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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Mercantile Ports & Logistics Limited | LSE:MPL | London | Ordinary Share | GG00BKSH7R87 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.15 | -8.33% | 1.65 | 1.60 | 1.70 | 1.80 | 1.625 | 1.80 | 2,290,751 | 16:16:13 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMPL
RNS Number : 0204T
Mercantile Ports & Logistics Ltd
29 June 2018
29 June, 2018
Mercantile Ports & Logistics Limited (the "Company" or "MPL")
Preliminary results for the year ended 31 December 2017
MPL, which is developing a modern port and logistics facility in Mumbai, India, is pleased to announce its preliminary results for the year ended 31 December 2017.
The preliminary results are set out below.
Enquiries:
Hot Features
Premium
MPL C/O Redleaf Communications
+44 (0) 20 7382 4769
Cenkos Securities plc Stephen Keys/Callum Davidson
(Nomad and Broker) +44 (0) 20 7397 8900
Redleaf Communications Charlie Geller/Fiona Norman
(Financial PR) +44 (0) 20 7382 4769
MPL@redleafpr.com
Chairman's Statement
2017 was a busy year for MPL, with work continuing uninterrupted throughout the year. The Company achieved the key construction milestone of completing piling for its 400 metre jetty in November and then, by the end of the year, had three berths capable of receiving vessels. Since the year end, progress has continued, with more than 300 metres of the 400 metre general cargo jetty completed in all respects and the civil construction works completed on an additional 200 metres dedicated to break bulk berth, all of which, when completed, will bring the final quay length of the all-weather facility to 1,000 meters.
The Company was pleased to announce post the period end that it had received notification under section 7 of the Customs Act 1962 of the appointment of KPL's Karanja Terminal as a customs port. The Board considers this to be the major development in the customs clearance process and is consistent with the Board's view that receipt of final customs clearance is now a formality. This notification is publicly available and is, therefore, expected to be helpful in the discussions with future customers. Final customs approval is expected to be received soon, with revenue anticipated to be generated during August. This news was accompanied by confirmation that its wholly owned subsidiary, Karanja Terminal Port and Logistics Limited ("KTPL") had received notification from the Maharashtra Maritime Board (MMB) that KPL's lease over the land had been increased from 30 to 50 years. In addition, the MMB has also granted the Company the approval to develop an additional 200 acres of land and 1000 metres of waterfront.
The Board was pleased to announce two binding contracts during the year and the Company's marketing efforts have continued in the early part of 2018, with a further Memorandum of Understanding (MoU) announced and negotiations continuing with numerous potential end users. The Company expects to make further announcements in relation to new contract wins during the current year.
The Company's board evolved during the year, with the appointment of Andrew Henderson as CFO, who has been building the accounting team as the Company prepares to be revenue generating. In addition, 2017 saw the appointment of John Fitzgerald as a new non-executive Director as Peter Jones and James Sutcliffe retired. We have welcomed John's experience and contribution to the Board and thank Peter and James for their efforts that saw the project come from a concept to being one of the few privately financed infrastructure projects in India.
As a result of the date of revenue receipts being later than anticipated, the Company slowed down the level of expansion activity on site, particularly in the expensive work stream of land reclamation. As at today's date, the Company has reclaimed some 95 acres of land, with a further 20 acres worth of material being on site and currently being used for surcharging. This is significantly more than the 50 acres of back up land required to enable the facility to commence operations.
As at 31 December 2017, the Group had cash resources of GBP5.4 million and GBP21.1 million of undrawn banking facilities. During the year, in order to co-ordinate better with the Company's revenue profile, the Company and its principal bank, Canara Bank, amended the terms of the current Term Loan Facilities to extend the period of the banking facilities to March 2027 and move back the first quarterly repayment from December 2018 to June 2020. The Company will continue to review its future debt refinancing options. As has been widely reported, the banking sector in India has been experiencing difficulties and is undergoing reform. One of the consequences of this has been that the Indian public sector banks have imposed extra levels of bureaucracy, leading to unpredictable timing or delay in the receipt of funds by their customers, and the Group is not immune from this.
The Group continues to be in compliance with the terms of its banking facilities and the banking issues in India have not had an impact on the construction of the Facility to date. However, the Board is keen to ensure that the general situation with the Indian banking sector and any delay to the drawdown of the Company's banking facilities in the future does not have any impact on the Group. As such, I have agreed that I will personally provide a loan facility for 12 months to 30 June 2019, for an amount consistent with the undrawn existing bank facility, to ensure that there is no interruption to work on site should this be the case. This is in addition to the personal guarantee I have provided over the full debt facility.
The Company was pleased that the impairment review performed indicated that the Value in Use of the port, once completed, has been calculated as being higher than the final expected cost of the completed port. With the recent announcement of the leases extension beyond 2060 we were able to present a stronger internal valuation, with the new lease extension allowing us to model an additional 20 years of positive cash flows. We believe that the lease extension is a significant endorsement from the key government organisation responsible for the maritime economy and illustrates the confidence that the MMB has in MPL. The decision of the MMB comes on the back of significant interest in the new facility from a wide range of shipping and cargo businesses. Prime Minster Modi's government Sagarmala initiative supports port led development as a key driver of Indian economic development and MPL is proud to be an important contributor to the delivery of the Prime Minister's flagship policy. This was further supported with the announcement of progress with customs clearance and the reassurance it provides in being able to forecast revenue inflows more accurately.
Management are confident that they will be able to optimise MPL's capital structure in the next 12 months, including securing access to debt capital on better terms. The Company believes that it will achieve this based on the majority of construction risks having been removed and all regulatory risks having been successfully dealt with. In addition, the company has signed contracts with end users and a healthy pipeline of customers that have signaled to move from MoU to documentation stage.
Conclusion
2017 was a year of consolidation and preparing for the future in terms of building the port, the management team, securing first customers and developing a healthy pipeline to deliver on the promise of a professional and profitable port and logistics facility.
So far in 2018, we have seen further progress made and the recently announced lease extension was a significant boost for the Company and further support for our long-term growth plans. The slight extension to the timetable as a result of the prolonged customs approval process has been frustrating. However, Karanja lies at the heart of India's trading gateway and, with India's macro story still conducive to Karanja's growth, once operational, the Board sees enormous opportunities available to the Company. Everyone involved in this project recognises the strategic ambition of both our government and our customers. We're proud to be working with all our stakeholders to deliver on this vision.
