grounds.
at least twelve months from when the financial state-
ments are authorised for issue.
Overview of the scope of our audit
Our responsibilities and the responsibilities of the di-
Whilst the Parent Company’s activity and accounting is
rectors with respect to going concern are described in
in the United Kingdom, the main activity of the Group is
the relevant sections of this report.
accounted for from its operating location in India.
Overview of our audit approach
In establishing our overall approach to the Group audit,
Materiality
we determined the type of work that needed to be under-
taken at each of the components by us, as the primary
audit engagement team. For the full scope components
In planning and performing our audit we applied the
in Singapore and India where the finance functions
concept of materiality. An item is considered material
were carried out in India work was performed by a local
if it could reasonably be expected to change the eco-
audit team in India under our direction. The local audit
nomic decisions of a user of the financial statements.
team were from a Crowe Global network firm. We de-
We used the concept of materiality to both focus our
termined the appropriate level of involvement to enable
testing and to evaluate the impact of misstatements
us to determine that sufficient audit evidence had been
identified.
obtained as a basis for our opinion on the Group as a
whole. We discussed the risks of material misstatement
Based on our professional judgement, we determined
with the subcontracting auditor.
overall materiality for the Group financial statements
as a whole to be $80,000, based on approximately 5%
The primary team led by the Senior Statutory Auditor
of group adjusted operating loss, a key reporting metric
was ultimately responsible for the scope and direc-
(2019: $90,000 based on 5% of group adjusted profit).
tion of the audit process. The primary team interacted
regularly with the local team where appropriate during
We use a different level of materiality (“performance
various stages of the audit, reviewed relevant working
materiality”) to determine the extent of our testing for
papers and were responsible for the scope and direc-
the audit of the financial statements. Performance ma-
tion of the audit process. As part of the audit and due to
teriality is set based on the audit materiality as adjust-
COVID-19 travel restrictions the Senior Statutory Audi-
ed for the judgements made as to the entity risk and
tor had meeting calls with both local management and
our evaluation of the specific risk of each audit area
the local audit team. This, together with the additional
having regard to the internal control environment.
procedures performed at Group level, gave us appro-
priate evidence for our opinion on the Group financial
Where considered appropriate performance materiality
statements.
may be reduced to a lower level, such as, for related
party transactions and directors’ remuneration.
62
Key audit matters
ANNUAL REPORT
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
We identified going concern as a key audit matter and have detailed our response in the conclusions relating to going
concern section above.
This is not a complete list of all risks identified by our audit.
Key audit matter
How the scope of our audit addressed the key audit matter
Revenue recognition
We selected a sample of contracts to ensure that the performance
obligations had been correctly identified, the transaction price allocated
The Group’s operating revenue arises from mViva products.
appropriately and evidence existed of
the satisfaction of
those
Customer contracts can contain multiple different performance
performance obligations before revenue was recognised. For support
obligations with different revenue recognition points. We considered
and maintenance revenue recognised over time we reperformed the
the risk that the incorrect application of the policy could result in
calculation on the recognition of revenue for a sample of contracts.
material error.
Capitalisation of development costs
We obtained an understanding of the processes and controls over the
recognition of research and development expenses.
As disclosed in note 18, the Group has capitalised approximately
$2.9 million of development costs relating to the development of
We have evaluated the appropriateness of the capitalisation of the
the mViva product.
development expenditure by discussing with management and obtaining
We have focussed on this because research and development
the year, we challenged management to ensure that the developments
represents a significant part of this business and judgement is
were capital in nature and did not relate to routine software maintenance.
required in determining the appropriate accounting treatment.
As part of this work we met with the Head of Technology. Tests of detail
a technical overview of the developments made to the mViva software in
The Directors use judgement to determine whether research and
included:
development costs should be expensed or whether they meet the
•
testing the allocation of overhead costs to capitalised development
criteria for capitalisation. This criteria includes assessing whether
costs for mathematical accuracy and reasonableness including
the product being developed is commercially feasible, whether
challenging whether the overheads were directly attributable to the
the Group has adequate technical, financial and other required
software development and agreeing underlying data to headcount
resources to complete the development and whether the costs will
information;
be fully recovered through future sale or licensing of the product.
•
On a sample basis, we tested the amounts allocated to development
The Directors determined that the development costs meet the
costs to underlying payroll records and invoices; and
criteria for capitalisation.
•
Reviewing the pipeline of potential work to assess whether the
software still has commercial potential.
The capitalisation of intangibles is included within note 4 as an
area of critical accounting estimate and judgement. The accounting
policy for intangibles is outlined in note 3.
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.
ANNUAL REPORT
63
Other information
Matters on which we are required to report by ex-
The other information comprises the information in-
ception
cluded in the annual report including the Strategic and
In light of the knowledge and understanding of the
Governance reports set out on pages 7 to 59, other
Group and the Parent Company and their environment
than the financial statements and our auditor’s report
obtained in the course of the audit, we have not iden-
thereon. The directors are responsible for the other
tified material misstatements in the strategic report or
information. Our opinion on the financial statements
the Directors’ report.
does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do
We have nothing to report in respect of the following
not express any form of assurance conclusion thereon.
matters where the Companies Act 2006 requires us to
In connection with our audit of the financial statements,
report to you if, in our opinion:
our responsibility is to read the other information and,
in doing so, consider whether the other information is
•
adequate accounting records have not been kept
materially inconsistent with the financial statements or
by the Parent Company, or returns adequate for
our knowledge obtained in the audit or otherwise ap-
our audit have not been received from branches
pears to be materially misstated. If we identify such
not visited by us; or
material inconsistencies or apparent material misstate-
•
the Parent Company financial statements are not
ments, we are required to determine whether there is
in agreement with the accounting records and re-
a material misstatement in the financial statements or
turns; or
a material misstatement of the other information. If,
•
certain disclosures of Directors’ remuneration
based on the work we have performed, we conclude
specified by law are not made; or
that there is a material misstatement of the other infor-
• we have not received all the information and expla-
mation, we are required to report that fact.
nations we require for our audit.
We have nothing to report in this regard.
Responsibilities of the Directors for the financial
Opinion on other matters prescribed by the Com-
panies Act 2006
statements
As explained more fully in the Directors’ responsibil-
ities statement set out on page 63, the Directors are
In our opinion based on the work undertaken in the
responsible for the preparation of the financial state-
course of our audit:
ments and for being satisfied that they give a true and
fair view, and for such internal control as the Directors
•
the information given in the strategic report and
determine is necessary to enable the preparation of
the Directors’ report for the financial year for which
financial statements that are free from material mis-
the financial statements are prepared is consistent
statement, whether due to fraud or error.
with the financial statements; and
•
the Directors’ report and strategic report have been
In preparing the financial statements, the Directors
prepared in accordance with applicable legal re-
are responsible for assessing the Group’s and Parent
quirements.
Company’s ability to continue as a going concern, dis-
closing, as applicable, matters related to going concern
64
ANNUAL REPORT
and using the going concern basis of accounting un-
outcome. Our audit procedures to respond to these
less the Directors either intend to liquidate the group or
risks included enquiries of management about their
the Parent Company or to cease operations, or have
own identification and assessment of the risks of irreg-
no realistic alternative but to do so.
ularities, sample testing on the posting of journals and
reviewing accounting estimates for bias.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements,
even though we have properly planned and performed
our audit in accordance with auditing standards. We
are not responsible for preventing non-compliance and
cannot be expected to detect non-compliance with all
laws and regulations.
These inherent limitations are particularly significant in
the case of misstatement resulting from fraud as this
may involve sophisticated schemes designed to avoid
detection, including deliberate failure to record trans-
actions, collusion or the provision of intentional misrep-
resentations.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/audi-
torsresponsibilities. This description forms part of our
auditor’s report.
Auditor’s responsibilities for the audit of the finan-
cial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of
assurance but is not a guarantee that an audit con-
ducted in accordance with ISAs (UK) will always de-
tect a material misstatement when it exists. Misstate-
ments 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 de-
cisions of users taken on the basis of these financial
statements.
Irregularities,
including
fraud, are
instances of
non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, in-
cluding fraud is detailed below:
We obtained an understanding of the legal and regu-
latory frameworks within which the company operates,
focusing on those laws and regulations that have a
direct effect on the determination of material amounts
and disclosures in the financial statements. The laws
and regulations we considered in this context were the
relevant company law and taxation legislation in the
UK and India, the Group’s primary operating locations.
We identified the greatest risk of material impact on
the financial statements from irregularities, including
fraud, to be the override of controls by management
and the inappropriate use of accounting estimates and
judgements to achieve a particular financial reporting
ANNUAL REPORT
Use of our report
65
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
11 April 2021
66
ANNUAL REPORT
Group Statement of Comprehensive Income
For the year ended 31 December 2020
Revenue
Cost of sales and provision of services
Gross profit
Adjusted administrative expenses
Adjusted operating profit/(loss)
Exceptional items
Amortisation of acquisition-related intangibles
Share-based payments
Operating profit/(loss)
Finance income
Finance expense
Profit/(loss) before taxation
Income tax expense
PROFIT/(LOSS) 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
Note
5
6
7
18
11
12
13
14
2020
$’000
(audited)
4,020
(1,710)
2019
$’000
(audited)
6,667
(999)
_______
_______
2,310
5,668
(3,647)
_______
(1,337)
149
(686)
(32)
_______
(1,906)
64
(240)
(4,048)
_______
1,620
236
(686)
(52)
_______
1,118
54
(164)
_______
_______
(2,082)
(375)
_______
(2,457)
1,008
(194)
_______
814
25
_______
25
(25)
_______
(25)
(2,432)
789
Attributable to the owners of the Pelatro Group (basic and diluted)
15
(7.2)¢
2.5¢
The accompanying notes 1 to 32 are an integral part of these financial statements.
ANNUAL REPORT
67
Group Statement of Financial Position
For the year ended 31 December 2020
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
Current liabilities
Trade and other payables
Short term borrowings
Lease liabilities
Contract liabilities
Provisions
Other financial liabilities
TOTAL LIABILITIES
NET ASSETS
Note
2020
$’000
(audited)
2019
$’000
(audited)
18
19
20
14
21
21
21
21
22
23
24
25
26
25
23
24
25
26
27
11,649
1,218
308
16
751
149
10,891
515
339
63
519
231
_______
_______
14,091
12,558
609
3,335
485
1,805
293
5,283
501
1,101
_______
_______
6,234
20,325
7,178
19,736
1,196
172
207
173
_______
1,748
1,093
244
174
495
163
-
362
187
274
124
_______
947
321
246
205
665
202
948
_______
_______
2,169
3,917
2,587
3,534
16,408
16,202
68
ANNUAL REPORT
Issued share capital and reserves attributable to owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
TOTAL EQUITY
Note
28
28
28
2020
$’000
(audited)
1,212
14,045
(583)
1,734
2019
$’000
(audited)
1,065
11,603
(643)
4,177
_______
_______
16,408
16,202
The financial statements of Pelatro Plc, registered number 10630166, were approved by the board of Directors and
authorised for issue on 11 April 2021. They were signed on its behalf by:
Subash Menon (Director)
Nic Hellyer (Director)
The accompanying notes 1 to 32 are an integral part of the financial statements.
ANNUAL REPORT
Group Statement of Cash Flows
For the year ended 31 December 2020
Cash flows from operating activities
Profit/(loss) for the year
Adjustments for:
Income tax expense recognised in profit or loss
Finance income
Finance costs
Depreciation of tangible non-current assets
Profit on disposal of fixed assets
Amortisation of intangible non-current assets
Fair value adjustment on contingent consideration
Share-based payments
Foreign exchange gains/(losses)
Operating cash flows before movements in working capital
(Increase)/decrease in trade and other receivables
(Increase) in contract assets
Increase 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
Payment of earn out consideration relating to prior period acquisition
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs
Proceeds from borrowings
Repayment of borrowings
Repayments of principal on lease liabilities
Interest received
Interest paid
69
2019
$’000
(audited)
814
194
(11)
160
188
-
1,726
(236)
52
(8)
_______
2,879
(1,509)
(428)
103
701
_______
1,746
(334)
_______
1,412
(2,102)
(35)
(256)
-
_______
(2,393)
-
317
(313)
(171)
11
(93)
2020
$’000
(audited)
(2,457)
375
(20)
232
366
(10)
2,122
(149)
32
25
_______
516
2,229
(544)
676
(276)
_______
2,601
(339)
_______
2,262
(2,807)
(9)
(902)
(851)
_______
(4,569)
2,589
1,753
(919)
(171)
20
(185)
70
ANNUAL REPORT
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 cash equivalents at beginning of period
Cash and cash equivalents at end of period
Comprising:
Cash at bank and in hand
Overdraft
2020
$’000
(audited)
(16)
_______
3,071
764
(60)
1,101
_______
1,805
1,805
-
_______
1,805
2019
$’000
(audited)
(40)
_______
(289)
(1,270)
(20)
2,224
_______
934
1,101
(167)
_______
934
ANNUAL REPORT
71
Group Statement of Changes in Equity
For the year ended 31 December 2020
Share
capital
Share
premium
Exchange
reserve
Merger
reserve
Retained
profits
Total
Share-
based
payments
reserve
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 January 2019 as previously reported
1,065
11,603
(193)
(527)
Profit after taxation for the period
Share-based payments
Other comprehensive income:
Exchange differences
Transactions with owners:
Shares issued by Pelatro Plc for cash
Issue costs
Balance at 31 December 2019
Profit after taxation for the period
Share-based payments
Transfer on lapse of share options
Other comprehensive income:
Exchange differences
Transactions with owners:
Shares issued by Pelatro Plc for cash
Issue costs
-
-
-
-
-
-
-
-
-
-
-
-
(23)
-
-
-
-
-
-
-
100
-
-
3,363
15,311
814
-
-
814
100
(23)
-
-
_____
_____
_____
_____
_____
_____
_____
1,065
11,603
(216)
(527)
100
4,177
16,202
-
-
-
-
-
-
147
-
2,620
(178)
-
-
(24)
-
-
-
-
-
-
-
-
(2,457)
(2,457)
98
(14)
-
-
-
-
14
-
-
-
98
-
(24)
2,767
(178)
_____
_____
_____
_____
_____
_____
_____
Balance at 31 December 2020
1,212
14,045
(240)
(527)
184
1,734
16,408
Reserve
Sales
Description and purpose
Nominal value of issued shares
Software development
Amount subscribed for share capital in excess of nominal value less associated costs
Support
Marketing
The difference arising on the translation of foreign operations 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
Administration
Cumulative amounts charged in respect of unsettled options issued
All other net gains and losses not recognised elsewhere
The accompanying notes 1 to 32 are an integral part of these financial statements.
