Preliminary results

RNS Number : 6589M

Pelatro PLC

01 May 2018

 

1 May 2018

Pelatro Plc

("Pelatro", the "Company" or the "Group")

Preliminary results

Pelatro Plc (LSE symbol: PTRO), the precision marketing software specialist, is pleased to announce today its preliminary results for the year ended 31 December 2017.

Financial highlights

·              Revenue up c. 160% to $3.15 million (2016: $1.21 million)

·              Pre-exceptional EBITDA* increased c. 300% to $2.00 million (2016: $498,000)

·            Adjusted profit before tax $1.8 million (2016: $360,000); statutory profit before tax $1.10 million (2016: $360,000)

·              Adjusted earnings per share** up 305% to 8.9¢ (2016: 2.2¢)

·              Net cash as at 31 December 2017 $3.1 million (31 December 2016: $196,000)

* earnings before interest, tax, depreciation, amortisation and exceptional items

** based on pre-exceptional earnings after tax

Operational and corporate highlights

·          Admission to AIM on 19 December 2017 and placing of 6.1 million new Ordinary Shares, raising gross proceeds of $5.1 million for the Company at a price of 62.5 pence per Ordinary Share

·           Continued strong mViva customer progress in 2017 with 4 new customer wins and 1 new customer win since the year end

·              Further expansion of customer base

·              Increased investment in product innovation and sales and marketing

·           Acquisition of the Software Development Centre in Bangalore to bring development and support fully in house

Post year end highlights

·            Largest ever contract ($1.7 million revenue) won in Central Asia with subsidiary of Western European telco

·            One new sales person appointed to cover North Africa and Central Europe

·            Significant levels of change request work ongoing

·            Identified pipeline of 20 opportunities

·            c. 40% of year end receivables balance now paid

Richard Day, Non-executive Chairman of Pelatro commented:

"2017 was a very good year for Pelatro. The successful IPO and continued progress against our strategy have delivered strong results. Demand for Pelatro's product is robust and the environment for data analytics capability for Telcos remains attractive. The Group continues to deliver against its stated strategy and, with our recently announced contract new customer win, we are confident of at least meeting market expectations for 2018."

A copy of the results presentation provided to analysts will be available on Pelatro's website later today (www.pelatro.com).

For further information contact:

Pelatro Plc
Subash Menon, Managing Director	c/o IFC
Nic Hellyer, Finance Director
finnCap Limited (Nominated Adviser and Broker)	[phone]
Adrian Hargrave/Giles Rolls/Kate Bannatyne
IFC Advisory Limited (Financial PR and IR)	[phone]
Tim Metcalfe/Miles Nolan/Zach Cohen

This announcement is released by Pelatro Plc and, prior to publication, the information contained herein was deemed to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014. Such information is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Pelatro Plc was Nic Hellyer, Finance Director.

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 precision marketing campaigns. Pelatro provides its precision marketing software "mViva" for use by customers in B2C applications, with a current focus on providing multi-channel campaign management software to telcos, who face a series of challenges including market maturity, saturation and customer churn.

Pelatro has subsidiaries in the US, Singapore and India. Pelatro's solutions are currently deployed in seven telcos with one further implementation scheduled. The Group has been profitable since 2016.

The Company has a clear strategy to expand its target markets, the first element being to expand its reach in new geographies, principally Europe and North America, whilst continuing to expand its existing presence in geographies like Latin America, Africa and Asia. The second element is to add products that are adjacent in nature and to sell these to the existing customer base (for example, a Loyalty Management Solution which is likely to be complementary to mViva).

Managing Director's Statement

This set of results marks our inaugural year as an AIM-quoted public company. We have established an experienced Board of Directors with a clear focus on delivering the strategy which was set out in the Admission Document at the time of our Admission to AIM on 19 December 2017.

Overview

Pelatro is well positioned in a high growth market, is well funded and has an experienced and focused management team, backed up by skilled software developers and an increased sales and marketing function. mViva, the Group's precision marketing solution for telcos, is currently deployed in seven telcos including Robi Axiata, Smart Dialog, Bahamas Telecom and Inwi with one further in implementation.

Acquisition

At the end of 2017, the Group reacquired control of Pelatro Solutions Private Limited ("PSPL"), the business located in Bangalore, India which is responsible for the core software development functions of the Group as well as support and maintenance.

Outlook and prospects

The telecom industry continues to grapple with reducing Average Revenue Per User ("ARPU") coupled with a high level of churn. Adding to this is the changing nature of subscribers who have become more and more demanding. Responding to such a scenario in an effective manner, to ensure increasing revenue and profitability, calls for a deep understanding of subscriber behaviour and trends. This opens up a plethora of opportunities for Pelatro to assist telcos to overcome these challenges thereby ensuring increasing business through licensing and support of our product, mViva. With the benefit of increased financial resources and presence, Pelatro intends to expand its reach in new geographies, principally Europe and North America, while continuing to further its presence in Latin America, Africa and Asia.

Activity levels in the first months of the new financial year have been positive and the pipeline of new business opportunities remains strong. We announced our largest ever contract win worth $1.7 million on 17 April 2018 with a Central Asian subsidiary of a Western European telco. Our experience to date suggests that, once we make an initial sale into a new telco group, we have a greater ability to sell our mViva product to other subsidiaries in the same group.

We are currently in discussions with a further 20 telcos, across four continents. In addition to this, we have been busy processing various change requests for our existing clients, which are a result both of corporate change and refinements to the mViva product for the relevant client's specifications. In addition, we are in substantive discussions regarding migration towards a managed services model with potential and existing customers. Given the recent new customer win, current pipeline and current engagement with existing customers, I expect that the 2018 financial year will see further positive progress for Pelatro, with additional contract wins and revenue predominantly weighted towards the second half of the year as was the case in 2017.