Nikhil Gandhi
Executive Chairman
Mercantile Ports & Logistics Limited
29 June, 2018
Consolidated Statement of Comprehensive Income
for the Year ended 31 December 2017
Notes Year ended Year
31 Dec ended
17 31 Dec
GBP000 16
GBP000
CONTINUING OPERATIONS
Revenue - -
----------- ---------
- -
Administrative Expenses 5 (3,416) (2,409)
----------- ---------
OPERATING LOSS (3,416) (2,409)
Finance Income 6 11 1,301
Finance Cost - -
----------- ---------
NET FINANCING INCOME 11 1,301
----------- ---------
LOSS BEFORE TAX (3,405) (1,108)
Tax expense for the year 7 - (449)
----------- ---------
Loss FOR THE YEAR (3,405) (1,557)
=========== =========
Loss for the year attributable
to:
Non-controlling interest (1) 2
Owners of the parent (3,404) (1,559)
----------- ---------
Loss for the year (3,405) (1,557)
=========== =========
Other Comprehensive Income / (expense):
Items that will be reclassified
subsequently to profit or loss
Exchange differences on translating
foreign operations (2,785) 9,697
----------- ---------
Other comprehensive income/(expense)
for the year (2,785) 9,697
----------- ---------
Total comprehensive income/(expense)
for the year (6,190) 8,140
=========== =========
Total comprehensive income/(expense)
for the year attributable to:
Non-controlling interest (1) 2
Owners of the parent (6,189) 8,138
----------- ---------
(6,190) 8,140
=========== =========
Loss per share (consolidated):
Basic & Diluted, for the year
attributable to ordinary equity
holders 9 (0.008p) (0.020p)
The notes on pages 26 to 48 form
part of these consolidated financial
statements.
Consolidated Statement of Financial Position as
at 31 December 2017
Notes Year ended Year ended
31 Dec 31 Dec
17 16
GBP000 GBP000
Assets
Property, plant and equipment 10 123,985 95,111
----------- -----------
Total non-current assets 123,985 95,111
----------- -----------
Trade and other receivables 11 15,315 19,079
Cash and cash equivalents 12 5,423 35,697
----------- -----------
Total current assets 20,738 54,776
Total assets 144,723 149,887
=========== ===========
Equity
Share Premium 14 106,763 103,714
Retained earnings 14 (498) 2,905
Translation Reserve 14 (12,740) (9,955)
----------- -----------
Equity attributable to owners
of parent 93,525 96,664
----------- -----------
Non-controlling Interest 16 17
----------- -----------
Total equity 93,541 96,681
----------- -----------
Liabilities
Non-current
Borrowings 15 34,934 32,294
----------- -----------
Non-current liabilities 34,934 32,294
----------- -----------
Current
Borrowings 15 23 33
Current tax liabilities 16 7,417 9,077
Trade and other payables 17 8,808 11,802
----------- -----------
Current liabilities 16,248 20,912
----------- -----------
Total liabilities 51,182 53,206
----------- -----------
Total equity and liabilities 144,723 149,887
=========== ===========
The notes on pages 26 to 48 form part of these consolidated financial statements.
The consolidated financial statements have been approved and authorized for issue by the Board on 29 June 2018.
Nikhil Gandhi
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Year ended 31 December 2017
Notes Year ended Year ended
31 Dec 17 31 Dec
GBP000 16
GBP000
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss before tax (3,405) (1,108)
Non cash flow adjustments 19 (1,559) 3,764
----------- -----------
Operating (loss)/profit
before working capital
changes (4,964) 2,656
Net changes in working
capital 19 770 2,861
----------- -----------
Net cash from operating
activities (4,194) 5,517
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property, plant
and equipment 10 (31,752) (58,555)
Finance Income 6 11 1,301
Net cash used in investing
activities (31,741) (57,254)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issue of Share Capital 14 3,000 29,124
Reversal of share issue
cost 49 --
Proceeds from new borrowing 2,630 15,099
Net cash from financing
activities 5,679 44,223
----------- -----------
Net change in cash and
cash equivalents (30,256) (7,514)
Cash and cash equivalents,
beginning of the year 35,697 38,569
Exchange differences on
cash and cash equivalents (18) 4,642
----------- -----------
Cash and cash equivalents,
end of the year 5,423 35,697
=========== ===========
The notes on pages 26 to 48 form part of these consolidated financial statements.
Consolidated Statement of Changes in Equity
for the Year ended 31 December 2017
Share Translation Retained Non- Total
Premium Reserve Earnings controlling Equity
Interest
GBP000 GBP000 GBP000 GBP000 GBP000
--------- ------------ ---------- -------------
Balance at 1 January
2017 103,714 (9,955) 2,905 17 96,681
Issue of share capital 3,049 -- -- -- 3,049
--------- ------------ ---------- ------------- --------
Transactions with
owners 3,049 -- -- -- 3,049
--------- ------------ ---------- ------------- --------
Loss for the year -- -- (3,404) (1) (3,405)
Foreign currency translation
differences for foreign
operations -- (2,785) -- -- (2,785)
--------- ------------ ---------- ------------- --------
Total comprehensive
income for the year -- (2,785) (3,404) (1) (6,190)
--------- ------------ ---------- ------------- --------
Balance at 31 December
2017 106,763 (12,740) (498) 16 93,541
========= ============ ========== ============= ========
Balance at 1 January
2016 71,590 (19,652) 4,464 15 56,417
Issue of share capital 32,124 - - - 32,124
Transactions with
owners 32,124 - - - 32,124
----------------- --------- -------- --- ---------------
Loss for the year - - (1,559) 2 (1,557)
Foreign currency translation
differences for foreign
operations - 9,697 - - 9,697
----------------- --------- -------- --- ---------------
Total comprehensive
income for the year - 9,697 (1,559) 2 8,140
----------------- --------- -------- --- ---------------
Balance at 31 December
2016 103,714 (9,955) 2,905 17 96,681
================= ========= ======== === ===============
The notes on pages 26 to 48 form part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
Mercantile Ports & Logistics Limited formerly known as SKIL Ports & Logistics Limited (the "Company") was incorporated in Guernsey under The Companies (Guernsey) Law, 2008 with registered number 52321 on 24 August 2010. Its registered office and principal place of business is Martello Court, Admiral Park, St. Peter Port, Guernsey GY1 3HB. It was listed on the Alternative Investment Market ('AIM') of the London Stock Exchange on 7 October 2010.
The consolidated financial statements of the Company comprise the financial statements of the Company and its subsidiaries (together referred to as the "Group"). The consolidated financial statements have been prepared for the year ended 31 December 2017, and are presented in UK Sterling (GBP).
The principal activities of the Group are to develop, own and operate a port and logistics facilities. As of 31 December 2017, the Group had 51 (Fifty one) (prior year 26 (Twenty-Six) employees).
2. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PREPARATION
The consolidated financial statements have been prepared on a historical cost basis.
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and also to comply with The Companies (Guernsey) Law, 2008.
Going Concern
The financial statements have been prepared on a going concern basis as the directors believe that the Group has access to adequate funds and facilities to enable it to exist as a going concern for the foreseeable future. The Group has continued the construction work at site and the Directors believe that they will have sufficient sanctioned credit facilities from lenders for the port to become operational. It has been assumed that the port will become operational during August now that a key element of customs clearance has been obtained and revenue will be generated which will also help fund future costs.