72
ANNUAL REPORT
Notes to the Group Financial
Statements
As at 31 December 2020
1. General information
measured at fair value), and in accordance with the
AIM Rules, International Financial Reporting Stan-
dards (“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.
Pelatro Plc (“Pelatro” or the “Company”) is a public lim-
ited company incorporated and domiciled in England.
Basis of consolidation
The Company’s ordinary shares are traded on the AIM
market of the London Stock Exchange. These financial
The consolidated financial statements incorporate the
statements are the consolidated financial statements
financial statements of the Company and entities con-
of Pelatro Plc and its subsidiaries (“the Pelatro Group”
trolled by the Company (its subsidiaries) made up to 31
or the “Group”) and the company financial statements
December each year. Pelatro Solutions Private Limited
for Pelatro Plc. The financial statements are presented
(“PSPL”, the Group’s Indian subsidiary) has a statu-
in US dollars as the currency of the primary economic
tory year end of 31 March, however, for the purposes
environment in which the Group operates.
of consolidation, financial statements have been pre-
pared for PSPL as at 31 December 2020 on the same
Pelatro’s registered office is at 49 Queen Victoria
accounting principles as for the rest of the Group.
Street, London EC4N 4SA and its principal place of
business is at 403, 7th A Main, 1st Block, HRBR Lay-
The Company controls an investee if, and only if, the
out, Bangalore 560043, India.
Company has the following:
2. Adoption and impact of new and/
or revised standards
• Power over the investee (i.e. existing rights that
give it the current ability to direct the relevant activ-
ities of the investee);
• Exposure of rights to variable returns from its in-
One amendment has been adopted in the annual finan-
volvement with the investee; and
cial statements for the year ended 31 December 2020,
• The ability to use its power over the investee to
but have not had a significant effect on the Group:
affect its returns.
• Revised Conceptual Framework for Financial Re-
The results of subsidiaries or businesses acquired
porting
3. Significant accounting policies
Basis of accounting
The financial statements have been prepared on a
historical cost basis (except for certain financial instru-
ments and share-based payments that have been
during the year are included in the consolidated in-
come statement from the effective date of acquisition.
Where necessary, adjustments are made to the finan-
cial statements of subsidiaries to bring the accounting
policies used into line with those used by the Group.
All intra-group transactions, balances, income and ex-
penses are eliminated on consolidation.
ANNUAL REPORT
Going concern
73
When the consideration transferred by the Group in a
business combination includes assets or liabilities re-
These financial statements have been prepared on a
sulting from a contingent consideration arrangement,
going concern basis. The Directors have reviewed the
the contingent consideration is measured at its fair val-
Company’s and the Group’s going concern position
ue on the acquisition date and included as part of the
taking account of its current business activities, bud-
consideration transferred in a business combination.
geted performance and the factors likely to affect its fu-
ture development, set out in this Annual Report, and in-
Acquisition-related costs are expensed as incurred.
cluding the Group’s objectives, policies and processes
for managing its capital, its financial risk management
Goodwill
objectives and its exposure to credit and liquidity risks.
The excess of the:
Following such review, the Directors are of the view
that the Group has adequate financing to be able to
meet its financial obligations for a period of at least 12
•
•
consideration transferred;
amount of any non-controlling interest in the ac-
months from the date of approval of the Annual Report
quired entity; and
and financial statements. Accordingly the Group and
•
acquisition-date fair value of any previous equity
Company continue to adopt the going concern basis in
interest in the acquired entity.
preparing these financial statements.
over the fair value of the net identifiable assets ac-
quired is recorded as goodwill, which is initially rec-
Business combinations, goodwill and contingent
ognised as an asset at cost and is subsequently mea-
consideration
Business combinations
sured at cost less any accumulated impairment. For the
purpose of impairment testing, goodwill is allocated to
the cash-generating units expected to benefit from the
combination. Cash-generating units to which goodwill
The acquisition method of accounting is used to ac-
has been allocated are tested for impairment annually,
count for all business combinations, regardless of
or more frequently when there is an indication that the
whether equity instruments or other assets are ac-
unit may be impaired. If the recoverable amount of the
quired. The consideration transferred for the acquisi-
cash-generating unit is less than the carrying amount
tion of a business comprises the:
of the unit, the impairment loss is allocated first to re-
duce the carrying amount of any goodwill allocated to
•
•
•
•
fair values of the assets transferred;
the unit and then to the other assets of the unit pro-rata
liabilities to the former owners of the acquired busi-
on the basis of the carrying amount of each asset in the
ness incurred;
unit. Any impairment is recognised immediately in the
equity interests issued by the Group;
income statement and is not subsequently reversed.
fair value of any asset or liability resulting from a
contingent consideration arrangement; and
•
fair value of any pre-existing equity interest in the
subsidiary.
74
ANNUAL REPORT
Where settlement of any part of cash consideration is
(iii) collection of the amount due from the customer is
deferred (whether because it is contingent or other-
reasonably assured
wise), the amounts payable in the future are discounted
to their present value as at the date of exchange. The
The amount which is recognised is the amount to which
discount rate used is the Group’s incremental borrowing
the Group expects to be entitled to in exchange for the
rate, being the rate at which a similar borrowing could
goods or services transferred. Some contracts include
be obtained from an independent financier under com-
multiple deliverables, such as the sale of hardware as
parable terms and conditions.
Contingent consideration
well as software, and/or services such as post-con-
tract support, and usually include installation services
- typically, software installation could be performed by
another party and is therefore accounted for as a sep-
Contingent consideration is initially measured at fair val-
arate performance obligation. Where contracts include
ue at the date of completion of the acquisition and may
multiple performance obligations, the transaction price
be classified either as equity or a financial liability. The
is allocated to each performance obligation based on
accounting for changes in the fair value of contingent
the Group’s best estimate of their Standalone Selling
consideration arising on business combinations that
Price (“SSP”) notwithstanding any absence or contrary
do not qualify as measurement period adjustments de-
allocation of total cost within a contract. Where this is
pends on how the contingent consideration is classified:
not directly observable, it is estimated based on the
best available evidence, for example expected cost
•
amounts classified as a financial liability are sub-
plus margin.
sequently remeasured to fair value at subsequent
reporting dates and the corresponding gain or loss
Software licenses
is recognised in the Statement of Comprehensive
Income
Revenue in respect of the sale of perpetual licenses for
•
contingent consideration that is classified as equity
on-premise software is recognised on the later of the
is not remeasured at subsequent reporting dates
grant of the license or delivery of the software as ap-
and its subsequent settlement is accounted for
propriate. Certain contracts provide for revenue which
within equity
Revenue recognition
is contractually linked to the incremental revenue de-
rived by that customer from use of the software, the
amount being based on a pre-agreed share of that in-
cremental revenue which is recognised at the end of
Revenue is measured based on the consideration to
each month (a “gain share” contract). Certain contracts
which the Group expects to be entitled in a contract with
may provide for both a guaranteed (usually monthly)
a customer and excludes amounts collected on behalf
payment over a period (typically 2-3 years) as well as
of third parties. Each element of revenue (described be-
a gain share component. If the contract is a “right to
low) is recognised only when:
use” contract, then the upfront and fixed payments
are recognised on transfer of the license at their ag-
(i) when a performance obligation has been satisfied,
gregate present value using an imputed cost of funds.
that is, a customer obtains control of a good or service;
A notional finance income recognised on the reducing
(ii) consideration receivable is fixed or determinable;
balance of the notional balance outstanding (which is
and
recognised as a contract asset).
ANNUAL REPORT
75
Implementation services
Hardware
Revenue in respect of implementation of on-premise
Revenue in respect of sales of third-party hardware is
software is recognised on completion of the implemen-
recognised when goods are delivered.
tation.
Change Requests
ing Component
Interest income on contracts with a Significant Financ-
Revenue in respect of Change Requests (i.e. formal
Interest income is recognised on contracts with a Sig-
proposals from customers to change an existing sys-
nificant Financing Component as interest accrues using
tem, product or service) is recognised on completion of
the effective interest method. The effective interest rate
the work necessary to implement the required change.
is the rate that discounts estimated future cash receipts
through the expected life of the financial instrument to
Professional services
its net carrying amount.
Revenue and profits from the provision of professional
Cost of sales and provision of services
services such as managed services, training and con-
sultancy are delivered under a “time and materials”
The cost of provision of services includes the direct
type contract and are therefore recognised rateably
costs of consultants and employees who provide ser-
over time and based upon number of days worked.
vices, support or maintenance to customers, direct
Revenue from this revenue stream may create “Un-
sales commissions paid to third parties, and certain
billed Revenue” receivables through yet to be billed
third-party software licenses which are integral to the
time input and expenses at the reporting date.
performance of contracts. Cost of sales also includes
the acquisition cost of hardware resold to end custom-
Annual support and maintenance (also known as
ers.
Post-Contract Support or “PCS”)
Leases
Revenue from support and maintenance services is
recognised rateably over the period of the contract.
Applying IFRS 16, for all leases (except as noted be-
Revenue is recognised when the provision of support
low), the Group:
and maintenance and completion of the performance
obligations are carried out which is deemed to be
(i) recognises right-of-use assets and lease liabilities in
evenly throughout the term of the contract. Revenue
the consolidated statement of financial position, initial-
from this revenue stream may create a contract liabil-
ly measured at the present value of future lease pay-
ity if contractually stated PCS income is lower than its
ments;
SSP and an element thereof has thus effectively been
included in the license fee as stated in the contract.
(ii) recognises depreciation of right-of-use assets, and
A contract asset may be recognised if PCS income
interest on lease liabilities, in the consolidated state-
is recognised even though it is not contractually due
ment of comprehensive income; and
and payable (for example when the first year of PCS is
deemed as “free” to the customer).
76
ANNUAL REPORT
(iii) separates the total amount of cash paid in respect
the functional currency of the Company and the pre-
of lease obligations into a principal portion and interest
sentation currency for the consolidated financial state-
(both presented within financing activities) in the con-
ments.
solidated statement of cash flows.
In preparing the financial statements of the individual
Lease payments under (i) are discounted using the in-
companies, transactions in currencies other than the
terest rate implicit in the lease, if that rate can be deter-
entity’s functional currency (foreign currencies) are re-
mined, or the Group’s estimated incremental borrowing
corded at the rates of exchange prevailing on the dates
rate. The finance expense is charged to the Consolidat-
of the transactions. At each balance sheet date, mon-
ed Statement of Comprehensive Income over the lease
etary assets and liabilities that are denominated in for-
period so as to produce a constant periodic rate of in-
eign currencies are retranslated at the rates prevailing
terest on the remaining balance of the liability for each
on the balance sheet date. Non-monetary items that
period. The right-of-use asset is depreciated over the
are measured in terms of historical cost in a foreign
shorter of the asset’s useful life and the lease term on a
currency are not retranslated.
straight-line basis. Additionally under IFRS 16, right-of-
use assets are tested for impairment in accordance with
Exchange differences arising on the settlement of mon-
IAS 36 Impairment of Assets. This replaces the previ-
etary items, are included in profit or loss for the period.
ous requirement to recognise a provision for onerous
For the purpose of presenting consolidated financial
lease contracts.
statements, the assets and liabilities of the Group’s for-
eign operations are translated at exchange rates pre-
For short-term leases (lease term of 12 months or less)
vailing on the balance sheet date. Income and expense
and leases of low-value assets the Group has opted to
items are translated at the average exchange rates for
recognise a lease expense on a straight-line basis as
the period where it approximates the rates on the dates
permitted by the Standard. This expense is presented
of the underlying transactions. Exchange differences
within other expenses in the consolidated statement of
arising, if any, are classified as equity and transferred
profit or loss.
to the Group’s translation reserve.
