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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.80 | 1.70 | 1.90 | 1.80 | 1.80 | 1.80 | 89,505 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMPL
RNS Number : 2174A
Mercantile Ports & Logistics Ltd
28 September 2020
28 September 2020
Mercantile Ports & Logistics Limited
(the "Company" or "MPL")
Preliminary results for the year ended 31 December 2019
Mercantile Ports & Logistics (AIM: MPL), which is developing a modern port and logistics facility in Mumbai, India (the "Facility"), is pleased to announce its preliminary results for the year ended 31 December 2019. These are set out below.
Highlights
-- First revenues generated and new contracts secured including the TATA/Daewoo JV multi-year contract worth in excess of GBP5.5 million
-- Healthy business pipeline with several additional agreements under negotiation
-- Successful completion of specific onsite facilities including the weighbridge, office block, access road, border fencing, installation of CCTV security systems and Custom Bonded Areas
-- 50 acres signed-off as fully operational in October 2019
-- Maharashtra Maritime Board granted lease extension to 50 years and approval to develop an additional 200 acres of land and 1000 meters of waterfront
-- Strong balance sheet with total assets of GBP167 million, a debt to equity ratio of 0.58 - cash of GBP14.8 million and undrawn facilities of GBP12.8 million at year end
Jeremy Warner Allen , Chairman of MPL, commented : "The Board has taken proactive measures to mitigate operational risk arising from the COVID-19 outbreak and manage our business and cash flow.
"We have continued to make progress with contract negotiations and other areas and, given the current capability of the Karanja facility and its location, we are well positioned to perform strongly as restrictions are lifted and trading conditions improve."
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Enquiries:
MPL Jay Mehta
C/O Newgate Communications
+44 (0)203 757 6880
Cenkos Securities plc Stephen Keys/Russell Cook
(Nomad and Joint Broker) +44 (0)207 397 8900
Zeus Capital Limited John Goold (Corporate Broking)
(Joint Broker) +44 (0)203 829 5000
Newgate Communications Adam Lloyd/Isabelle Smurfit
(Financial PR) +44 (0)203 757 6880
mpl@newgatecomms.com
CHAIRMAN'S STATEMENT
We saw a number of important milestones achieved during 2019. The first of them was the inauguration of the Karanja facility in March - a ceremony hosted by the Chief Minister of the State, which included state and federal dignitaries. The ceremony showcased what has been built so far and the huge opportunity that lies ahead for the project and the Company as a whole, while benefiting the economy of Maharashtra and India. The Karanja project, once fully developed, will be one of the largest infrastructure projects in the State and will, I believe, play a critical role in the further development of the Navi Mumbai area.
In September 2019, we signed contracts with the Tata Group-Daewoo JV (the "JV"). Under this contract, the JV will use our facility as its port, logistics and engineering base to execute its work streams for the construction of India's longest sea bridge - the Mumbai Trans Harbour Link, which is one of the largest and most complex engineering projects in India, with an estimated build cost of approximately USD 2.1 billion. We see this as a good example of Karanja already being a major link in the development of the region and the country. Post period end, in April of this year, as scheduled, we handed over the first parcel of land to the JV with revenue generated from that date. The Company remains confident of handing over the balance of the 25-acre plot and a dedicated berth in the coming weeks. As previously announced, this contract is expected to translate into revenue in excess of GBP 5.5 million over a 40-month period which started in April 2020.
During the period, the Company completed the office complex at the facility and continued with ground improvements. With the facility operational, as previously outlined, major land reclamation works will be undertaken as cargo volumes increase and the focus has been on attracting new business. During the period, we were in advanced negotiations with a number of large, well established industrial businesses based in our region to handle products such as steel coils and bars, cement, fly ash, fertiliser, bentonite, edible oils, base oils and bitumen amongst others. We are also discussing setting up various warehouse zones across our facility.
Previously, the Company has referred to analysing the optimum configuration for the facility and also the most favourable cargo mix, based on revenue and margin potential. We are pleased that we have been able to engineer the facility in a way which will enable us to handle clean cargo, as well as coal for energy generation at separate dedicated jetties. Post the current monsoon season, the Company will accelerate the handling of coal at its facility and MPL expects to handle approx. 1 million tonnes in the first twelve months, rising to 3 million tonnes in year 3, translating into revenue of GBP 4 million in year 1, increasing to GBP 12 million in year 3. This business is due to start in November / December of this year.
During the course of 2019 and the early part of 2020, MPL was actively engaged with its consortium bank partners to secure access to the remaining amount of debt under the original facility. We are pleased that, once again, we have full access to our banking facility. However, a key priority of the Company during the course of next year is to replace this facility with one carrying a lower interest rate to reflect the fact that the Company is now revenue generating and has better visibility of future revenue. More importantly, the lower interest rate should also reflect that all regulatory matters have been successfully dealt with and that the majority of the construction risk is behind us. Over the coming months we will continue to make efforts towards achieving an optimal debt facility.
Update on operations during the COVID-19 lockdown
As we announced previously, the Indian Central government enforced a nation-wide lockdown, between 25 March 2020 until 30 June 2020, as part of its measures to contain the spread of COVID-19. Strict local restrictions still remain throughout the country, including in the state of Maharashtra, where our facility is situated and where we principally operate from. During the lockdown, severe restrictions were placed on the movement of individuals and most economic activities have come to a halt, barring those related to essential goods and services. As a result, logistics demand in the country has seen a significant decline during the first six months of FY 2020. However, the key to India's future growth will, we believe, be centred around logistics infrastructure and logistical support and services to move goods efficiently across the state and the country. Our facility is well positioned to play a pivotal role in this and we are adapting to make sure that, when full trading starts, we can capture additional business.
Despite these circumstances, the Company is confident that it has sufficient resources to see it through the current COVID-19 crisis. The Company has benefitted from the interest moratorium on its debt and will continue to work with its banks to ensure that it has access to liquidity. In addition, the Company has implemented various cost reduction and efficiency improvement measures to conserve cash and improve liquidity, including 35 per cent salary reductions for Senior Executives, Non-Executive Directors and Senior Management, cancelation of discretionary expenditure, and the re-negotiation and reduction of fees of contractors and other services providers.
As previously announced, the severe lockdown restrictions in India, which included office closures and travel bans, created challenges outside the Company's control when completing the audit process, including obtaining historic records from third parties. Whilst it had been hoped that all outstanding matters would be cleared by this time to enable a clean audit opinion, it was decided that the audit should be completed now, with a qualification, rather than wait longer. As stated in their audit opinion, our independent auditor was not able to verify a closing balance of GBP 4.8 million on December 31st 2019 from one of our bank accounts in India. The balance of monies that were in that account as at 14 September was GBP 3.6 million and the Board and management have verified that payments totalling approx. GBP 1.2 million have been made in servicing bank interest, payments to vendors and towards operational expenses since 31 December. As such, the Board is confident that the closing balance of GBP4.8million is true and accurate.
During the course of 2019, MPL spent GBP 14.52 million on developing out the facility including for interest payments, payments to contractors, vendors and various operational and administrative expenses. As at 14th September 2020, MPL had cash of approximately GBP 6.9 million, together with access to GBP 9.9 million in debt from it consortium banks.
Indian Economy
COVID-19 and the subsequent extended countrywide lockdown have caused severe disruption to the Indian economy. However, it is likely to be less severely affected than certain other countries that are largely dependent on exports and wider international demand. Amid projections of a sharp contraction in the global economy, the International Monetary Fund projects Indian GDP to contract by 4.5 per cent in FY2020 and projects the Indian economy to recover strongly, with GDP growth of 6 per cent in FY2021.
There is no doubt the global economy continues to face headwinds and India is no different to that. The Reserve Bank of India has taken several steps to counter the negative impact of the lockdown on the economy through various monetary policy measures, including reduction in repo-reverse repo rates, a moratorium on loan interest and repayment, and 90 days freeze on non-performing assets declaration. We trust that these measures, coupled with the easing of lockdown restrictions in a phased manner, will help economic activity to resume to its full extent in due course.
Outlook
The long-term impact on the global economy of the Covid-19 outbreak is unclear and, whilst it is not possible to estimate the full financial impact of the outbreak, we have taken proactive measures to mitigate our operational risk and manage our business and cash flow.