As has been widely reported, the banking sector in India has been experiencing difficulties and is undergoing reform. One of the consequences of this has been that the Indian public sector banks have imposed extra levels of bureaucracy, leading to unpredictable timing or delay in the receipt of funds by their customers, and the Group is not immune from this. The Group continues to be in compliance with the terms of its banking facilities and the banking issues in India have not had an impact on the construction of the Facility to date. However, the Board is keen to ensure that the general situation with the Indian banking sector and any delay to the drawdown of its banking facilities in the future does not impact on the Group. As such, Nikhil Gandhi, the Chairman of the Group, has provided a loan facility for 12 months to 30 June 2019, on terms consistent with the Group's existing bank facility, should there be a delay in accessing the Group's existing bank facilities in the future.
The Group continues to closely monitor and manage its liquidity risk. In assessing the Group's going concern status, the Directors have taken account of the financial position of the Group, anticipated future utilisation of available bank facilities and other funding options, its capital investment plans and forecast of gross operating margins as and when the operations commence. Stress testing of the forecasts has been performed. Based on the above, the Board of Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
(b) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the results of the Company and entities controlled by the Company (its subsidiaries) up to 31 December 2017. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group obtains and exercises control through holding more than half of the voting rights. The financial statements of the subsidiaries are prepared for the same period as the Company using consistent accounting policies. The fiscal year of KTLPL (Karanja Terminal & Logistics Private Limited) ends on March 31 and its accounts are adjusted for the same period as the Company for consolidation.
Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Non-controlling interests
Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.
(c) LIST OF SUBSIDIARIES
Details of the Group's subsidiaries which are consolidated into the company's financial statements are as follows:
Subsidiary Immediate Country % Voting % Economic
Parent of Incorporation Rights Interest
Mercantile
Karanja Terminal Ports &
& Logistics Logistics
(Cyprus) Ltd Limited Cyprus 100.00 100.00
Karanja
Terminal
Karanja Terminal & Logistics
& Logistics (Cyprus)
Private Limited Ltd India 99.75 99.75
Mercantile
* Mercantile Ports &
Ports (Netherlands) Logistics
BV Limited Netherlands 100.00 100.00
* Mercantile Ports (Netherlands) BV was incorporated
on 19(th) April 2017, in Netherlands jurisdiction.
(d) FOREIGN CURRENCY TRANSLATION
The consolidated financial statements are presented in UK Sterling (GBP), which is the Company's functional currency. The functional currency for all of the subsidiaries within the Group is as detailed below:
Karanja Terminal & Logistics (Cyprus) Ltd (KTLCL) - Euro
Karanja Terminal & Logistics Private Limited (KTLPL) - Indian Rupees
Mercantile Ports (Netherlands) BV - Euro
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the retranslation of monetary items denominated in foreign currency at the year-end exchange rates are recognised in the consolidated statement of comprehensive income.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date).
In the Group's financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than GBP are translated into GBP upon consolidation.
On consolidation, the assets and liabilities of foreign operations are translated into GBP at the closing rate at the reporting date. The income and expenses of foreign operations are translated into GBP at the average exchange rates over the reporting period. Foreign currency differences are recognised in other comprehensive income in the translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the translation reserves shall be transferred to the consolidated statement of comprehensive income.
(e) REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made.
Interest income:-
Interest income is reported on an accruals basis using the effective interest method.
The Group is in the process of constructing its initial project, the creation of a modern and efficient port and logistics facility in India. The Group has not yet commenced operations and hence, currently does not have any revenue from operations of its core business activity.
(f) Borrowing costs
Borrowing costs directly attributable to the construction of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use. Other borrowing costs are expensed in the period in which they are incurred and reported in finance costs.
(g) Leases
Finance leases
The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. A corresponding amount is recognised as a finance lease liability. The corresponding finance lease liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant proportion of the outstanding capital balance and is charged to profit or loss, as finance costs over the period of the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred.
(h) INCOME TAX
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity. Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
We recognize deferred tax assets to the extent that we believe that these assets are more probable than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
(i) FINANCIAL ASSETS
Financial assets are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transaction costs.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. Financial assets are derecognised when they are extinguished, discharged, cancelled or they expire.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement financial assets, other than those designated and effective as hedging instruments, are classified into the following categories upon initial recognition:
-- loans and receivables
All financial assets are reviewed for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of the counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group.
(j) FINANCIAL LIABILITIES
The Group's financial liabilities include trade and other payables, tax payables and borrowings. Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transaction costs. Financial liabilities are measured subsequently at amortised cost using the effective interest method. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
(k) PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
The Group is in the process of constructing its initial project; the creation of a modern and efficient port and logistics facility in India. All the expenditures directly attributable in respect of the port and logistics facility under development are carried at historical cost under Capital Work In Progress as the Board believes that these expenses will generate probable future economic benefits. These costs include borrowing cost, professional fees, construction costs and other direct expenditure. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of constructed asset includes the cost of materials, sub-contractors and any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
Parts of the property, plant and equipment are accounted for as separate items (major components) on the basis of nature of the assets.
Depreciation is recognised in the Consolidated Statement of Comprehensive Income over the estimated useful lives of each part of an item of property, plant and equipment. For items of property, plant and equipment under construction, depreciation begins when the asset is available for use, i.e. when it is in the condition necessary for it to be capable of operating in the manner intended by management. Thus, as long as an item of property, plant and equipment is under construction, it is not depreciated. Leasehold improvements are amortised over the shorter of the lease term or their useful lives.
Depreciation is calculated on a straight-line basis.
The estimated useful lives for the current year are as
Assets Estimated Life of
assets
Office equipment 3-5 Years
Computers 2-3 Years
Furniture 5-7 Years
Vehicles 5-7 Years
Depreciation methods, useful lives and residual value are reassessed at each reporting date.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses.
(l) TRADE RECEIVABLES AND PAYABLES
Trade receivables are financial assets categorised as loans and receivables, measured initially at fair value and subsequently at amortised cost using an effective interest rate method, less an allowance for impairment. An allowance for impairment is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.
Trade payables are financial liabilities at amortised cost, measured initially at fair value and subsequently at amortised cost using an effective interest rate method.
(m) ADVANCES
Payments made to the EPC contractor and suppliers for construction of the port asset where the work has not been completed are treated as advances and are held on the balance sheet until they can be offset against future work completed in line with the terms of the contractual agreement.
(n) CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
(o) SHARE CAPITAL AND RESERVES
Shares are 'no par value'. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.
Foreign currency translation differences are included in the translation reserve. Retained earnings include all current and prior year retained profits.
(p) IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
Internal and external sources of information are reviewed at the end of the reporting period to identify indications that the property, plant and equipment may be impaired.
