Final Results
30 June 2022
Mercantile Ports & Logistics Limited
("MPL", the "Group" or the "Company")
Final Results
Mercantile Ports & Logistics Limited (AIM: MPL), which is operating and developing out its port and logistics facility in Navi Mumbai, Maharashtra, India, is pleased to announce its preliminary results for the year ended 31 December 2021.
Chairman's Statement
2021 was another year of progress for MPL but one which, inevitably, was hampered by COVID-19. The coal jetty handled volume cargo for the first time and a number of new contracts were signed. However, the second wave of the pandemic that hit India in the early part of 2021 was much harsher than the first one. The resulting restrictions imposed in the country and around the world had a cascading effect on our business, setting our customer acquisition strategy behind schedule and impacting cargo volumes.
Despite the challenges that were faced, much was achieved during the year, with construction starting on a new warehousing facilities, which continued into early 2022. Our cornerstone customer, Tata Daewoo, delivered the first blocks of the Mumbai Trans Harbour Link, which had been constructed at the Facility. We were proud to have played our part in this achievement and we look forward to continuing to perform under this contract.
With COVID-19 restrictions currently behind us, India's economic and business environment has rebounded with vigour. India does seem to be a bright spot in the global economy, with growth outpacing most of Western Europe, the US and China. Our facility in Karanja will undoubtedly benefit from this, both in terms of handling cargo for the development of the region as well as increased handling of raw materials such as cement, steel, sand, fertilizer and coal.
The Company enhanced its business development team during the period and this additional resource is delivering results, with momentum expected to continue during the course of 2022.
The Company is pleased to report that it is in early stage discussions with a number of large shipping lines to handle containers at its port. This development is welcomed and will ensure over time both stable and predictable revenue streams. The facility's location is well placed to handle containers both from a road logistics perspective as well as by barge transportation. Contracts for container cargo provide predictable and long term revenue and the Company is hopeful of being able to announce progress in this regard during FY 2022.
The Board was extremely pleased to announce the culmination of months of negotiations with its consortium of banks to restructure the Company's outstanding debt in June 21. The highlight of the restructuring was the c.400 basis point reduction in the interest rate of the debt, in addition to a defined moratorium of the payment of the interest and principal amounts. This was a significant achievement by the Company and demonstrated that the Company's existing lenders recognise the lower risk nature of the business and the significant opportunities available for the Company to pursue. However, one of the Board's principal priorities for 2022 is to further enhance the terms of its debt facility further, to better reflect progress that the business has made. The Company is working with a number of international brokers to facilitate this.
To further strengthen the capital structure of the Company, MPL embarked on a fund raise in the second half of 2021amounting to £9.5 mn (net of cost). The Board was extremely pleased that the majority of its existing institutional investors participated in the placing, with Hunch Ventures, our largest investor, demonstrating its support for the Company by increasing its shareholding in the offering to 29%.
I was delighted to welcome Dmitri Tsvetkov to the board of MPL. Dmitri joined as a non-executive director and Chairman of the Audit Committee bringing public company experience to MPL and his position of as CFO of another Indian listed Company on AIM will further strengthen MPL's reporting and finance functions.
Jeremy Warner Allen
Chairman
Mercantile Ports & Logistics Limited
29 June, 2022
Operational Review
Indian Economy
After a dramatic second wave in 2021, the pandemic is steadily receding.
The momentum that the Company had demonstrated came to a halt in early 2021 as the Delta variant caused a sharp increase in COVID-19 cases and fatalities. Restrictions were imposed and India endured one of the most comprehensive lockdowns in the world. However, with the vaccine rollout starting in January, India demonstrated enormous resilience and, by end-September 2021, more than half of the eligible population had been given at least one vaccination and at mid-November, more than one of four of the population was fully vaccinated.
Synopsis of current status
With COVID-19 receding, the recovery began gaining momentum and GDP is projected to grow at 9.4% in fiscal year (FY) 2021-22 before reverting to 6.9% in FY 2022-23 and 6.2% in FY 2023-24. (Source: https://www.oecd.org/economy/india-economic-snapshot/ )
As is being seen across the globe, inflation is increasing, but is expected to ebb as supply chain disruptions are overcome.