India has been particularly adversely affected by the epidemic and, on behalf of the Board I should like to thank, all our employees, banks, shareholders, vendors and stakeholders for their commitment and support that we have received during these extraordinary times. Our team has continued to make progress with contract negotiations and other areas despite the lockdown and, given the current capability of the facility and its location, I believe that we are well positioned in every way to perform strongly as restrictions are lifted and trading conditions improve.
Jeremy Warner Allen
Chairman
Mercantile Ports & Logistics Limited
25 September, 2020
OPERATIONAL REVIEW
The Facility continues to be part operational with 25% of the 200 Acres site fully signed off as operational from 1 October 2019. The area which is fully operational includes a fenced custom bond area, a brand new operational office block, a six lane gated complex and furnished operating work spaces for Custom Operational trial.
Operational trials had previously been carried out by the Group itself and, before the end of 2018, the Facility handled cargo for immediate onward transportation for one of India's most prominent steel manufacturers on a trial basis, this trial continued in the first half of 2019 when we received our first test revenues.
The Directors consider the Facility to be well-aligned with Indian government policy. In addition, the Directors believe that the Facility is ideally situated to benefit from some of the significant infrastructure projects that are taking place near the site. In particular, projects that have commenced or are proposed include the US$2.7bn Mumbai Trans Harbour Link, the US$2.5bn Navi Mumbai Airport, JNPT's US$1.3bn Fourth Terminal and the Navi Mumbai Digital City, which is expected to attract significant investment. Each of these projects will require enormous quantities of steel, cement and other materials, and the Directors expect the Facility to play a major part in the logistics for the construction of some or all of these projects.
The Group has been delighted with the support that it has received from Maharashtra Maritime Board (MMB) and in particular the extension of its lease of the Project Land to 2059. Whilst the Directors' immediate focus is on completing the build out of the Company's Facility to 200 acres, the Directors are proud to have received permission from MMB to extend the Facility to 400 acres, with 2,000 meters of sea frontage, which the Directors intend to pursue in the future. The Facility is now operational and the focus is on attracting, contracting and moving cargo in volume. Whilst a small volume of cargo has been handled already, the Directors expect larger volumes to be handled in the coming months.
The reclamation of land will continue this year and next year in parallel with the pipeline of new business coming on stream. 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 MMB has in MPL.
Marketing update
The Company's marketing efforts continued in 2019 and to help maximise the Company's profile and marketing ability, we welcomed Mr Rajeev Ranjan Sinha to our advisory panel. Mr Sinha has served as Principal Secretary (Ports) to the Government of Maharashtra and also served as Deputy Chairman of Mumbai Port Trust and Chief Executive Officer of the Maharashtra Maritime Board.
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.
Going Concern
The Board initially, prior to the outbreak of Covid-19, assessed the Group's ability to operate as a going concern for the next 12 months from the date of signing the financial statements, based on a financial model which was prepared as part of approving the 2020 budget.
The Directors considered the cash forecasts prepared for the two-years ending 31 December 2021 (which includes the potential impact of COVID-19), together with certain assumptions for revenue and costs, to satisfy themselves of the appropriateness of the going concern basis used in preparing the financial statements.
Regarding financing, the Group had access to capital of GBP27.55 million made up of a cash balance of GBP14.8m as at 31 December 2019 and GBP12.75 million still to drawdown on its the Rupee term loan facility of INR 480 Crore. Under the terms of the loan facility the Company was to start repayment of the principal amount from June 2020 with GBP15.1 million of payments to be repaid in the 2 years period from 01 January 2020 to 31 December 2021. In March 2020 a payment holiday for 3 months as per RBI guideline was agreed with the Banking consortium for March, April, and May. As at 22 May the RBI in India has provided a further 3-month payment holiday to August 2020. The Directors also took account of the principal risks and uncertainties facing the business referred to above, a sensitivity analysis on the key revenue growth assumption and the effectiveness of available mitigating actions.
The uncertainty as to the future impact on the Group of the recent Covid-19 outbreak has subsequently been considered as part of the Group's adoption of the going concern basis. In the downside scenario analysis performed, the Directors have considered the impact of the Covid-19 outbreak on the Group's trading and cash flow forecasts. In preparing this analysis, the directors assumed that the lockdown effects of the Covid-19 virus would peak in India around the end of June and trading will normalise over the subsequent few months, albeit attaining substantially lower levels of revenue than budgeted, for at least the rest of the current financial year.
A range of mitigating actions within the control of management were assumed, including reductions in the Directors and all staff salary by 35% from May 2020 until the end of the year, a reduction in all non-essential services and delay in building out the facility which is not needed for the current three signed customer until significant revenue is again being generated. The Directors have also considered the financial support commitment made by the RBI in India. The Directors have also assumed, having had productive discussions with its lenders, that certain bank fees due to be paid in October 2020, can be deferred to the end of the current facility.
In this scenario, the Group would remain within its banking facilities, although some of the financial covenants would require a waiver from the lenders during the current financial year, in order to avoid being breached. Further adverse changes arising from Covid-19 would increase the challenge of complying with financial covenants and remaining within banking facilities. The Directors, as stated above, are in discussions with its lenders which, albeit at early stages, are considered as being productive.
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.
Based on the above indications, after taking into account the impact of Covid-19 on the Group's future trading, the Directors believe that it remains appropriate to continue to adopt the going concern in preparing the financial statements.
However, the downside scenario detailed above, indicates the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern.
Shareholder engagement
This year's AGM is in Guernsey on Thursday, 15 October 2020.
On account of the Coronavirus pandemic and associated Government guidance, including the rules on physical distancing and limitations on public gatherings, Shareholders are strongly discouraged from attending the Annual General Meeting and indeed entry will be refused if the law and/or Government guidance so requires. Arrangements will be made by the Company to ensure that a minimum number of shareholders required to form a quorum will attend the General Meeting in order that the meeting may proceed.
Your vote is important to us and your Board of Directors wishes to ensure that your vote is counted at the AGM, therefore, all Shareholders are encouraged to submit their vote in advance. Details of how to do this are contained in AGM notice at the back of this document. All valid proxy votes will be included in the poll to be taken at the meeting.
Conclusion
2019 was a year of progress and preparation for the future. We have continued constructing the Facility, received our first paying client and secured new contracts. COVID-19 has brought unforeseen challenges to the Indian economy and MPL is not immune from this. However, Karanja lies at the heart of India's trading gateway and, with India's macro story still going strong, the Board sees enormous opportunities available to the Group. The Group is well placed to benefit from any economic recovery in the region and we remain committed to delivering a state of the art, modern port and logistics facility, of which all our stakeholders can be proud.
