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TIDMERE
RNS Number : 7764K
Eredene Capital PLC
21 July 2011
Date: 21 July 2011
On behalf of: Eredene Capital PLC ("Eredene" or "Eredene Group")
Embargoed until: 0700hrs
Eredene Capital PLC
Preliminary Results for the year to 31 March 2011
Eredene Capital PLC (AIM: ERE), the AIM quoted investor in Indian infrastructure, announces its preliminary results for the year to 31 March 2011.
Highlights
-- Eredene Capital PLC ("Eredene", "Eredene Group") reports an uplift in the value of its investments in India of 14%
-- Profit for the year of GBP1.9m (2010: GBP2.6m) primarily due to fair value adjustments on investments
-- Net Asset Value attributable to equity shareholders of 23.3p per share as at 31 March 2011 (2010: 23.0p)
-- Post year end in May 2011, Eredene raised GBP30m (before expenses) in a new share placing, ensuring the company has a strong cash balance
-- Six of the Eredene Group's 11 projects in India are now generating revenue, of which two are paying dividends
-- New Chairman, Struan Robertson, appointed in March 2011
A briefing for analysts will be held at 09:30hrs today at the offices of Numis Securities, The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT.
Commenting on the Group's results, Alastair King, Chief Executive and Founder, said:
"India remains an attractive growth story, and Eredene continues to achieve significant milestones in its goal of investing for growth in the country's infrastructure. We have a healthy spread of 11 investments, primarily in container handling, port services, logistics and warehousing, and a strong cash balance which will finance further investments. We can look to the future with confidence."
Enquiries:
Eredene Capital PLC Tel: +44 20 7448 8000
Alastair King (Chief Executive) www.eredene.com
Brian Mooney
Numis Securities Ltd (Nominated advisor Tel :+44 20 7260 1000
& joint broker)
Heraclis Economides / David Benda
Arden Partners plc (Joint broker) Tel: +44 20 7614 5917
Chris Hardie / Adrian Trimmings
Redleaf Polhill Ltd Tel: +44 20 7566 6720
Samantha Robbins / Luis Mackness eredene@redleafpr.com
Notes to Editors
-- Eredene Capital PLC is a leading UK-based AIM quoted investor in infrastructure projects in India. It focuses primarily on ports, port services, logistics and distribution warehouses.
-- The Eredene Group has made investments in eleven projects in India - nine in ports and port services, logistics and distribution warehouses, one in IT offices and one in a large scale, affordable housing development. Six of its investee companies are revenue generating, of which two are dividend paying.
-- Eredene trades on the Alternative Investment Market (AIM) of the London Stock Exchange.
Chairman's Statement
Summary
The 12 month period to 31 March 2011 was another positive year for the Eredene Group, with satisfactory growth achieved in the majority of the Group's core container-handling, port services, logistics and warehousing investments in India. The Group reported a profit for the year of GBP1.9m and an increase in the net asset value per share to 23.3p. The value of the Group's investments in India grew by 14% in the year.
After the end of the financial year in May 2011, Eredene Capital PLC raised GBP30m (before expenses) by placing an additional 166,666,667 shares at 18p per share - a small premium to the share price at the time. The placing was supported by both existing and new shareholders. The fresh capital is earmarked for Ennore Container Terminal and other potential pipeline projects. Eredene is continuing to work with its consortium partners on securing local debt financing in India for the Ennore Container Terminal to enable construction to start on this project. Under current schedules, it is planned that the new terminal will be ready to handle its first container vessels in 2013.
Also post year-end in April 2011, Sattva Conware, a container freight station business near Ennore Port became revenue generating so that six of Eredene's 11 projects in India are now earning revenue. Two of the Eredene Group's investee companies, Sattva Vichoor CFS, and port services operator Ocean Sparkle Limited, are paying regular dividends. Nine of Eredene's investments in India are concentrated in the business of ports, ports services, logistics and distribution warehousing; one is in an IT office complex and one in a large-scale, affordable housing development. The investments are strategically located across different areas of the country.
India's economy maintained its strong growth, although high inflation remained a concern. The Indian Government has set ambitious targets for more than $1 trillion to be invested in infrastructure over the next five year period 2012-2017 - more than double the amount invested in the previous five-year period.
Financial Results
During the year to 31 March 2011, Eredene made a profit of GBP1.9m (2010: GBP2.6m) representing 0.69p per share (2010: 1.01p per share). As at 31 March 2011, Eredene had a Net Asset Value ("NAV") attributable to equity shareholders of GBP65.4m (2010: GBP64.4m) representing 23.3p per share (2010: 23.0p).
As an investment company, Eredene's performance is primarily judged by the change in its net asset value per share. Eredene's NAV per share has increased by 1.3% in the year to 31 March 2011 and by 2.2% from the 22.8p reported at 30 September 2010. The increase in NAV was primarily due to the increase in the fair value of Eredene's investments following Grant Thornton's independent valuation of Eredene's non-consolidated investments as at 31 March 2011. This led to a valuation gain of GBP4.9m (2010: GBP6.4m).
