Half-year Report

RNS Number : 2052A

Pelatro PLC

22 September 2022

 

22 September 2022

Pelatro Plc

("Pelatro" or the "Group")

Interim results

Pelatro Plc (AIM: PTRO), the precision marketing software specialist, is pleased to announce today its results for the 6 months ended 30 June 2022.

Financial highlights

• Revenue $4.19m (H1 2021: $3.46m), an increase of 21%

• Recurring revenue $2.41m (H1 2021: $2.43m), 58% of revenue

• Adjusted EBITDA^* $1.87m (H1 2021: $1.61m)

• Adjusted EBITDA^* margin 45% (FY 2021 39%)

• Adjusted earnings per share 0.2¢ (H1 2021: 0.9¢)

Operational highlights

• 3 new customers won this year to date

• Entry into financial services sector with a significant win

Post period end highlights

• Further contract wins and change requests give visibility over at least c. $8.5m revenue for the full year

• FY23 building steadily with over $6m of revenue already visible

• Cash receipts in July and August of c. $1.6m

Outlook

Management expectations for the year underpinned by:

• Strong revenue visibility for full year and diversification into non telco verticals  

• Current pipeline ** of c.$19m, of which c. $3m is from existing customers

Richard Day, Non-executive Chairman of Pelatro commented:

"It is a measure of the progress we have made in implementing our strategy of moving from a licence fee model to being more a recurring revenues service provider that, with three months still to go this year, we already have visibility over 95% of our expected full year revenue. We have already announced the winning of two new telco customers plus one in financial services, and our cost base is now increasingly stable. We are picking up new business and are looking forward with every confidence."

For further information contact:

Pelatro Plc
Subash Menon, Managing Director	c/o finnCap
Nic Hellyer, Chief Financial Officer
finnCap Limited (Nominated Adviser and joint broker)	[phone]
Carl Holmes/Milesh Hindocha (Corporate Finance)
Dowgate Capital Limited (joint broker)	[phone]
Stephen Norcross

* earnings before interest, tax, depreciation, amortisation, exceptional items and share-based payments

** "pipeline" is defined as opportunities where an RFI or RFP has been received and recurring revenue contracts are included as the sum of the likely revenue over 3 years in order to provide comparability with one-off license fee income

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Notes to editors

The Pelatro Group was founded in March 2013 by Subash Menon and Sudeesh Yezhuvath with the objective of offering specialised, enterprise class software solutions for customer engagement principally to telcos who face a series of challenges including market maturity, saturation and customer churn.

Pelatro provides its "mViva" platform for use by customers in B2C and B2B applications, and is well positioned in the Customer Engagement space. Our technology orchestrates the digital journey of the customers of the telcos through contextual, relevant and real time offers and loyalty programs across multiple channels including websites, social media, apps and others.

For more information about Pelatro, visit www.pelatro.com

Managing Director's statement

Our results in the first half of 2022 and trading to date reflect both the consolidation of our existing customer base as well as a healthy flow of new business which will ensure growth in the coming years. Given that our first customer was secured in 2016, a number of our typically five year contracts have been coming up for renewal in the last 12-18 months, and it is extremely pleasing to note that not one of our existing customers has sought to replace us, and in fact have sought to strengthen their relationship with us by requesting upgrades and change requests and/or additional software modules or services. All of these produce valuable income for us and embed Pelatro at the very heart of the customers' operations. The success of our mViva software in enabling users to increase their revenue; this is further demonstrated by the consistency of income from contracts where we take a share of the resulting gain by the customer. Additionally we regularly see mViva enabling significant reductions in subscriber churn.

We have also been expanding the range of industries we cover: having started serving solely the telecommunications sector, we have now secured contracts in the financial services sector and are closely tracking opportunities in retail, all data rich sectors where our powerful data analytics capabilities with advanced features like AI/machine learning technologies and real time engagement enable our customers to enhance, enrich and extend their relationships with their consumers.