Jay Mehta
Managing Director
Mercantile Ports & Logistics Limited
25 September 2020
Consolidated Statement of Comprehensive Income
for the Year ended 31 December 2019
Notes Year ended Year ended
31 Dec 19 31 Dec
GBP000 18
GBP000
CONTINUING OPERATIONS
Revenue 30 -
Cost of sales (47)
(17) -
Administrative Expenses 5 (4,351) (3,296)
----------- -----------
OPERATING LOSS (4,368) (3,296)
Finance Income 6 19 13
Finance Cost (632) -
----------- -----------
NET FINANCING INCOME (613) 13
----------- -----------
LOSS BEFORE TAX (4,981) (3,283)
Tax expense for the year 7 - -
----------- -----------
Loss FOR THE YEAR (4,981) (3,283)
=========== ===========
Loss for the year attributable to:
Non-controlling interest (8) (5)
Owners of the parent (4,973) (3,278)
----------- -----------
LOSS FOR THE YEAR (4,981) (3,283)
=========== ===========
Other Comprehensive Income / (expense):
Items that will not be reclassified subsequently
to profit or (loss)
Re-measurement of net defined benefit liability 22 4 4
Items that will be reclassified subsequently
to profit or (loss)
Exchange differences on translating foreign
operations (5,256) (2,218)
----------- -----------
Other comprehensive expense for the year (5,252) (2,214)
----------- -----------
Total comprehensive expense for the year (10,233) (5,497)
=========== ===========
Total comprehensive expense for the year attributable
to:
Non-controlling interest (8) (5)
Owners of the parent (10,225) (5,492)
----------- -----------
(10,233) (5,497)
=========== ===========
Earnings per share (consolidated):
Basic & Diluted, for the year attributable (GBP0.003) (GBP0.006)
to ordinary equity holders 9
Consolidated Statement of Financial Position as at 31 December
2019
Notes Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Assets
Property, plant and equipment 10(a) 133,108 131,257
Intangible asset 10(b) 5 --
----------- -----------
Total non-current assets 133,113 131,257
----------- -----------
Trade and other receivables 11 18,729 26,169
Cash and cash equivalents 12 14,823 13,113
----------- -----------
Total current assets 33,552 39,282
Total assets 166,665 170,539
=========== ===========
Equity
Stated Capital 14 134,627 134,627
Retained earnings 14 (8,741) (3,772)
Translation Reserve 14 (20,214) (14,958)
----------- -----------
Equity attributable to owners of parent 105,672 115,897
----------- -----------
Non-controlling Interest 3 11
----------- -----------
Total equity 105,675 115,908
----------- -----------
Liabilities
Non-current
Employee benefit obligations 15 4 3
Borrowings 16 35,989 33,831
Lease liabilities payables 18 2,460 -
----------- -----------
Non-current liabilities 38,453 33,834
----------- -----------
Current
Employee benefit obligations 15 130 58
Borrowings 16 2,605 59
Current tax liabilities 17 6,949 7,341
Leases Liabilities payable 18 930 -
Trade and other payables 18 11,923 13,339
----------- -----------
Current liabilities 22,537 20,797
----------- -----------
Total liabilities 60,990 54,631
----------- -----------
Total equity and liabilities 166,665 170,539
=========== ===========
The consolidated financial statements have been approved and authorized for issue by the Board on 25 September 2020
Jeremy Warner Allen
Chairman
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Year ended 31 December 2019
Notes Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (4,981) (3,283)
Non cash flow adjustments 20 1,204 59
----------- -----------
Operating (loss)/profit before working
capital changes (3,777) (3,224)
Net changes in working capital 20 1,811 (13)
----------- -----------
Net cash from operating activities (1,966) (3,237)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and
equipment (4,221) (8,420)
Proceeds from Sale of fixed asset - 5
Finance Income 6 15 13
Net cash used in investing activities (4,206) (8,402)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of Share Capital 14 8,287 19,552
Proceeds from borrowing &repayment
of interest - net 169 (44)
Repayment of leasing liabilities (313) -
principal (Net)
Interest payment on leasing liabilities (62) -
Net cash from financing activities 8,081 19,508
----------- -----------
Net change in cash and cash equivalents 1,909 7,869
Cash and cash equivalents, beginning
of the year 13,113 5,423
Exchange differences on cash and
cash equivalents (199) (179)
----------- -----------
Cash and cash equivalents, end of
the year 14,823 13,113
=========== ===========
Consolid ated St atement of Changes in Equity
for the Year ended 31 December 2019
Stated Translation Retained Other Non- controlling Total
Capital Reserve Earnings Components Interest Equity
of equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- ------------ ---------- ------------ ---------------------
Balance at
1 January 2018 106,763 (12,740) (498) -- 16 93,541
Issue of share capital 29,820 -- - -- - 29,820
Share Issue cost (1,956) -- - -- - (1,956)
--------- ------------ ---------- ------------ --------------------- -----------
Transactions with
owners 134,627 (12,740) (498) -- 11 121,405
--------- ------------ ---------- ------------ --------------------- -----------
Loss for the year -- -- (3,278) -- (8) (3,283)
Foreign currency
translation
differences
for foreign operations -- (2,218) -- -- -- (2,218)
Re-measurement of
net defined benefit
liability -- -- - 4 -- 4
Re-measurement of
net defined benefit
liability transfer
to retained earning -- -- 4 (4) -- --
Total comprehensive
income for the year -- (2,218) (3,274) -- (8) (10,233)
--------- ------------ ---------- ------------ --------------------- -----------
Balance at
31 December 2018 134,627 (14,958) (3,772) -- 11 115,908
========= ============ ========== ============ ===================== ===========
Balance at
1 January 2019 134,627 (14,958) (3,772) - 11 115,908
Issue of share capital - - - - - -
Share Issue cost - - - - - -
-------- --------- -------- ---- ---- ---------
Transactions with
owners 134,627 (14,958) (3,772) -- 16 115,908
-------- --------- -------- ---- ---- ---------
Loss for the year -- -- (4,973) -- (8) (4,981)
Foreign currency
translation differences
for foreign operations -- (5,256) -- -- -- (5,256)
Re-measurement of
net defined benefit
liability -- -- -- 4 -- 4
Re-measurement of
net defined benefit
pension liability
transfer to retained
earning -- -- 4 (4) -- --
-------- --------- -------- ---- ---- ---------
Total comprehensive
income for the year -- (5,256) (4,969) -- (8) (10,233)
-------- --------- -------- ---- ---- ---------
Balance at
31 December 2019 134,627 (20,214) (8,741) -- 3 105.675
======== ========= ======== ==== ==== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
Mercantile 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 comprises 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 2019, 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 2019, the Group had 56 (Fifty six) (2018: 57 (Fifty seven) employees).
2. SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PREPARATION
The consolidated financial statements have been prepared on a historical cost basis except where otherwise stated. The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") and interpretations as adopted by the European Union and also to comply with The Companies (Guernsey) Law, 2008.
Going Concern
In accordance with Provision 31 of the 2018 revision of the UK Corporate Governance Code. The Board initially, prior to the outbreak of Covid-19, assessed the Group's ability to operate as a going concern for the next 12 months from the date of signing the financial statements, based on a financial model which was prepared as part of approving the 2020 budget.
The Directors considered the cash forecasts prepared for the two-years ending 31 December 2021 (which includes the potential impact of COVID-19), together with certain assumptions for revenue and costs, to satisfy themselves of the appropriateness of the going concern basis used in preparing the financial statements.
Regarding financing, the Group had capital GBP27.55 million made up of a cash balance of GBP14.8m as at 31 December 2019 and GBP12.75 million still to drawdown on its the Rupee term loan facility of INR 480 Crore. Under the terms of the loan facility the Company was to start repayment of the principal amount from June 2020 with GBP15.1 million of payments to be repaid in the 2 years period from 01 January 2020 to 31 December 2021. In March 2020 a payment holiday for 3 months as per RBI guideline was agreed with the Banking consortium for March, April, May. As at 22 May the RBI in India has provided a further 3-month payment holiday to August 2020. The directors believe that the debt providers will continue to support the Group thereafter.
The Directors also took account of the principal risks and uncertainties facing the business referred to above, a sensitivity analysis on the key revenue growth assumption and the effectiveness of available mitigating actions.
The uncertainty as to the future impact on the Group of the recent Covid-19 outbreak has subsequently been considered as part of the Group's adoption of the going concern basis. In the downside scenario analysis performed, the Directors have considered the impact of the Covid-19 outbreak on the Group's trading and cash flow forecasts. In preparing this analysis, the directors assumed that the lockdown effects of the Covid-19 virus will peak in India around the end of June and trading will normalise over the subsequent few months, albeit attaining substantially lower levels of revenue than budgeted, for at least the rest of the current financial year. This scenario will lead to a material reduction in the Group's revenues and results for 2020.
A range of mitigating actions within the control of management were assumed, including reductions in the Directors and all staff salary by 35% from May 2020 until the end of the year, a reduction in all non-essential services and delay in building out the facility which isn't needed for the current 3 signed customer until significant revenue is again being generated. The Directors have also considered the financial support commitment made by the RBI in India. The Directors have also assumed, having had productive discussions with its lenders, that certain bank fees due to be paid in October 2020, can be deferred to the end of the current facility.
In this scenario, the Group would remain within its banking facilities, although some of the financial covenants would require a waiver from the lenders during the current financial year, in order to avoid being breached. Further adverse changes arising from Covid-19 would increase the challenge of complying with financial covenants and remaining within banking facilities. The Directors, as stated above, are in discussions with its lenders which, albeit at early stages, are considered as being productive.
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.
Based on the above indications, after taking into account the impact of Covid-19 on the Group's future trading, the Directors believe that it remains appropriate to continue to adopt the going concern in preparing the financial statements.