Property, plant and equipment is stated at cost, net of accumulated depreciation and/or impairment losses, if any. There is currently no impairment of property, plant and equipment.
(q) STANDARDS, AMMENTS AND INTERPRETATIONS TO EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN ADOPTED EARLY BY THE GROUP
A number of new standards, amendments to standards and interpretations are not effective for annual periods beginning 1 January 2017, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early.
i. IFRS 9 Financial Instruments (effective from 1 January 2018)
IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces a new expected credit loss model. The new guidance has also substantially reformed the existing hedge accounting rules. It provides a more principles-based approach that aligns hedge accounting closely with risk management policies. There is not expected to be an impact of adopting IFRS 9 on the Group's consolidated financial statements in 2018.
ii. IFRS 15 Revenue from contracts with customers (effective from 1 January 2018)
IFRS 15 replaces IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer - so the notion of control replaces the existing notion of risks and rewards. The standard provides a single principles-based five-step model to be applied to all contracts with customers. The adoption of this standard will have no impact on the Group's financial statements until revenue is generated, at which point this new standard will be applied.
iii. IFRS 16 Leases (effective from 1 January 2019)
IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC-15 Operating lease incentives and SIC -27 Evaluating the substance of transaction involving the legal form of lease.
The new standard requires the lessee to recognise the operating lease commitment on the balance sheet. The Group, as a lessee, has substantial operating leases and commitments as disclosed in note 22. The standard would require future lease commitments to be recognised as a liability, with a corresponding right of use asset. This will impact the EBITDA and debt to equity ratios of the Group. In addition, depending on the stage of lease, there would be a different pattern of expense recognition on leases. Currently, lease expenses are recognised in cost of sales, however, in future the lease expense would be an amortisation charge and finance expense.
The Group is in the process of collating its leases and computing the impact.
3. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The following are significant management judgments in applying the accounting policies of the Group that have the most significant effect on the financial statements.
Impairment Review
At the end of each reporting period, the board is required to assess whether there is any indication that an asset may be impaired (i.e. its carrying amount may be higher than its recoverable amount). As at 31 December the carrying value of the port which is still under construction is GBP123.65 Million. The Value in use has been calculated using the present value of the future cash flows expected to be derived from the port. As the port is still under construction this has included the costs to completion plus the anticipated revenues and expenses once the port becomes operational. The key assumptions behind the discounted cash flow as at 31 December 2017 are:
-- Construction outflow to get the asset in a state to start generating income.
-- Cash flow projections have been run until 2059 - the length of the lease of the land at the year end.
-- The revenue capacity is a product of the area available to store and stack containers and jetty capacity.
-- Inflation 4%. -- Utilisation rate at 10% in 2019, 50% in 2020, 65% in 2021 & 75% by 2022. -- Revenue based on current comparable market rates.
-- The costs are set based on a margin of 37%, which is based on of similar ports & CFS facilities.
-- Discount Rate 13.25%
-- While the company has obtained the approval to build out a further 200 Acres of Land and develop a further 1,000 meters of waterfront, the costs and future income flow associated with this second phase of construction project have not been considered in the current review. The impairment review is based on the current project being the completion and operation of the Multi-purpose site being developed over 200 acres of land with a sea frontage of 1,000 meters.
Going concern
As has been widely reported, the banking sector in India has been experiencing difficulties and is undergoing reform. The directors believe the Group is a going concern and have prepared the accounts on this basis for the reasons noted on page 26.
Recognition of income tax liabilities
The Group has recognised a tax liability based on its best estimate of the amount of tax that will be payable. In light of a recent court judgement, there is a possibility that the group will not be expected to pay Income tax in India on interest income due to the availability of pre-operating losses, however due to the uncertainty around this the Group has currently recognised the full liability at this time.
4. SEGMENTAL REPORTING
The Group has only one operating and geographic segment, being the project on hand in India and hence no separate segmental report has been presented.
5. ADMINISTRATIVE EXPENSES
Year ended Year ended
31 Dec 31 Dec
17 16
GBP000 GBP000
Employee costs 302 306
Directors' fees 484 348
Operating lease rentals 302 188
Foreign exchange gains/loss 4 3
Depreciation 113 85
Other administration costs 2,211 1,479
----------------- -----------------
3,416 2,409
----------------- -----------------
6. FINANCE INCOME Year ended Year ended
31 Dec 17 31 Dec 16
GBP000 GBP000
Interest on demand deposits -- 1,297
Interest on bank deposits 11 4
----------- -----------
11 1,301
=========== ===========
7. INCOME TAX
Year ended Year ended
31 Dec 17 31 Dec 16
GBP000 GBP000
Loss Before Tax (3,405) (1,108)
Applicable tax rate in India* 30.90% 34.61%
----------- -----------
Expected tax credit (1,052) (384)
Adjustment for non-deductible
losses of MPL & Cyprus entity
against income from India 311 339
Adjustment for non-deductible
expenses 741 494
Actual tax expense -- 449
=========== ===========
*Considering that the Group's operations are presently based in India, the effective tax rate of the Group of 30.90% (prior year 34.61%) has been computed based on the current tax rates prevailing in India. In India, incomes earned from all sources (including interest income) are taxable at the prevailing tax rate unless exempted. However, administrative expenses are treated as non-deductible expenses until commencement of operations. The current income tax expense of Nil million (prior year GBP0.44 million) represents tax on profit/interest arising in India.
The Company is incorporated in Guernsey under The Companies (Guernsey) Law 2008, as amended. The Guernsey tax rate for companies is 0%. The rate of withholding tax on dividend payments to non-residents by companies within the 0% corporate income tax regime is also 0%. Accordingly, the Company will have no liability to Guernsey income tax on its income and there will be no requirement to deduct withholding tax from payments of dividends to non-resident shareholders.
In Cyprus, the tax rate for companies is 12.5% with effect from 1 January 2014.
8. AUDITORS' REMUNERATION
The following are the details of fees paid to the auditors, Grant Thornton UK LLP and Indian auditors, in various capacities for the year:
Year ended Year ended
31 Dec 17 31 Dec 16
GBP000 GBP000
Audit Fees
Audit of financial statements 78 75
Site visit fees 9 9
Audit related assurance services:
Review of interim financial
information 15 11
102 95
----------- -----------
A fee of Nil was charged for financial advisory services performed by Grant Thornton UK LLP during the year (2016: GBP45,000). The statutory audits of Karanja Terminal & Logistics Private Limited and Karanja Terminal & Logistics (Cyprus) Limited are conducted by other auditors, fees paid for these audits is GBP3,000 (2016: GBP3,000). Audit fees related to prior year overruns during the year amount to GBP29,000 (2016: GBP10,000).