Where lease-related expenses are directly attributable
Share-based payments
to the cost of development of the Group’s proprietary
software (as further detailed in Note 18), such expenses
The Group has applied the requirements of IFRS 2
are capitalised in accordance with the Group’s account-
Share-based payments in respect of options granted
ing policy relating to such development expenditure.
under a share option plan for senior employees dat-
Foreign currencies
ed 15 January 2019 (the “Plan”) and certain options
issued at the time of the Company’s IPO. Under the
terms of both the Plan and the options issued at IPO,
The individual financial statements of each Group com-
the Group is able to make equity-settled share-based
pany are prepared in the currency of the primary eco-
payments to certain employees and a Director by way
nomic environment in which it operates (its functional
of issue of options over ordinary shares. Such equi-
currency). For the purpose of the consolidated financial
ty-settled share-based payments are measured at fair
statements, the results and financial position of each
value at the date of grant. This fair value is determined
Group company are expressed in US Dollars, which is
as at the grant date of the options and is expensed on
ANNUAL REPORT
77
a straight-line basis over the vesting period, based on
Taxation
the Group’s estimate of the number of options that will
eventually vest. A corresponding amount is credited to
Any tax payable is based on taxable profit for the year.
equity reserves.
Taxable profit differs from net profit as reported in the
income statement because it excludes items of income
Fair value is measured by use of a Black-Scholes mod-
or expense that are taxable or deductible in other years
el and key inputs to that model have been assessed
and it further excludes items that are never taxable or
as follows:
deductible. The Group’s liability for current tax is cal-
culated using tax rates that have been enacted or sub-
•
expected volatility was based upon historical vol-
stantively enacted by the reporting date.
atility and applied over the expected life of the
schemes;
Deferred tax is the tax expected to be payable or recov-
•
expected life was based upon historical data and
erable on differences between the carrying amounts of
was adjusted based on management’s best esti-
assets and liabilities in the financial statements and the
mates for the effects of non-transferability, exer-
corresponding tax bases used in the computation of
cise restrictions and behavioural considerations;
taxable profit and is accounted for using the balance
and
sheet liability method. Deferred tax liabilities are pro-
•
risk-free rate was taken as the two-, three- and four
vided in full, with no discounting, for all taxable tem-
year UK gilt yields as appropriate for the expected
porary differences; deferred tax assets are recognised
life of the options concerned
to the extent that it is probable that taxable profits will
be available against which deductible temporary differ-
Proceeds received on exercise of share options and
ences can be utilised. Deferred tax is calculated at the
warrants are credited to share capital (in respect of
tax rates that are expected to apply in the period when
nominal value) and share premium account (in respect
the liability is settled or the asset is realised. Deferred
of the excess over nominal value). Cancelled options
tax is charged or credited in the income statement, ex-
are accounted for as an acceleration of vesting. The
cept when it relates to items charged or credited direct-
unrecognised grant date fair value is recognised in the
ly to equity, in which case the deferred tax is also dealt
consolidated statement of comprehensive income in
with in equity.
the year that the options are cancelled.
Such assets and liabilities are not recognised if the
Where share-based payment expenses are directly at-
temporary difference arises from the initial recognition
tributable to the cost of development of the Group’s
of goodwill or from the initial recognition (other than in
proprietary software (as further detailed in Note 18),
a business combination) of other assets and liabilities
such expenses are capitalised in accordance with the
in a transaction that affects neither the tax profit nor the
Group’s accounting policy relating to such develop-
accounting profit.
ment expenditure.
Borrowing costs
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profits
All borrowing costs are recognised in profit or loss in
will be available to allow all or part of the asset to be
the period in which they are incurred.
recovered.
78
ANNUAL REPORT
Deferred tax assets and liabilities are offset when there
Patents and licenses
is a legally enforceable right to set off current tax as-
sets against current tax liabilities and when they relate
The costs incurred in purchasing licenses and estab-
to income taxes levied by the same taxation authority
lishing patents are measured at cost, net of any amor-
and the Group intends to settle its current tax assets
tisation and any provision for impairment. Amortisation
and liabilities on a net basis.
is calculated so as to write off the cost of an asset, less
its estimated residual value, over the useful economic
Intangible assets
life of that asset as follows:
Development expenditure
Intellectual property/patents
over 10 years on a straight-line
basis
Expenditure on the development of the Group’s pro-
Licenses
over 5 years on a straight-line
prietary enterprise software where it meets certain
basis
criteria (given below), is capitalised and subsequently
amortised on a straight-line basis over its useful life.
Where no internally generated intangible asset can be
Customer relationships
recognised, development expenditure is written-off in
the period in which it is incurred.
Customer relationships acquired are recognised as in-
tangible assets at their fair values (see note 18). Cus-
An asset is recognised only if all of the following con-
tomer relationships are amortised on a straight-line
ditions are met:
basis over 10 years.
•
•
the product is technically feasible and marketable;
Impairment of tangible and intangible assets ex-
the Group has adequate resources to complete the
cluding goodwill
development of the product;
•
it is probable that the asset created will generate
At each reporting date, the Group reviews the carry-
future economic benefits; and
ing amounts of its tangible and intangible assets to
•
the development cost of the asset can be mea-
determine whether there is any indication that those
sured reliably
assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset
Development expenditure is amortised on a straight-
is estimated in order to determine the extent of the im-
line basis over 4 years, such amortisation being
pairment loss (if any). Where the asset does not gen-
charged to profit or loss. Expenditure on research ac-
erate cash flows that are independent from other as-
tivities is recognised as an expense in the period in
sets, the Group estimates the recoverable amount of
which it is incurred.
the cash-generating unit to which the asset belongs.
An intangible asset with an indefinite useful life is test-
ed for impairment annually and whenever there is an
indication that the asset may be impaired.
ANNUAL REPORT
79
Recoverable amount is the higher of fair value less
Financial assets
costs to sell and value in use. If the recoverable amount
of an asset (or cash-generating unit) is estimated to be
Financial assets are recognised on the consolidated
less than its carrying amount, the carrying amount of
statement of financial position when the Group has
the asset (cash-generating unit) is reduced to its recov-
become a party to the contractual provisions of the in-
erable amount. Any impairment loss is recognised as
strument. The Group’s financial assets consist of cash,
an expense through profit and loss.
loans, deposits, and receivables and contract assets.
Property, plant and equipment
The classification of financial assets at initial recogni-
tion depends on the financial asset’s contractual cash
flow characteristics and the Group’s business model for
Items of property, plant and equipment are stated at
managing them. The Group has reviewed its business
cost less accumulated depreciation and accumulated
model for its financial assets and has concluded that
impairment losses, if any. The cost of an asset com-
they are held for collecting contractual associated cash
prises its purchase price and any directly attributable
flows. Under IFRS 9 receivables and contract assets
costs of bringing the asset to the location and condition
(other than those which contain a significant financing
for its intended use.
component) are initially recognised at fair value and
will subsequently be measured at amortised cost.
Depreciation is charged to profit or loss (unless it is
included in the carrying amount of another asset) on a
The Group recognises lifetime expected credit loss-
straight-line basis to write off the depreciable amount
es (“ECL”) for trade receivables and contract assets.
of the assets net of the estimated residual values over
The expected credit losses on these financial assets
their estimated useful lives as follows:
are estimated using a provision matrix based on the
Computer equipment
Over 3 years on a straight-line
basis
Group’s historical credit loss experience, adjusted for
factors that are specific to the debtors, general eco-
nomic conditions and an assessment of both the cur-
Leasehold improvements
Over 5 years on a straight-line
rent as well as the forecast conditions at the reporting
basis
date, including time value of money where appropriate.
Office equipment
Over 5 years on a straight-line
basis
Trade and other receivables and contract assets
Vehicles
Over 8 years on a straight-line
These assets arise principally from the provision of
basis
sales of software and services and support and main-
tenance to customers in the ordinary course of busi-
The assets’ residual values and useful lives are re-
ness. They are generally due for settlement between
viewed, and adjusted if appropriate, at each reporting
30 and 90 days and therefore are generally classified
date. An asset’s carrying amount is written down im-
as current other than where the terms of the contract
mediately to its recoverable amount if the asset’s car-
provide for payment over an extended period of time
rying amount is greater than its estimated recoverable
(in which case the relevant element of the receivable
amount.
is classified as current and the balance is classified as
non-current, net of an allowance for the time value of
money). The timing of revenue recognition, invoicing
80
ANNUAL REPORT
and cash collections results in both invoiced accounts
is multiplied by the amount of the expected loss arising
receivable and uninvoiced receivables, as well as
from default to determine the lifetime expected credit
contract assets. Invoicing may be implemented (de-
loss for the trade receivables. In the absence of any
pending on the contract with the end customer) ac-
historic credit losses and the expectation of no specif-
cording to usage or upon achievement of contractual
ic losses in the foreseeable future, the Directors as-
milestones.
sessed a hypothetical likely default amount by applying
a percentage “probability of default” to the receivables
Trade receivables are recognised initially at the
balance, such probability being related to the underly-
amount of consideration that is unconditional unless
ing credit rating of the customer or country of origin.
they contain significant financing components, when
Trade receivables and contract assets are reported net,
they are recognised at fair value. The Group holds
with such provisions recorded in a separate provision
the trade receivables with the objective to collect the
account with the loss being recognised within cost of
contractual cash flows and therefore measures them
sales in the consolidated statement of comprehensive
subsequently at amortised cost using the effective in-
income.
terest method, less provision for impairment.
Long-term trade receivables
Contract assets represent amounts relating to reve-
nue recognised at the date of the statement of finan-
Long-term trade receivables represent amounts relat-
cial position but not yet due or invoiceable under the
ing to revenue recognised at the date of the statement
terms of the contract. These arise most typically for
of financial position but not yet due or invoiceable un-
the Group either in (i) licenses of software where the
der the terms of the contract. These arise most typically
consideration is structured as an upfront payment fol-
for the Group as a result of the sale of licenses as an
lowed by a series of additional payments, which may
upfront payment followed by a series of additional pay-
comprise fixed sums or fixed sums plus sums relating
ments, which may comprise fixed sums or fixed sums
to some measure of (for example) sales made by the
plus sums relating to some measure of (for example)
purchaser of the license; or (ii) licenses of software
gains made by the purchaser of the license. Such pay-
where payment for the aggregate consideration may
ments may extend over several years. Under IFRS 15,
be structured such that the initial consideration does
if the contract is a “right to use” contract, then the up-
not fully reflect the SSP of the license.
front and fixed payments are recognised on transfer of
the license at their aggregate present value using an
Such payments may extend over several years. Un-
imputed cost of funds.
der IFRS 15, if the contract is a “right to use” contract,
then the upfront and fixed payments are recognised
Contract fulfilment assets
on transfer of the license at their aggregate present
value using an imputed cost of funds.
Contract fulfilment costs are divided into: (i) costs that
give rise to an asset; and (ii) costs that are expensed as
Impairment provisions for current and non-current
incurred. When determining the appropriate accounting
trade receivables and contract assets are recognised
treatment for such costs, the Group firstly considers
based on the simplified approach within IFRS 9 using
any other applicable standards. If those standards pre-
a provision matrix for the determination of lifetime ex-
clude capitalisation of a particular cost, then an asset is
pected credit losses, which assesses the probability
not recognized under IFRS 15. If other standards are
ANNUAL REPORT
81
not applicable to contract fulfilment costs, the Group
Cash and cash equivalents
applies the following criteria which, if met, result in cap-
italisation: (i) the costs directly relate to a contract or
Cash and cash equivalents include cash in hand, de-
to a specifically identifiable anticipated contract; (ii) the
posits held at call with banks, other short term high-
costs generate or enhance resources of the entity that
ly liquid investments with original maturities of three
will be used in satisfying (or in continuing to satisfy)
months or less, and – for the purpose of the statement
performance obligations in the future; and (iii) the costs
of cash flows - bank overdrafts. Bank overdrafts are
are expected to be recovered.
shown within loans and borrowings in current liabilities
on the consolidated statement of financial position.
The assessment of these criteria requires the appli-
cation of judgement, in particular when considering if
Financial liabilities and equity instruments
costs generate or enhance resources to be used to sat-
isfy future performance obligations and whether costs
Equity and debt instruments are classified as either fi-
are expected to be recoverable.
nancial liabilities or as equity in accordance with the
substance of the contractual arrangements and the
The Group’s contract fulfilment assets are due princi-
definitions of a financial liability and an equity instru-
pally to sales commissions payable to third parties in
ment. The Group’s financial liabilities include trade and
return for assistance in obtaining certain contracts. The
other payables and borrowings which are measured at
Group amortises capitalised costs to obtain a contract
amortised cost using the effective interest rate method.
over the expected life of that contract in line with the
Financial liabilities are recognised on the consolidat-
recognition of revenue relating to that contract. Such
ed statement of financial position when the Group has
amortisation is included within cost of sales.
become a party to the contractual provisions of the in-
strument.