However, the downside scenario detailed above would indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern.
(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 2019. Subsidiaries are all entities over which the Company has the power to control the financial and operating policies. The Company 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 (Karanja Terminal & Logistics Private Limited KTPL ends on March 31 and its accounts are adjusted for the same period as a 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 Parent Country of % Voting Rights % Economic
Incorporation Interest
Karanja Terminal Mercantile
& Logistics (Cyprus) Ports & Logistics
Ltd Limited Cyprus 100.00 100.00
Karanja Terminal Karanja Terminal
& Logistics Private & Logistics
Limited (Cyprus) Ltd India 95.88 95.88
Mercantile
* Mercantile Ports Ports & Logistics
(Netherlands) BV Limited Netherlands 100.00 100.00
* Mercantile Ports (Netherlands) BV has closed its operations from
24 July 2019.
(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 profit or loss in the Consolidated Statement of Comprehensive Income.
(e) REVENUE RECOGNITION
Revenue arises mainly from the provision of services relating to use of the port by customers, including use of the port, loading/ unloading services, storage and land rental.
To determine whether to recognise revenue, the Group follows a 5-step process:
1. Identifying the contract with a customer 2. Identifying the performance obligations 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations 5. Recognising revenue when/as performance obligation(s) are satisfied.
The total transaction price for a contract is allocated amongst the various performance obligations based on their relative standalone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties.
Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers.
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. Invoicing for services is set out in the contract.
The group does not believe there are elements of financing in the contracts. There are no warranties or guarantees included in the contract.
The specific recognition criteria described below must also be met before revenue is recognised.
Port operation and logistics services
Revenue from port operation services including cargo handling, storage, rail infrastructure, other ancillary port services and logistics services are recognized in the accounting period in which the services are rendered on proportionate completion method basis based on services completed till reporting date. Revenue is recognized based on the actual service provided to the end of reporting period as a proportion of total services to be provided.
Some contracts contain multiple services. Management determines if these are separate performance obligations based on the ability of the customer to benefit from these services in isolation from other services.
Interest income
Interest income is reported on an accrual's 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.
(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) EMPLOYEE BENEFITS
i) Defined contribution plans (Provident Fund)
In accordance with Indian Law, eligible employees receive benefits from Provident Fund, which is a defined contribution plan. Both the employee and employer make monthly contributions to the plan, which is administrated by the government authorities, each equal to the specific percentage of employee's basic salary. The Group has no further obligation under the plan beyond its monthly contributions. Obligation for contributions to the plan is recognised as an employee benefit expense in the Consolidated Statement of Comprehensive Income when incurred.
ii) Defined benefit plans (Gratuity)
In accordance with applicable Indian Law, the Group provides for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering eligible employees. The Gratuity Plan provides a lump-sump payment to vested employees, at retirement or termination of employment, and amount based on respective last drawn salary and the years of employment with the Group. The Group's net obligation in respect of the Gratuity Plan is calculated by estimating the amount of future benefits that the employees have earned in return of their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past service cost and the fair value of plan assets are deducted. The discount rate is a yield at reporting date on risk free government bonds that have maturity dates approximating the terms of the Group's obligation. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the total of any unrecognised past service cost and the present value of the economic benefits available in the form of any future refunds from the plan or reduction in future contribution to the plan.
The Group recognises all remeasurements of net defined benefit liability/asset directly in other comprehensive income and presents them within equity.
iii) Short term benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as a related service provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
(h) Leases
As lessee, the Group assesses whether a contract contains a lease at inception of the contract. The Group recognises a right-of-use asset and corresponding lease liability in the statement of financial position for all lease arrangements where it is the lessee, except for short-term leases with a term of twelve months or less and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
The lease liability is initially measured at the present value of the future lease payments from the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, the asset and company specific incremental borrowing rates. Lease liabilities are recognised within borrowings on the statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability, with a corresponding adjustment to the related right-of-use assets, whenever:
-- The lease term changes or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
-- The lease payments change due to the changes in an index or rate or a change in expected payment under a guaranteed residual value, in which case the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate;
-- A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of modification.
The right-of-use assets are initially recognised on the balance sheet at cost, which comprises the amount of the initial measurement of the corresponding lease liability, adjusted for any lease payments made at or prior to the commencement date of the lease, any lease incentive received and any initial direct costs incurred, and expected costs for obligations to dismantle and remove right-of use assets when they are no longer used. Right-of-use assets are recognised within property, plant and equipment on the statement of financial position. Right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease over the shorter of the useful life of the right-of-use asset or the end of the lease term.
The Group enters into lease arrangements as a lessor with respect to some of its time charter vessels. Leases for which the Group is an intermediate lessor are classified as finance or operating leases by reference to the right-of-use asset arising from the head lease. Income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of these leases.
The comparative period lease contracts were accounted for under IAS 17. Assets under finance leases, where substantially all of the risks and rewards of ownership transferred to the Group as lessee, were capitalised and amortised over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. All other leases were classified as operating leases, the expenditures for which were recognised in the statement of income on a straight-line basis over the lease term.
(i) 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
The accounting for income tax are accounted 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.
Deferred tax assets are recognized to the extent that Management believes that these assets are more probable than not to be realized. In making such a determination, it considers 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 it is determined that it would be able to realize the deferred tax assets in the future in excess of the net recorded amount, the necessary adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income tax.
(j) FINANCIAL ASSETS
The Group has adopted IFRS 9 from 1(st) January 2018 and Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires .
Classification and Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
-- amortised cost -- fair value through profit or loss (FVTPL) -- fair value through other comprehensive income (FVOCI).
In the periods presented the corporation does not have any financial assets categorised as FVOCI.
The classification is determined by both:
-- the entity's business model for managing the financial asset -- the contractual cash flow characteristics of the financial asset.
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.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
-- they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
-- the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. 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 as well as listed bonds that were previously classified as held-to-maturity under IAS 39.
Impairment of financial assets
IFRS 9's impairment requirements use more forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'. This replaces IAS 39's 'incurred loss model'. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.
(k) FINANCIAL LIABILITIES
Classification and measurement of financial liabilities
As the accounting for financial liabilities remains largely the same under IFRS 9 compared to IAS 39, the Group's financial liabilities were not impacted by the adoption of IFRS 9. However, for completeness, the accounting policy is disclosed below.
The Group's financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or finance income.
(l) 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 and income directly related to testing the facility is offset against the corresponding expenditure. 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
Leasehold Land Development Over 40 year's period of Concession
Agreement by Maharashtra Maritime
board .
Marine Structure, Dredged Channel 40 Years as per concession agreement
Non Carpeted road other than RCC 3 Years
Office equipment 3-5 Years
Computers 2-3 Years
Computer software 5 Years
Plant & machinery 15 Years
Furniture 5-10 Years
Vehicles 5-8 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.
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.
(m) 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.
(n) ADVANCES
Advances paid to the EPC contractor and suppliers for construction of the facility are categorised as advances and will be offset against future work performed by the contractor.
(o) CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand deposits that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
(p) STATED CAPITAL AND RESERVES
Shares have 'no par value'. Stated capital includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from stated capital, 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.
(q) NEW STANDARD ADOPTED DURING THE YEAR
During the calendar year the company has adopted all new and revised IFRS standards that became effective as of 1 January 2019, the material changes being is as follow:
(i) IFRS 16 "Leases"
The Group has adopted the standard from January 1, 2019 without restating comparative amounts for the year 2018 as permitted by the modified retrospective approach. In addition, the Group has applied the exceptions provided for short-term leases, including contracts with a term of less than twelve months after the application date and those relating to low-value assets.
Most of the lease contracts are operating leases where the Group is the lessee. Leased assets are mainly real estate assets.
Key assumptions that the Group is applying for implementing the standard are as follows:
Terms: For each contract, the Group reviewed the renewal and the early termination options within the term of the arrangement and determined, after taking into account all the relevant facts and circumstances, what would be the date at which the Group reasonably expects the contract to be terminated. For certain categories of leased assets, the Group assesses that there is no reasonably certain extension option, consequently the duration selected coincides with the first term of the lease contract. For real estate lease arrangements, the Group defines the reasonable end date of the contracts, while taking into account the renewal and early termination options stated in the agreements, in line with the asset's expected period of use.