9. LOSS PER SHARE
Year ended Year
31 Dec ended
17 31 Dec
16
Loss attributable to equity holders GBP(3,404,000) GBP(1,559,000)
of the parent
Weighted average number of shares
used in basic and diluted loss
per share 412,620,439 78,467,548
LOSS PER SHARE
Basic and Diluted loss per share (0.008p) (0.020p)
Both basic and diluted loss per share for the year ended 31 December 2017 have been calculated using the loss attributable to equity holders of the Group of GBP3.4 million (prior year loss of GBP1.6 million).
10. PROPERTY, PLANT AND EQUIPMENT
Details of the Group's property, plant and equipment and their carrying amounts are as follows:
Computers Office Furniture Vehicles Capital
Equipment Work In
Progress Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gross carrying
amount
Balance 1 Jan
2017 33 36 25 279 94,936 95,309
Net Exchange
Difference (1) (1) (1) (6) (2,762) (2,771)
Additions 8 23 11 237 31,473 31,752
----------------- ---------- ----------- ---------- --------- ---------- --------
Balance 31
Dec 2017 40 58 35 510 123,647 124,290
----------------- ---------- ----------- ---------- --------- ---------- --------
Depreciation
Balance 1 Jan
2017 (23) (18) (12) (145) - (198)
Net Exchange
Difference 1 1 1 3 - 6
Charge for
the year (8) (7) (5) (93) - (113)
----------------- ---------- ----------- ---------- --------- ---------- --------
Balance 31
Dec 2017 (30) (24) (16) (235) - (305)
----------------- ---------- ----------- ---------- --------- ---------- --------
Carrying amount
31 Dec 2017 10 34 19 275 123,647 123,985
----------------- ---------- ----------- ---------- --------- ---------- --------
Capital
Computers Office Furniture Vehicles Work In Total
Equipment Progress
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gross
carrying
amount
Balance 1 Jan
2016 22 26 21 237 28,570 28,876
Net Exchange
Difference 4 5 4 42 5,024 5,079
Additions 7 5 - - 61,342 61,354
------------- ---------------- ------------ --------------------- --------------- ------------------ ----------------
Balance 31
Dec
2016 33 36 25 279 94,936 95,309
------------- ---------------- ------------ --------------------- --------------- ------------------ ----------------
Depreciation
Balance 1 Jan
2016 (14) (11) (7) (64) - (96)
Net Exchange
Difference (2) (2) (1) (12) - (17) (17)
Charge for
the
year (7) (5) (4) (4) (69) - (85)
Balance 31
Dec
2016 (23) (18) (12) (145) - (198)
------------- ---------------- ------------ --------------------- --------------- ------------------ ----------------
Carrying
amount
31 Dec 2016 10 18 13 134 94,936 95,111
============= ================ ============ ===================== =============== ================== ================
The net exchange difference on the Group's property, plant and equipment's carrying amount is a loss of GBP2.77 million (prior year gain of GBP5.08 million). The net exchange difference on the Group's property, plant and equipment carrying amount is on the account of the foreign exchange movement.
a) Net Book Value of assets held under Finance Lease
KTLPL's vehicles are held under finance lease arrangements. The Net Book Value of assets held under finance lease arrangements are as follows:
Year ended Year ended
31 Dec 31 Dec
17 16
GBP000 GBP000
Vehicles 275 134
----------- -----------
275 134
----------- -----------
The Port facility being developed in India has been hypothecated by the Indian subsidiary as security for the bank borrowings (Borrowing limit sanctioned INR 480 crore (GBP55.84 million) (2016 INR 480 crore (GBP57.51 million)) for part financing the build out of the facility.
The borrowing costs in respect of the bank borrowing for financing the build out of facility are capitalised under Capital work in progress. During the year the company has capitalised borrowing cost of GBP4.58 million (prior year GBP3.93 million).
The Indian subsidiary has estimated the total project cost of INR1,351 crore (GBP157million) towards construction of the port facility. Out of the aforesaid Project cost, the contract signed with the Major contractor is INR.1,048 crores (GBP121million). As of 31st Dec. 2017, the contractual amount (net of advances) of INR 104.8 crores (GBP12.2 million) is still payable. There were no other material contractual commitments.
Karanja Terminal & Logistics Private Limited (KTLPL), the Indian subsidiary has successfully agreed a Rupee term loan of INR 480 crore (GBP55.84 million) for part financing the port facility. The Rupee term loan has been sanctioned by four Indian public sector banks and the loan agreement was executed on 28th February, 2014. As at 29 September 2017 the agreement was amended extending the tenure of the loan for 13 years and 6 months with repayment beginning at the end of June 2020.
11. TRADE AND OTHER RECEIVABLES
Year ended Year ended
31 Dec 17 31 Dec 16
GBP000 GBP000
Deposits 2,227 2,226
Advances 12,999 16,743
Debtors
- Related Party 72 72
- Prepayment 17 38
----------- -----------
15,315 19,079
----------- -----------
Advances include payment to EPC contractor of GBP12.5 million (prior year GBP16.7 million) towards mobilisation advances and quarry development. These advances will be recovered as a deduction from the invoices being raised by the contractor over the contract period.
12. CASH AND CASH EQUIVALENTS
Year ended
Year ended 31 Dec
31 Dec 17 16
GBP000 GBP000
Cash at bank and
in hand 5,081 25,977
Deposits 342 9,720
----------- -----------
5,423 35,697
----------- -----------
Cash at bank earns interest at floating rates based on bank deposit rates. Short-term deposits are callable on demand depending on the immediate cash requirements of the Group, and earn fixed interest at the respective short-term deposit rates. The fair value of cash and short-term deposits is GBP5.42 million (prior year GBP35.70 million).
13. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Risk Management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Risk management is carried out by the Board of Directors.
(a) Market Risk
(i) Translation risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market foreign exchange rates. The Company's presentation currency is the UK Sterling (GBP). The functional currency of MPL is Sterling (GBP). The functional currency of its subsidiary Karanja Terminal & Logistics Private Limited (KTLPL) is INR and the functional currency of Karanja Terminal & Logistics (Cyprus) Ltd and Mercantile Ports (Netherlands) BV is Euro.
The exchange difference arising due to variances on translating a foreign operation into the presentation currency results in a translation risk. These exchange differences are recognised in other comprehensive income. As a result, the profit, assets and liabilities of this entity must be converted to GBP in order to bring the results into the consolidated financial statements. The exchange differences resulting from converting the profit and loss account at average rate and the assets and liabilities at closing rate are transferred to the translation reserve.
This balance is cumulatively a GBP12.7m loss to equity. This is mainly due to a movement from approximately 1:70 to 1:100 between 2010 to 2013 and the translation reserve reaching a loss of GBP21.6m at 31 December 2013. This resulted in a significant loss to the GBP value of the Indian entity net assets. The closing rate at 31 December 2017 was 1:85, hence the loss in the reserve is not as significant as in 2013-15. With the majority of funding now in India this risk is further mitigated.