Inorganic growth

The enhanced balance sheet and diversification of the Board with the addition of the independent non-executive Directors ahead of our IPO positions the Group well to continue its strategy of growth, both organically and potentially through targeted acquisitions. This aspect of the strategy will only be deployed very carefully and opportunistically with the primary objective being to acquire customers at a faster pace. In keeping with that approach, any acquisitions will be in our area of operation or in adjacent areas.

Summary

With our continued investment in our mViva software and sales and marketing expansion, I anticipate further improvement in our market position as we respond to the growing demand for data analytics by telcos. Following the contract win referred to above, and  with the activity arising from our existing client base, we have full revenue visibility for the year ending 31 December 2018.

2017 was very successful year for the Group, which of course is made up of a great many team and individual successes. I would like to thank the management and staff for their continued support and resolve to achieve success in our pursuit of market leadership in data analytics.

Subash Menon

Managing Director

1 May 2018

Financial review

Introduction

Our full year results highlight the rapid growth the Group has experienced in 2017, which growth we expect to continue as our product achieves wider adoption throughout the telecommunications industry.

The admission of the Company's shares to trading on AIM was a transformational event, giving the Group the opportunity to raise significant financial resources and the capacity to expand its sales team and customer reach, as well as bringing in-house the Software Development Centre. New funds raised at the time of the IPO were $5.1 million (gross) through the issue of approximately 6.1 million new Ordinary Shares at a placing price of 62.5 pence per share. In consequence, the Group is now broadly owned as to 29% by the wider investing community and 71% by the founders and current employees of the Company.

As a result of the IPO and its associated costs, the Group incurred a number of exceptional costs during the year amounting to approximately $701,000. These have been excluded from the calculation of underlying results as presented below unless otherwise stated.

Key performance indicators

	2017	2016	Growth
Revenue	$3.15m	$1.21m	160%
Adjusted EBITDA	$2.00m	$498,000	302%
Profit before tax	$1.10m	$360,000	204%
Contracted customers	7	3

Income statement

Revenue

2017 continued the trends seen in the prior year, with revenues rising around 160% to $3.15 million. Of this, approximately $2.42 million related to license fees and associated revenue such as change requests, a further $476,000 related to Pelatro's share of the gain accrued by customers using its software ("gain share") and $255,000 related to the provision of hardware at the special request of a customer.

As all the Group's revenue is in US Dollars, there is no impact on revenue arising from foreign exchange movements.

Cost of sales

Cost of sales includes both the expensed element of software development costs as well as the cost of hardware purchased on behalf of end customers (2017: $799,000; 2016: $632,000). The element of cost of sales relating to software development expenses reduced due to a higher level of costs which were required to be capitalised under the Group's accounting policies.

Overheads

Pre-exceptional overheads increased by around 360% to $343,000 (2016: $75,000), largely as a result of directors' remuneration (which was not paid in 2016), partly due to higher amounts of commission payable on increased revenue, and also due to higher legal and professional costs associated with the growing complexity of the Group.

Overhead costs also include the net cost of foreign exchange movements which resulted in a gain in the year of $15,000 (2016: nil). This gain arises principally from the impact of the strengthening of Pounds Sterling on the translation into US Dollars of the IPO proceeds, net of the impact of costs arising in Pounds Sterling over the course of the trading period. As well as exposure to Pounds Sterling on costs arising in the UK, the Group is exposed also to foreign exchange movements in the Indian Rupee due to the software research, development and support activities carried out by its Indian subsidiary, Pelatro Solutions Private Limited ("PSPL"). However, given that PSPL was acquired only on 13 December 2017, foreign exchange movements relating to this subsidiary were minimal in 2017.

Research and development costs

During the year, as in previous years, the Group has invested substantially in product research and development and support through PSPL. This investment has contributed strongly to the growth in revenues and it is anticipated that the cash cost of such investment will continue to increase. However, as set out below, the accounting charge for costs relating to software development in the year decreased by 17% to $525,000 (2016: $632,000) due to a higher proportion of costs being capitalised as more resources were given to product development which was applicable across our customer base. Cash costs were approximately $1.28 million (2016: $1.00 million) representing a 28% increase.

Capitalised development expenditure in 2017 was $752,000, resulting in an intangible asset in the statement of financial position of $908,000 (net of amortisation, 2016: $357,000).

R&D and related costs	2017	2016
	USD'000	USD'000
Amount of R&D expensed in the year	525	632
Amortisation of previously capitalised development costs	201	138
	_______	_______
Total R&D charge under IFRS	726	770
Total R&D cash expenditure	1,277	998
Amount of development costs capitalised	752	366

Amortisation (of development costs) increased to $201,000 (2016: $138,000) due to further additions to the value of the Group's development costs plus the full year effect of the previous year's capitalisation.

In the short to medium term it is anticipated that cash spend on R&D and related expenses will continue to rise reflecting the need to support the expansion of the Group in revenue terms; it is expected that development costs capitalised will continue at or around the current proportion of cash spend.

Profitability

Pre-exceptional EBITDA (earnings before interest, tax, depreciation, amortisation and exceptional items) increased by 302% in the year to $2.0 million (2016: $498,000). Profit before tax and exceptional items was $1.80 million (2016: $0.36 million). Profit before tax was $1.1 million (2016: $0.36 million).

Excluding exceptional costs, adjusted earnings per share were 8.9 cents (2016: 2.2 cents).

Statement of financial position

Goodwill and other intangible assets

The goodwill in the Group balance sheet arises from the acquisition of PSPL on 13 December 2017. As PSPL was initially loss-making and then minimally profitable, and had been funded largely by related party and third-party debt, it had significant negative net assets at the time of acquisition, thus leading to the goodwill acquired.

Changes to other intangible assets includes the addition of acquired software licenses at a fair value of $16,000 and the capitalisation of development costs of $752,000 (2016: $366,000) and associated amortisation of $202,000 (2016: $138,000). The Group's deferred tax asset arose as a result of the acquisition of PSPL, which has significant trading losses brought forward to offset against future tax liabilities.

Property, plant and equipment

The movement in property, plant and equipment arises entirely from the acquisition of PSPL as the Group has no tangible assets elsewhere.