Operations Update
From an operations perspective, 2021 marked an inflection point for MPL. In September 2021, with the waning of the second wave of the COVID-19 pandemic, MPL commenced the handling of significant and regular volumes of cargo under new contracts that were signed during the course of 2021. The Karanja facility was able to demonstrate its ability to be a 24X7 facility with the commencement of night navigation (berthing / de-berthing of vessels at night). With all key aspects of port and logistics operation, including vessel navigation, yard operations and transportation, being carried out in a seamless manner, successfully handled over 295,000 MT of coal in the September 2021 - March 2022 period. Whilst volume of coal handled during this period, was somewhat lower than expected on account of the third wave of the pandemic in December 2021 / January 2022, it is pleasing that this part of the Facility is operating well and we expect to increase volumes during FY 2022.
The port received positive feedback from its customers regarding the overall efficiency of operations and appreciation for the fact that no demurrage was incurred by any customer over this period. MPL continues to strengthen its business development and operations team, including on the container side of the business as it prepares to start handling containers during the course of 2022. New contracts are in discussion with a number of customers in a variety of cargo, including, with a large fertilizer company, a large French multinational for handling of construction material, a steel manufacturer, regional traders for multiple commodities and container handlers. In addition, the Company is in discussions with an international Logistics company interested in establishing a warehousing zone at Karanja Port.
Going Concern
Post the COVID-19 Pandemic outbreak in CY 2020 & 2021, the Board has 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 the financial model which was prepared as part of approving the 2022 budget.
The Directors considered the cash forecasts prepared for Eighteen months from 1 January 2022 up to 30 June 2023, together with certain assumptions for revenue and costs, to satisfy themselves of the appropriateness of the going concern used in preparing the financial statements.
Regarding financing, the group had capital £4.78 million cash balance as at 31 December 2021, additional line of unsecured credit from Hunch Ventures amounting to £4.5 million to mitigate funding risk as well as ensuring continuity in business. The company will use the cash generated from operations to manage the projected costs until June, 2023 of £ 3.33 million.
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.
A range of mitigating actions within the control of management has been assumed, including a reduction in all non-essential services.
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 utilization of available fund, 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 past 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.
Based on the above, the Board of Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
Conclusion
The port is well on its way to ramp up capacity utilization to achieve its targeted revenues and diversify its commodity mix towards handling a wider variety of bulk cargo as well as containers.
The Indian economy remains on a steady path to recovery, with businesses reverting to pre-COVID-19 levels of trade. With the level of containerization in India remaining far below the global average, and overall port capacity in the country remaining short of demand, the business case for a port & logistics facility like Karanja continues to stay robust.
Through the course of 2022, MPL will look to deepen its engagement with existing and new customers for incremental volumes as well as diversify its product / commodity mix towards revenue and margin accretive business of containers.
|
Consolidated Statement of Comprehensive Income for the Year ended 31 December 2021
|
|||
|
|
Notes |
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
CONTINUING OPERATIONS |
|
|
|
|
Revenue |
5 |
1,801 |
745 |
|
Cost of sales |
6 |
(307) |
(48) |
|
|
|
1,494 |
697 |
|
Administrative Expenses |
7 |
(8,373) |