The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the cash and cash equivalents available with the Indian entity of INR 94.87 million (GBP1.10 million) as on reporting date (prior year INR 850.13 million (GBP10.18 million)) In computing the below sensitivity analysis, the management has assumed the following % movement between foreign currency (INR) and the underlying functional currency (GBP):
Functional Currency 31 Dec 2017 31 Dec 2016 (GBP) INR +- 10% +- 10%
The following table details the Group's sensitivity to appreciation or depreciation in functional currency vis-à-vis the currency in which the foreign currency cash and cash equivalents are denominated:
Functional GBP GBP
currency (depreciation (appreciation
by 10%) by 10%)
GBP000 GBP000
31 December
2017 110 (110)
31 December
2016 1,018 (1,018)
If the functional currency (GBP) had weakened with respect to foreign currency (INR) by the percentages mentioned above, for year ended 31 December 2017 then the effect will be change in profit and equity for the year by GBP0.1 million (prior period GBP1.01 million). If the functional currency had strengthened with respect to the various currencies, there would be an equal and opposite impact on profit and equity for each year. This exchange difference arising due to foreign currency exchange rate variances on translating a foreign operation into the presentation currency results in a translation risk.
(ii) Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations with floating interest rates.
KTLPL has successfully tied-up a rupee term loan of INR 480 crore (GBP55.84 million) for part financing the build out of its facility. The company has commenced the drawdown of its sanctioned bank borrowing as of the reporting date. The rate of interest on the bank borrowing will be a floating rate linked to the bank base rate with an additional spread of 375 basis points (2016: 375 bp). The present composite rate of interest is 13.20% (2016: 13.20%).
The base rate set by the bank may be changed periodically as per the discretion of the bank in line with Reserve Bank of India (RBI) guidelines. Based on the current economic outlook and RBI Guidance, management expects the Indian economy to enter a lower interest rate regime as moderating inflation will allow the RBI and thus the banks to lower its base rate in the coming quarters.
Interest rate sensitivity
At 31 December 2017, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. The exposure to interest rates for the Group's money market funds is considered immaterial.
The following table illustrates the sensitivity of profit to a reasonably possible change in interest rates of +/- 1% (2016: +/- 1%). These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.
Year Profit for Equity, net
the Year of tax
GBP000 GBP000
+1% -1% +1% -1%
31 December - - - -
2027
31 December
2026 (46) 46 (30) 30
31 December
2025 (133) 133 (86) 86
31 December
2024 (222) 222 (144) 144
31 December
2023 (315) 315 (205) 205
31 December
2022 (404) 404 (263) 263
31 December
2021 (479) 479 (311) 311
31 December
2020 (537) 537 (349) 349
31 December
2019 (561) 561 (365) 365
31 December
2018 (490) 490 (319) 319
(b) Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group's maximum exposure (GBP13.09 million) to credit risk is limited to the carrying amount of financial assets recognised at the reporting date. The Group's policy is to deal only with creditworthy counterparties. The Group has no significant concentrations of credit risk.
The Group does not concentrate any of its deposits in one bank or a non-banking finance company (NBFC). This is seen as being prudent. Credit risk is managed by the management having conducted its own due diligence. The balances held with NBFC's and banks are on a short-term basis. Management reviews quarterly NAV information sent by NBFC's and monitors bank counter-party risk on an on-going basis.
(c) Liquidity risk
Liquidity risk is the risk that the Group might be unable to meet its financial obligations. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities. KTLPL has tied-up rupee term loan of INR 480 crore (GBP55.84 million) for financing the construction of the facility. The company has utilised this bank borrowing during the year.
The Group's objective is to maintain cash and demand deposits to meet its liquidity requirements for 30-day periods at a minimum. This objective was met for the reporting periods. Funding for build out of the port facility is secured by sufficient equity, sanctioned credit facilities from lenders and the ability to raise additional funds due to headroom in the capital structure.
As at 29 September 2017 the agreement was amended extending the tenure of the loan for 13 years and 6 months with repayment beginning at the end of June 2020 to ensure additional headroom. Since this amendment was agreed, the banking crisis in India has resulted in uncertainty about the timing and availability of when funds can be drawn on this bank facility. This has been mitigated by the Chairman providing a loan facility for 12 months to 30 June 2019 for an amount consistent with the undrawn bank facility. This is being monitored closely by the Board and alternative funding options are being explored.
The Group manages its liquidity needs by monitoring scheduled contractual payments for build out of the port facility as well as forecast cash inflows and outflows due in day-to-day business. Liquidity needs are monitored and reviewed by the management on a regular basis. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.
As at 31 December 2017, the Group's non-derivative financial liabilities have contractual maturities (and interest payments) as summarised below:
Principal payments Interest payments
----------------- --------------------- --------------------
Payment falling INR in INR in GBP000
due Crore GBP000 Crore
----------------- ---------- --------- --------- ---------
Within 1 year - - 52,73 6,134
1 to 5 year's 154.8 18,009 282.01 32,807
After 5 year's 325.2 37,832 91.42 10,636
---------- --------- --------- ---------
Total 480.00 55,841 426.16 49,577
---------- --------- --------- ---------
The present composite rate of interest of 13.20% and closing exchange rate has been considered for the above analysis. Principal and Interest Payments are after considering future drawdowns of term loans.
In addition, the Company's liquidity management policy involves considering the level of liquid assets necessary to meet the funding requirement; monitoring balance sheet liquidity ratio against internal requirements and maintaining debt financing plans. As a part of monitoring balance sheet liquidity ratio, management monitors the debt to equity ratio and has specified optimal level for debt to equity ratio of 1.
Financial Instruments
Fair Values
Set out below is a comparison by category of carrying amounts and fair values of the entire Group's financial instruments that are carried in the financial statements.
(Carried at amortised cost)
Year ended
Year ended 31 Dec
Note 31 Dec 17 16
GBP000 GBP000
Financial Assets
Cash and Equivalents 2
Cash and Cash Equivalents 12 5,423 35,697
Loan and receivables 11 15,315 19,079
----------- -----------
20,738 54,776
=========== ===========
Financial Liability
Borrowings 15 34,957 32,327
Trade and other payables 17 8,808 11,802
----------- -----------
43,765 44,129
=========== ===========
The fair value of the Company's financial assets and financial liabilities significantly approximate their carrying amount as at the reporting date.
14. EQUITY
14.1 Issued Capital
The share capital of MPL consists only of fully paid ordinary shares of no par value. The total number of issued and fully paid up shares of the company as on each reporting date is summarised as follows:
Year ended Year ended
Particulars 31 Dec 17 31 Dec 16
Shares issues and fully
paid:
Beginning of the year 384,017,699 44,000,000
Addition in the year 30,000,000 340,017,669
-------------- -------------
Closing number of shares 414,017,699 384,017,699
-------------- -------------
The share premium amounts to GBP106.76 million (prior year GBP103.71 million) after reduction of share issue costs. Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting. During the year company has allotted GBP3 million shares to Nikhil Gandhi (see note 18).