Discount rates: The Group determined discount rates reflecting each subsidiary's specific credit risk, the currency of the contract and the weighted average maturity of the reimbursement of the lease liability. For the transition the incremental borrowing rate used is the rate applicable to the residual terms of the contracts.
For contracts previously classified as finance leases the Group has recognized the carrying amount of the right of use assets and lease liability at the date of initial application.
The reconciliation between operating lease commitments disclosed at December 31, 2018 and the lease liability recognized at IFRS 16 first application date is presented below:
Particular GBP000
Operating lease commitments disclosed as at December
31, 2018 8,375
-------
Discounted using incremental borrowing rate of 8% 5,449
-------
Lease liability at January 1, 2019 2,926
-------
Opening unpaid lease liability as at 01 January 2019 740
-------
Of which are:
-------
Current lease liabilities 1,033
-------
Non-current lease liabilities 2,633
-------
Right-of-use assets include the following types of assets:
Particular 31 Dec 2019 1 January
GBP000 2019
GBP000
Land & building (Office premises) 2,570 2,926
------------ ----------
The first time application of IFRS 16 affected mainly the following items in the statement of financial position on January 1, 2019:
Particular 31 Dec 2018 30 Dec 2019 1 January
GBP000 GBP000 2019
GBP000
Property plant and equipment 131,257 2,926 134,183
------------ ------------ ----------
Non-current financial liabilities 33,834 2,633 36,467
------------ ------------ ----------
Current financial liabilities 20,797 293 21,090
------------ ------------ ----------
(ii) IFRIC 23 - Uncertainty over income tax treatment
The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. Due to its global reach, including operating in high-risk jurisdictions, the Group's global tax position is subject to enhanced complexity and uncertainty, which may lead to uncertain tax treatments and the corresponding recognition and measurement of current and deferred taxes. The judgements and estimates made to separately recognise and measure the effect of each uncertain tax treatment are re-assessed whenever circumstances change or when there is new information that affects those judgements. The Group has re-assessed its global tax exposure and the key estimates taken in determining the positions recorded for adopting IFRIC 23. As of 1 January 2019, the global tax exposure has been determined by reference to the uncertainty that the tax authority may not accept the Group's proposed treatment of tax positions. The adoption of the interpretation had no material impact on the Group .
(r) 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 2019, 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 this standard early.
i) Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate Benchmark Reform
ii) Amendments to IFRS 3 - Definition of business - effective for year ends beginning on or after 1 January 2020
iii) Amendments to IAS 1 and IAS 8 - Definition of material - effective for year ends beginning on or after 1 January 2020
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.
Recognition of income tax liabilities
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. Nevertheless, full liability has been provided for income tax based on the assumption that in the event the department takes a different stance, then tax applicable on the interest income will have to be settled, whenever demanded. However, no accrual has been made for tax related interest or penalties on the non-payment of Indian income tax until there's a certainty on the tax position.
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 GBP164.40 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 2019 are:
-- Cash flow projections have been run until 2059. This is the length of the lease of the land.
-- The revenue capacity is a product of the area available to store and stack containers and jetty capacity.
-- Inflation 7.35%. -- Utilisation rate at 8% in 2020, 65% in 2021, 75% in 2022 on word. -- Revenue based on current comparable market rates.
-- The costs are set based on margins of 40-45%, based on margin of similar ports & CFS facilities.
-- Discount Rate 13.45%
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 125 acres of land with a sea frontage of 1,000 meters.
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.
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Employee costs 456 265
Directors' fees 403 452
Operating lease rentals 11 327
Foreign exchange gains/loss 39 --
Depreciation 608 71
Other administration costs 2,834 2,181
----------------- -----------------
4,351 3,296
----------------- -----------------
5. ADMINISTRATIVE EXPENSES
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Interest on bank deposits 19 13
-------------- --------------
19 13
-------------- --------------
6. (a) FINANCE INCOME
6. (b) FINANCE EXPENSE
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Interest on term loan* 266 --
Interest others 366
----------- -----------
632 --
=========== ===========
-- During the year company has capitalized partial port asset and in same proportion interest on term loan is pertaining to capitalized portion is charged to statement of Profit & Loss account.
7. INCOME TAX
*Considering that the Group's operations are presently based in India, the effective tax rate of the Group of 22.88% (prior year 30.90%) has been computed based on the current tax rates prevailing in India. In India, income 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 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. There is no tax expense in Cyprus.
In Netherland, the tax rate for companies is 20% with effect from 1 January 2018. There is no tax expense in Netherland.
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Loss Before Tax (4,981) (3,263)
Applicable tax rate in India* 22.88% 30.90%
------------------- -------------------
Expected tax credit (1,140) (1,008)
Adjustment for non-deductible losses
of MPL & Cyprus entity against income
from India 391 412
Adjustment for non-deductible expenses 749 596
------------------- -------------------
-- --
=================== ===================
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 19 31 Dec 18
GBP000 GBP000
Audit Fees
Fees payable to the auditor for the
audit of the Group's financial statements 87 87
Other fees payable to the auditor in
respect of:
Interim Financial Statement Review 9 9
Auditing of accounts of subsidiary undertakings 3
Tax fees 1 0
----------- -----------
Total auditor's remuneration 100 96
----------- -----------
A fee of GBP Nil was debited to Statement of Comprehensive Income for financial advisory services performed by Grant Thornton UK LLP during the year (2018: GBP56,650). 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 GBP7,486 (2018: GBP6,875). Audit fees related to prior year overruns during the year amount
to GBP22,087 (2018: GBP58,436). 9. EARNINGS PER SHARE
Both basic and diluted earnings per share for the year ended 31 December 2019 have been calculated using the loss attributable to equity holders of the Group of GBP5.0 million (prior year loss of GBP3.3 million).
Year ended Year ended
31 Dec 19 31 Dec 18
Loss attributable to equity holders GBP(4,973,000) GBP(3,278,000)
of the parent
Weighted average number of shares
used in basic and diluted earnings
per share 1,905,022,123 516,141,290
EARNINGS PER SHARE
Basic and Diluted earnings per share (GBP0.003) (GBP0.006)
10 (a). PROPERTY, PLANT AND EQUIPMENT
Details of the Group's property, plant and equipment and their carrying amounts are as follows:
Computers Office Furniture Vehicles Plant Port Right Capital Total
Equipment & Asset of use Work
Machinery in Progress
asset
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ----------- ---------- --------- ----------- ------- -------- ------------ --------
Gross
carrying
amount
Balance 1 Jan
2019 40 58 34 474 -- -- -- 130,989 131,595
IFRS 16
Adoption - - - - - - 2926 - 2,926
Net Exchange
Difference (2) (3) (2) (29) -- -- (155) (6,911) (7,102)
Additions 4 4 - 47 - - - 6,567 6,622
Disposals -- -- -- -- -- -- -- -- --
Transfers ^ 10 77 212 -- 27 39,404 -- *(39,736) (6)
-------------- ---------- ----------- ---------- --------- ----------- ------- -------- ------------ --------
Balance 31
Dec 2019 52 136 244 492 27 39,404 2,771 90,909 134,035
-------------- ---------- ----------- ---------- --------- ----------- ------- -------- ------------ --------
Depreciation
Balance 1 Jan
2019 (35) (32) (19) (252) -- -- -- -- (338)
Net Exchange
Difference 1 2 1 14 -- -- -- -- 18
Charge for
the year (4) (12) (8) (52) (1) (329) (201) -- (607)
Disposals -- -- -- -- -- -- -- -- --
-------------- ---------- ----------- ---------- --------- ----------- ------- -------- ------------ --------
Balance 31
Dec 2019 (38) (42) (26) (290) (1) (329) (201) -- (927)
-------------- ---------- ----------- ---------- --------- ----------- ------- -------- ------------ --------
Carrying
amount
31 Dec 2019 14 94 218 202 26 39,075 2,570 90,909 133,108
-------------- ---------- ----------- ---------- --------- ----------- ------- -------- ------------ --------
^ During the year company has partially commenced its port operations, after getting all necessary approvals from the Government Authorities. Company has started utilizing 25 acres of land and 250-meter jetty which is ready for use for carrying out operations. Capitalization of port is done on in above line.