A capitalised cost to obtain a contract is derecognised
either when it is disposed of or when no further econom-
An equity instrument is any contract which evidences
ic benefits are expected to flow from its use or disposal.
a residual interest in the assets of an entity after de-
At each reporting date, the Group determines wheth-
ducting all of its liabilities. Equity instruments issued by
er there is an indication that cost to obtain a contract
the Group, such as share capital and share premium,
maybe impaired. If such indication exists, the Group
are recognised at the proceeds received net of direct
makes an estimate by comparing the carrying amount
issue costs.
of the assets to the remaining amount of consideration
that the Group expects to receive less the costs that
Borrowings
relate to providing services under the relevant contract.
In determining the estimated amount of consideration,
Interest-bearing loans are recorded initially at fair val-
the Group uses the same principles as it does to de-
ue, net of direct issue costs. Finance charges, includ-
termine the contract transaction price, except that any
ing premiums payable on settlement or redemption
constraints used to reduce the transaction price will be
and direct issue costs, are accounted for on an accru-
removed for the impairment test.
als 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.
82
ANNUAL REPORT
Provisions
Exceptional items
Provisions are recognised when the Group has a
Exceptional items are disclosed separately in the fi-
present obligation as a result of a past event, and it is
nancial statements where it is necessary to do so to
probable that the Group will be required to settle that
provide further understanding of the financial perfor-
obligation. Provisions are measured at the Directors’
mance of the Company or the Group. They are items of
best estimate of the expenditure required to settle the
income or expense that have been shown separately
obligation at the reporting date and are discounted to
due to their nature.
present value where the effect is material. Long-term
provisions are those provisions where the settlement
of the obligation is expected to be on a date more than
one year from the reporting date.
4. Critical accounting judgements
and key sources of estimation
uncertainty
Segmental information
For management purposes, the Group’s activities are
principally related to the provision of data analytics ser-
vices to customers, and all other activities performed
by the Pelatro Group are solely to support its primary
revenue generation activities. All the processes are pri-
marily subject to the same risks and returns and the
Directors therefore consider that there are no identifi-
able business segments that are subject to risks and
returns different to the core business. As such, internal
reporting provided to the chief operating decision-mak-
er (“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.
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 lia-
bilities, and income and expenses. The estimates and
associated assumptions are based on historical expe-
rience 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. Re-
visions 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.
Accordingly, the Directors have determined that there
is only one reportable segment under IFRS 8 and the
financial information therefore presents entity-wide in-
formation. The results and assets for this segment can
be determined by reference to the statement of com-
prehensive income and statement of financial position.
The key assumptions and critical accounting judge-
ments concerning the future and other key sources of
estimation uncertainty at the reporting date that have
a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the
next financial year, are discussed below:
The Pelatro Group primarily serves customers in south
and south-east Asia and Africa, with a developing pres-
ence in Europe.
ANNUAL REPORT
Revenue
83
Critical judgements
Estimates
Revenue and the associated profit are recognised from sale
Estimates relating to revenue include the appropriate SSP for various
of software licences, rendering of services, and maintenance
components of a contract, and in the case of contracts which have
and support. When software licences are sold, the Board must
a Significant Financing Component, the appropriate discount rate to
exercise judgement as to when the appropriate point in time has
apply to the payment profile in order to derive an appropriate present
passed at which all performance obligations for that software
value to record as revenue.
licence have been performed, at which point revenue in relation
to the stand-alone sales price (“SSP”) of the software licence
A number of contracts entered into by the Group during the year
is recognised. In many cases performance obligations do not
are recognised for revenue in a manner which differs materially
simply follow the commercial and contractual arrangement
from the contractual terms; in certain cases this resulted in revenue
agreed with the customer, in some cases the revenue streams
being recognised earlier than contractually due; in others it deferred
are combined within an overall commercial arrangement.
revenue after the date at which it was contractually due. The effect of
Such combined circumstances require judgement to assess
this is shown in Note 5.
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.
84
ANNUAL REPORT
Capitalised development costs
Critical judgements
Estimates
Estimates relating to capitalised development costs include the
asset’s likely revenue generation and its applicable useful economic
life. These estimates are continually reviewed and updated based
on past experience and reviews of competitor products available in
the market.
Development costs are accounted for in accordance with IAS
38 Intangible Assets, and costs that meet the qualifying criteria
are capitalised and systematically amortised over the useful
economic life of the intangible asset. Determining whether
development costs qualify for capitalisation as intangible assets
requires judgement, including assessments of the nature of the
work underlying the costs carried out by relevant employees,
estimates of the technical and commercial viability of the asset
created, and its applicable useful economic life. These estimates
are continually reviewed and updated based on past experience
and reviews of competitor products available in the market.
Impairment reviews
Critical judgements
Estimates
The Group tests goodwill, intangible assets and property, plant
The Group uses long-term forecasts of cash flow and estimates of
and equipment annually for impairment, or more frequently
future growth both to value acquired intangible assets and goodwill
if there are indications that an impairment may be required.
and to assess whether goodwill or intangible assets are impaired,
Judgement is required as to whether indicators of impairment
and to determine the useful economic lives of its intangible assets.
exist and hence whether to perform more detailed analysis to
Estimates are therefore required of the level of future growth,
evaluate any impairment required. Identifying indicators of
resulting cash flows as well as an appropriate discount rate to derive
impairment requires judgements to be made as to the prospects
their carrying value. Assumptions regarding sales and operating
and value drivers of the individual assets.
profit growth, gross margin, and discount rate are considered to
be the key areas of estimation in the impairment review process –
In valuing these assets and liabilities, judgement is required as to
further disclosure regarding such estimates is made in Note 18.
the likelihood of occurrence of future events which will affect the
value of such assets.
ANNUAL REPORT
5. Revenue and segmental analysis
An analysis of revenue by type is as follows:
The Directors consider that the Group has a single
Recurring software sales and services
business segment, being the sale of information man-
Maintenance and support
At 31 December
agement 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.
Total recurring revenues
Change requests
Total repeating revenues
Software – new licenses
Consulting
Resale of hardware
2020
$’000
1,528
1,323
––––––
2,851
426
______
3,277
698
45
-
85
2019
$’000
133
256
––––––
2,962
1,551
______
4,513
1,887
258
9
An analysis of revenue by product or service and by
geography is given below.
Revenue by geography
4,020
6,667
Revenue by type
The Group has five principal revenue models, being:
1. contracts for the use of the Group’s software on
a regular (usually monthly) basis, which may also
provide for Group employees to provide related
services the customer (“managed services”) and/or
for the Group to take a share of the revenue gain
achieved through use of the software (“gain share”);
2. contracts based on the sale of perpetual licenses
for use of the Group’s proprietary enterprise soft-
ware;
3. provision of specific customer-requested modifica-
tions to Group software (“change requests”);
4. provision of maintenance and support for the soft-
ware and its users; and
5. provision of consultancy services and/or training re-
lating to the use of the software
The Group recognises revenue in seven geographical
regions based on the location of customers, as set out
in the following table:
At 31 December
Caribbean
Central Asia
Eastern Europe
North Africa
South Asia
South East Asia
Sub-Saharan Africa
2020
$’000
2019
$’000
145
175
168
64
1,096
2,372
133
256
91
135
1,791
4,181
-
_______
80
_______
4,020
6,667
Management makes no allocation of costs, assets or
liabilities between these segments since all trading ac-
tivities are operated as a single business unit.
An analysis of revenue by status of invoicing is as fol-
lows:
At 31 December
In addition, the Group may, if required by the customer,
supply appropriate hardware on which to host the soft-
(i) Revenue invoiced to customers under
contractual terms
(ii) Revenue recognised under terms of
contract but unbilled at period end (“UBR”)
ware, either for the account of the customer or (partic-
(iii) Net revenue recognised other than (ii)
ularly in the case of managed services) retained in the
ownership of the Group.
Less: revenue recognised or to be
recognised as interest under IFRS 15
2020
$’000
2,593
2019
$’000
2,619
1,232
3,947
239
(44)
3,947
(43)
_____
_____
Total revenue recognised in the year
4,020
6,667
86
ANNUAL REPORT
Customer concentration
PCS at other than a standalone selling price (“SSP”).
The Group has three customers representing individual-
deemed to accrue over the full term of the service
ly over 10% of revenue each and in aggregate approxi-
provision (whether paid or otherwise) and, as far as is
mately 53% of total revenue at $2.14m (2019: four such
estimable, at a deemed market rate (i.e. the SSP). Ac-
customers, in aggregate approximately 67% of revenue
cordingly, the financial statements reflect adjustments
For revenue recognition purposes PCS income is
at $4.48m). The three customers accounted for reve-
to income:
nue of $0.89m, $0.63m and $0.62m respectively (2019:
$2.02m, $0.82m, $0.81m and $0.79m).
(i) to accelerate the recognition of revenue for initial
Revenue recognition
years for which no contractual payment is due (and
consequent adjustments to revenue to derecognise
revenue in later years when contractual payments ex-
License revenue
ceed revenue to be recognised); and
As explained in Note 2, the Group recognises revenue
(ii) to accelerate or defer the recognition of revenue in
from the sale of licenses and the implementation of the
cases where the contractual PCS charge is lower (or
software so licensed separately, as the two activities
higher) than a market rate (the difference being netted
represent distinct performance obligations. However, as
off or added to the revenue recognised in respect of the
implementation to date has always been carried out by
license fee).
Group personnel and is usually viewed by the customer
as an integral part of the license purchase, the two ac-
For the financial year 2020 revenue includes/(excludes)
tivities are reported as one.
(i) a net amount of $(101,000) representing income
from PCS already recognised ahead of its contractu-
Irrespective of the split between license and implemen-
ally due dates (2019: $104,000 recognised ahead of
tation recognition, some contracts provide for fixed pay-
its contractually due dates), and (ii) an amount of $nil
ments to be made by customers (usually monthly) over
(2019: $248,000) representing revenue netted off li-
a given term (e.g. three or five years). Under IFRS 15, in
cense income and allocated to PCS.
order to reflect the time value of money, such contracts
are recognised (at the point of transfer of the license)
Remaining performance obligations
as the capitalised value of the income stream. In addi-
tion, interest income accrues on the credit deemed to
There are certain software support, professional ser-
be extended to the customer (on a reducing balance
vice, maintenance and licences contracts that have
basis). For the financial year 2020 this figure amounts
been entered into for which both:
to license revenue of $0.20m and interest income of
$44,000 (2019: $0.45m and $7,000).
•
the original contract period was greater than 12
PCS
Ancillary to a license sale, the Group typically provides
five years of PCS but does not charge for the first year;
similarly in certain contracts the Group may provide
months; and
•
the Group’s right to consideration does not corre-
spond directly with performance.
ANNUAL REPORT
87
The amount of revenue that will be recognised in future
Non-current assets comprise intangible assets, good-
periods on these contracts when those remaining per-
will, and plant, property and equipment.
formance obligations will be satisfied is shown below
Year to 31 December
2021
$’000
2022
$’000
2023-6
$’000
579
394
442
Revenue expected to be
recognised on software and
service contracts
Comparative figures for the year ended 31 December
6. Operating expenses
Profit for the year has been arrived at after charging:
2020
$’000
2019
$’000
Amortisation of intangible non-current assets
2,122
1,726
Depreciation of tangible non-current assets
(Profit)/loss on disposal of Right to Use
198
(10)
93
-
2019 were as follows:
assets
Year to 31 December
2020
$’000
2021
$’000
2022-5
$’000
595
461
522
Staff costs (see note 9)
1,787
1,503
Auditor’s remuneration (see note 8)
Short-term lease expenses
Realised foreign exchange (gains)/losses
41
23
3
41
23
(14)
Revenue expected to be
recognised on software and
service contracts
Costs of obtaining and fulfilling contracts of $0.59m
have been capitalised in 2020 (net of amortisation
against revenue recognised in respect of those con-
tracts) (2019: $9,000).
Non-current assets
Information about the Group’s non-current assets by
location of assets is as follows:
At 31 December
India
Russia
Singapore
UK
2020
$’000
1,208
25
5,516
6,426
2019
$’000
495
53
3,825
7,603
_______
_______
13,175
11,976
88
ANNUAL REPORT
7. Non-GAAP profit measures and
exceptional items
Reconciliation of operating profit to adjusted earnings
years relating to that grant; also the value of the share
before interest, taxation, depreciation and amortisation
option to the employee differs considerably in value
(“EBITDA”)
and timing from the actual cash cost to the Group.
Year to 31 December
Operating profit/(loss)
Adjusted for:
2020
$’000
2019
$’000
(1,906)
1,118
Amortisation and depreciation
2,420
1,915
Revenue recognised as interest under IFRS 15
44
43
Exceptional items:
- gain on adjustment of contingent liability
(149)
(236)
Expensed share-based payments
32
52
Adjusted EBITDA
______
______
441
2,892
Criteria for adjustments to operating profit or loss in the
calculation of adjusted EBITDA are that they (i) arise
from an irregular and significant event or (ii) are such
that the income/cost is recognised in a pattern that is
unrelated to the resulting operational performance.