The Group had administrative expenses of GBP3.8m in the period (2010: GBP3.6m) which included GBP0.8m (2010: GBP0.5m) of administrative expenses relating to the Group's subsidiaries, MJ Logistic Services and Sattva Conware. Also included within administrative expenses was an amount of GBP0.5m (2010: GBP0.6m) relating to foreign exchange movements on the Group's cash deposits.
Investee Companies
Below are some of the key developments and achievements both during the year and in the subsequent period.
-- Eredene is working towards financial closure of the debt funding for Ennore Container Terminal, a GBP207m project in which Eredene is a partner in a consortium led by Spain's biggest port terminal operator Grup Maritim TCB. Construction is expected to commence by the end of 2011 in spite of delayed closure of the debt funding, allowing the first ships to be handled in early 2013.
With excellent road and rail connectivity and pre-existing breakwaters and dredged navigation channels, the new container terminal will serve a growing industrial hinterland and motor manufacturing hub, and it will have an eventual planned capacity of 2.4 million TEUs (twenty foot equivalent units, the length of a standard container) per annum. As such, it will be one of India's largest single operator container terminals. Ennore Container Terminal will be run by Grup Maritim TCB, which has operations in Spain, Latin America and Turkey.
-- MJ Logistic Services ("MJL"), a multi-user distribution and warehousing business in Northern India, is planning to construct a second large-scale warehouse at its main site in Palwal, close to Delhi. Its first state-of-the-art 200,000 sq ft facility, which opened for business in October 2009, is operating at near capacity with a list of top brand customers. In addition to ambient and temperature controlled storage, MJL provides value added features such as computer operated inventory, rack shelving, and automated packaging. Customers include Tata Motors, Unilever, Danisco, McCain and Walmart. The cold storage capacity is being further expanded with nine additional chambers planned. MJL reported a positive EBITDA (earnings before interest, tax, depreciation and amortisation) in the year, its first since operations began at Palwal in 2009.
-- Sattva Vichoor Container Freight Station ("CFS"), one of two investments in Tamil Nadu State with the Sattva Business Group, paid a dividend for the third consecutive year. The 26-acre CFS handles containers from Chennai port and also provides facilities for on-site assembly of imported machinery. The CFS handled 60,000 TEUs for year ended 31 March 2011 compared to 45,000 in 2010. The CFS also added a 21,000 sq ft leased warehouse during the year taking its total warehouse capacity to 81,000 sq ft. Customers at the CFS include South Korean machinery manufacturer Doosan, NYK Line, Maersk, CMA-CGM, and MSC Shipping Company.
-- A second joint investment with the Sattva Business Group, Sattva Conware CFS, built to serve Ennore Port, opened for business and started generating revenue in April 2011 in a 42,000 sq ft warehouse. Its first major customer is steelmaker ArcelorMittal. A 120,000 sq ft container yard along with a 32,000 sq ft warehouse is expected to be operational in 2011.
-- Contrans Logistics' first CFS at Pipavav Port in Gujarat State saw a 37% rise in revenue in the 2010-2011 period reflecting an increase in higher-value import business. Throughput was 20,200 TEUs (2010: 19,500). The CFS turned cash positive for the first time since the operation was launched in 2008.The CFS is situated just outside the gates of one of the fastest growing ports in India, Maersk-owned Pipavav Port, which now handles about 500,000 TEUs per annum.
-- Contrans Logistics' second project, an Inland Container Depot at Baroda in central Gujarat, has received approval from the Ministry of Railways to start construction of the siding which will link the planned 140-acre facility to the main rail network. The depot will provide warehousing and logistic services for both road and rail freight on the Delhi-Mumbai corridor.
-- Eredene has made two investments in integrated logistic parks in Eastern India with tea, shipping and hospitality conglomerate Apeejay Surrendra Group. The logistics facility at Haldia, a petrochemical hub at the mouth of the Hooghly River and the main port for Kolkata, opened for storage business in October 2010 using a 60,000 sq ft hard stand area for iron ore customers. Construction work at the site was disrupted due to local elections in West Bengal and is expected to resume after the end of the current monsoon season. The 45-acre phase 1 is planned to include three domestic warehouses of a total area of 96,000 sq ft, a bonded warehouse of 57,000 sq ft and a container yard of 288,000 sq ft, and is scheduled to be operational in early 2012.
-- A second logistics facility is being developed by Apeejay Infra-Logistics at Kalinganagar in Orissa to service the ports of Paradip and Dhamra and to support the local steel industry. Most of the land infrastructure work has been completed, including construction of the boundary wall, road layout and land filling, and a weighbridge installed. The 15-acre phase 1 is targeted to be launched by early 2012 and is planned to comprise a domestic warehouse of 62,000 sq ft, a bonded warehouse of 21,000 sq ft, and a container yard of 245,000 sq ft.