We have worked hard to enhance the quality of our earnings such that the significant majority of our revenue is now recurring in nature and, whilst license sales are still an important contributor to revenue, even these are often structured on the basis of regular monthly payments (for example, the recent contract won with a Middle East telco with an initial value of around $1m payable over three years). This contract also demonstrates our strategy of securing relationships with members of large international telco groups where we can leverage off the success of initial implementations to enable us to market powerfully from "reference" customers.

Financial review

Revenue and profitability

In the six months to 30 June 2022 revenue increased by 21% over the comparable period to $4.19m (H1 2021: $3.46m). Of the total revenue, approximately $2.41m (H1 2021: $2.43m) was recurring revenue, comprising managed services, post contract support and gain share revenue, the slight fall being due to currency effects on INR-denominated revenue, the timing of certain services in one of our larger contracts, and recent recurring revenue contract wins coming onstream only in H2. Taking change requests of just under $1m into account some 81% of H1 revenue was repeating revenue, with the balance relating to license and other revenue.

Underlying operating profit (excluding the impact of non-cash share-based payments, amortisation of customer-related intangible assets) was $0.27m (H1 2021: $0.48m). Within this, underlying "cash" costs rose only marginally from $3.3m to $3.7m, reflecting both relatively stable staff numbers compared to the growth of previous years as well as some benefit of the strength of the US dollar (only around 10% of the Group's costs are incurred directly in USD with some 70% in INR, around 10% in GBP and the rest in other currencies). However, we recognised an increased amortisation charge on our capitalised development costs, where amortisation of c. $1.3m is now ahead of the capitalised spend of c. $1.2m.

Cash flow and trade receivables

Cash generated from operating activities was approximately $0.15m after working capital movements (H1 2021: $0.52m). This reduction compared to the prior period resulted from an increase in trade receivables to $5.59m (31 December 2021 $4.96m). Whilst part of this increase was due to increased revenue, some is also due to delays in payment arising from routine foreign exchange approvals needed by certain customers. These approvals usually take a considerable period of time, and such delays are not unexpected and always resolved in due course. We expect the majority of these receivables to unwind in H2 and hence the H1 cash flow is not representative of our expectations for the year as a whole: cash of $1.6m has been received in the months of July and August and a further $0.3m to date.

Capitalised development expenditure was $1.22m (H1 2021: $1.19m), again reflecting the relative stability in underlying numbers of the development team.

Current trading and outlook

Business has been improving significantly throughout the year with several new customers signing up for our products; in particular entry into the financial services sector has been a major step for us during the past few months. Our efforts in this sector have resulted in a strong pipeline getting built and we expect to win several new customers in the financial services sector in the coming quarters.

Revenue visibility for the full year reached around 95% of market forecasts earlier this month, which we view as a good measure of the momentum in the business. Given this traction, we expect to end 2022 with a strong base of recurring revenue and to start 2023 with excellent visibility for that year in turn. As in previous years, existing customers continue to take more products and services from us thereby increasing the annual revenue from them. Accordingly, we view our prospects for 2022 positively and look forward to further growth in years to come.

Group statement of comprehensive income

		6 months to 30 June 2022	6 months to 30 June 2021	Year to December 2021
	Note	$'000	$'000	$'000
		(unaudited)	(restated)	(audited)
Revenue	1	4,189	3,460	7,266
Cost of sales and provision of services		(991)	(968)	(2,206)
		_______	_______	_______
Gross profit		3,198	2,492	5,060
Adjusted administrative expenses		(2,926)	(2,010)	(4,831)
		_______	_______	_______
Adjusted operating profit		272	482	229
Amortisation of acquisition-related intangibles		(343)	(342)	(686)
Share-based payments		(3)	(15)	(32)
		_______	_______	_______
Operating profit/(loss)		(74)	125	(489)
Finance income	3	17	23	44
Finance expense	4	(84)	(110)	(221)
		_______	_______	_______
Profit/(loss) before taxation		(141)	38	(666)
Income tax (expense)		(134)	(42)	(181)
		_______	_______	_______
(LOSS) FOR THE PERIOD		(275)	(4)	(847)
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations		(126)	(53)	(82)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of equity balances		(80)	(26)	(15)
		_______	_______	_______
Other comprehensive income, net of tax		(206)	(79)	(97)
TOTAL COMPREHENSIVE (LOSS) FOR THE PERIOD		(481)	(30)	(944)
Earnings/(loss) per share
Reported
Basic and diluted	5	(0.6)¢	0.0¢	(2.1)¢
Adjusted
Basic and diluted	5	0.2¢	0.9¢	(0.4)¢