* During the year company has capitalised CWIP to amounting to GBP39,736,000 under various head i.e Port Asset GBP39,404,000, Plant & Machinery GBP27,000, Furniture GBP212,000, Office Equipment GBP77,000, Intangible Asset Software GBP6,000 and Computer GBP10,000.
The Group leases various assets including land and buildings. As at 31 December 2019, the net book value of recognised right-of use assets relating to land and buildings was GBP2.57 million. The depreciation charge for the period relating to those assets was GBP0.20 million.
Amounts recognised in the statement of income are detailed below:
Particular GBP000
31 Dec 2019
Depreciation on right-of-use
assets 201
-------------
Interest expense on lease liabilities 215
-------------
Expense relating to short-term --
leases
-------------
Expense relating to low-value
leases 1
-------------
417
-------------
Computers Office Furniture Vehicles Capital Work Total
Equipment In Progress
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gross carrying
amount
Balance 1 Jan 2018 40 58 35 510 123,647 124,290
Net Exchange Difference (1) (2) (1) (15) (3,616) (3,635)
Additions 1 2 -- 11 10,958 10,972
Disposals -- -- -- (32) -- (32)
------------------------- ---------- ----------- ---------- --------- ------------- --------
Balance 31 Dec
2018 40 58 34 474 130,989 131,595
------------------------- ---------- ----------- ---------- --------- ------------- --------
Depreciation
Balance 1 Jan 2018 (30) (24) (16) (235) -- (305)
Net Exchange Difference 1 1 -- 7 -- 9
Charge for the
year (6) (9) (3) (53) -- (71)
Disposals -- -- -- 29 -- 29
------------------------- ---------- ----------- ---------- --------- ------------- --------
Balance 31 Dec
2018 (35) (32) (19) (252) -- (338)
------------------------- ---------- ----------- ---------- --------- ------------- --------
Carrying amount
31 Dec 2018 5 26 15 222 130,989 131,257
------------------------- ---------- ----------- ---------- --------- ------------- --------
The net exchange difference on the Group's property, plant and equipment's carrying amount is a loss of GBP6.97 million (prior year gain of GBP3.64 million). The net exchange difference on the Group's property, plant and equipment carrying amount is on the account of the foreign exchange movement.
Assets provided as security
The following assets are provided as security for loans payable as described in Note 3:
-- Vehicles with a carrying value of GBP202,000 (2018: GBP222,000) in favour of the "vehicle loans"; and
-- All other immovable and movable property with a carrying value of GBP132,906,000 (2081: GBP131,035,000) in favour of the "bank loans".
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Vehicles 202 222
----------- -----------
202 222
----------- -----------
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 (GBP51.35 million) (2018 INR 480 crore (GBP54.21 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 for portion of port which are still under construction under Capital Work in Progress. During the year the Group has capitalised borrowing cost of GBP4.03 million (prior year GBP4.58 million) and borrowing cost expensed out of GBP0.35 million (prior year GBP Nil).
The Indian subsidiary has estimated the total project cost of INR1,404 crore (GBP150.19 million) towards construction of the port facility. Out of the aforesaid project cost, the contract signed with the major contractor is INR 1,048 crores (GBP112.11 million). As of 31 December 2019, the contractual amount (net of advances) of INR 138.24 crores (GBP14.79 million) is still payable. There were no other material contractual commitments.
Karanja Terminal & Logistics Private Limited (KTPL), the Indian subsidiary has received sanction of a Rupee term loan of INR 480 crore (GBP51.35 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 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.
10. (b). Intangible Asset
Intangible Asset
-Software
GBP000
Gross carrying amount
Balance 1 Jan 2019 --
CWIP Capitalized 6
Disposals --
Balance 31 Dec 2019 6
----------------------------- ----------------------------
Depreciation
Balance 1 Jan 2019 --
Charge for the year (1)
Disposals --
----------------------------- ----------------------------
Balance 31 Dec 2019 (1)
----------------------------- ----------------------------
Carrying amount 31 Dec 2019 5
----------------------------- ----------------------------
*During the year company has partially commenced its port operations, after getting all necessary approvals from the Government Authorities. Company has started utilizing 25 acres of land and 250-meter jetty which is ready for use for carrying out operations. Capitalization of port is done on in above line.
11. TRADE AND OTHER RECEIVABLES
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Deposits 4,312 3,699
Advances 14,218 14,082
Accrued Interest of fixed deposits 4 --
Debtors
- Related Party 96 72
- Prepayment 84 26
- Others 15 8,290
----------- -----------
18,729 26,169
----------- -----------
Advances include payment to EPC contractor of GBP11.11 million (prior year GBP11.70 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. The debtors - other include trade receivable other 0.01 million which is past due for 30 days management estimate that amount is fully realisable hence no provision for expected credit loss is made for the same amount.
12. CASH AND CASH EQUIVALENTS
Year ended Year ended
31 Dec 19 31 Dec 19
GBP000 GBP000
Cash at bank and in hand 14,676 13,101
Deposits 147 12
----------- -----------
14,823 13,113
----------- -----------
Cash at bank earns interest at floating rates based on bank deposit rates. The fair value of cash and short-term deposits is GBP14.82 million (prior year GBP13.11 million). Included in cash and cash equivalents is GBP4.8 million that is within a bank account that is not in the name of the company, as a result of the 2018 share sale. The Company is the beneficiary of the account and has control over this cash. During the year, the Company has been able to draw money out of this account to cover working capital throughout the year.
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 functional and presentation currency is the UK Sterling (GBP). The functional currency of its subsidiary Karanja Terminal & Logistics Private Limited (KTLPL) is INR and 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.
While consolidating the Indian subsidiary accounts the group has taken closing rate of GBP 1: INR 93.4835 for Statement of Financial Position items and for profit and loss item GBP 1: INR 89.9051
This balance is cumulatively a GBP20.21m loss to equity (2018: GBP14.96m loss). 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 2019 was 1:93, 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. During 2019 the average and year end spot rate used for INR to GBP were 93.48 and 89.91 respectively (2018: 90.97 and 88.55).
Translation risk sensitivity
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 638.65 million (GBP6.832 million) as on reporting date (prior year INR 8.43 million (GBP0.095 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 2019 31 Dec 2018 (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 currency GBP GBP
(depreciation by10%) (appreciation by
10%)
GBP000 GBP000
31 December 2019 759.07 (621.06)
31 December 2018 10.58 (8.66)
If the functional currency GBP had weakened with respect to foreign currency (INR) by the percentages mentioned above, for year ended 31 December 2019 then the effect will be change in profit and equity for the year by GBP0.759 million (prior period GBP0.011 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.
KTPL has successfully tied-up a rupee term loan of INR 480 crore (GBP51.35 million) for part financing the build out of its facility. The Group has commenced the drawdown of its sanctioned bank borrowing as of the reporting date. The rate of interest on the bank borrowing is a floating rate linked to the bank base rate with an additional spread of 505 basis points (2018: 375 bp). The present composite rate of interest from all lender varies from 13.20% to 13.45% based on respective banks MCLR (2018:13.20%).
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 2019, 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% (2018: +/- 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 the Equity, net of
Year tax
GBP000 GBP000
----------------- -----------------
+1% -1% +1% -1%
------------------ --------- ------ --------- ------
31 December 2029 - - - -
------------------ --------- ------ --------- ------
31 December 2028 - - - -
------------------ --------- ------ --------- ------
31 December 2027 (57) 57 (44) 44
------------------ --------- ------ --------- ------
31 December 2026 (104) 104 (80) 80
------------------ --------- ------ --------- ------
31 December 2025 (172) 172 (133) 133
------------------ --------- ------ --------- ------
31 December 2024 (241) 241 (186) 186
------------------ --------- ------ --------- ------
31 December 2023 (313) 313 (241) 241
------------------ --------- ------ --------- ------
31 December 2022 (380) 380 (293) 293
------------------ --------- ------ --------- ------
31 December 2021 (435) 435 (335) 335
------------------ --------- ------ --------- ------
31 December 2020 (473) 473 (365) 365
------------------ --------- ------ --------- ------
(b) Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group's maximum exposure (GBP17.94 million (previous year GBP22.47 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.
Customer credit risk is managed by the Company's established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive evaluation and individual credit limits are defined in accordance with this assessment.