Trade and other receivables

At 31 December 2017 trade receivables stood at $1.78m (2016: $140,000). The increase relates largely to the weighting of revenues in the second half of the year, with over one third of the total revenue billed in the last quarter. In addition, certain contracts are by necessity bespoke and under extended settlement terms. Of these receivables, approximately $726,000 has been received since the year end and to date, of which $350,000 relates to the $756,000 debtor over 121 days referred to in Note 14 and the balance relates to other customers.

Trade and other payables

At the year end trade payables stood at $53,000 (2016: $291,000). The decrease largely reflects the acquisition of PSPL (previously the Group's only significant trade creditor), with whom trading balances are now intra-Group and hence not shown in the consolidated Group Statement of Financial Position. Other payables of $320,000 (2016: $40,000) comprise an accrued tax liability of $201,000 and sundry creditors and accruals - the Group has tax liabilities with UK, Singaporean, US and Indian tax authorities in relation to trading in 2017. Costs relating to the IPO are not tax deductible, whether taken to share premium or through the profit and loss account, and hence have a concomitant effect on tax arising in Pelatro Plc.

A further $101,000 (2016: $1,000) was owed to Directors largely as a result of travel and other expenses incurred by them on behalf of Group companies for which reimbursement was outstanding at the year end.

Statement of cash flows

Cash flow, cash and borrowings

The Group's financial position was strong at 31 December 2017 with closing cash of $4.1m, largely arising from the funds from the IPO net of the receivables balance which built up during the year, and around $1.0m of debt arising as a result of the acquisition of PSPL, which historically had been funded mostly by loans from the founders as well as third party debt (2016: $196,000 and no debt).

Operating cash flow excluding working capital movements, was mostly re-invested in product development.

Other matters

Financial instruments

The Group does not have any contractual obligation under any financial instruments with respect to the hedging of interest rate or currency risk.

Summary

Pelatro had a most encouraging year in 2017 and has entered the new financial year with a robust balance sheet to support our future expansion.

Nic Hellyer

Finance Director

1 May 2018

Group statement of comprehensive income for the year ended 31 December 2017

		2017	2016
	Note	USD'000	USD'000
		(audited)	(unaudited pro forma)
Revenue	5	3,146	1,205
Cost of sales		(799)	(632)
		_______	_______
Gross profit		2,347	573
Adjusted administrative expenses	6	(546)	(213)
		_______	_______
Adjusted operating profit		1,801	360
Exceptional items	7	(701)	-
		_______	_______
Statutory operating profit		1,100	360
Finance expense		(4)	-
		_______	_______
Profit before taxation		1,096	360
Income tax expense	8	(252)	-
		_______	_______
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS		844	360
Discontinued operations
Loss for the year from discontinued operations		-	(49)
		_______	_______
PROFIT FOR THE YEAR		844	311
Attributable to:
Owners of the Pelatro Group		830	314
Non-controlling interests		14	(3)
		_______	_______
		844	311
Other comprehensive income/(expense):
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations which may subsequently be reclassified to profit or loss		(2)	(19)
Items that not will be reclassified subsequently to profit or loss:
Gain on bargain purchase of minority interest		14	-
		_______	_______
Net other comprehensive income		12	(19)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR		856	292
Attributable to:
Owners of the Pelatro Group		842	297
Non-controlling interests		14	(5)
		_______	_______
		856	292
Earnings per share
Statutory
Attributable to the owners of the Pelatro Group (basic and diluted)	10	4.8c	1.9c
From continuing operations (basic and diluted)	10	4.8c	2.2c
Adjusted
From continuing operations (basic and diluted)	10	8.9c	2.2c

Group statement of financial position as at 31 December 2017

		2017	2016
	Note	USD'000	USD'000
		(audited)	(unaudited pro forma)
Assets
Non-current assets
Intangible assets	12	1,211	357
Property, plant and equipment	13	30	-
Deferred tax asset		113	-
		_______	_______
		1,354	357
Current assets
Trade receivables	14	1,778	157
Other assets	14	217	-
Cash and cash equivalents		4,126	196
		_______	_______
		6,121	353
Total assets		7,475	710
Liabilities
Non-current liabilities
Borrowings	16	266	-
		_______	_______
		266	-
Current liabilities
Trade and other payables	15	474	331
Short term borrowings	16	774	-
		_______	_______
		1,248	331
Total liabilities		1,514	331
NET ASSETS		5,961	379
Issued share capital and reserves attributable to owners of the parent
Share capital	18	801	551
Share premium	18	4,472	-
Other reserves	18	(529)	(531)
Retained earnings		1,217	359
		_______	_______
TOTAL EQUITY		5,961	379

Group statement of cash flows for the year ended 31 December 2017

	Note	2017	2016
		USD'000	USD'000
		(audited)	(unaudited pro forma)
Cash flows from operating activities
Profit for the year		844	311
Adjustments for:
Income tax expense recognised in profit or loss		247
Finance costs		4	-
Depreciation of tangible non-current assets		1	11
Amortisation of intangible non-current assets		202	138
Provision for deferred taxes		5	-
		_______	_______
Operating cash flows before movements in working capital		1,303	460
(Increase)/decrease in trade and other receivables		(1,698)	59
Increase/(decrease) in trade and other payables		440	(72)
		_______	_______
Cash generated from operating activities		45	447
Income tax paid		78	-
		_______	_______
Net cash generated from operating activities		(33)	447
Cash flows from investing activities
Acquisition of property, plant and equipment		(1)	(2)
Development of intangibles		(752)	(366)
Increase in loans to members of Pelatro LLC		-	(17)
Cash inflow on acquisition of subsidiaries net of cash acquired		9
Net cash and cash equivalents divested with subsidiary		-	(16)
		_______	_______
Net cash used in investing activities		(744)	(401)
Cash flows from financing activities
Issue of ordinary shares, net of issue costs		4,742	-
Amounts advanced by related parties		2	-
Repayments to related parties		(9)	-
Repayment of loans from members of Pelatro LLC		17	-
Proceeds from borrowings		2	54
Repayment of borrowings		(47)	-
Finance costs		(4)	-
Less interest accrued but not paid		4	-
		_______	_______
Net cash generated by/(used in) financing activities		4,707	54
Net increase in cash and cash equivalents		3,930	100
Net foreign exchange differences		-	(23)
Cash and equivalent at beginning of period		196	119
		_______	_______
Cash and cash equivalents at end of period		4,126	196