Group statement of financial position

		As at 30 June 2022	As at 30 June 2021	As at 31 December 2021
	Note	$'000	$'000	$'000
		(unaudited)	(restated)	(audited)
Assets
Non-current assets
Intangible assets	6	10,999	11,777	11,453
Tangible assets		811	1,095	982
Right-of-use assets		147	238	240
Deferred tax assets		16	16	14
Contract assets	7	1,257	461	606
Trade and other receivables		41	91	163
		_______	_______	_______
		13,271	13,678	13,458
Current assets
Contract assets	7	569	733	555
Trade receivables		5,550	3,716	4,793
Other assets		443	387	315
Cash and cash equivalents		1,647	784	3,331
		_______	_______	_______
		8,209	5,620	8,994
Total assets		21,480	19,298	22,452
Liabilities
Non-current liabilities
Borrowings	8	396	1,031	608
Lease liabilities		12	117	80
Contract liabilities		211	139	278
Long-term provisions	10	178	149	202
		_______	_______	_______
		797	1,436	1,168
Current liabilities
Short-term borrowings	8	250	504	136
Lease liabilities		160	139	188
Trade and other payables	9	329	356	603
Contract liabilities		431	289	469
Provisions	10	168	198	72
		_______	_______	_______
		1,338	1,486	1,468
Total liabilities		2,135	2,922	2,636
NET ASSETS		19,345	16,376	19,816
Issued share capital and reserves
Share capital		1,501	1,212	1,501
Share premium		18,046	14,045	18,046
Other reserves		(835)	(611)	(639)
Retained earnings		633	1,730	908
		_______	_______	_______
TOTAL EQUITY		19,345	16,376	19,816

Group statement of cash flows

	6 months to 30 June 2022	6 months to 30 June 2021	Year to 31 December 2021
	$'000	$'000	$'000
	(unaudited)	(restated)	(audited)
Cash flows from operating activities
Profit/(loss) for the period	(275)	(182)	(847)
Adjustments for:
Income tax expense/(credit) recognised in profit or loss	134	42	181
Finance income	(17)	(4)	(44)
Finance costs	84	107	221
Depreciation of tangible non-current assets	254	210	467
Profit on disposal of fixed assets	-	-	(10)
Amortisation of intangible non-current assets	1,677	1,266	2,814
Share-based payments	3	15	32
Realised foreign exchange (gains)/losses	15	10	9
	_______	_______	_______
Operating cash flows before movements in working capital	1,875	1,464	2,823
(Increase)/decrease in trade and other receivables	(732)	(199)	(1,271)
(Increase)/decrease in contract assets	(652)	173	206
Increase/(decrease) in trade and other payables	(235)	(623)	(532)
Increase in contract liabilities and other deferred income	(104)	(293)	45
	_______	_______	_______
Cash generated from operating activities	152	522	1,271
Income tax paid	(188)	(191)	(258)
	_______	_______	_______
Net cash generated from operating activities	(36)	331	1,013
Cash flows from investing activities
Development of intangible assets	(1,220)	(1,176)	(2,540)
Purchase of intangible assets	-	(3)	(42)
Acquisition of property, plant and equipment	(16)	(42)	(88)
	_______	_______	_______
Net cash used in investing activities	(1,236)	(1,221)	(2,670)
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs	-	-	4,290
Proceeds from borrowings	2	226	70
Repayment of borrowings	(62)	(81)	(748)
Repayments of principal on lease liabilities	(118)	(85)	(173)
Interest received	17	4	44
Interest paid	(69)	(125)	(203)
Interest expense on lease liabilities	(16)	(9)	(25)
	_______	_______	_______
Net cash generated by/(used in) financing activities	(246)	(70)	3,255
Net increase/(decrease) in cash and cash equivalents	(1,518)	(960)	1,598
Net foreign exchange differences	(166)	(61)	(72)
Cash and cash equivalents at beginning of period	3,331	1,805	1,805
	_______	_______	_______
Cash and cash equivalents at end of period	1,647	784	3,331