Exceptional items are treated as exceptional by reason
of their nature and are excluded from the calculation of
adjusted EBITDA (and adjusted earnings per share in
Note 15) to allow a better understanding of comparable
year-on-year trading and thereby an assessment of the
underlying trends in the Group’s financial performance.
These measures also provide consistency with the
Group’s internal management reporting. Exceptional
items in 2020 comprise the gain on the adjustment of
contingent liabilities relating to the final earnout pay-
ment in respect of the Danateq Acquisition.
Elements of depreciation on right-to-use assets rec-
ognised under IFRS 16 and share-based payment ex-
pense are deemed to be directly attributable overheads
for the purposes of capitalising relevant expenditure on
developing intangible assets (see Note 18). The fig-
ures above are shown net of amounts so capitalised.
EBITDA (and adjusted EPS) are financial measures
that are not defined or recognised under IFRS and
should not be considered as an alternative to other in-
dicators of the Group’s operating performance, cash
flows or any other measure of performance derived in
accordance with IFRS. Accordingly, these non-IFRS
measures should be viewed as supplemental to, but
not as a substitute for, measures presented in this An-
nual Report and Accounts. Information regarding these
measures is sometimes used by investors to evaluate
the efficiency of an entity’s operations; however, there
are no generally accepted principles governing the cal-
culation of these measures and the criteria upon which
these measures are based can vary from company to
company. These measures, by themselves, do not pro-
vide a sufficient basis to compare the Group’s perfor-
mance with that of other companies and should not be
considered in isolation or as a substitute for operating
profit or any other measure as an indicator of operating
performance, or as an alternative to cash generated
from operating activities as a measure of liquidity.
Adjustment for share-based payment expense is made
The calculation of adjusted earnings per share is
because, once the cost has been calculated for a giv-
shown in Note 15.
en grant of options, the Directors cannot influence the
share-based payment charge incurred in subsequent
ANNUAL REPORT
8. Auditor’s renumeration
Year to 31 December
Audit of the financial statements of Pelatro Plc
Amounts receivable by auditor in respect of: Tax compliance
9. Staff costs
Wages and salaries
Social security contributions
Less: amounts capitalised as intangible assets
The average number of persons employed by the Com-
pany during the period was:
Year to 31 December
Sales
Software development
Support
Marketing
Administration
89
2019
$’000
41
3
2020
$’000
41
4
_______
______
45
44
2020
$’000
4,410
83
2019
$’000
3,495
65
(2,706)
(2,057)
_______
______
1,787
1,503
2020
2019
4
96
48
3
15
4
88
40
3
15
_______
______
166
150
90
ANNUAL REPORT
10. Directors’ remuneration and transactions
The Directors’ emoluments in the year ended 31 December 2020 were:
Executive Directors
S. Menon
S. Yezhuvath
N. Hellyer
Non-Executive Directors
R. Day
P. Verkade
Basic
salary
2020
$’000
Bonus
2020
$’000
Benefits
in kind
Share-based
payments
Pension
Total
Total
2020
$’000
2020
$’000
2020
$’000
2020
$’000
2019
$’000
191
191
90
70
39
-
-
28
-
-
29
16
11
-
-
-
-
5
-
-
-
-
3
2
-
220
207
137
72
39
262
253
111
72
38
_______
______
______
______
_______
_______
______
581
28
56
5
5
675
736
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 options granted to a director at the time of the Group’s 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 $32,000 (net of amounts capitalised of $66,000) (2019: $52,000) has been recognised during the year
for share-based payments over the vesting period. This share-based payment expense comprises the charge in the
current period relating to the expensing of the fair value of (a) 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 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 employ-
ment. Of this amount, $27,000 net (2019: $45,000) relates to costs of share options issued to subsidiary employees.
ANNUAL REPORT
91
Movements in the number of share options outstanding and their related weighted average exercise prices are as
follows:
Outstanding at the beginning of the year
Granted during the year
Forfeited/cancelled during the year
No. of options
Weighted average exercise price
2020
1,631,500
-
(126,000)
2019
50,000
1,640,000
(58,500)
2020
72.7p
-
73.0p
___________
__________
2019
62.5p
73.0p
73.0p
Outstanding at the end of the year
1,505,500
1,631,500
72.7p
72.7p
Outstanding options are exercisable at prices between 62.5p and 73p, and have a weighted average remaining con-
tractual life of 6.8 years.
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
2020 was £0.380 (31 December 2019: £0.705) and hence no deferred tax is provided in respect of the potential ex-
ercise 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
2020
$’000
20
44
2019
$’000
11
43
_______
_______
64
54
92
ANNUAL REPORT
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 income
2020
$’000
198
31
(14)
25
_______
240
2019
$’000
96
40
(19)
47
_______
164
An element of interest on lease liabilities is deemed to be directly attributable overheads for the purposes of capital-
ising relevant expenditure on developing intangible assets (see Note 18).
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
Total current income tax
Deferred tax
Reversal/(recognition) of deferred tax asset
Total deferred income tax
Total income tax expense recognised in the year
Reconciliation of the total tax charge
2020
$’000
-
321
(18)
2019
$’000
(32)
286
(7)
_______
_______
303
247
72
(53)
_______
_______
72
375
(53)
194
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% (2019: 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:
ANNUAL REPORT
Year to 31 December
Profit/(loss) before taxation
Tax charge/(credit) 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
Recognition of deferred tax liability
Derecognition of deferred tax asset
Adjustments recognised in current year tax in respect of prior years
Current tax (prior period) exchange difference
Deferred tax not recognised
Income tax expense recognised for the current year
93
2019
$’000
1,009
192
(113)
179
(118)
(45)
(22)
109
51
21
-
(53)
(7)
-
-
2020
$’000
(2,082)
(396)
(425)
247
5
(28)
(47)
186
63
-
24
61
(18)
(1)
704
_______
375
_______
194
The tax effect of exchange differences recorded within the Group Statement of Comprehensive Income is a credit of
$6,000 (2019: $5,000 credit).
Temporary differences associated with Group investments
At 31 December 2020, there was no recognised deferred tax liability (2019: $nil) for taxes that would be payable on
the unremitted earnings of certain of the Group’s subsidiaries as the Group has determined that undistributed profits
of its subsidiaries will not be distributed in the foreseeable future.
Deferred tax
Recognised deferred tax asset
At 1 January
Recognised in profit and loss
At 31 December
Comprising:
Timing differences
Tax losses
2020
$’000
63
(47)
2019
$’000
10
53
_______
_______
16
-
16
63
8
55
_______
_______
16
63
94
ANNUAL REPORT
Deferred income tax assets have only been recognised to the extent that it is considered probable that they can be
recovered against future taxable profits based on profit forecasts for the foreseeable future. The deferred income tax
assets at 31 December 2020 above are expected to be utilised in the next two years.
Recognised deferred tax liability
At 1 January
Recognised in profit and loss
At 31 December
Comprising:
Timing differences
Factors affecting future tax charges
UK
2020
$’000
-
24
2019
$’000
-
-
_______
_______
24
24
-
-
_______
_______
24
-
The current rate for corporation tax in the UK is 19% but, as a result of the March 2021 Budget statement, this is due
to rise to 25% from 1 April 2023 for profits in excess of £250,000. This tax rate is yet to be substantively enacted.
India
Under Indian tax law, with effect from 1 April 2019 any company which opted not to utilise certain tax exemptions or
incentives was eligible for a reduced income tax rate of 22% (previously 25%). For the tax year to 31 March 2020
the effective tax rate for the Group’s Indian subsidiary PSPL was therefore 27.82% inclusive of surcharges and cess.
PSPL has now opted for the reduced rate and its effective tax rate from henceforth will be 25.17%.
ANNUAL REPORT
15. Earnings
Reported earnings per share
95
Basic earnings per share (“EPS”) amounts are calculated by dividing net profit or loss for the year attributable to
owners of the Company by the weighted average number of ordinary shares outstanding during the year.
The Group has one category of security potentially dilutive to ordinary shares in issue, being those share options
granted to employees where the exercise price (plus the remaining expected charge to profit under IFRS 2) is less
than the average price of the Company’s ordinary shares during the period in issue. No dilution arose in the year as
the exercise price was above the average share price for the year.
The following reflects the earnings and share data used in the basic earnings per share computations:
Year to 31 December
2020
$’000
Profit/(loss) attributable to equity holders of the parent:
Profit/(loss) attributable to ordinary equity holders of the parent for basic earnings
(2,457)
2019
$’000
814
Weighted average number of ordinary shares in issue
34,136,617
32,532,431
Basic earnings/(loss) per share attributable to shareholders
(7.2)¢
2.5¢
Adjusted earnings per share
Adjusted earnings per share is calculated as follows:
Year to 31 December
Profit/(loss) 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
2020
$’000
(2,457)
(149)
32
25
686
(18)
_______
(1,881)
2019
$’000
814
(236)
52
47
686
(7)
_______
1,356
Weighted number of ordinary shares in issue
34,136,617
32,532,431
Adjusted earnings/(loss) per share attributable to shareholders
(5.5)¢
4.2¢
96
ANNUAL REPORT
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 (2019:
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 Montvale, NJ 07645, USA
Sales
100% of
members’ capital
Pelatro Pte Limited
Singapore
One Raffles Place,
#10-62, Tower 2, Singapore 048616
Ownership of IP;
operation of branch
in Russia
100% ordinary
shares
Pelatro Solutions Private
Limited
India
403, 7th A Main, HRBR Layout, Bangalore 560043,
India
Research,
development and
support
100% ordinary
shares
Pelatro Sdn Bhd
Malaysia
Suite 21.02, Level 21, Centerpoint South, Mid Valley
City, Lingakaran Syed Putra, 59200 Kuala Lumpur
W.P., Kuala Lumpur, Malaysia
Employment of
Malaysian national
100% ordinary
shares
ANNUAL REPORT
97
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, cus-
tomer relationships and goodwill.
An analysis of goodwill and other intangible assets is as follows:
Development
costs
$’000
Third party
software
$’000
Patents
Customer
relationships
Goodwill
Total
$’000
$’000
$’000
$’000
Financial year 2020
Cost
At 1 January 2020
Additions
Foreign exchange
At 31 December 2020
Amortisation
At 1 January 2020
Charge for the year
Foreign exchange
At 31 December 2020
Net carrying amount
At 31 December
2020
6,391
2,872
-
_______
9,263
(1,957)
(1,416)
-
_______
(3,373)
5,890
At 1 January 2020
4,434
108
4
(2)
23
4
-
6,862
470
13,854
-
-
-
-
2,880
(2)
_______
_______
_______
_______
_______
110
27
6,862
470
16,732
(34)
(20)
2
-
-
-
(972)
(686)
-
-
-
-
(2,963)
(2,122)
2
_______
_______
_______
_______
_______
(52)
-
(1,658)
-
(5,083)
58
74
27
23
5,204
470
11,649
5,890
470
10,891
98
ANNUAL REPORT
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)
-
23
-
-
6,862
-
-
-
745
-
(275)
-
11,849
2,282
(275)
(2)
_______
_______
_______
_______
_______
_______
At 31 December 2019
6,391
108
23
6,862
470
13,854
Amortisation
At 1 January 2019
Charge for the year
Foreign exchange
(935)
(1,022)
-
(19)
(18)
3
-
-
-
(286)
(686)
-
-
-
-
(1,240)
(1,726)
3
_______
_______
_______
_______
_______
_______
At 31 December 2019
(1,957)
(34)
Net carrying amount
At 31 December 2019
At 1 January 2019
Development costs
4,434
3,209
74
79
-
23
-
(972)
-
(2,963)
5,890
6,576
470
745
10,891
10,609
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.
ANNUAL REPORT
Goodwill
99
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. 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 ex-
ample 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 Decem-
ber 2020 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 ac-
quired in December 2017, and whose principal activity was at the time to develop the Group’s software and provide
administrative support for the rest of the Group. Subsequent to its acquisition, the activities of this subsidiary have
grown to include the provision of post-contract support and other services to customers.
The goodwill relating to this CGU was tested for impairment at 31 December 2020 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 over 5 years. The key assumptions used in the value in use calculations
were as follows:
(i)
The operating cash flows for this business for the years to 31 December 2021 and 2022 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 depen-
dent on other Group companies making third-party sales;
(ii)
Growth has been assumed in operating cash flows for the remainder of the value in use such that a con-
sistent post-tax margin is maintained over the 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 11.6% has been used (being the Weighted Average Cost of Capital in local curren-
ANNUAL REPORT
100
(iii)
cy).
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 oper-
ating cash flows could cause the carrying value of the goodwill to exceed the recoverable amount, resulting in an im-
pairment charge. The Board is confident that the assumptions in respect of operating cash flows remain appropriate.
The Group has conducted sensitivity analyses 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 2020.