Group statement of changes in equity for the year ended 31 December 2017

	Share capital	Share premium	Exchange reserve		Merger reserve	Retained profits		Attributable to owners of the Pelatro Group	Non-controlling interests		Total equity
	$'000	$'000	$'000		$'000	$'000		$'000	$'000		$'000
Pro forma balance at 1 January 2016	551	-	17		(531)	45		82	(53)		29
Profit after taxation for the financial year	-	-	-		-	314		314	(3)		311
Exchange differences reclassified to profit or loss on disposal of foreign operations	-	-	(17)		-	-		(17)	(2)		(19)
Non-controlling interest lost on disposal of subsidiary	-	-		-	-	-		-	58		58
	_____	_____	_____		_____	_____		_____	_____		_____
Pro forma balance at 31 December 2016	551	-	-		(531)	359		379	-		379
Profit after taxation for the year	-		-		-	830		830	14		844
Other comprehensive income:
Exchange difference on translation of overseas subsidiaries	-	-	(2)		-			(2)	-		(2)
Bargain purchase of non-controlling interest in subsidiary	-	-	-		-	14		14	-		14
Non-controlling interest lost on acquisition of minority interest in subsidiary	-	-	-		-	14		14	(14)		-
Transactions with owners:
Reserves arising on reconstruction	(20)	-	-		4	-		(16)	-		(16)
Shares issued by Pelatro Plc for cash	270	4,901	-		-	-		5,171	-		5,171
Issue costs	-	(429)						(429)	-		(429)
	_____	_____	_____		_____	_____		_____	_____		_____
Balance at 31 December 2017	801	4,472	(2)		(527)	1,217		5,961	-		5,961

Reserve	Description and purpose
Share capital	Nominal value of issued shares
Share premium	Amount subscribed for share capital in excess of nominal value less associated costs
Merger reserve	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
Exchange reserve	The difference arising on the translation of the assets and liabilities of overseas subsidiary companies into the presentational currency of the Group
Retained earnings	All other net gains and losses not recognised elsewhere

Notes to the Group financial statements

1. Reporting entity

Pelatro Plc ("Pelatro" or the "Company") is a public limited company incorporated and domiciled in the UK. The Company's ordinary shares are traded on AIM. These condensed consolidated financial statements ("financial statements"), as at and for the year ended 31 December 2017, comprise the Company and its subsidiaries (together referred to as the "Group") prepared on the basis set out in Note 3 below. The Group is primarily involved in the development and provision of data analytics software, primarily for telecommunications companies ("telcos").

2. Statutory Accounts

As the Company was newly-incorporated in 2017, statutory accounts for prior periods have not been drawn up nor delivered to the registrar of companies. Copies of the 2017 Annual Report and Accounts will be made available to shareholders in due course together with a notice of the Annual General Meeting.  Further copies, when available, may be obtained by contacting the Company Secretary at Pelatro Plc, 49 Queen Victoria Street, London EC4N 4SA.  An electronic copy will be available on the Group's web site (www.pelatro.com).

3. Basis of preparation

 Basis of accounting

Whilst the financial information included in this preliminary announcement has been prepared on the basis of the requirements of International Financial Reporting Standards ("IFRS") in issue, as adopted by the European Union ("EU") and effective at 31 December 2017, this announcement, due to its condensed nature, does not itself contain sufficient information to comply with IFRS.

The Group expects to publish full Consolidated Financial Statements in May 2018. The financial information contained in these condensed financial statements does not constitute the Company's statutory accounts within the meaning of the Companies Act 2006.

These financial statements have been prepared under the historical cost convention.

Basis of consolidation

Pelatro Plc was incorporated on 21 February 2017. On 7 September 2017 Pelatro Plc acquired Pelatro LLC in exchange for the issue of shares in Pelatro Plc. At the same time, the 98% of the share capital in Pelatro Pte Limited ("Pelatro Pte") that was held by Pelatro LLC, as well as the 2% owned by third parties as a minority interest, was purchased by Pelatro Plc.

As a result of this group reconstruction (the "Reconstruction"), the members of Pelatro LLC received shares in the Company in direct proportion to their original membership interest in Pelatro LLC, and Pelatro Plc became the direct owner of 100% of the share capital of Pelatro Pte.

In determining the appropriate accounting treatment for the Reconstruction, the Directors considered IFRS 3 - Business Combinations (Revised 2008) ("IFRS 3"). However, they concluded that the Reconstruction fell outside the scope of IFRS 3 as it represented a combination of entities already under common control. In accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, in developing an appropriate accounting policy, the Directors considered the pronouncements of other standard setting bodies and specifically looked to accounting principles generally accepted in the United Kingdom ("UK GAAP") for guidance, and in particular the merger accounting provisions of FRS 102 section 19 "Business Combinations and Goodwill", which does not conflict with IFRS and reflects the economic substance of the transaction.

Under merger accounting principles, the assets and liabilities of both entities are recorded at book value, not fair value. Intangible assets and contingent liabilities are recognised only to the extent that they were recognised by the legal acquirer in accordance within applicable IFRS, no goodwill is recognised, any expenses of the combination are written off immediately to the income statement and comparative amounts, if applicable, are restated as if the combination had taken place at the beginning of the earliest accounting period presented. Accordingly, although the Reconstruction did not become effective until 7 September 2017, the consolidated financial statements for 2017 have been presented as if the current Group structure at this date had always been in place.