Group statement of changes in equity

	Share capital	Share premium	Exchange reserve	Merger reserve	Share-based payments reserve	Retained profits		Total
	$'000	$'000	$'000	$'000	$'000	$'000		$'000
Balance at 1 January 2021	1,212	14,045	(240)	(527)	184	1,734		16,408
(Loss) after taxation for the period	-	-	-	-	-	(4)		(4)
Share-based payments	-	-	-	-	51	-		51
Other comprehensive income:
Exchange differences	-	-	(79)	-	-	-		(79)
	_____	_____	_____	_____	_____	_____		_____
Balance at 30 June 2021	1,212	14,045	(319)	(527)	235	1,730		16,376
(Loss) after taxation for the period	-	-	-	-	-	(843)		(843)
Share-based payments	-	-	-	-	11	-		11
Transfer on lapse of share options					(21)	21		-
Other comprehensive income:
Exchange differences	-	-	(18)	-	-	-		(18)
Transactions with owners:
Shares issued by Pelatro Plc for cash	289	4,334	-	-	-	-		4,623
Issue costs	-	(333)	-	-	-	-		(333)
	_____	_____	_____	_____	_____	_____		_____
Balance at 31 December 2021	1,501	18,046	(337)	(527)	225	908		19,816
(Loss) after taxation for the period	-	-	-	-	-	(275)		(275)
Share-based payments	-	-	-	-	10	-		10
Other comprehensive income:
Exchange differences	-	-	(206)	-	-	-		(206)
	_____	_____	_____	_____	_____	_____		_____
Balance at 30 June 2022	1,501	18,046	(543)	(527)	235	633		19,345

Notes to the Group financial statements

1  Segmental analysis

Revenue by type

	6 months to 30 June 2022	6 months to 30 June 2021	Year to 31 December 2021
	$'000	$'000	$'000
Recurring software sales and services	1,775	1,922	3,456
Maintenance and support	630	506	1,334
	_______	_______	_______
Total recurring revenues	2,405	2,428	4,790
Change requests	978	1,009	1,958
	_______	_______	_______
Total repeating revenues	3,383	3,437	6,748
Licence related income	798	23	498
Other income	8	-	20
	_______	_______	_______
	4,189	3,460	7,266

Revenue by geography

The Group recognises revenue in seven geographical regions based on the location of customers, as set out in the following table:

	6 months to 30 June 2022	6 months to 30 June 2021	Year to 31 December 2021
	$'000	$'000	$'000
Caribbean	79	64	130
Central Asia	280	287	443
Eastern Europe	230	75	426
Middle East and North Africa	893	152	104
South Asia	1,552	1,102	2,656
South East Asia	1,147	1,780	3,407
Sub-Saharan Africa	8	-	100
	_______	_______	_______
	4,189	3,460	7,266

2  Non-GAAP profit measures and exceptional items

Reconciliation of operating profit to earnings before interest, taxation, depreciation and amortisation ("EBITDA"):

	6 months to 30 June 2022	6 months to 30 June 2021	Year to 31 December 2021
	$'000	$'000	$'000
Operating profit/(loss)	(74)	125	(489)
Adjusted for:
- amortisation and depreciation	1,926	1,450	3,227
	_______	_______	_______
EBITDA	1,852	1,575	2,738
Other adjustments:
- revenue recognised as interest under IFRS 15	17	19	38
Expensed share-based payments	3	15	32
	_______	_______	_______
Adjusted EBITDA	1,872	1,609	2,808

The criteria for adjusting operating income or expenses in the calculation of adjusted EBITDA are that they are material and either (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. Materiality is defined as an amount which, to a user, would influence decision-making based on, and understandability of, the financial statements.