14.2 Other Components of Equity
Retained Earnings
Retained earnings of GBP (0.50) million (prior year GBP2.90 million) include all current year retained profits.
Translation Reserve
The translation reserve of GBP12.74 million (prior year GBP9.96 million) is on account of exchange differences relating to the translation of the net assets of the Group's foreign operations which relate to subsidiaries, from their functional currency into the Group's presentational currency being Sterling.
15. BORROWINGS
Borrowings consist of the following:
Year ended Year ended
31 Dec 17 31 Dec 16
GBP000 GBP000
Current
Vehicle loan 23 33
----------- -----------
23 33
----------- -----------
Non-Current
Bank loan 34,720 32,215
Vehicle loan 214 79
----------- -----------
34,934 32,294
----------- -----------
Borrowing
Karanja Terminal & Logistics Private Limited (KTLPL), the Indian subsidiary has successfully agreed a Rupee term loan of INR 480 crore (GBP55.84 million) for part financing the port facility. The Rupee term loan has been sanctioned by four Indian public sector banks and the loan agreement was executed on 28(th) February, 2014. On 29 September 2017 the terms of sanction was amended, extending the tenure of the loan for 13 years and 6 months with repayment commencing from the end of June 2020. The repayment schedule is as follows:
Repayment amount
================= ======================
Payment falling GBP000
due INR in Crore
================= ============= =======
Within 1 year - -
1 to 5 year's 154.8 18,009
After 5 year's 325.2 37,832
------------- -------
Total 480.00 55,841
------------- -------
The rate of interest will be a floating rate linked to the Canara bank base rate (9.40%) with an additional spread of 375 basis points. The present composite rate of interest is 13.20%. The borrowings are secured by the hypothecation of the port facility and pledge of its shares as well as a personal guarantee by the chairman, Nikhil Ghandi. The carrying amount of the bank borrowing is considered to be a reasonable approximation of the fair value.
KTLPL has utilised the Rupee term loan facility of INR 298.45 crore (GBP34.72 million) (prior year INR 268.87 crore (GBP32.22 million)) as of the reporting date.
16. current tax liabilities
Current tax liabilities consist of the following:
Year ended Year ended
31 Dec 31 Dec
17 16
GBP000 GBP000
Duties & taxes 52 1,492
Provision for Income Tax 7,365 7,585
----------- -----------
Current tax liabilities 7,417 9,077
----------- -----------
The carrying amounts and the movements in the Provision for Income Tax account are as follows:
GBP000
Carrying amount 1 January
2017 7,585
Exchange difference (220)
-------
Carrying amount 31 December
2017 7,365
-------
The Company recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final outcome of assessment by the Income Tax department on these matters is different from the amounts that were initially recorded, such differences will impact the income tax provisions in the period in which such determination is made. The company discharges the tax liability on the basis of income tax assessment.
17. TRADE AND OTHER PAYABLES
Trade and other payables consist of the following:
Year ended Year ended
31 Dec 17 31 Dec 16
GBP000 GBP000
Current
Sundry creditors* 8,416 11,510
Interest payable 392 292
----------- -----------
8,808 11,802
----------- -----------
* Sundry creditors are purely in nature of material and services availed for port construction.
18. RELATED PARTY TRANSACTIONS
The consolidated financial statements include the financial statements of the Company and the subsidiaries listed in the following table:
Type of
Country Ownership share
Name of Incorporation Field Activity Interest Held
----------------------- ------------------ ------------------- -------------- ----------------
Cyprus Holding Company 100% Ordinary
HELD BY The Company
(MPL):
Karanja Terminal
& Logistics (Cyprus)
Ltd
Mercantile Port Netherland Subsidiary 100% Ordinary
(Netherlands) Company of
BV MPL
HELD BY Karanja
Terminal & Logistics
(Cyprus) Ltd:
Karanja Terminal Operating
& Logistics Pvt. Company -Terminal
Ltd India Project 99.75% Ordinary
The Group has the following related parties with whom it has entered into transactions with during the year.
a) Shareholders having significant influence
The following shareholders of the Group have had a significant influence during the year under review:
-- SKIL Global Ports & Logistics Limited, which is 100% owned by Mr. Nikhil Gandhi, holds 10.32% of issued share capital as at 31 December 2017 (as at 31 December 2016 - 3.31%) of Mercantile Ports & Logistics Limited. Nikhil Gandhi has subscribed to and acquired new shares with a market value of GBP3 million in January 2017.
-- Pavan Bakhshi holds 0.39% of issued share capital as on 31 December 2017 (as on 31 December 2016 - 0.36%) of Mercantile Ports & Logistics Limited at the year end.
-- Peter Jones holds 0.05% of issued share capital as on 31 December 2017 (as on 31 December 2016 - 0.05%) of Mercantile Ports & Logistics Limited at the year end. Peter Jones resigned as a director during the year.
-- James Sutcliffe holds 0.002% of issued share capital as on 31 December 2017 (as on 31 December 2016 - 0.002%) of Mercantile Ports & Logistics Limited at the year end. James Sutcliffe resigned as a director during the year.
-- Lord Howard Flight holds 0.30% of issued share capital as on 31 December 2017 (as on 31 December 2016 - 0.26%) of Mercantile Ports & Logistics Limited at the year end.
-- Jay Mehta holds 0.074% of issued share capital as on 31 December 2017 (as on 31 December 2016 - 0%) of Mercantile Ports & Logistics Limited at the year end.
-- John Fitzgerald holds 0.063% of issued share capital as on 31 December 2017 (as on 31 December 2016 - 0%) of Mercantile Ports & Logistics Limited at the year end.
-- Andrew Henderson holds 0.015% of issued share capital as on 31 December 2017 (as on 31 December 2016 - 0%) of Mercantile Ports & Logistics Limited at the year end.
b) Key Managerial Personnel of the parent
Non-executive Directors
- Mr. Peter Anthony Jones (resigned on 20 September 2017) - Mr. James Stocks Sutcliffe (resigned on 20 September 2017) - Lord Howard Flight - Mr. John Fitzgerald (appointed on 20 September 2017)
Executive Directors
- Mr. Nikhil Gandhi (Chairman) - Mr. Pavan Bakhshi (Managing Director) - Mr. Jay Mehta (Director) - Mr. Andrew Henderson (appointed on 20 September 2017)
c) Key Managerial Personnel of the subsidiaries
Directors of KTLPL (India)
- Mr. Pavan Bakhshi - Mr. Jay Mehta - Mr. Jigar Shah - Mr. Nikhil Gandhi
(Mr. Nikhil Gandhi is Chairman)
Directors of KTLCL (Cyprus)
- Mr. Pavan Bakhshi - Ms. Andria Andreou - Ms. Olga Georgiades
d) Other related party disclosure
Entities that are controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual or close family member of such individual referred above.