On 12 December 2017 Pelatro Plc acquired the whole of the issued share capital of Pelatro Solutions Private Limited ("PSPL"). This acquisition has been accounted for as a normal business combination under IFRS 3.

In accordance with the exemptions given by section 408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income.

Comparative financial information

The 2016 comparative information represents the consolidated results of the Pelatro LLC group which, for the period from 1 July 2015 to 1 August 2016, included PSPL (which ownership was accounted for as a discontinued operation), and which was thus prior to the acquisition of Pelatro LLC by Pelatro Plc. A statutory audit opinion on this comparative information has not been (and will not be) issued as there was previously no requirement for an audit. However, the information is extracted from the admission document of the Company dated 13 December 2017 issued in connection with the admission of the Company's Ordinary Shares to trading on AIM (the "Admission Document") and which contained an accountants' report on this information as required by paragraph 20.1 of Annex 1 of the Prospectus Directive Regulation as applied by part (a) of Schedule Two to the AIM Rules for Companies, which was given for the purposes of complying with the AIM Rules and for no other purpose.

Furthermore, given the application of merger accounting above, the unaudited 2016 statements are pro forma in nature.

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 signing of these accounts.  On this basis, they consider it appropriate to have adopted the going concern basis in the preparation of these accounts.

Functional and presentational currency

The consolidated financial statements are presented in US dollars ("USD" or "$"), which is also the functional currency of Group members other than PSPL, and all values are rounded to the nearest thousand ($'000) except where otherwise indicated. "¢" denotes cent, or 1/100th of one US Dollar.

Use of estimates and judgements

The preparation of financial information in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about significant areas of estimation uncertainty in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial information is included in the following note: Note 12 - Intangible assets.

4. Accounting Policies

The principal accounting policies which apply in preparing the financial statements for the year ended 31 December 2017 are consistent with those disclosed in the Admission Document. There have been no significant changes to the Group's accounting policies during the year.

Cost of sales

Cost of sales includes direct costs relating to software supply and support and the acquisition cost of hardware resold to end customers.

Exceptional items

Exceptional items comprise items of income and expense that are material in amount and unlikely to recur and which merit separate disclosure in order to provide an understanding of the Group's underlying financial performance.

5. Segmental analysis

Operating segments

For management purposes, the Group's activities are principally related to the provision of data analytics services to customers, and all other activities performed by the Pelatro Group are solely to support its primary revenue generation activities. All the processes are primarily subject to the same risks and returns and the Directors therefore consider that there are no identifiable business segments that are subject to risks and returns different to the core business. As such, internal reporting provided to the chief operating decision-maker ("CODM", which has been determined to be the Board of Directors) for making decisions about resource allocations and performance assessment relates to the consolidated operating results of the Pelatro Group.

Accordingly, the Directors have determined that there is only one reportable segment under IFRS 8 and the financial information therefore presents entity-wide information. The results and assets for this segment can be determined by reference to the statement of comprehensive income and statement of financial position.

The Pelatro Group primarily serves customers in Africa, Asia and the Caribbean.

Revenue by geography

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

At 31 December	2017	2016
	USD'000	USD'000
Caribbean	331	548
North Africa	756	27
South and South East Asia	1,904	630
Sub-Saharan Africa	155	-
	_______	_______
	3,146	1,205

Management makes no allocation of costs, assets or liabilities between these segments since all trading activities are operated as a single business unit.

The Group has six customers representing individually over 10% each and in aggregate approximately 95% of revenue at $2,991,000 (2016: two customers representing individually over 10% each and in aggregate approximately 98% of revenue at $1,178,000). The six customers accounted for revenue of $756,000, $628,000, $586,000, $350,000, $340,000 and $331,000 respectively (2016: $630,000 and $548,000).

Revenue by type

The Group's revenue is analysed between the sale of licenses to use mViva software, associated maintenance and support, and the resale of hardware to host the software, as set out in the following table:

At 31 December	2017	2016
	USD'000	USD'000
License fees,	2,891	1,205
Resale of hardware	255	-
	_______	_______
	3,146	1,205

Management makes no allocation of costs, assets or liabilities between these segments since all trading activities are operated as a single business unit.

Customer concentration

The Group has six customers representing individually over 10% each and in aggregate approximately 95% of revenue at $2,991,000 (2016: two customers representing individually over 10% each and in aggregate approximately 98% of revenue at $1,178,000). The six customers accounted for revenue of $756,000, $628,000, $586,000, $350,000, $340,000 and $331,000 respectively (2016: $630,000 and $548,000).

Revenue attributable to these six customers was all attributable to license fees, support and maintenance, other than the customer accounting for $756,000, of which $501,000 related to license fees and $255,000 to the resale of hardware.

Non-current assets

Information about the Group's non-current assets by location of assets are as follows:

At 31 December	2017	2016
	USD'000	USD'000
US	-	357
Singapore	908	-
UK	287	-
India	159	-
	_______	_______
	1,354	357

Non-current assets comprise intangible assets, goodwill, deferred tax assets and plant, property and equipment. During the year, the Group's IP was transferred from Pelatro LLC in the US to Pelatro Pte in Singapore.

6. Operating expenses

Profit for the year has been arrived at after charging

	2017	2016
	USD'000	USD'000
Staff costs	14	-
Amortisation of intangible non-current assets	202	138
Depreciation of tangible non-current assets	1	-
Research costs expensed	525	632
Auditor's remuneration (see Note 8)	124	-
Operating lease charges - land and buildings	6	-
Foreign exchange (gain)/loss	(15)
Included in profit/(loss) for the year from discontinued operations:
Depreciation of tangible non-current assets	-	11

7. Non-GAAP profit measures and exceptional items

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

	2017	2016
	USD'000	USD'000
Operating profit	1,100	360
Adjusted for:
Amortisation and depreciation	203	138
Exceptional items within operating expenses	701	-
	_______	_______
Adjusted EBITDA	2,004	498

Exceptional items comprise financial advisory, legal, accounting and other costs relating to the admission to trading of the Company's shares in December, the associated placing of new Ordinary shares, and the Group reconstruction and acquisition of PSPL carried out to facilitate this.