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 below) to allow a better understanding of comparable year-on-year trading and thereby an assessment of the underlying trends in the Group's financial performance. These measures also provide consistency with the Group's internal management reporting.

Adjustment for share-based payment expense is made because, once the cost has been calculated for a given grant of options, the Directors cannot influence the share-based payment charge incurred in subsequent years relating to that grant; also the value of the share option to the employee differs considerably in value and timing from the actual cash cost to the Group.

3  Finance income

	6 months to 30 June 2022	6 months to 30 June 2021	Year to 31 December 2021
	$'000	$'000	$'000
	(unaudited)	(unaudited)	(audited)
Interest receivable on interest-bearing deposits	-	4	6
Notional interest accruing on contracts with a significant financing component	17	19	38
	_______	_______	_______
Total finance income	17	23	44

4  Finance expense

	6 months to 30 June 2022	6 months to 30 June 2021	Year to 31 December 2021
	$'000	$'000	$'000
	(unaudited)	(unaudited)	(audited)
Interest and finance charges paid or payable on borrowings	68	101	202
Interest on lease liabilities under IFRS 16	16	13	25
Less: amounts capitalised as intangible assets	-	(4)	(6)
	_______	_______	_______
Total finance expense	84	110	221

5  Earnings per share

Earnings per share - reported ("EPS")

The calculation of the basic and diluted EPS is based on the following data:

	6 months to 30 June 2022	6 months to 30 June 2021	Year to 31 December 2021
	$'000	$'000	$'000
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent	(275)	(4)	(847)
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share	45,407,431	37,032,431	41,153,537

The weighted average number of shares and the loss for the year for the purposes of calculating the fully diluted earnings per share are the same as for the basic loss per share calculation. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under IAS33.

Adjusted earnings per share

Adjusted EPS is calculated as follows:

	6 months to 30 June 2022	6 months to 30 June 2021	Year to 31 December 2021
	$'000	$'000	$'000
Earnings attributable to owners of the Parent	(275)	(4)	(847)
Adjusting items:
- expensed share-based payments	3	15	32
- amortisation of acquisition-related intangibles	343	342	686
- prior year adjustments to tax charge	-	(18)	(42)
	_______	_______	_______
Adjusted earnings attributable to owners of the Parent	71	335	(171)
Weighted number of ordinary shares in issue	45.407,431	37,032,431	41,153,537
Adjusted earnings per share attributable to shareholders (basic and diluted)	0.2¢	0.9¢	(0.4)¢

The criteria for inclusion of adjusting items in the calculation of adjusted EPS are the same as those relating to the calculation of adjusted EBITDA as set out in Note 3. Additionally, amortisation of acquisition-related intangibles relates to the amortisation of intangible assets in respect of customer relationships which are recognised on a business combination and are non-cash in nature.

The Group has one category of potentially dilutive ordinary share, 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.

6  Intangible assets

Intangible assets comprise capitalised development costs, acquired software, customer relationships and goodwill.