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 (GBP51.35 million) out of which INR 360.79 crore (GBP38.59 million) are disbursed and GBP11.63M as at December 2019 of cash reserves which can be used for financing the build out of its facility.
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.
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 2019, the Group's non-derivative financial liabilities have contractual maturities (and interest payments) as summarized below:
Principal payments Interest payments
Payment falling INR in Crore GBP000
due INR in Crore GBP000
============= ======= ============= =======
Within 1 year 24.35 2,605 46.82 5,208
1 to 5 year's 210.16 22,481 130.04 14,465
After 5 year's 126.28 13,508 20.54 2,284
------------- ------- ------------- -------
Total 360.79 38,594 197.40 21,957
------------- ------- ------------- -------
The present composite rate of interest ranges from 13.20% to 13.45% 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 Group'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 1:1.
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
Note 31 Dec 19 31 Dec 18
GBP000 GBP000
Financial Assets 2
Cash and Cash Equivalents 12 14,823 13,113
Loan and receivables 11 1,583 10,743
----------- ----------------
16,406 23,856
=========== ================
Financial Liability
Borrowings 16 38,594 33,890
Trade and other payables 18 15,313 13,340
Employee benefit obligations 15 134 61
----------- ----------------
54,041 47,291
=========== ================
The fair value of the Group's financial assets and financial liabilities significantly approximate their carrying amount as at the reporting date.
The carrying amount of financial assets and financial liabilities are measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the group does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
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:
Particulars Year ended Year ended
31 December 19 31 December 18
-------------------------- ------------------------
No of shares GBP000 No of shares GBP000
---------------- -------- -------------- --------
Shares issues and fully paid:
Beginning of the year 1,905,022,123 134,627 414,017,699 106,763
Addition in the year (net of
share issue costs) -- -- 1,491,004,424 27,864
---------------- -------- -------------- --------
Closing number of shares 1,905,022,123 134,627 1,905,022,123 134,627
------------------------------- ---------------- -------- -------------- --------
The stated capital amounts to GBP134.63 million (prior year GBP134.63 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 the Company has allotted Nil (prior year 1,491) million equity shares to various institutional and private investors, by way of a rights issue.
14.2 Other Components of Equity
Retained Earnings
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Opening Balance (3,772) (518)
Loss for the year (4,973) (3,258)
Re-measurement of net defined benefit liability 4 4
----------- -----------
Closing balance (8,741) (3,772)
----------- -----------
Retained earnings of GBP (8.74) million (prior year GBP3.77 million) include all current year retained profits.
Translation Reserve
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Opening Balance (14,958) (12,740)
Loss for the year during the year (5,256) (2,218)
----------- -----------
Closing balance (20,214) (14,958)
----------- -----------
The translation reserve of GBP20.21 million (prior year GBP14.96 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. EMPLOYEE BENEFIT OBLIGATIONS
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Non- Current
Pensions - defined benefit plans 4 3
----------- -----------
4 3
----------- -----------
Current
Wages, salaries 105 36
Pensions - defined benefit plans 25 22
130 58
----------- -----------
16. BORROWINGS
Borrowings consist of the following:
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Non-Current
Bank loan 35,989 33,705
Vehicle loan -- 126
----------- -----------
35,989 33,831
----------- -----------
Current
Bank loan 2,605 --
Vehicle loan 59
----------- -----------
2,605 59
----------- -----------
Borrowing
Karanja Terminal & Logistics Private Limited (KTPL), the Indian subsidiary has tied-up a rupee term loan of INR 480 crore (GBP51.35 million). The Rupee term loan has been sanctioned by four Indian public sector banks and the loan agreement was executed on 28 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 rate of interest will be a floating rate linked to the Canara bank MCLR rate (8.65%) (2018: 9:40%) with an additional spread of 505 basis points. The present composite rate of interest charged by consortium banks rages from 13.45%. The borrowings are secured by the hypothecation of the port facility and pledge of its shares. 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 360.79 crore (GBP38.59 million) (prior year INR 298.45 crore (GBP33.71 million)) as
of the reporting date.
17. current tax liabilities
Current tax liabilities consist of the following:
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Duties & taxes 177 192
Provision for Income Tax 6,772 7,149
----------- -----------
Current tax liabilities 6,949 7,341
----------- -----------
The carrying amounts and the movements in the Provision for Income Tax account are as follows:
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Carrying amount 1 January 7,149 7,365
Exchange difference (377) (216)
----------- -----------
Carrying amount 31 December 6,772 7,149
----------- -----------
The Group 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 Group discharges the tax liability on the basis of income tax assessment.
18. TRADE AND OTHER PAYABLES
Trade and other payables consist of the following:
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Non-Current
Sundry creditors (Lease liability) 2,460 --
------------------------------------------- ----------- -----------
2,460
------------------------------------------- ----------- -----------
Current
Sundry creditors 11,535 12,692
Lease Liability Payable - (refer note 22) 930 --
Interest payable 388 647
----------- -----------
12,853 13,339
----------- -----------
Future minimum lease payments at 31 December 2019 were as follows
Within 1-2 2-3 3-4 4-5 After
Payment falling 1 Year Year Year Year Year 5
due Year Total
Lease payments 1.137 232 318 209 199 6,339 8,525
Finance charges (207) (193) (181) (174) (172) (4,208) (5,135)
----------------- -------- ------ ------ ------ ------ -------- --------
Net Present
values 930 130 137 35 27 2,131 3,390
----------------- -------- ------ ------ ------ ------ -------- --------
19. RELATED PARTY TRANSACTIONS
The consolidated financial statements include the financial statements of the Company and the subsidiaries listed in the following table:
Country Ownership Type of
Name of Incorporation Field Activity Interest share Held
------------------------------ ------------------ ------------------- -------------- ------------
Cyprus Holding Company 100% Ordinary
HELD BY The Company
(MPL):
Karanja Terminal &
Logistics (Cyprus)
Ltd
Mercantile Port (Netherlands) Netherland Subsidiary Company 100% Ordinary
BV of MPL
HELD BY Karanja Terminal
& Logistics (Cyprus)
Ltd:
Karanja Terminal & Operating Company
Logistics Pvt. Ltd India -Terminal 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 5.16% of issued share capital as at 31 December 2019 (as at 31 December 2018 - 5.16% )of Mercantile Ports & Logistics Limited.
-- Lord Howard Flight holds 0.26% of issued share capital as on 31 December 2019 (as on 31 December 2018 - 0.20%) of Mercantile Ports & Logistics Limited at the year end. Lord Howard Flight had acquired additional shares of GBP0.06 million, in December 2018.
-- Jay Mehta holds 0.28% of issued share capital as on 31 December 2019 (as on 31 December 2018 - 0.28%) of Mercantile Ports & Logistics Limited at the year end.
-- John Fitzgerald holds 0.12% of issued share capital as on 31 December 2019 (as on 31 December 2018 - 0.03%) of Mercantile Ports & Logistics Limited at the year end.
-- Andrew Henderson holds 0.03% of issued share capital as on 31 December 2019 (as on 31 December 2018 - 0.03%) of Mercantile Ports & Logistics Limited at the year end.
-- Jeremy Warner Allen holds 0.40% of issued share capital as on 31 December 2019 (as on 31 December 2018 - 0.40 %) of Mercantile Ports & Logistics Limited at the year end.