Exceptional items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted EBITDA and adjusted earnings per ordinary share to allow a better understanding of comparable year-on-year trading and thereby an assessment of the underlying trends in the Group's financial performance. These measures also provide consistency with the Group's internal management reporting.

The calculation of adjusted earnings per share is shown in Note 10.

8. Auditor's remuneration

	2017	2016
	USD'000	USD'000
Charged in the financial year:
Audit of the financial statements of Pelatro Plc	-	-
Amounts receivable by auditor in respect of:
Audit of financial statements of subsidiaries pursuant to legislation	-	-
Tax compliance	3	-
Advisory work in respect of IPO	119	-
Other advisory work	2
	_______	_______
	124	-
To be charged in respect of audit services relating to the financial year:
Audit of the financial statements of Pelatro Plc	41	-
Audit of financial statements of subsidiaries pursuant to legislation	3
Tax compliance	4
Accountancy work	3
	_______	_______
	51	-

The financial statements for the year to 31 December 2016 were not audited and accordingly no related expense was incurred.

9. Taxation

Tax on profit on ordinary activities

	2017	2016
	USD'000	USD'000
Current tax
UK corporation tax charge/(credit) at 19%	-	-
Overseas corporation tax charge/(credit)	247	-
	_______	_______
Total current income tax	247	-
Deferred tax
Reversal of deferred tax asset	5	-
	_______	_______
Total deferred income tax	5	-
Total income tax expense recognised in the year	252	-

Pelatro LLC is a US LLC and, for the period from its incorporation to 7 September 2017 was treated as a flow-through entity for both US federal and state income tax purposes. As such, its then members were taxed on their distributable share of the profits of the business, and Pelatro LLC itself was not subject to US federal or state income tax. Hence no provision or liability (including deferred tax) for federal or state income taxes relating to Pelatro LLC is included in the tax charge for these periods and accordingly no tax charge arose in the Group accounts for the period when Pelatro LLC was the sole constituent of the Group (including all of 2016).

From 8 September 2017 Pelatro LLC elected to be taxed as a C Corporation and hence tax arising at the corporate level within Pelatro LLC will be accounted for accordingly in the consolidated tax expense and liability.

At 31 December 2017, the Group had an undiscounted deferred tax asset of $113,000 (2016: $nil). The asset comprises principally short-term timing differences in PSPL. Deferred tax assets have been measured at an effective rate of 31% in India.

Reconciliation of the total tax charge

The tax expense in the income statement for the year is higher than the standard rate of corporation tax in the UK of 19%. A reconciliation of income tax expense applicable to the profit before taxation at the statutory tax rate to income tax expense at the effective tax rate is as follows:

	2017	2016
	USD'000	USD'000
Profit before taxation	1,108	311
Tax at the applicable rate of 19%	211	60
Tax effects of:
Effect of tax chargeable to members	4	(60)
Expenses not deductible for tax purposes	176	-
Income not taxable	(154)	-
Tax exemptions and rebates	(29)	-
Foreign tax credits	6	-
Higher rates on overseas taxation	(10)	-
Overseas withholding tax expenses	48
	_______	_______
Income tax expense	252	-

The tax effect of exchange differences recorded within the Group Statement of Comprehensive Income is nil (2016: nil).

Temporary differences associated with Group investments

At 31 December 2017, there was no recognised deferred tax liability (2016: $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.

The temporary differences associated with investments in subsidiaries for which deferred tax liability has not been recognised aggregate to $nil (2016: $nil).

Deferred tax

Recognised deferred tax

	2017	2016
	USD'000	USD'000
At 1 January	-	-
Movement in the period:
- acquired on acquisition of subsidiary undertaking	118	-
- other timing differences	(5)	-
	_______	_______
At 31 December	113	-
Comprising:
Temporary differences	(7)	-
Tax losses	120	-
	_______	_______
	113	-

Future tax rates

The main rate of corporation tax for UK companies stood at 20% from 1 April 2015. The Finance Bill 2015, which was substantively enacted on 26 October 2015, announced further reductions to the main rate of corporation tax, reducing it to 19% from 1 April 2017. The Finance Act 2016, which was approved on 15 September 2016, will reduce the rate by a further 2% to 17% from 1 April 2020 (superseding the 18% rate effective from that date introduced in Finance (No.2) Act 2015).

The Group's recognised and unrecognised deferred tax assets in its Indian subsidiary have been shown 31%, being the substantively enacted rates in that country.

Factors affecting future tax charges

The Group has carried forward tax losses in India of $387,000 against which a deferred tax asset of $120,000 is recognised. These losses expire between 2022 and 2024.

10. Earnings

Reported earnings per share

Basic earnings per share ("EPS") amounts are calculated by dividing net profit or loss for the year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the year (such calculation having been adjusted to reflect the issue of ordinary shares by the Company for the acquisition of Pelatro LLC as if these shares had been issued on incorporation of Pelatro LLC). A calculation of diluted earnings per share is not applicable as there were no dilutive potential shares outstanding at the end of the reporting periods.

In respect of figures for the year ended 31 December 2016, as equity capital was represented by members' interests and not ordinary shares, pro forma earnings per share has been included based on the relevant number of shares in the Company following the group reorganisation but prior to the issue of shares to raise new funds on admission to AIM.