-- Ocean Sparkle Limited (OSL), India's leading port operations and marine services company in which Eredene acquired a 7.69% stake for GBP7.3m in July 2010, continued to perform well. The privately owned Hyderabad-based company generated revenue of GBP39.5m for the year ended March 2011 (2010 GBP34.3m), profit before tax of GBP7.4m (31 March 2010: GBP8.4m) and again declared a dividend. OSL operates India's largest fleet of harbour tugs with a presence in most of the Major Ports of India.
-- Construction work is continuing at Matheran Realty and Gopi Resorts' low-cost housing development at Tanaji Malusare City near Mumbai. By the end of the financial year, deposits had been taken on a total of 3,300 units. A previously disclosed shareholder dispute was taken to arbitration in London in May 2011. The arbitration decision is expected later in the year.
-- Construction on Sribha Infrastructure Solutions' IT office complex in Bangalore is on hold pending repayment of a debt to Sribha Infrastructure Solutions from a third party. Eredene has no further obligations, and has written down its 36.5% stake by a further GBP21,000 to GBP470,000 from the initial investment of GBP2.1m.
New share capital
After the end of the financial year, Eredene raised GBP30m (before expenses) by way of a placing of 166,666,667 new Ordinary Shares at a price of 18p per share, which was at a small premium to the then market price. The placing was supported by a number of Eredene's largest shareholders and by some major new investors, and was approved at a General Meeting of Shareholders on 10 May 2011. The shares were admitted to trading on AIM on 12 May 2011. It is intended that the majority of the proceeds will be used to fund Eredene's share in the development of Ennore Container Terminal and also to invest in potential pipeline projects in India.
Following the admission of the new ordinary shares, the company's total issued share capital is 446,906,698 ordinary shares of 10p each.
India's Economy and Infrastructure
India has become one of the fastest growing economies in the world. GDP growth in the financial year to 31 March 2011 was 8.5% according to the Central Statistics Organisation of India. Inflation, however, is running at around 8% and is expected to remain at these levels and continue to be a risk to the economy. India is targeting 9-9.5% growth in its 12(th) five-year plan period, 2012-2017.
The Government of India has announced an ambitious target of investing GBP1.03 trillion in infrastructure over the next five year period, 2012-2017, more than double the $439 billion invested in the current five-year period. Spending on infrastructure would therefore increase to 9% of GDP from the current 5%. A sizeable portion will be spent on ports, port infrastructure, and transport and logistics - Eredene's principal areas of investment.
Around 95% of India's external trade by volume and 70% by value are routed by sea through the country's 13 major and approximately 200 minor ports. Port capacity has reached over one billion tonnes per annum, according to Shipping Minister G.K. Vasan, but this is still inadequate. Annual port capacity in India needs to grow to more than 3.23 billion tonnes by 2020, more than three times the present levels, according to the Shipping Ministry's maritime agenda for the decade.
Investment in logistics is also set to rise, with a projected annual growth of 10%. Logistics costs in India are 13-14% of GDP compared to 8-9% in developed economies. India's logistics market achieved revenues of $82.1 billion in 2010 and is expected to reach revenues of $90 billion in 2011. Growing at a projected 10% per annum, the logistics industry is forecast to generate revenues of $200 billion by 2020.
Board changes
This is my first Chairman's report since joining Eredene in March 2011 and taking over from David Coltman who retired because of rapidly deteriorating ill health. David died on 9 June 2011 and I would like to extend Eredene's condolences to his family and to pay tribute to his outstanding contribution to the company during his three years as Chairman. I would also like to take this opportunity to thank our shareholders for their continuing support and also to thank our staff and associates for their commitment and hard work.
Outlook
Major infrastructure investment is vital for India's development, and Eredene is therefore operating in a critical sector which will almost certainly experience rapid growth. With its current projects, Eredene is well positioned to earn attractive and sustainable revenues and to achieve significant capital returns.