	Development costs	Third party software	Patents	Customer relationships	Goodwill	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Cost
At 1 January 2022	11,839	120	57	6,862	470	19,348
Additions	1,220	6	-	-	-	1,226
Foreign exchange	-	(4)	-	-	-	(4)
	_______	_______	_______	_______	_______	_______
At 30 June 2022	13,059	122	57	6,862	470	20,570
Amortisation or impairment
At 1 January 2022	(5,478)	(71)	(2)	(2,344)	-	(7,895)
Charge for the period	(1,317)	(9)	(7)	(343)	-	(1,676)
	_______	_______	_______	_______	_______	_______
At 30 June 2022	(6,795)	(80)	(9)	(2,687)	-	(9,571)
Net carrying amount
At 30 June 2022	6,264	42	48	4,175	470	10,999
At 1 January 2022	6,361	49	55	4,518	470	11,453

7  Contract assets

Contract assets are comprised as follows:

	As at 30 June 2022	As at 30 June 2021	As at 31 December 2021
	$'000	$'000	$'000
Due after one year
Contract assets relating to revenue	972	98	227
Contract fulfilment assets	285	363	379
	_______	_______	_______
	1,257	461	606
Due within one year
Contract assets relating to revenue	380	581	375
Contract fulfilment assets	189	152	180
	_______	_______	_______
	569	733	555

8  Loans and borrowings

	As at 30 June 2022	As at 30 June 2021	As at 31 December 2021
	$'000	$'000	$'000
Non-current liabilities
Secured term loans	10	237	23
Unsecured borrowings	386	794	585
	_______	_______	_______
	396	1,031	608
Current liabilities
Current portion of term loans	15	138	11
Unsecured borrowings	235	366	125
	_______	_______	_______
	250	504	136
Total loans and borrowings	646	1,535	744

9  Trade and other payables

	As at 30 June 2022	As at 30 June 2021	As at 31 December 2021
	$'000	$'000	$'000
Due within a year
Trade payables	151	30	152
Other payables	178	326	451
	_______	_______	_______
Total trade and other payables	329	356	603

10  Provisions

Long-term	As at 30 June 2022	As at 30 June 2021	As at 31 December 2021
	$'000	$'000	$'000
Employee gratuities	132	108	141
Leave encashment	46	41	61
	_______	_______	_______
	178	149	202

Short-term	As at 30 June 2022	As at 30 June 2021	As at 31 December 2021
	$'000	$'000	$'000
Employee gratuities	7	12	7
Leave encashment	22	17	30
Other provisions (including tax)	139	169	35
	_______	_______	_______
	168	198	72

11  Post balance sheet events

Other than disclosed above there have been no events subsequent to the reporting date which would have a material impact on these interim financial results.

Basis of preparation

The Group has prepared its interim financial statements (the "statements") for the 6 months ended 30 June 2022 (the "interim results") in accordance with the AIM Rules of the London Stock Exchange and not in accordance with IAS34 Interim Financial Reporting; the statements are prepared in accordance with the recognition and measurement principles of International Accounting Standards in conformity with the requirements of the Companies Act 2006, but do not include all the disclosures that would otherwise be required

The statements have been prepared under the historical cost convention. The accounting policies adopted in the statements are consistent with those adopted in the Group's Annual Report and Financial Statements for the year ended 31 December 2021 and those which will be adopted in the preparation of the annual report for the year ending 31 December 2022. The statements do not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited.

Going concern

The Directors have considered trading and cash flow forecasts prepared for the Group, and based on these, and confirmed banking facilities, are satisfied that the Group will continue to be able to meet its liabilities as they fall due for at least one year from the date of these results. On this basis, they consider it appropriate to have adopted the going concern basis in the preparation of the interim results, which were approved by the Board of Directors on 21 September 2022.

Comparative financial information

The comparative financial information presented herein for the year ended 31 December 2021 does not constitute full statutory accounts for that period. Statutory accounts for the year ended 31 December 2021 have been filed with the Registrar of Companies. These statutory accounts carried an unqualified Auditor's Report, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. The accounts for the 6 months to 30 June 2021 have been restated to reflect a reallocation of amortisation expense on capitalised development costs resulting from a revised assessment of amortisation costs undertaken as part of the review of the financial results for the year ended 31 December 2021. The resulting adjustment to amortisation expense has not effected either the 30 June 2021 cash position or the full year results.

 

END

 

 

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