The following reflects the earnings and share data used in the basic earnings per share computations:

	2017	2016
	USD'000	USD'000
Profit attributable to equity holders of the parent:
Continuing operations	830	360
Discontinued operations	-	(46)
	_______	_______
Profit attributable to ordinary equity holders of the parent for basic earnings	830	314
Weighted number of ordinary shares in issue	17,273,968	16,211,040
Basic earnings per share attributable to shareholders	4.8c	1.9c
Basic earnings per share for continuing operations attributable to shareholders	4.8c	2.2c

Adjusted earnings per share

Adjusted earnings per share is calculated as follows:

	2017	2016
	USD'000	USD'000
Statutory earnings attributable to owners of the Parent	830	314
Adjusting items:
- loss from discontinued operations	-	46
- exceptional items	701	-
	_______	_______
Adjusted earnings attributable to owners of the Parent	1,531	360
Weighted number of ordinary shares in issue	17,273,968	16,211,040
Adjusted earnings per share attributable to shareholders	8.9c	2.2c

11. Dividends paid and proposed

No dividends were declared or paid during the year and no dividends will be proposed for approval at the AGM (2016: none).

12. Intangible assets

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

	USD'000	USD'000	USD'000	USD'000
	Development costs	Software	Goodwill	Total
Cost
At 1 January 2017	538	-	-	538
Additions	752	-	-	752
Created as part of a business combination	-	-	287	287
Acquired as part of a business combination	-	32	-	32
	_______	_______	_______	_______
At 31 December 2017	1,290	32	287	1,609
Amortisation or impairment
At 1 January 2017	(181)	-	-	(181)
Acquired as part of a business combination	-	(15)	-	(15)
Charge for the year	(201)	(1)	-	(202)
	_______	_______	_______	_______
At 31 December 2017	(382)	(16)	-	(398)
Net carrying amount
At 31 December 2017	908	16	287	1,211
At 1 January 2017	357	-	-	357

	USD'000	USD'000	USD'000	USD'000
	Development costs	Software	Goodwill	Total
Cost
At 1 January 2016	173	-	-	173
Additions	365	-	-	365
	_______	_______	_______	_______
At 31 December 2016	538	-	-	538
Amortisation or impairment
At 1 January 2016	(43)	-	-	(43)
Charge for the year	(138)	-	-	(138)
	_______	_______	_______	_______
At 31 December 2016	(181)	-	-	(181)
Net carrying amount
At 31 December 2016	357	-	-	357
At 1 January 2016	130	-	-	130

Development costs

Development costs are either internally generated or acquired and are capitalised at cost. Such costs predominantly comprise capitalised staff costs (and allocable related costs) associated with the development of new products and services which will be saleable to more than one customer.

These intangible assets have been assessed as having a finite life and are amortised on a straight-line basis over their useful life, which is estimated at four years. The amortisation charge on intangible assets is included in administrative expenses in the consolidated statement of comprehensive income. These assets are tested for impairment when an indicator of impairment arises and annually prior to them being made available for use.

Software

Software assets represent purchased licences and distribution rights for third party software and is capitalised at cost and amortised on a straight-line basis over the relevant estimated useful life. The estimated useful life of these intangible assets ranges between three and nine years depending on their nature. Amortisation charges in respect of intangible assets are included in administrative expenses.

Goodwill

Goodwill arose on the acquisition of PSPL. It is assessed as having an indefinite life and is assessed for impairment at least annually.

Deferred tax asset

An analysis of the Group's deferred tax asset is given in Note 9.

13. Tangible assets

	USD'000	USD'000	USD'000
	Computer equipment	Office equipment	Total
Cost
At 1 January 2017	-	-	-
Additions	-	1	1
Acquired as part of a business combination	56	3	59
	_______	_______	_______
At 31 December 2017	56	4	60
Depreciation
At 1 January 2017	-	-	-
Acquired as part of a business combination	(28)	(1)	(29)
Charge for the year	(1)	-	(1)
	_______	_______	_______
At 31 December 2017	(29)	(1)	(30)
Net carrying amount
At 31 December 2017	27	3	30
At 1 January 2017	-	-	-

All tangible assets were acquired as a result of the acquisition of PSPL on 12 December 2017; accordingly, it is not relevant to present comparative information for 2016.

14. Trade and other receivables

	2017	2016
	USD'000	USD'000
Due within a year
Trade receivables	1,778	140
Other receivables	195	17
Prepayments	22	-
	_______	_______
Total trade and other receivables	1,995	157

"Other receivables" in 2016 represents amounts due from the then members of Pelatro LLC.

Analysis of trade receivables

	Carrying amount	Neither impaired or past due	Past due but not impaired
			61-90 days	91-120 days	More than 121 days
	USD'000	USD'000	USD'000	USD'000	USD'000
2017
Trade receivables	1,778	1,022	-	-	756
2016
Trade receivables	140	129	-	11	-

The Group allows an average debtor's payment period of 90 days after invoice date. Interest is not typically charged on overdue debts although it is provided for in some contracts. It is the Group's policy to assess debtors for recoverability on an individual basis and to make provision where it is considered necessary. In assessing recoverability, the Group takes into account any indicators of impairment up until the reporting date; however, given the bespoke nature of the Group's contracts and the often continuing relationship, no impairment has been deemed necessary. No debtors' balances have been renegotiated during the year or in the prior year.

15. Trade and other payables

	2017	2016
	USD'000	USD'000
Due within a year
Trade payables	53	291
Other payables	320	40
Amounts due to related parties	101	-
	_______	_______
Total trade and other payables	474	331

Other payables principally comprise provisions for taxation liabilities and other costs.

16. Loans and borrowings

	2017	2016
	USD'000	USD'000
Non-current liabilities
Secured term loan	266	-
	_______	_______
	266	-
Current liabilities
Current portion of term loan	30	-
Unsecured borrowings	744	-
	_______	_______
	774	-
Total loans and borrowings	1,040	-

The non-current secured term loan is primarily secured on the personal property of a director of the Company. The loan is repayable in 120 equal monthly instalments of INR 278,255 ($4,359) with an implied interest rate of 12.5%.

Unsecured current borrowings comprise loans from Directors of the Company of $428,000 (at nil interest cost) and an overdraft facility ($316,000) from a commercial bank (which carries an interest rate of 10.5%).

The Directors consider that the carrying amount of borrowings approximates to their fair value.