Struan Robertson
Non-Executive Chairman
21 July 2011
Investment Portfolio Summary
Investment Amount Fair Value Sector Location Progress
invested at
at 31/3/11
31/3/11
---------------- --------- ----------- --------------- -------------- -----------------
1. Sattva CFS & GBP0.9m GBP4.6m Container Chennai, Revenue
Logistics - Logistics Tamil generating &
Vichoor CFS Nadu dividend paying
---------------- --------- ----------- --------------- -------------- -----------------
2. Sattva GBP3.7m N/A as Container Ennore, Operational &
Conware CFS subsidiary Logistics Tamil revenue
Nadu generating
---------------- --------- ----------- --------------- -------------- -----------------
Contrans GBP5.6m GBP8.2m Container Pipavav, Operational &
Logistic 3. Logistics Gujarat revenue
Project One: Container Baroda, generating
Pipavav CFS 4. Logistics Gujarat Pre-construction
Project Two: phase
Baroda CFS
---------------- --------- ----------- --------------- -------------- -----------------
Apeejay GBP2.2m GBP4.9m Logistics Haldia, West Operational &
Infra-Logistics Park Bengal revenue
5. Project One: Logistics Kalinganagar, generating
Haldia Park West Bengal Construction
Logistics Park phase
6. Project Two:
Kalinganagar
Logistics Park
---------------- --------- ----------- --------------- -------------- -----------------
7. MJ Logistic GBP9.2m N/A as Warehousing & Northern Operational &
Services subsidiary Third Party India revenue
Logistics generating
---------------- --------- ----------- --------------- -------------- -----------------
8. Sribha GBP2.1m GBP0.5m Office Bangalore, Construction
Infrastructure Infrastructure Karnataka halted
Solutions
---------------- --------- ----------- --------------- -------------- -----------------
9. Matheran GBP12.7m GBP11.9m Urban Mumbai Construction &
Realty & Gopi Development region taking sales
Resorts deposits
---------------- --------- ----------- --------------- -------------- -----------------
10. Bay of GBP0.9m GBP0.9m Container Ennore, Pre-construction
Bengal Gateway Terminal Tamil phase
Terminal Nadu
---------------- --------- ----------- --------------- -------------- -----------------
11. Ocean GBP7.3m GBP8.8m Marine Pan-India Revenue
Sparkle operations & generating &
maintenance dividend paying
---------------- --------- ----------- --------------- -------------- -----------------
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2011
Year Year
ended 31 ended 31
March 2011 March 2010
Note GBP'000 GBP'000
Portfolio return and revenue
Change in fair value of equity
investments 7 4,921 6,400
Other portfolio income 55 115
------------ ------------
4,976 6,515
Revenue from services 3,468 1,672
Cost of sales for services (2,621) (1,508)
------------ ------------
Gross profit 847 164
Gross profit and net portfolio
return 5,823 6,679
------------ ------------
Administrative expenses (3,787) (3,631)
Finance income 128 179
Finance costs (701) (102)
Profit before taxation 1,463 3,125
------------ ------------
Taxation credit/(charge) 4 404 (489)
Profit after taxation 1,867 2,636
============ ============
Other comprehensive income
Foreign currency translation (537) 1,159
------------ ------------
Total comprehensive income for
the period 1,330 3,795
Profit attributable to:
Owners of the parent company 1,936 2,677
Minority interest (69) (41)
------------ ------------
1,867 2,636
------------ ------------
Total comprehensive income
attributable to:
Owners of the parent company 1,247 3,641
Minority interest 83 154
------------ ------------
1,330 3,795
------------ ------------
Earnings per share
------------ ------------
Basic and diluted 6 0.69p 1.01p
------------ ------------
Consolidated Balance Sheet at 31 March 2011
31 March 31 March
2011 2010
Note GBP'000 GBP'000
NON-CURRENT ASSETS
Property, plant and equipment 16,614 16,696
Investments held at fair value through
profit or loss 7 39,713 26,341
Intangible assets 1,095 1,162
Deferred income tax asset 37 36
Other receivables 29 33
--------- ---------
57,488 44,268
--------- ---------
CURRENT ASSETS
Trade and other receivables 942 1,037
Cash and cash equivalents 15,558 27,591
---------
16,500 28,628
--------- ---------
TOTAL ASSETS 73,988 72,896
--------- ---------
CURRENT LIABILITIES
Trade and other payables (630) (711)
Current income tax liabilities (6) (481)
Borrowings (508) -
NON-CURRENT LIABILITIES
Borrowings (5,565) (5,770)
Provisions (12) (9)
TOTAL LIABILITIES (6,721) (6,971)
--------- ---------
TOTAL NET ASSETS 67,267 65,925
========= =========
EQUITY
Share capital 28,024 28,024
Share premium 3,441 3,441
Special reserve 32,826 32,826
Foreign exchange reserve 1,291 1,739
Retained deficit (185) (1,663)
Capital and reserves attributable to
equity shareholders of the company 65,397 64,367
Non-controlling interests 1,870 1,558
TOTAL EQUITY 67,267 65,925
========= =========
Consolidated Statement of Changes in Equity for the year ended 31 March 2011
Foreign
Share Share Special exchange
capital premium reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31 March 2011
As at 1 April 2010 28,024 3,441 32,826 1,739
--------- --------- --------- ----------
Total comprehensive income for
the period - - - (448)
Share based payment - - - -
Minority interest on dilution
of shareholding - - - -
--------- --------- --------- ----------
As at 31 March 2011 28,024 3,441 32,826 1,291
--------- --------- --------- ----------
Year ended 31 March 2010
As at 1 April 2009 24,473 - -32,826 740
--------- --------- --------- ----------
Total comprehensive income for
the period - - - 999
Share based payment - - - -
Shares issued net of issue costs 3,551 3,441 - -
Minority interest on acquisition