101
Total
$’000
677
902
-
_______
1,579
(162)
(198)
(1)
_______
(361)
1,218
515
Total
$’000
436
256
(15)
ANNUAL REPORT
19. Tangible assets
Financial Year 2020
Cost
At 1 January 2020
Additions
Foreign exchange differences
At 31 December 2020
Depreciation
At 1 January 2020
Charge for the year
Foreign exchange differences
At 31 December 2020
Net carrying amount
At 31 December 2020
At 1 January 2020
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
Net carrying amount
At 31 December 2019
At 1 January 2019
Leasehold
improvements
$’000
Computer
equipment
$’000
Office
equipment
$’000
Vehicles
$’000
312
1
(7)
59
1
(1)
_______
_______
59
(9)
(11)
-
305
(59)
(36)
-
_______
_______
(20)
39
50
(95)
210
253
109
24
(2)
_______
131
(7)
(17)
-
_______
(24)
107
102
197
877
10
_______
1,084
(87)
(134)
(1)
_______
(222)
862
110
Financial Year 2019
Leasehold
improvements
$’000
Computer
equipment
$’000
Office
equipment
$’000
Vehicles
$’000
49
63
(3)
93
106
(2)
30
31
(2)
264
56
(8)
_______
_______
_______
_______
_______
109
-
(7)
-
197
(46)
(44)
3
59
(2)
(8)
1
312
(26)
(34)
1
_______
_______
_______
_______
(7)
102
49
(87)
110
47
(9)
50
28
(59)
253
238
677
(74)
(93)
5
_______
(162)
515
362
102
ANNUAL REPORT
20. Right-of-use assets
Right-of-use assets comprise leases over office buildings and vehicles as follows:
2020
Cost
At 1 January 2020
Additions in respect of new leases
Disposals in respect of leases terminated
Effects of foreign exchange movements
At 31 December 2020
Depreciation
At 1 January 2020
Charge for the period
Eliminated on leases terminated
Effects of foreign exchange movements
At 31 December 2020
Net carrying amount
At 31 December 2020
At 1 January 2020
2019
Cost
At 1 January 2019
Effect of adoption of 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 building
$’000
690
227
(231)
(25)
_______
661
(368)
(153)
157
9
_______
(355)
306
322
Office buildings
$’000
-
557
139
(6)
_______
690
-
(212)
(160)
4
_______
(368)
322
-
Vehicles
$’000
31
-
-
1
_______
32
(14)
(14)
-
(2)
_______
(30)
2
17
Vehicles
$’000
-
-
30
1
_______
31
-
-
(13)
(1)
_______
(14)
17
-
Total
$’000
721
227
(231)
(24)
_______
693
(382)
(167)
157
7
_______
(385)
308
339
Total
$’000
-
557
169
(5)
_______
721
-
(212)
(173)
3
_______
(382)
339
-
ANNUAL REPORT
103
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) rec-
ognised as “trade receivables”); and
(iii) amounts relating to revenue recognised at the date of the statement of financial position but not invoiceable under
the terms of the contract, or fulfilment assets (“contract assets”).
Aged analysis of trade receivables
Year to 31 December
Carrying amount
Neither impaired or
past due
Past due (in days) but not impaired
2020
Trade receivables
2019
Trade receivables
$’000
3,484
5,514
$’000
3,152
5,114
61-90
$’000
91-120
$’000
More than 121
$’000
34
-
93
-
205
400
104
Contract assets
Due after one year
At 1 January
Contract assets recognised in the period
Transfer to current contract assets
At 31 December
Due within one year
At 1 January
Contract assets recognised in the period, net of releases to receivables or cash, or
amortisation to profit or loss
Transfer from non-current contract assets
At 31 December
Contract assets are comprised as follows:
Due after one year
Contract assets relating to revenue
Contract fulfilment assets
Due within one year
Contract assets relating to revenue
Contract fulfilment assets
ANNUAL REPORT
2019
$’000
312
320
(113)
_______
519
2019
$’000
72
108
113
_______
293
2019
$’000
519
-
_______
519
2019
$’000
284
9
_______
293
2020
$’000
519
441
(209)
_______
751
2020
$’000
293
107
209
_______
609
2020
$’000
311
440
_______
751
2020
$’000
457
152
_______
609
ANNUAL REPORT
105
Trade terms, credit risk and impairments
The Group’s exposure to credit risk equates to the carrying value of cash held on deposit (whether at banks or as
deposits against liabilities, e.g. leases) 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.
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 Di-
rectors 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. Further-
more, 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
The loss allowance is comprised as follows:
On trade receivables
On contract assets
Loss allowance at 31 December
2020
$’000
29
8
_______
37
2020
$’000
30
7
_______
37
2019
$’000
-
29
_______
29
2019
$’000
25
4
_______
29
106
ANNUAL REPORT
The largest individual counterparty to a receivable included in trade and other receivables at 31 December 2020 was
$562,000 (of which some $523,000 related to unbilled revenue) (2019: $1,067,000). Based on invoiced receivables,
the largest individual counterparty owed the Group $200,000 (2019: $210,000). 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.
22. Other assets
At 31 December
Prepayments
Deposits
Other assets (including withholding tax, GST and VAT refunds)
Total other assets
23. Loans and borrowings
Loans and borrowings comprise:
At 31 December
Non-current liabilities
Secured term loans
Unsecured borrowings
Current liabilities
Current portion of term loans
Unsecured borrowings
Total loans and borrowings
2020
$’000
130
80
275
_______
485
2020
$’000
277
919
_______
1,196
99
145
_______
244
1,440
2019
$’000
109
131
261
_______
501
2019
$’000
362
-
_______
362
79
167
_______
246
608
The Group has six term loans, all in its operating subsidiary in India and denominated in INR, with interest rates be-
tween 10% and 13.5% (in INR) and one USD-linked loan at 5.5%, and repayable between 5 and 6 years from their
inception, between April 2023 and September 2026.
ANNUAL REPORT
107
Reconciliation between opening and closing balances for liabilities resulting in financing cash flows
1 January
2020
Non-cash
changes
– foreign
exchange
movements
Non-cash
changes –
net lease
liabilities
taken on
Interest
accruals
included in
cash flow
Transfer from
non-current to
current
31
December
2020
Cash flows -
net
(repayments)
and
drawdowns
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Non-current liabilities
Secured term loans
Unsecured borrowings
Lease liabilities
Current liabilities
Current portion of secured
term loan
Unsecured borrowings
Lease liabilities
362
187
79
167
205
(8)
-
(9)
5
(5)
(9)
-
135
-
-
8
Total
1,000
(26)
143
-
-
-
6
-
6
(77)
(114)
(141)
77
114
141
-
-
1,033
-
(62)
(137)
(171)
277
919
172
99
145
174
663
1,786
The Directors consider that the carrying amount of borrowings approximates to their fair value.
24. Lease liabilities
Lease liabilities comprise liabilities arising from the committed and expected payments on leases over office buildings
and vehicles.
Financial year 2020
Amounts due in more than one year
At 1 January 2020
Liabilities taken on in the period
Liabilities (disposed of) in the period
Transfer from long-term to short-term
Effects of foreign exchange movements
At 31 December 2020
Office
buildings
Vehicles
Total
$’000
$’000
$’000
186
163
(28)
(140)
(9)
1
-
-
(1)
-
187
163
(28)
(141)
(9)
_______
_______
_______
172
-
172
108
ANNUAL REPORT
Amounts due in less than one year
At 1 January 2020
Liabilities taken on in the period
Liabilities (disposed of) in the period
Repayments of principal
Transfer from long-term to short-term
Effects of foreign exchange movements
At 31 December 2020
Financial year 2019
Amounts due in less 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
Amounts due in less than one year
At 1 January 2019
Effect of adoption of IFRS 16
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
Office
buildings
Vehicles
Total
$’000
193
69
(56)
(164)
140
(8)
$’000
12
-
-
(12)
1
(1)
$’000
205
69
(56)
(176)
141
(9)
_______
_______
_______
174
-
174
Office
buildings
Vehicles
Total
$’000
$’000
$’000
-
273
97
(180)
(4)
-
-
12
(11)
-
-
273
109
(191)
(4)
_______
_______
_______
186
1
187
Office
buildings
Vehicles
Total
$’000
$’000
$’000
-
124
43
(155)
180
1
-
-
17
(16)
11
-
-
124
60
(171)
191
1
_______
_______
_______
193
12
205
PSPL, the Group’s main operating subsidiary, has entered into various leases over office space in Bangalore and
Mumbai, typically on 3 to 4 year terms with rollover options. The Group also has a lease on office space in Nizhny
Novgorod in Russia. Given the impact of COVID-19 and working from home options, and the near-term expiry of
certain leases, the Group intends to review its office accommodation arrangements in 2021/22.
ANNUAL REPORT
109
25. Trade and other payables and
contract liabilities
At 31 December
Due within one year
Trade payables
Other payables
2020
$’000
2019
$’000
810
283
82
239
_______
_______
Total trade and other payables
1,093
321
Trade payables include amounts due in respect of sales
commissions due to sales agents which is payable in
less than one year. Other payables comprise principal-
ly amounts due in respect of staff bonuses declared for
December and paid in January.
The average credit period taken for normal trade pur-
chases 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 pay-
ables are paid within the appropriate credit time frame.
The Directors consider that the carrying amount of
trade payables approximates to their fair value.
At 31 December
Due within one year
2020
$’000
2019
$’000
Contract liabilities at 1 January
665
61
Contract liabilities recognised/
(released to revenue) in the
period
Transfers from long-term
liabilities
Contract liabilities at 31
December
26. Provisions
At 31 December
Due within one year
Employee gratuities
Leave encashment
Other provisions (including tax)
(257)
564
87
40
_______
_______
495
665
2020
$’000
2019
$’000
13
24
126
9
16
177
_______
_______
163
202
Contract liabilities
At 31 December
2020
2019
Contract liabilities represent consideration received in
respect of unsatisfied performance obligations. Chang-
es to the Group’s contract liabilities are attributable
solely to the satisfaction of performance obligations.
Due after one year
Employee gratuities
Leave encashment
$’000
$’000
116
57
81
43
_______
_______
173
124
At 31 December
Due after one year
Contract liabilities at 1 January
Contract liabilities recognised
in the period
Transfers to short-term
liabilities
2020
$’000
2019
$’000
274
20
112
202
(87)
(40)
Other provisions comprise tax and other expenses.
Under the Indian Payment of Gratuity Act 1972, em-
Contract liabilities at 31
December
207
274
for the payment of a “gratuity” upon certain end of
_______
_______
ployees with more than 5 years’ service are eligible
110
ANNUAL REPORT
employment events, including retirement, resignation,
arising taken to goodwill or profit and loss as appropri-
death and termination or redundancy. The calculation
ate. These valuations were based on Level 3 inputs,
of the gratuity due is based on the last drawn salary
i.e. Inputs which are not based on observable market
and number of years of service. The potential liability
data. The valuation technique used was based on ex-
arising from these requirements is calculated by third
pectations of future revenue and the probability that the
party actuaries based on employee profiles, their com-
acquired assets would meet the obligations under the
pleted number of years in the organization, their age,
sale and purchase agreement; inputs for the valuation
salary and also on the probability of termination of em-
were principally management estimates on the prob-
ployment, and a provision made accordingly.
ability and timescale of the assets acquired meeting
the revenue targets specified in the sale and purchase
Under the terms of their employment, employees are
agreement. There have been no changes to valuation
eligible to carry forward 30 “earned leaves” (EL) to the
techniques in the year.
next calendar year. Any EL balance over and above
this is paid in cash by March the following year, hence
A reconciliation of such liabilities carried at fair value is
resulting in a long-term provision.
as follows:
27. Other financial liabilities
As at 31 December
2020
2019
$’000
$’000
Consideration on the acquisition of the
Danateq Assets
- potentially due within one year
-
948
As at 31 December
Balance b.f.
Finance expense
Fair value adjustment to
goodwill
Fair value adjustment to profit
or loss
Settlement of liability net of
other SPA adjustments
_______ _______
-
948
Balance c.f.
2020
$’000
948
25
-
2019
$’000
1,439
47
(275)
(149)
(263)
(824)
_______
_______
-
948
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, payable (if earned) in two tranches
in respect of the first year following completion of the
acquisition and similarly the second.
On acquisition these liabilities were provisionally as-
sessed at an aggregate fair value of $1.43m (as dis-
counted 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 subsequently reassessed
at the end of each reporting period and the differences
ANNUAL REPORT
111
28. Share capital and reserves
Share capital and share premium
Ordinary shares of 2.5p
each (issued and fully paid)
$’000
Number
of the Pelatro LLC capital LLC capital at the time of
the acquisition was transferred to the merger reserve,
together with certain other items relating to investments
At 1 January 2019
1,065
32,532,431
in subsidiaries.
Issued for cash during the year
-
-
_______
_______
29. Financial instruments
At 31 December 2019
1,065
32,532,431
Issued for cash during the year
147
4,500,000
Financial risk management
At 31 December 2020
1,212
37,032,431
_______
_______
On 21 and 22 August the Company issued a further
4,500,000 2.5 pence Ordinary shares at a price of 47.0
pence per share by way of a placing to institutional and
other investors. The Company incurred incremental
costs totalling $178,000 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 Plac-
ing were deemed to relate directly to the issue of new
shares and thus resulted in a debit to share premium
of $178,000.