17. Operating leases

The total future value of minimum lease payments is due as follows:

	2017	2016
	USD'000	USD'000
Not later than one year	97	-
Later than one year and not later than five years	62	-
Later than five years	-	-
	_______	_______
	159	-

PSPL entered into a 5 year lease in November 2014 for its premises at 1st Block, HRBR Layout, Bangalore, India. The Company entered into a short-term lease in September 2017 for its premises at Queen Victoria Street, London, UK.

IFRS 16 "Leases" (effective for the year ending 31 December 2019), which supersedes IAS 17 "Leases" and related interpretations, will require all leases to be recognised on the balance sheet, eliminating the distinction between operating and finance leases. The Group has one operating lease arrangement which would require recognition under IFRS 16 and will consider the financial impact of IFRS 16 in due course. In broad terms, if adopted as at 31 December 2017, the impact would be to recognise lease liabilities of approximately $153,000 and corresponding assets relating to the right to use the properties which is the subject of the current leases.

The Company does not intend to apply the standard retrospectively and so any difference between the carrying value of the assets created and the corresponding liabilities will be applied as an adjustment to opening equity at the date of initial application

18. Share capital and reserves

Share capital and share premium

The Company was incorporated on 21 February 2017 with 100 Ordinary shares of £1 each in issue. A further 49,900 shares were issued on 31 July. On 7 September these shares were split on the basis of 39 new shares for every old share such that there were then 2,000,000 Ordinary shares of 2.5 pence each in issue. Also on 7 September, 16,211,040 shares of 2.5 pence each were issued in connection with the acquisition of Pelatro LLC.

On 19 December 2017 the Company's shares were admitted to trading on the AIM market of the London Stock Exchange (the "Admission"). In conjunction with the Admission, the Company made an initial public offering ("IPO") of 6,102,212 new 2.5 pence ordinary shares at a price of 62.5 pence per ordinary share.

The Company incurred incremental costs totalling $1,129,000 in respect of its admission to trading on AIM and the associated issue of new shares. IAS 32 "Financial Instruments: Presentation'" requires the costs of issuing new shares be charged against the share premium account. Management has reviewed the incremental costs to identify those solely incurred in issuing new shares, those incurred in connection with the entire share capital, and those not associated with issuing new shares.

Those costs incurred in connection with the entire share capital have been apportioned to the issue of new shares by reference to the number of new shares compared to the entire share capital. As a consequence, costs relating directly to the new issue of shares in connection with the IPO, plus attributable IPO costs allocated between the share premium account and profit and loss account in proportion to the number of primary and secondary shares admitted to trading on Admission, resulted in a debit of $428,000 against share premium and a charge of the remaining $701,000 to administrative expenses.

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.

Merger reserve

As noted in Note 3, the acquisition by Pelatro Plc of Pelatro LLC on 7 September has been accounted for as a reverse asset acquisition. Consequently, the previously recognised book values and assets and liabilities were retained and the consolidated financial information for the period from the date of acquisition has been presented as a continuation of the Pelatro business which was previously wholly owned by Pelatro LLC. The difference between the nominal value of the shares issued pursuant to the above share arrangement and the nominal value of the Pelatro LLC capital at the time of the acquisition has been transferred to the merger reserve, together with certain other items relating to investments in subsidiaries.

19. Business combinations

On 12 December 2017 the Group completed the acquisition of Pelatro Solutions Private Limited ("PSPL"), the company with which the Group has an agreement for software development, implementation and support.

The amounts recognised in respect of identifiable assets acquired and liabilities assumed are set out in the table below.

	Book value	Adjustment	Fair value
	USD'000	USD'000	USD'000
Property, plant and equipment	31	-	31
Intangible assets	16	-	16
Deferred tax asset	-	118	118
Trade and other receivables	802	-	802
Cash and bank balances	11	-	11
Long-term borrowings	(272)	-	(272)
Trade and other payables	(117)	(33)	(150)
Short term borrowings	(808)	-	(808)
	_______	_______	_______
Net identifiable assets and liabilities	(337)	85	(252)
Goodwill on acquisition			287
			_______
Consideration payable in cash			35
Analysis of cash flows on acquisition
Net cash acquired with subsidiary			11
Cash paid			-
			_______
Net cash inflow			11

The goodwill recognised above is attributable to intangible assets from PSPL that cannot be individually separated and reliably measured due to their nature. These items include the expected value of synergies and assembled workforce.

From the date of acquisition, PSPL contributed $nil of revenue to the Group (as all revenue arising is inter-company) and operating losses of $123,000. If the combination had taken place at the beginning of the year, contributed revenue would have been $nil and operating losses would have been $1,324,000.

The cash consideration for PSPL of $34,644 was paid to the former shareholders of PSPL in January 2018.

20. Additional information

Related party transactions

Amounts outstanding at the end of the year in respect of transactions with related parties were as follows:

Amount outstanding - (debtor)/creditor	2017	2016
	USD'000	USD'000
Key management personnel - net loans outstanding	428	296
Key management personnel - outstanding reimbursements in respect of expenses incurred on behalf of Group companies	101	1

  Details of unsecured loan transactions with key management personnel are as follows:

Related party and nature of transaction	2017	2016
	USD'000	USD'000
Outstanding at the beginning of the year	-	-
Acquired as part of a business combination	431	-
Loan taken during the year	2	-
Loan repaid during the year	(9)	-
Foreign exchange movements	4
	_______	_______
Loans outstanding at the end of the year	428	-

The Directors are deemed to be the only key management personnel.

Other than disclosed in this note or elsewhere in this financial information as appropriate, no related party transactions have taken place during the year that have materially affected the financial position or performance of the Group.

The loans disclosed above were repaid in full in January 2018.

Capital commitments

As at 31 December 2017, the Group had no material capital commitments (2016: nil).

Contingent liabilities

The Group had no contingent liabilities at 31 December 2017 (2016: None).

21. Copies of announcement

Copies of this announcement will be available from the Company's registered office at 49 Queen Victoria Street, London EC4N 4SA and from the Company's website: www.pelatro.com.

 

END

 

 

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