of subsidiary - - - -
--------- --------- --------- ----------
As at 31 March 2010 28,024 3,441 32,826 1,739
--------- --------- --------- ----------
Retained
earnings/ Share holders Non-controlling Total
(deficit) equity interest equity
GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31 March
2011
As at 1 April 2010 (1,663) 64,367 1,558 65,925
----------- -------------- ---------------- --------
Total comprehensive
income for the
period 1,695 1,247 83 1,330
Share based payment 33 33 - 33
Minority interest on
dilution of
shareholding (250) (250) 229 (21)
----------- -------------- ---------------- --------
As at 31 March 2011 (185) 65,397 1,870 67,267
----------- -------------- ---------------- --------
Year ended 31 March
2010
As at 1 April 2009 (4,361) 53,678 1,092 54,770
----------- -------------- ---------------- --------
Total comprehensive
income for the
period 2,642 3,641 154 3,795
Share based payment 56 56 - 56
Shares issued net of
issue costs - 6,992 - 6,992
Minority interest on
acquisition of
subsidiary - - 312 312
----------- -------------- ---------------- --------
As at 31 March 2010 (1,663) 64,367 1,558 65,925
----------- -------------- ---------------- --------
Consolidated Cash Flow Statement for the year ended 31 March 2011
Year ended Year
31 March ended 31
2011 March 2010
GBP'000 GBP'000
Cash flow from operating activities
Profit before taxation 1,463 3,125
Adjustments for:
Finance income (128) (179)
Dividend income (55) (25)
Unrealised gain on investments held at
fair value (4,921) (6,400)
Share based payment charge 33 56
Foreign exchange differences 542 588
Depreciation 305 59
Amortisation 25 25
Goodwill written to income statement - 26
Decrease/(increase) in trade and other
receivables 88 (412)
Decrease in trade and other payables (82) (5)
Increase in provisions 3 9
Taxation paid (59) -
Net cash used in operating activities (2,786) (3,133)
----------- ------------
Cash flows from investing activities
Purchase of property, plant and equipment (927) (4,812)
Purchase of investments (8,451) (1,662)
Interest received 139 190
Dividends received 55 25
Net cash used in investing activities (9,184) (6,259)
----------- ------------
Cash flows from financing activities
Proceeds from issue of ordinary shares - 6,992
Proceeds from issue of shares in subsidiary
to minority interest 36 441
Proceeds from borrowings 548 3,769
Net cash generated from financing activities 584 11,202
----------- ------------
Net (decrease)/increase in cash and cash
equivalents (11,386) 1,810
Cash and cash equivalents at the
beginning of the period 27,591 26,235
Exchange losses (647) (454)
Cash and cash equivalents at the end
of the period 15,558 27,591
=========== ============
Notes for the year ended 31 March 2011
1. Status of financial information
The financial information does not constitute the Group's statutory accounts for either the year ended 31 March 2011 or the year ended 31 March 2010, but is derived from those accounts. The Group's statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered in due course. The auditors' reports on both the 2010 and 2011 accounts were not qualified or modified; did not draw attention to any matters by way of an emphasis of matter; and did not contain any statement under Section 498 of the Companies Act 2006
2. Accounting policies
Eredene Capital PLC (the "Company") is a company incorporated and domiciled in the United Kingdom and quoted on the London Stock Exchange's AIM market. The consolidated financial statements of the Group for the year ended 31 March 2011 comprise the Company and its subsidiaries (together referred to as the "Group").
Basis of preparation
The Group's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use in the EU ("IFRS").
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.
The financial statements are presented in pounds sterling. They have been prepared on the historical cost basis, except for the revaluation of certain investments.
Basis of consolidation
The Group's financial statements consolidate the financial statements of the Company and its subsidiary undertakings. Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The results of any subsidiaries sold or acquired are included in the Group income statement up to, or from, the date control passes. Intra-Group sales and profits are eliminated fully on consolidation.
On acquisition of a subsidiary, all of the subsidiary's separable, identifiable assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. On disposal of a subsidiary, the consideration received is compared with the carrying cost at the date of disposal and the gain or loss is recognised in the income statement. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets is recorded as goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Subsidiaries' results are amended where necessary to ensure consistency with the policies adopted by the Group.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in
intangible assets and allocated from the acquisition date to each of the Group's cash generating units ("CGU") that are expected to benefit from the business combination. Goodwill may be allocated to CGUs in both the acquired business and in the existing business. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
Acquired intangible assets
Intangible assets, other than goodwill, that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. The pipeline of investments acquired is amortised over the period in which gains or losses on the investments made from the pipeline are expected to be realised of ten years. The amortisation charge for the period is included within administrative expenses.