-- Karanpal Singh via Hunch Ventures and Investment Limited holds 21.75% of issued share capital as on 31 December 2018 (as on 31 December 2018 - 21.75%) of Mercantile Ports & Logistics Limited at the year end.
b) Key Managerial Personnel of the parent
Non-executive Directors
-- Lord Howard Flight -- Mr. John Fitzgerald -- Jeremy Warner Allen (appointed Chairman from 16 January 2020) -- Karanpal Singh
Executive Directors
-- Mr. Nikhil Gandhi (Step down as Chairman from 16 January 2020) -- Mr. Jay Mehta (Managing Director) -- Mr. Andrew Henderson
c) Key Managerial Personnel of the subsidiaries
Directors of KTLPL (India)
-- Mr. Jay Mehta -- Mr. Jigar Shah (Resigned from 2 February 2019) -- Mr. Nikhil Gandhi (Chairman) -- Mr. M L Meena
Directors of Karanja Terminal & Logistics (Cyprus) Ltd - KTLCL (Cyprus)
-- Ms. Andria Andreou -- Ms. Olga Georgiades -- Mr. Andrew Henderson
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 -- KJS Concrete Private Limited
e) Transaction with related parties
The following transactions took place between the Group and related parties during the year ended 31 December 2019:
Nature of transaction Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Athos Hq Group Bus. Ser. Cy
Ltd Administrative fees 25 22
----------- -----------
25 22
----------- -----------
The following table provides the total amount outstanding with related parties as at year ended 31 December 2019:
Transactions with shareholder having significant influence
Nature of transaction Year ended Year ended
31 Dec 31 Dec 18
19 GBP000
GBP000
SKIL Global Ports & Logistics Limited
Debtors Advances 96 72
Hunch Ventures and Investment Limited
Debtors Share subscription nil 8,287
Receipt and repayment
KJS Concrete Private Limited of advance nil 770
----------- -----------
96 9,129
----------- -----------
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 19 31 Dec 18
GBP000 GBP000
Non Executive Directors fees
- Jeremy Warner Allen 40 3
- Lord Flight 40 40
- John Fitzgerald 45 45
----------- -----------
125 88
----------- -----------
Executive Directors Fees
- Pavan Bakhshi* nil 175
- Jay Mehta 100 99
- Andrew Henderson 75 90
- Nikhil Gandhi 102 --
----------- -----------
277 364
----------- -----------
Total compensation paid to Key Managerial Personnel 402 452
----------- -----------
* Mr. Pavan Bakshi resigned as a Director on 16 December 2018.
Compensation to Key Managerial Personnel of the subsidiaries
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Directors' fees
KTLPL - India 202 99
KTLCL - Cyprus 3 3
----------- -----------
205 102
----------- -----------
Sundry Creditors
As at 31 December 2019, the Group had GBP3.56 million (prior year GBP2.65 million) as sundry creditors with related parties.
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Grevek Investment & Finance Pvt Ltd 3,555 2,645
----------- -----------
3,555 2,645
----------- -----------
Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party.
20. 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 19 31 Dec 18
GBP000 GBP000
Non-cash flow adjustments
Depreciation 608 71
Finance Income (19) (13)
Unrealised exchange (gain)/loss (5) 1
Finance Cost 620 --
1,204 59
----------- -----------
Increase/(Decrease) in trade payables 1,330 3,714
Increase/Decrease in trade & other receivables 481 (3,727)
----------- -----------
1.811 (13)
----------- -----------
21. 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.
22. EMPLOYEE BENEFIT OBLIGATIONS
a) Defined Contribution Plan:
The following amount recognized as an expense in statement of profit and loss on account of provident fund and other funds. There are no other obligations other than the contribution payable to the respective authorities.
Year ended Year ended
31 Dec 19 31 Dec 18
GBP000 GBP000
Contribution to Provident Fund 8 6
Contribution to ESIC 2 1
----------- -----------
10 7
----------- -----------
b) Defined Benefit Plan:
The Company has an unfunded defined benefit gratuity plan. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member's tenure of service and salary at retirement age. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service as per the provision of the Payment of Gratuity Act, 1972 with total ceiling on gratuity of INR1 Million.
The following tables summaries the components of net benefit expense recognised in the Consolidated Statement of Comprehensive Income and the funded status and amounts recognised in the Consolidated Statement of Financial Position for the gratuity plan:
As at As at
Particulars 31 Dec 19 31 Dec 18
GBP000 GBP000
Statement of Comprehensive Income
Net employee benefit expense recognised in
the employee cost
Current service cost 7 6
Past service cost - 3
Interest cost on defined benefit obligation 2 1
Total expense charged to loss for the period 9 10
Amount recorded in Other Comprehensive Income
(OCI)
Opening amount recognised in OCI
Remeasurement during the period due to :
Actuarial (gain) / loss arising on account
of experience changes (4) (4)
----------------- -----------------
Amount recognised in OCI (4) (4)
Closing amount recognised in OCI (4) (4)
================= =================
Reconciliation of net liability / asset
Opening defined benefit liability 25 19
Translation diff in opening balance (1) -
Expense charged to profit or loss account 9 10
Amount recognised in Other Comprehensive Income (4) (4)
Benefit Paid -- --
----------------- -----------------
Closing net defined benefit liability 29 25
================= =================
Movement in benefit obligation and Consolidated Statement of Financial Position
A reconciliation of the benefit obligation during the inter-valuation period:
Particulars As at As at
31 Dec 19 31 Dec 18
GBP000 GBP000
Opening defined benefit obligation 25 19
Translation diff in opening balance (1) --
Current service cost 7 6
Past service cost - 3
Interest on defined benefit obligation 2 1
Re-measurement during the period due to :
Actuarial (gain) / loss arising on account
of experience changes (4) (4)
Benefits paid -- --
----------------- -----------------
Closing defined benefit obligation liability
recognised in Consolidated Statement of Financial
Position 29 25
================= =================
Particulars As at As at
31 Dec 19 31 Dec 18
GBP000 GBP000
Net liability is bifurcated as follows :
Current 4 3
Non-current 25 22
------------------ -------------------
Net liability 29 25
------------------ -------------------
23. CONTINGENT LIABILITIES AND COMMITMENTS
Particulars As at As at
31 Dec 19 31 Dec 18
GBP000 GBP000
Bank guarantee issued to Maharashtra Pollution
Control Board 27 11
----------- -----------
The Commissioner Of Customs - Jawaharlal
Nehru Custom House 107 --
----------- -----------
Capital Commitment not provided for construction
of port
(Net of advances) 6,138 8,544
----------- -----------
25. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The changes in the Group's liabilities arising from financing activities can be classified as follows:
Particulars Long-term Short-term Leased Total
borrowing borrowing liabilities
GBP000 GBP000 GBP000 GBP000
1 January 2019 33,830 59 185 34,074
Adoption of IFRS 16 - - 2,926 2,926
Opening lease current liability - - 740 740
Revised 1 January 2019 33,830 59 3,851 37,740
--------------------------------- ----------- ----------- ------------- --------
Cash-flows:
- Repayment (2) (58) (347) (407)
- Proceeds 6,970 -- 34 7,004
--------------------------------- ----------- ----------- ------------- --------
Non-cash:
- Exchange difference (2056) (1) (148) (2,205)
- Reclassification (2,646) 2,646 -- --
--------------------------------- ----------- ----------- ------------- --------
31 December 2019 36,096 2,646 3,390 42,132
================================= =========== =========== ============= ========
Particulars Long-term Short-term Leased Total
borrowing borrowing liabilities GBP000
GBP000 GBP000 GBP000
----------------------- ----------- ----------- ------------- --------
1 January 2018 34,934 23 236 35,193
----------------------- ----------- ----------- ------------- --------
Cash-flows:
- Repayment (29) (23) (51) (103)
- Proceeds 8 -- -- 8
----------------------- ----------- ----------- ------------- --------
Non-cash:
- Exchange difference (1015) (1) -- (1,016)
- Reclassification (60) 60 -- --
----------------------- ----------- ----------- ------------- --------
31 December 2018 33,830 59 185 34,074
======================= =========== =========== ============= ========
25. Closure of subsidiary operation.
During the period group has closed the wholly owned subsidiary i.e Mercantile Ports (Netherlands) B.V. with effect from 17 May 2019.
26. EVENTS SUBSEQUENT TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATE
The full impact of COVID-19 on the macroeconomic environment became clear in early 2020, after the balance sheet date of this report. While the directors are monitoring the situation closely, they do not consider that the impact of COVID-19 after the reporting period has a material impact on the results as reported in these financial statements. No adjustments have been made to or additional disclosures made in these financial statements as a result of COVID-19. It is not possible to estimate the impact of COVID-19 on the Company at this time.
As at 29 July the company secretary changed from Intertrust to Beauvoir Trust Limited.
27. AUTHORISATION OF FINANCIAL STATEMENTS
The consolidated financial statements for the year ended 31 December 2019 were approved and authorised for issue by the Board of Directors 25 September 2020.
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END
FR SEMFMWESSELU
(END) Dow Jones Newswires
September 28, 2020 02:00 ET (06:00 GMT)
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