Merger reserve
The Group’s principal financial instruments are cash
and deposits, trade receivables, contract assets, bor-
rowings, 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 ex-
plained 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
The acquisition by Pelatro Plc of Pelatro LLC on 7
customer or counterparty to financial instruments
September 2017 was accounted for as a reverse asset
fails to meet a contractual obligation. Credit risk
acquisition. Consequently, the previously recognised
arises from the Group’s cash and cash equivalents
book values and assets and liabilities were retained
and receivables balances. Cash is held predomi-
and the consolidated financial information for the peri-
nantly with ICICI, an institution with a Baa3 bank
od from the date of acquisition has been presented as
deposit credit rating from Moody’s, and Kotak Ma-
a continuation of the Pelatro business which was previ-
hindra Bank, which has an A-3 (short term) and
ously wholly owned by Pelatro LLC. The difference be-
BBB- (long term) credit rating from Standard and
tween the nominal value of the shares issued pursuant
Poors. The credit quality of customers is assessed
to the above share arrangement and the nominal value
by taking into account their financial position, past
112
ANNUAL REPORT
experience and other factors, and the Group mini-
Classification of financial instruments
mises 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 and
cash and cash equivalents based on expected
cash flows
Financial assets
Cash
Deposits
Trade receivables
Contract assets
Financial liabilities
The capital structure of the Group consists of debt,
Other payables and accruals
which includes borrowings as disclosed in note 23,
Trade payables
cash and cash equivalents and equity attributable to
Short-term borrowings
equity holders of the parent, comprising issued capi-
Long-term borrowings
tal, reserves and retained earnings as disclosed in the
Lease liabilities
Other financial liabilities -
contingent consideration
Group
2020
$’000
1,805
80
3,484
1,360
619
810
244
1,196
346
-
Group
2019
$’000
1,101
131
5,514
812
441
82
246
362
379
948
Group statement of changes in equity. The Group is
not subject to any externally imposed capital require-
ments 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 sharehold-
ers through optimisation of the balance of debt and
equity. Financing decisions are made based on fore-
casts 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.
All trade receivables are due from customers outside
the UK.
Foreign currency risk management and sensitivity
analysis
The Group undertakes certain transactions denomi-
nated in foreign currencies. Hence, exposures to ex-
change rate fluctuations arise. The Group is mainly ex-
posed to the currencies of the UK (Great British Pounds
or GBP), the US (US dollars or USD) and India (Indian
Rupees or INR), both with respect to balance sheet
amounts and income and expenditure, with some ex-
penditure exposure to the currencies of Singapore (Sin-
gapore Dollars or SGD), Malaysia (Malaysian Ringgits
or MYR) and 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.
ANNUAL REPORT
113
The following table shows the denomination of the
Limitations of sensitivity analysis
year end cash, cash equivalents and borrowings, and
trade receivables and payables balances in the princi-
The sensitivity analysis above demonstrates the ef-
pal currencies disclosed above:
fect of a change in one of the key assumptions while
As at 31 December 2020
USD
GBP
other assumptions remain unchanged. In reality, such
an occurrence is very unlikely due to correlation be-
tween the factors. Furthermore, these sensitivities are
non-linear, and larger or smaller impacts cannot easi-
ly be derived from the results. The sensitivity analysis
does not take into consideration that the Group’s as-
sets and liabilities are actively managed and may vary
at the time that any actual market movement occurs.
INR
’000
33,060
5,845
20,857
-
(105,146)
’000
580
-
3,271
1,360
-
’000
556
-
-
-
-
(780)
(18)
(2,550)
-
(1)
(25,191)
_______
_______
_______
Interest rate risk management and sensitivity anal-
ysis
Cash and cash equivalents
Deposits
Trade receivables
Contract assets
Borrowings
Trade payables
Lease liabilities
Net currency exposure
4,431
537
(73,125)
As at 31 December 2019
USD
GBP
INR
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate be-
cause of changes in market interest rates. At the year
end the Group had no exposure to interest rate risks
Cash and cash equivalents
Deposits
Trade receivables
Contract assets
Borrowings
Trade payables
Lease liabilities
’000
498
-
5,541
812
-
(26)
’000
’000
as all of its borrowings were fixed rate.
8
-
-
-
-
41,358
9,347
-
642
Liquidity risk management and interest risk tables
Ultimate responsibility for liquidity risk management
(43,304)
rests with the Board of Directors, which has built an
(25)
(2,508)
appropriate liquidity risk management framework for
-
(10)
(27,002)
the management of the Group’s short, medium and
_______
_______
_______
long-term funding and liquidity management require-
Net currency exposure
6,825
(27)
(21,467)
ments. The Group manages liquidity risk by maintain-
ing adequate reserves and borrowing facilities and
Had the foreign exchange rate between the US dollar
by continuously monitoring forecast and actual cash
and the other Group currencies changed by 5%, this
flows.
would have affected the profit for the year and the net
assets of the Group by $10,000 (2019: $5,000).
114
ANNUAL REPORT
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 2020
Fixed rate instruments - borrowings
Lease liabilities
Total
As at 31 December 2019
Fixed rate instruments - borrowings
Lease liabilities
Total
Weighted average
effective interest
rate
Less than 1
year
2-5 years
More than 5
years
$’000
$’000
$’000
13.2%
9.2%
244
174
1,074
172
122
-
Total
$’000
1,440
346
_______
_______
_______
_______
418
1,246
122
1,786
Weighted average
effective interest
rate
Less than 1
year
2-5 years
More than 5
years
$’000
$’000
$’000
10.0%
9.1%
246
205
283
187
79
-
Total
$’000
608
392
_______
_______
_______
_______
451
470
79
1,000
Fair values of financial assets and financial liabilities
As at 31 December 2020 and 31 December 2019 there were no material differences between the book value and fair
value of the Group’s financial assets and liabilities.
ANNUAL REPORT
115
30. Related party transactions
Amounts outstanding at the end of the year in respect
To comply with local legislation regarding resident di-
of transactions with related parties were as follows:
rectors, Hamish Christie is a director of Pelatro Pte
Amount outstanding – (debtor)/
creditor
Key management personnel -
outstanding reimbursements in respect
of expenses incurred on behalf of Group
companies
2020
2019
$’000
$’000
-
14
The remuneration of the Directors, who are deemed to
be the only key management personnel of the Group,
is set out below in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures.
Wages and salaries
Bonuses
Share-based payments
Pension cost and other benefits
in kind
2020
$’000
581
28
5
61
2019
$’000
571
98
7
60
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 approx-
imately $14,000 were made to those two companies;
there was a balance of approximately $2,500 out-
standing at the year end in relation to 2020 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 per-
formance of the Group.
31. Capital commitments and contin-
gent liabilities
Other than as disclosed above, as at 31 December
2020 the Group had no material capital commitments
_______
_______
(2019: nil) nor any contingent liabilities (2019: nil).
675
736
During the year Suresh Yezhuvath (the brother of Sub-
32. Events after the reporting date
ash Menon and Sudeesh Yezhuvath) arranged a loan
whereby a syndicate of certain business associates of
There have been no events subsequent to the reporting
his would provide funding of INR 60m (approx. $820k)
date which would have a material impact on the finan-
in order to facilitate the acquisition of computer hard-
cial statements.
ware needed for the implementation of a long-term
managed services contract. The loan was on a 6 year
term basis at an interest rate of 15.25%. Neither Mr Me-
non nor Mr Yezhuvath took any benefit from this loan,
which was considered to be on reasonable commercial
terms. Suresh Yezhuvath participated in the funding in
the amount of c. $130k at the same rate.
116
ANNUAL REPORT
Company Statement of Financial Position
As at 31 December 2020
Assets
Non-current assets
Investments in subsidiaries
Intangible assets
Right-of-use assets
Contract assets
Trade and other receivables
Current assets
Contract assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Liabilities
Non-current liabilities
Lease liabilities
Contract liabilities
Other long-term liabilities
Current liabilities
Lease liabilities
Contract liabilities
Trade and other payables
Other financial liabilities
Total Liabilities
NET ASSETS
Note
7
8
9
10
11
10
11
12
13
12
13
14
2020
$’000
(audited)
825
5,742
1
746
149
_______
7,463
552
4,042
1,206
2019
$’000
(audited)
746
6,740
16
467
211
_______
8,180
224
5,326
400
_______
_______
5,800
13,263
5,950
14,130
-
207
360
1
294
-
_______
_______
567
1
486
460
-
295
13
637
182
948
_______
_______
947
1,514
11,749
1,780
2,075
12,055
ANNUAL REPORT
117
Issued share capital and reserves attributable to owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
TOTAL EQUITY
Note
15
15
15
2020
$’000
(audited)
2019
$’000
(audited)
1,212
14,045
(186)
(3,322)
1,065
11,603
(214)
(399)
_______
_______
11,749
12,055
For the period ended 31 December 2020, the Company recorded a loss of $2,923,000 (2019: loss $657,000).
The financial statements of Pelatro Plc, registered number 10630166, were approved by the board of Directors and
authorised for issue on 11 April 2021. They were signed on its behalf by:
Subash Menon (Director)
Nic Hellyer (Director)
The accompanying notes 1 to 17 are an integral part of these financial statements.
118
ANNUAL REPORT
Company Statement of Changes in Equity
For the year ended 31 December 2020
Share
capital
Share
premium
Exchange
reserve
Retained
profits
Total
equity
Share-
based
payments
reserve
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 January 2019
1,065
11,603
(211)
Profit after taxation for the year
Share-based payments
Other comprehensive income:
Exchange differences
Balance at 31 December 2019
Profit after taxation for the year
Share-based payments
Other comprehensive income:
Exchange differences
Transactions with owners:
Shares issued by Pelatro Plc for cash
Issue costs
-
-
-
-
-
-
-
-
100
-
-
(103)
-
258
12,715
(657)
(657)
-
-
100
(103)
_______
_______
_______
_______
_______
_______
1,065
11,603
(314)
100
(399)
12,055
-
-
-
-
-
-
147
-
2,620
(178)
-
-
(54)
-
-
-
83
-
-
-
(2,923)
(2,923)
-
-
-
-
83
(54)
2,767
(178)
_______
_______
_______
_______
_______
_______
Balance at 31 December 2020
1,212
14,045
(368)
183
(3,322)
11,749
Reserve
Share capital
Share premium
Exchange reserve
Share-based payments reserve
Description and purpose
Nominal value of issued shares
Amount subscribed for share capital in excess of nominal value
less associated costs
The difference arising on the translation of balances denominated
in currencies other than US Dollars into the presentational
currency of the Company
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 18 are an integral part of these financial statements.
ANNUAL REPORT
119
Notes to the Company Financial Statements
1. Accounting policies
Share
capital
Share
Exchange
premium
reserve
Share-
based
Retained
profits
Total
equity
Basis of preparation
In addition, and in accordance with FRS 101, further
disclosure exemptions have been adopted because
$’000
$’000
$’000
$’000
$’000
$’000
The Parent Company financial statements of Pelatro
equivalent disclosures are included in the consolidated
Plc (the “Company”) have been prepared in accor-
financial statements. These financial statements do not
dance with Financial Reporting Standard 101 Reduced
include certain disclosures in respect of:
Disclosure Framework and as required by the Compa-
nies Act 2006.
•
•
business combinations;
financial instruments (other than certain disclo-
The financial statements have been prepared in US
sures required as a result of recording financial
Dollars, which is the currency of the primary economic
instruments at fair value);
environment in which the Company operates (its func-
•
fair value measurement (other than certain disclo-
tional currency). The financial statements are prepared
sures required as a result of recording financial in-
under the historical cost convention and were approved
struments at fair value); and
for issue on 11 April 2021.
•
impairment of assets.
No profit and loss account is presented by the Compa-
Investments in subsidiaries
Shares issued by Pelatro Plc for cash
Issue costs
147
2,620
(178)
ny as permitted by section 408 of the Companies Act
2006.
Balance at 31 December 2020
1,212
14,045
(368)
183
(3,322)
11,749
Disclosure exemptions adopted
_______
_______
_______
_______
_______
_______
Investments consist of the Company’s subsidiary un-
dertakings. Investments are initially recorded at cost,
being the fair value of the consideration given and in-
cluding directly attributable charges associated with
Balance at 1 January 2019
1,065
11,603
(211)
258
12,715
Profit after taxation for the year
Share-based payments
Other comprehensive income:
Exchange differences
Balance at 31 December 2019
Profit after taxation for the year
Share-based payments
Other comprehensive income:
Exchange differences
Transactions with owners:
payments
reserve
100
83
-
-
-
-
-
-
-
-
-
-
-
-
-
(103)
(54)
-
-
-
-
-
-
(657)
(657)
-
-
-
-
-
-
100
(103)
83
(54)
2,767
(178)
_______
_______
_______
_______
_______
_______
1,065
11,603
(314)
100
(399)
12,055
(2,923)
(2,923)
-
-
-
-
-
-
-
In preparing these financial statements the Company
the investment. Subsequently they are reviewed for
has taken advantage of all disclosure exemptions con-
impairment if events or changes in circumstances indi-
ferred by FRS 101. Therefore, these financial state-
cate the carrying value may not be recoverable.
ments do not include:
Trade receivables
•
certain disclosures regarding the Company’s cap-
•
•
ital;
a statement of cash flows;
Short term trade receivables are measured at trans-
action price, less any impairment. The Company as-
the effect of future accounting standards not yet
sesses at each reporting date whether any trade re-
adopted;
ceivables or other assets or group of financial assets
•
the disclosure of the remuneration of key manage-
is impaired.
ment personnel; and
•
disclosure of related party transactions with other
wholly-owned members of the Pelatro Group.