- SKIL Infrastructure Limited - JPT Securities Limited - KLG Capital Services Limited - Grevek Investment & Finance Private Limited - Carey Commercial (Cyprus) Limited - Henley Trust (Cyprus) Limited - Athos Hq Group Bus. Ser. Cy Ltd - Henderson Accounting Consultants Limited - John Fitzgerald Limited
e) Transaction with related parties
The following transactions took place between the Group and related parties during the year ended 31 December 2017:
Nature of Year ended Year ended
transaction 31 Dec 31 Dec
17 16
GBP000 GBP000
Athos Hq Group Bus. Ser. Cy Administrative
Ltd fees 18 10
----------- -----------
18 10
----------- -----------
The following table provides the total amount outstanding with related parties as at year ended 31 December 2017:
Transactions with shareholder having significant influence
SKIL Global Ports & Logistics Limited - Receivable amount:
Nature of Year ended Year ended
transaction 31 Dec 17 31 Dec 16
GBP000 GBP000
Debtors Advances 72 72
----------- -----------
72 72
----------- -----------
Transactions with Key Managerial Personnel of the subsidiaries
See Key Managerial Personnel Compensation details as provided below
Advisory services fee
None
Compensation to Key Managerial Personnel of the parent
Fees paid to persons or entities considered to be Key Managerial Personnel of the Group include:
Year ended Year ended
31 Dec 17 31 Dec 16
GBP000 GBP000
Non Executive Directors
fees
- Peter Jones 45 45
- James Sutcliffe 40 40
- Lord Flight 40 12
- John Fitzgerald 17 -
----------- --------------------------------------------------------
142 97
Executive Directors
Fees
- Pavan Bakhshi 175 175
- Jay Mehta 107 76
- Andrew Henderson 64 -
----------- --------------------------------------------------------
346 251
----------- --------------------------------------------------------
Total compensation paid 488 348
to Key Managerial Personnel
----------- --------------------------------------------------------
All of the compensation relates to short-term employee benefits. There are no long-term employee benefits.
Compensation to Key Managerial Personnel of the subsidiaries
Year ended Year
31 Dec ended
17 31 Dec
GBP000 16
GBP000
Directors' fees
KTLPL - India 107 77
KTLCL - Cyprus 3 2
----------- --------
110 79
----------- --------
Sundry Creditors
As at 31 December 2017, the Group had GBP0.11 million (prior year GBP0.05 million) as sundry creditors with related parties.
Year ended Year ended
31 Dec 17 31 Dec 16
GBP000 GBP000
Grevek Investment &
Finance Pvt Ltd 114 50
----------- -----------
114 50
----------- -----------
Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party.
19. CASH FLOW ADJUSTMENTS AND CHANGES IN WORKING CAPITAL
The following non-cash flow adjustments and adjustments for changes in working capital have been made to profit before tax to arrive at operating cash flow:
Year ended Year ended
31 Dec 31 Dec
17 16
GBP000 GBP000
Non-cash flow adjustments
Depreciation 113 85
FX movement on depreciation - (8)
Finance Income (11) (1,301)
Tax Expenses - (449)
Movement in Share
Capital (due to share
issued in lieu of
services) - 3,000
(Decrease)Increase
in Non-Controlling
Interest (1) 2
(Decrease)/Increase
in Current Tax Liabilities (1,660) 2,435
----------- -----------
(1,559) 3,764
----------- -----------
(Decrease)/increase
in trade payables (3,094) 8,743
Increase in other
payables 100 164
Decrease/(increase)
in trade & other receivables 3,764 (6,046)
----------- -----------
770 2,861
----------- -----------
20. CAPITAL MANAGEMENT POLICIES AND PROCEDURE
The Group's capital management objectives are:
-- To ensure the Group's ability to continue as a going concern
-- To provide an adequate return to shareholders
Capital
The Company's capital includes share premium (reduced by share issue costs), retained earnings and translation reserve which are reflected on the face of the statement on financial position and in Note 14.
21. Finance Lease
KTLPLs vehicles are held under finance lease arrangements. As of 31 December 2017, the net carrying amount of the vehicles is GBP0.28 million (2016: GBP0.13 million).
Finance lease liabilities are secured by the related assets held under finance leases. Future minimum finance lease payments at 31 December were as follows:
Minimum lease payments due
after
within 1 to 5 5 Total
1 year year year
GBP000 GBP000 GBP000 GBP000
31 December
2017
Lease payments 221 76 - 297
Finance charges (38) (23) - (61)
-------- -------- -------- --------
Net present
values 183 53 - 236
-------- -------- -------- --------
31 December
2016
Lease payments 42 90 - 132
Finance charges (10) (11) - (21)
-------- -------- -------- --------
Net present
values 32 79 - 111
-------- -------- -------- --------
22. Operating Lease
The Group has entered into a 30 years lease agreement with the Maharashtra Maritime Board for the development of a port and logistics facility in India. As stated in note 23, this has been extended to 50 years post year end.
Payments falling due Future minimum Future minimum
lease lease
payments outstanding payments outstanding
on 31 Dec 17 on 31 Dec 16
GBP000 GBP000
Within 1 year 273 205
1 to 5 years 989 819
After 5 years 3,299 3,602
---------------------- ----------------------
Total 4,561 4,626
---------------------- ----------------------
The future minimum lease payments are as follows:
Payments falling due Future minimum Future minimum
lease lease
payments outstanding payments outstanding
on 31 Dec 17 on 31 Dec 16
INR in Million INR in Million
Within 1 year 23 17
1 to 5 years 85 68
After 5 years 284 301
---------------------- ----------------------
Total 392 386
---------------------- ----------------------
The annual lease rent is payable by KTLPL in INR. The exchange rate on the reporting date has been considered for deriving the GBP amount for future minimum lease payment.
23. CONTINGENT LIABILITIES AND COMMITMENTS
The group has no (2016: GBPNIL) contingent liabilities as at 31 December 2017.
24. EVENTS SUBSEQUENT TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATE
As at 15 June the company received confirmation from the Maharashtra Maritime Board (MMB) that KTPL's lease over the land has been increased from 30 to 50 years. In addition, the MMB has also granted the Company the approval to develop an additional 200 acres of land and build a further 1 kilometre of berthing capacity.
It was also announced on the 15 June that the company had received notification under section 7 of the Customs Act 1962 of the appointment of KTPL's Karanja Terminal as a customs port. The Board considers this to be the major development in the customs clearance process and consistent with Board's view that receipt of final customs clearance is a formality.
25. AUTHORISATION OF FINANCIAL STATEMENTS
The consolidated financial statements for the year ended 31 December 2017 were approved and authorised for issue by the Board of Directors on 29 June 2018.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR EALKNASPPEEF
(END) Dow Jones Newswires
June 29, 2018 02:01 ET (06:01 GMT)
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