Impairment of intangible assets (including goodwill)
Goodwill is not subject to amortisation but is tested for impairment annually and whenever events or circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are tested for impairment when events or a change in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset's fair value less
costs to sell and the value in use. For the purposes of assessing impairments, assets are grouped at the lowest levels for which there are identifiable cash flows (i.e. cash generating units).
Property, plant and equipment
Property, plant and equipment is stated at cost less depreciation and impairment. Depreciation on property plant and equipment is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life. It is calculated at the following rates:
Fixtures and fittings - 6-20% per annum straight line basis
Office equipment - 5-33% per annum straight line basis
Buildings - 3-22% per annum straight line basis
Vehicles and machinery - 5-10% per annum straight line basis
Financial assets
- Investments held at fair value through profit or loss
Investments in which the Group has a long-term interest and over whose operating and financial policies it exerts significant influence, but which are held as part of an investment portfolio, the value of which is through their marketable value as part of a basket of investments, are not regarded as joint ventures or associated undertakings. The treatment adopted is in accordance with IAS 39 'Financial Instruments: Recognition and Measurement' and the exemptions applying to venture capital organisations in IAS 28 'Investments in Associates' and IAS 31 'Interests in Joint Ventures'.
These investments are measured at fair value through profit or loss. Gains and losses arising from changes in the fair value of these investments, including foreign exchange movements, are included in profit or loss for the period.
Unquoted investments are valued using appropriate valuation methodologies, based on the International Private Equity and Venture Capital Guidelines, which reflect the price at which an orderly transaction would take place between knowledgeable and willing market participants.
- Loans and receivables
Other receivables
Other receivables are recognised and carried at amortised cost less an allowance for any uncollectible amounts. Unless otherwise indicated, the carrying amount of the group's financial assets are a reasonable approximation to their fair value.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short term deposits.
- Financial liabilities held at amortised cost
Borrowings
Borrowings are recognised initially at fair value. Borrowings are subsequently carried at amortised cost.
Trade and other payables
Trade payables and other payables are recognised and carried at amortised cost and are a short term liability of the Group.
Foreign currency
Foreign currency transactions of individual companies are translated at the rates ruling when they occurred. Foreign currency monetary assets and liabilities are translated at the rate of exchange ruling at the balance sheet date. Any differences are taken to the income statement.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the date the fair value was determined.
On consolidation, the assets and liabilities of the Group's overseas subsidiaries are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as equity and translated to a foreign exchange reserve.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of the instruments are recognised immediately in the income statement.
Portfolio return and revenue
Change in fair value of equity investments represents revaluation gains and losses on the Group's portfolio of investments.
Dividends receivable from equity shares are included within other portfolio income and recognised on the ex-dividend date or, where no ex-dividend date is quoted, are recognised when the Group's right to receive payment is established.
Revenue from services comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the group's activities. This is primarily the provision of storage and transportation services, for which revenue is recognised on provision of services and dispatch of goods. Revenue is shown net of value-added tax, returns, rebates and discounts.
Share-based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is determined using an option pricing model and charged to the income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.
Where equity instruments are granted to persons other than employees, the income statement is charged with fair value of goods and services received. If it is not possible to identify the fair value of these goods or services provided, the income statement is charged with the fair value of the options granted.
Deferred tax
Deferred tax expected to be payable or recoverable on differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that at the time of the transaction, affects neither the taxable profit nor the accounting profit. Deferred tax is calculated at the rates of taxation enacted or substantively enacted at the balance sheet date.
Pension costs
The Company contributes to directors' and employees' personal money-purchase pension schemes. Contributions are charged to the income statement in the period in which they become payable.
National Insurance on share options
To the extent that the share price at the balance sheet date is greater than the exercise price on options granted under unapproved schemes, provision for any national insurance contributions has been made based on the prevailing rate of national insurance. The provision is accrued over the performance period attaching to the award.
Operating leases
Operating lease rentals are charged to the income statement on a straight-line basis over the term of the lease.
3. Critical accounting judgements and estimates
The preparation of the Group's financial statements requires the directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
The directors consider that the following estimates and judgements are likely to have the most significant effect on the amounts recognised in the financial statements.
Accounting for investments
Investments in which the Group has a long-term interest and over whose operating and financial policies it exerts significant influence, but which are held as part of an investment portfolio, the value of which is through their marketable value as part of a basket of investments, are not regarded as joint ventures or associated undertakings. The treatment adopted is in accordance with IAS 39 'Financial Instruments: Recognition and Measurement' and the exemptions applying to venture capital organisations in IAS 28 'Investments in Associates' and IAS 31 'Interests in Joint Ventures'.
