(Alliance News) - Marketing software firm Pelatro PLC is to miss annual revenue expectations, it said Monday, but only because of the way a major new contract win will be booked.
Shares were 32% higher on Monday afternoon in London at a price of 52.75 pence each.
London-based Pelatro said one of the largest telecommunications firms in the world has picked Pelatro to provide its contextual marketing platform, as well as unified communications manager software.
The contract lasts for an initial five years, with an expected revenue over the period of between USD10 million and USD12 million. Some extra costs will be booked to carry out the work, including hiring new staff.
Pelatro said it won a "highly competitive" selection process against some "leading" rivals.
"We are delighted with this very significant contract win which validates the quality of our software, especially in the context of its relevance to Tier 1 telcos. It also marks a major shift for our business in terms of moving towards a recurring revenue model and enhancing our quality and visibility of earnings materially," said Pelatro Chief Executive Subash Menon.
One impact of the move towards recurring revenue contracts is that though it has won some USD16 million to USD18 million of contracts in 2019, a minimal amount will be booked in 2019 results. If they were pure licence contract wins, around USD6 million to USD7 million would have been registered in 2019.
"The contract win is highly significant for the long-term prospects for the group; however, with the contract having taken significant time and management resource to secure, the timing of conversion of certain other pipeline opportunities has been impacted," said Pelatro.
"Therefore, the group now expects to end 2019 below revenue expectations, at not less than USD6.5 million, with USD6.3 million booked to date."
In 2018, Pelatro booked revenue of USD6.1 million, just under double the previous year's total of USD3.2 million.
Pelatro said its overall pipeline remains "strong", and it stressed opportunities are not being lost merely moved further down the road.
"Whilst it is disappointing to fall short of expectations for the full year, the decision to target a different revenue model, and a different type of contract has been taken for the long-term benefit of the group, shareholder value and we are encouraged by the strength of the pipeline of opportunities going into the new financial year," added CEO Menon.
"The board remains confident that Pelatro is very well positioned to capitalise on the large long term opportunity. We are focused on higher-quality recurring revenue and steady cashflow."
By George Collard; georgecollard@alliancenews.com
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