120
Taxation
Income taxes
Current tax assets and liabilities are measured at the
amount expected to be recovered from or paid to tax-
ation authorities, based on tax rates and laws that are
enacted or substantively enacted by the statement of
financial position date.
Deferred income tax is recognised on all temporary dif-
ferences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial
statements, with the following exceptions:
• where the temporary difference arises from the ini-
tial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination
that at the time of the transaction affects neither
accounting nor taxable profit or loss;
•
in respect of taxable temporary differences associ-
ated 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
•
deferred income tax assets are recognised only to
the extent that it is probable that taxable profit will
be available against which the deductible tempo-
rary differences, carried forward tax credits or tax
losses can be utilised.
Deferred income tax assets and liabilities are mea-
sured at the tax rates that are expected to apply when
the related asset is realised, or liability is settled, based
on tax rates and laws enacted or substantively enacted
at the statement of financial position date.
ANNUAL REPORT
The carrying amount of deferred income tax assets is
reviewed at each statement of financial position date.
Deferred income tax assets and liabilities are offset
only if a legally enforceable right exists to set off current
tax assets against current tax liabilities, the deferred in-
come 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 comprehen-
sive income or directly to equity if it relates to items
that are credited or charged to other comprehensive
income or directly to equity. Otherwise, income tax is
recognised in the income statement.
Foreign currencies
Transactions denominated in foreign currencies are
translated at an approximation of the exchange rate
ruling on the date of the transaction. Assets and liabil-
ities denominated in foreign currencies are translated
at the exchange rate ruling on the balance sheet date.
Resulting exchange gains and losses are taken to the
profit and loss account.
Related party transactions
The Company has taken advantage of the exemption
under FRS 101 from disclosing related party transac-
tions with entities that are wholly owned subsidiary un-
dertakings of the Pelatro Group.
ANNUAL REPORT
121
2. Critical accounting judgements
and key sources of estimation
uncertainty
Key sources of estimation uncertainty
5. Share-based payments
Share-based payments associated with share options
granted to employees of subsidiaries of the parent
company are treated as an expense of the subsidiary
company to be settled by equity of the parent company.
The key assumptions concerning the future and other
The share-based payment expense increases the val-
key sources of estimation uncertainty at the reporting
ue of the parent company’s investment in the subsidiar-
date that have a significant risk of causing a material
ies and is credited to retained earnings.
adjustment to the carrying amounts of assets and liabil-
ities within the next financial year, are as follows:
6. Dividends paid and proposed
Investments in subsidiary companies
No dividends were declared or paid during the year and
no dividends will be proposed for approval at the Annu-
The carrying cost of the Company’s investments in sub-
al General Meeting of the Company.
sidiary companies is reviewed at each reporting date
by reference to the income that is projected to arise
7. Investment in subsidiaries
therefrom. From a review of these projections, the Di-
rectors have made no provisions against their carrying
values as the Directors believe that the investments
concerned will generate sufficient economic benefits to
At 1 January 2019
justify their carrying values.
Investment in the period – share-based
payments in respect of subsidiaries
At 31 December 2019
Investment in the period – share-based
payments in respect of subsidiaries
At 31 December 2020
3. Auditor’s remuneration
The figures within the auditors’ remuneration note in
the Pelatro consolidated financial statements include
fees charged by the Company’s auditors to Pelatro plc
in respect of audit and non-audit services. As such, no
separate disclosure has been given above.
4. Directors’ remuneration
Information concerning Directors’ remuneration can be
found in note 10 to the Group financial statements.
$’000
654
92
_______
746
79
_______
825
122
ANNUAL REPORT
8. Intangible assets
Intangible assets comprise software acquired through business combinations, customer relationships and goodwill.
An analysis of goodwill and other intangible assets is as follows:
Financial year 2020
Cost
At 1 January 2020
Additions
Acquired software
Customer
relationships
Goodwill
$’000
$’000
$’000
1,250
-
6,862
-
43
-
Total
$’000
8,155
-
At 31 December 2020
1,250
6,862
43
8,155
_______
_______
_______
_______
Amortisation or impairment
At 1 January 2020
Charge for the year
At 31 December 2020
Net carrying amount
At 31 December 2020
At 1 January 2020
(443)
(312)
_______
(755)
495
807
(972)
(686)
_______
(1,658)
5,204
5,890
-
-
(1,415)
(998)
_______
_______
-
(2,413)
43
43
5,742
6,740
Goodwill arose on the acquisition of the Danateq Assets. It is assessed as having an indefinite life but the Company
tests whether goodwill has suffered any impairment on an annual basis. The Danateq Acquisition in 2018 comprised
various contracts and customer relationships, certain enterprise software and the related workforce. Given the op-
portunity to leverage this expertise across Pelatro’s existing business and the ability to exploit the Group’s thus en-
larged 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 the Company, thus leading to the recognition
of an amount of goodwill.
ANNUAL REPORT
9. Right-of-use assets
Right-of-use assets comprise a lease over a vehicle as follows:
Cost
At 1 January 2020
Effects of foreign exchange movements
At 31 December 2020
Depreciation
At 1 January 2020
Charge for the period
Eliminated on leases terminated
Effects of foreign exchange movements
Vehicles
$’000
31
1
_______
32
(15)
(14)
-
(2)
_______
2019
Cost
At 1 January 2019
Additions in the period
Effects of foreign exchange movements
At 31 December 2019
Depreciation
At 1 January 2019
Charge for the period
Effects of foreign exchange movements
At 31 December 2020
(31)
At 31 December 2019
Net carrying amount
At 31 December 2020
At 1 January 2020
Net carrying amount
At 31 December 2019
At 1 January 2019
1
16
123
Vehicles
$’000
-
30
1
_______
31
-
(13)
(2)
_______
(15)
16
-
124
ANNUAL REPORT
10. Contract assets
Due after one year
At 1 January
Contract assets recognised in the period,
net of releases to receivables or cash, or
amortisation to profit or loss
2020
$’000
467
2019
$’000
198
the expectation of no specific losses in the foresee-
able future, the Directors assess a hypothetical likely
default amount by applying a percentage “probability
of default” to the receivables balance, such probabil-
430
330
ity being related to the underlying credit rating of the
Transfer to current contract assets
(151)
(61)
At 31 December
_______
_______
746
467
customer or country of origin. Furthermore, taking into
account the time value of money when applied to con-
tracts assets (which may unwind over a period of years
following their initial recognition), a loss allowance for
expected credit losses has been recorded as follow:
Due within one year
At 1 January
Contract assets recognised in the period,
net of releases to receivables or cash, or
amortisation to profit or loss
2020
$’000
224
2019
$’000
54
177
109
Loss allowance at 1 January
Increase in loss allowance
2020
2019
$’000
$’000
29
8
-
29
_______ _______
Transfer from non-current contract assets
151
61
Loss allowance at 31 December
37
29
At 31 December
552
224
The loss allowance is comprised as follows:
_______
_______
On trade receivables
On contract assets
2020
$’000
30
7
2019
$’000
25
4
_______
_______
Loss allowance at 31 December
37
29
Contract assets are comprised as follows:
Contract assets relating to revenue
Contract fulfilment assets
2020
2019
$’000
$’000
306
440
467
-
_______
_______
746
467
Credit risk and impairments
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 con-
ditions as opposed to relying on past historical default
rates. In the absence of any historic credit losses and
125
Vehicles
$’000
-
-
12
(11)
-
_______
1
Vehicles
$’000
-
17
(16)
11
-
_______
12
ANNUAL REPORT
11. Trade and other receivables
Due within a year
Trade receivables
Other receivables and prepayments
Intra-Group receivables
2020
$’000
2019
$’000
2,915
5,055
96
1,031
125
146
_______
_______
Total trade and other receivables
4,042
5,326
Financial year 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
Due after more than one year
Trade receivables
149
211
At 31 December 2019
Amounts due in less than one year
At 1 January 2019
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
12. Lease liabilities
Lease liabilities comprise liabilities arising from the
committed and expected payments on a lease over a
vehicle.
Amounts due in more than one year
At 1 January 2020
Liabilities taken on in the period
Liabilities (disposed of) in the period
Transfer from long-term to short-term
Effects of foreign exchange movements
At 31 December 2020
Amounts due in less than one year
At 1 January 2020
Liabilities taken on in the period
Liabilities (disposed of) in the period
Repayments of principal
Transfer from long-term to short-term
At 31 December 2020
Vehicles
$’000
1
-
-
(1)
-
_______
-
Vehicles
$’000
12
-
-
(12)
1
_______
1
126
ANNUAL REPORT
13. Contract liabilities
Contract liabilities represent consideration received in
respect of unsatisfied performance obligations. Chang-
es to the Group’s contract liabilities are attributable
Due after more than one year
solely to the satisfaction of performance obligations.
Trade payables
2020
$’000
2019
$’000
360
-
_______
_______
At 31 December
Due after one year
Contract liabilities at 1 January
Contract liabilities recognised in the period
Transfers to short-term liabilities
2020
2019
$’000
$’000
294
-
(87)
112
222
(40)
_______ _______
Contract liabilities at 31 December
207
294
At 31 December
Due within one year
2020
$’000
2019
$’000
Contract liabilities at 1 January
Contract liabilities recognised/(released
to revenue) in the period
Transfers from long-term liabilities
637
(238)
87
33
564
40
Contract liabilities at 31 December
486
637
_______
_______
14. Trade and other payables
Due within a year
Trade payables
Other payables
2020
$’000
2019
$’000
446
14
58
124
_______
_______
Total trade and other payables
460
182
Total trade and other payables
360
-
15. Share capital and reserves
Share capital and share premium
Ordinary shares of 2.5p each (issued
and fully paid)
$’000
Number
At 1 January 2019
1,065
32,532,431
Issued for cash during the year
-
-
_______
_______
At 31 December 2019
1,065
32,532,431
Issued for cash during the year
147
4,500,000
_______
_______
At 31 December 2020
1,212
37,032,431
On 21 and 22 August the Company issued a further
4,500,000 2.5 pence Ordinary shares at a price of 47.0
pence per share by way of a placing to institutional and
other investors. The Company incurred incremental
costs totalling $178,000 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 Plac-
ing were deemed to relate directly to the issue of new
shares and thus resulted in a debit to share premium
of $178,000.
ANNUAL REPORT
127
Share-based payments
As further detailed in Note 11 to the Consolidated
Financial Statements, the Company has granted under
the terms of a share option plan for employees options
with an exercise price of 73p, vesting in tranches
as follows: 25% after one year, 25% after two years
and 50% after three years. There are no conditions
The expected life used in the model has been adjust-
ed, based on management’s best estimate, for the ef-
fects of non-transferability, exercise restrictions and be-
havioural considerations. The share price per share at
31 December 2020 was £0.380 (31 December 2019:
£0.705) and hence no deferred tax is provided in re-
spect of the potential exercise of options currently ex-
attaching to the vesting of the options other than
tant.
continued employment. An expense of $27,000 (2019:
$45,000) recorded in the Consolidated Financial
Statements relates to costs of share options issued to
subsidiary employees.
16. Capital commitments and contin-
gent liabilities
Movements in the number of share options outstanding
Other than as disclosed in the Group financial state-
and their related weighted average exercise prices are
ments, as at 31 December 2020 the Group had no ma-
as follows:
terial capital commitments nor any contingent liabilities
No. of options
Weighted average
exercise price
2020
2019
2020
2019
1,631,500
50,000
72.7p
62.5p
(2019: $nil)
17. Events after the reporting date
-
1,640,000
-
73.0p
curred subsequent to the reporting date.
There have been no significant events which have oc-
(126,000)
(58,500)
73.0p
73.0p
_______
_______
18. Related parties
1,505,500
1,631,500
72.7p
72.7p
The Company is exempt from disclosing transactions
Outstanding at the
beginning of the
year
Granted during
the year
Forfeited/
cancelled during
the year
Outstanding at the
end of the year
within the wholly owned subsidiaries in the Group. Oth-
er related party transactions are included within those
disclosed in the Group consolidated financial state-
ments.
The fair values of the share options issued in the year
was derived using a Black Scholes model. The follow-
ing key assumptions were used in the calculations:
Grant date
17 January 2019
Exercise price
Share price at grant date
73p
73p
Risk free rate
Volatility
Expected life
Fair Value
0.86 - 0.92%
35%
4.5 - 5.5 years
19.0 - 20.8p
W W W . P E L A T R O . C O M