Value of investments
The Group's investments held at fair value through profit or loss are valued based on the International Private Equity and Venture Capital Guidelines. An independent valuer, Grant Thornton, was engaged to value the investments under those Guidelines. The valuations are made based on market conditions and information about the investment. These estimates are subjective in nature and involve uncertainties and matters of significant judgement (e.g interest rates, volatility and estimated cash flows).
Impairment of goodwill
The Group is required to test whether goodwill has suffered any impairment on at least an annual basis. The recoverable amount is determined using value in use calculations. The use of this method requires the estimation of future cash flows and the selection of a suitable discount rate in order to calculate the present value of these cash flows.
Share-based payments
The charge for share-based payments is calculated using an option valuation model which requires highly subjective assumptions to be made including the future volatility of the Company's share price, expected dividend yields, risk-free interest rates and expected staff turnover. The directors draw on external sources to aid them in the determination of the appropriate data to use in such calculations.
4. Taxation
Year ended Year ended
31 March 31 March
Recognised in the income statement: 2011 2010
GBP'000 GBP'000
Current tax expense
UK corporation tax - -
Adjustment to provision for prior period (415) 481
Deferred tax
Movement in deferred tax asset 11 8
Income tax (credit)/charge (404) 489
----------- -----------
The tax assessed for the period differs from the standard rate of corporation tax in the UK applied to the Group profit before tax. The differences are explained below:
Year ended Year ended
31 March 31 March
2011 2010
GBP'000 GBP'000
Profit on ordinary activities before tax 1,463 3,125
----------- -----------
Profit on ordinary activities at the standard
rate of
corporation tax in the UK for the period
of 28.0% (2010: 28.0%) 410 875
Effects of:
Expenses not deductible for tax purposes 107 119
Capitalised expenses deductible for tax
purposes 11 6
Depreciation less than capital allowances 2 2
Non-taxable gains on investments (1,378) (1,792)
Non-UK recoverable overseas losses 331 361
Non-taxable dividend income (15) (7)
Tax losses carried forward 544 449
Non-taxable finance income (1) (5)
Adjustment to provision for prior period (415) 481
Tax (credit)/charge for period (404) 489
----------- -----------
Deferred tax
No deferred tax asset has been recognised on unutilised taxable losses due to lack of certainty that taxable profits will be available against which deductible temporary differences can be utilised. The potential unrecognised asset is GBP3.5m (2010: GBP2.9m).
5. Dividends
The Board does not recommend the payment of a dividend for the year (2010 - nil).
6. Earnings per share and net assets per share
The calculation of the basic and diluted earnings per share is based on the profit for the period attributable to equity shareholders of GBP1,936,000 (2010: GBP2,677,000) and the weighted average number of shares in issue during the period of 280,240,031 (2010: 265,646,046). There was no difference between the basic earnings per share and diluted earnings per share as the dilutionary effect of the shares under option was less than 0.01p per share. 18.2 million shares (2010: 18.2 million) under option were non-dilutionary as the exercise price was in excess of the company's share price at the year end date.
The calculation of net asset value per share is based on the net assets attributable to equity shareholders of GBP65,397,000 (2010: GBP64,367,000) and the number of shares in issue at the period end of 280,240,031 (2010: 280,240,031).
7. Investments held at fair value through profit or loss
The Group has the following investments held at fair value through profit or loss, all of which are incorporated in India:
Class % held % held
of Net Profit/(loss) Date of 31 31
shares Assets before financial March March
held GBP'000 tax GBP'000 statements 2011 2010
Apeejay
Infra-Logistics
Pvt Ltd Ord. 5,051 3 31/3/10 50% 50%
Matheran Realty
Pvt Ltd A 11,938 (101) 31/3/10 63% 63%
Gopi Resorts Pvt
Ltd A & B 2,432 (205) 31/3/10 75% 75%
Contrans
Logistic Pvt
Ltd Ord. 6,973 (507) 31/3/10 44% 44%
Sattva CFS &
Logistics Pvt
Ltd Ord. 2,843 798 31/3/11 49% 49%
Sribha
Infrastructure
Solutions Co
Pvt Ltd Ord. 303 (63) 31/3/08 37% 37%
Bay of Bengal
Gateway
Terminal Pvt
Ltd Ord. n/a n/a n/a 22% -
Ocean Sparkle
Ltd Ord. 45,604 7,403 31/3/11 8% -
The Group's investment in Matheran Realty Pvt Ltd ("Matheran") at 31 March 2011 is held through a direct holding of 45% in Matheran and an indirect holding of 18% via the Group's 44% holding in Alibante Developments Ltd which itself held 42% of Matheran. The Group's investment in Gopi Resorts Pvt Ltd ("Gopi") is held through a direct holding of 32% in Gopi and an indirect holding of 43% via Matheran's stake of 68% in Gopi.
Whilst the Group has effective stakes in Matheran and Gopi in excess of 50%, those holding are comprised of the above minority stakes which do not provide the Group with control of those entities. As a result the Group has accounted for Matheran and Gopi as investments held at fair value rather than as subsidiaries as the Group does not control Matheran or Gopi.
At 31 March 2011 the cost and valuation of the Group's investments was as follows:
Unrealised
Historical gain/(loss) Fair value
cost at 31/3/11 1/4/10 - 31/3/11 at 31/3/11
GBP'000 GBP'000 GBP'000
Apeejay Infra-Logistics Pvt
Ltd 2,196 369 4,854
Matheran Realty Pvt Ltd 10,128 431 8,518
Gopi Resorts Pvt Ltd 2,542 167 3,367
Contrans Logistic Pvt Ltd 5,572 1,146 8,166
Sattva CFS & Logistics Pvt
Ltd 880 1,414 4,640
Sribha Infrastructure
Solutions Company Pvt Ltd 2,126 (21) 470
Bay of Bengal Gateway
Terminal Pvt Ltd 940 3 943
Ocean Sparkle Ltd 7,343 1,412 8,755
31,727 4,921 39,713
---------------- ----------------- -----------
At 31 March 2010 the cost and valuation of the Group's investments was as follows:
Unrealised
Historical gain/(loss) Fair value
cost at 31/3/10 1/4/09 - 31/3/10 at 31/3/10
GBP'000 GBP'000 GBP'000
Apeejay Infra-Logistics Pvt
Ltd 2,196 2,059 4,485
Matheran Realty Pvt Ltd 10,128 3,099 8,087
Gopi Resorts Pvt Ltd 2,542 (1,090) 3,200
Contrans Logistic Pvt Ltd 5,405 2,668 6,852
Sattva CFS & Logistics Pvt
Ltd 880 796 3,226
Sribha Infrastructure
Solutions Company Pvt Ltd 2,126 (1,132) 491
23,277 6,400 26,341
---------------- ----------------- -----------
The Group's holdings in the above investments are all held by wholly owned intermediate Mauritian registered holding companies except for Bay of Bengal Gateway Terminal Pvt Ltd which is directly owned by Eredene Capital PLC.
The investments were independently valued at 31 March 2011 by Grant Thornton India. The investments are valued using appropriate valuation methodologies, in accordance with the International Private Equity and Venture Capital Guidelines endorsed by the British & European Venture Capital Associations, which reflect the amount for which an asset could be exchanged between knowledgeable, willing parties on an arm's length basis. The companies in which the Group has invested are at various stages of development. The methodologies used in the valuation of these investments include Earnings Multiples, Net Assets and Discounted Cash Flow.
Earnings Multiple - this methodology involves the application of an earnings multiple to the earnings of the business being valued in order to derive a value for the business. This methodology is appropriate where the business has an identifiable stream of continuing earnings that can be considered to be maintainable. A number of earnings multiples may be used including price/earnings and enterprise value/earnings before interest, tax, depreciation and amortisation.
Net Assets - this methodology involves deriving the value of a business by reference to the value of its assets. The assets and liabilities may be adjusted to reflect the fair value of those assets and liabilities as at the valuation date.
Discounted Cash Flow - this methodology involves deriving the value of a business by calculating the present value of expected future cash flows. The cash flows and the terminal value are those of the underlying business rather than from the investment itself. A suitable discount rate is estimated based on the weighted average cost of capital of the business.
The actual methodologies used vary from investment to investment with the independent valuers applying an appropriate methodology based on the particular circumstances of the underlying business.
The movements in non-current investments were as follows:
GBP'000
Carrying value at 31 March 2009 18,279
-------
Purchases, at cost 1,662
Unrealised gains on investments 6,400
Carrying value at 31 March 2010 26,341
-------
Purchases, at cost 8,451
Unrealised gains on investments 4,921
Carrying value at 31 March 2011 39,713
-------
8. Post balance sheet events
After the end of the financial year, Eredene raised GBP30m (before expenses) by way of a placing of 166,666,667 new Ordinary Shares at a price of 18p per share, which was at a small premium to the then market price. The placing was supported by a number of Eredene's largest shareholders and by some major new investors and was approved at a General Meeting of Shareholders on 10 May 2011. The shares were admitted to trading on AIM on 12 May 2011.
9. Forward-looking statements
This document may contain forward-looking statements with respect to certain of the plans and current goals and expectations relating to the future financial condition, business performance and results of Eredene Capital PLC. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of Eredene Capital PLC including, amongst other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates, foreign exchange rates, inflation, the impact of competition, delays in implementing proposals, the timing, impact and other uncertainties of future investments, the impact of tax or other legislation and other regulations in the jurisdictions in which Eredene Capital PLC and its affiliates operate. As a result, Eredene Capital PLC's actual future condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward-looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
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