(4,944) |
|
OPERATING LOSS |
|
(6,879) |
(4,247) |
|
|
|
|
|
|
Finance Income |
8(a) |
40 |
104 |
|
Gains from extinguishment of debt |
8(a) |
5,408 |
-- |
|
Finance Cost |
8(b) |
(4,576) |
(1,976) |
|
NET FINANCING COST |
|
872 |
(1,872) |
|
LOSS BEFORE TAX |
|
(6,007) |
(6,119) |
|
Tax (expense)/Income for the year |
9 |
(14) |
(456) |
|
Loss FOR THE YEAR |
|
(6,021) |
(6,575) |
|
|
|
|
|
|
Loss for the year attributable to: |
|
|
|
|
Non-controlling interest |
|
(5) |
(11) |
|
Owners of the parent |
|
(6,016) |
(6,564) |
|
LOSS FOR THE YEAR |
|
(6,021) |
(6,575) |
|
|
|
|
|
|
Other Comprehensive (Loss)/income: |
|
|
|
|
Items that will not be reclassified subsequently to profit or (loss) |
|
|
|
|
Re-measurement of net defined benefit liability |
24 |
8 |
(4) |
|
Items that will be reclassified subsequently to profit or (loss) |
|
|
|
|
Exchange differences on translating foreign operations |
|
(673) |
(6,161) |
|
Other comprehensive expense for the year |
|
(665) |
(6,165) |
|
Total comprehensive expense for the year |
|
(6,686) |
(12,740) |
|
Total comprehensive expense for the year attributable to: |
|
|
|
|
Non-controlling interest |
|
(5) |
(11) |
|
Owners of the parent |
|
(6,681) |
(12,729) |
|
|
|
(6,686) |
(12,740) |
|
Earnings per share (consolidated): |
|
|
|
|
Basic & Diluted, for the year attributable to ordinary equity holders |
11 |
*(0.231p) |
*(0.345p) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2021
|
|
Notes |
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Assets |
|
|
|
|
Property, plant and equipment |
12(a) |
131,344 |
131,343 |
|
Intangible asset |
12(b) |
4 |
4 |
|
Total non-current assets |
|
131,348 |
131,347 |
|
|
|
|
|
|
Trade and other receivables |
13 |
18,484 |
18,771 |
|
Cash and cash equivalents |
14 |
4,783 |
3,895 |
|
Total current assets |
|
23,267 |
22,666 |
|
Total assets |
|
154,615 |
154,013 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Non-current |
|
|
|
|
Employee benefit obligations |
17 |
43 |
33 |
|
Borrowings |
18 |
39,932 |
34,729 |
|
Lease liabilities payable |
20 |
1,562 |
1,716 |
|
Non-current liabilities |
|
41,537 |
36,478 |
|
Current |
|
|
|
|
Employee benefit obligations |
17 |
449 |
198 |
|
Borrowings |
18 |
1,037 |
4,074 |
|
Current tax liabilities |
19 |
415 |
384 |
|
Lease liabilities payable |
20 |
795 |
694 |
|
Trade and other payable |
20 |
10,171 |
14,512 |
|
Current liabilities |
|
12,867 |
19,862 |
|
Total liabilities |
|
54,404 |
56,340 |
|
|
|
|
|
|
Net assets |
|
100,211 |
97,673 |
|
|
|
|
|
|
Equity |
|
|
|
|
Stated Capital |
16 |
143,851 |
134,627 |
|
Retained earnings |
16 |
(16,402) |
(10,394) |
|
Translation Reserve |
16 |
(27,237) |
(26,564) |
|
Equity attributable to owners of parent |
|
100,212 |
97,669 |
|
Non-controlling Interest |
|
(1) |
4 |
|
Total equity |
|
100,211 |
97,673 |
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS |
|
for the Year ended 31 December 2021
|
|
|
Notes |
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
CASH FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
Loss before tax |
|
(6,007) |
(6119) |
|
Non cash flow adjustments |
22 |
5,174 |
2,020 |
|
Operating (loss)/profit before working capital changes |
|
(833) |
(4,099) |
|
Net changes in working capital |
22 |
(4,686) |
1,661 |
|
Net cash used in operating activities |
|
(5,519) |
(2,438) |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES |
|
|
|
|
Used in purchase of property, plant and equipment |
|
(2,107) |
(8,390) |
|
Finance Income |
8 |
19 |
73 |
|
Net cash used in investing activities |
|
(2,088) |
(8,317) |
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES |
|
|
|
|
From issue of additional shares |
16 |
9,224 |
-- |
|
From borrowing |
|
984 |
2,678 |
|
Repayment of bank borrowing Principal |
|
(641) |
-- |
|
Interest paid on borrowing |
|
(810) |
(1,520) |
|
Repayment of leasing liabilities principal |
|
(96) |
(845) |
|
Interest payment on leasing liabilities |
|
(131) |
(188) |
|
Net cash from financing activities |
|
8,530 |
125 |
|
Net change in cash and cash equivalents |
|
923 |
(10,630) |
|
|
|
|
|
|
Cash and cash equivalents, beginning of the year |
|
3,895 |
14,823 |
|
Exchange difference on cash and cash equivalents |
|
(35) |
(298) |
|
Cash and cash equivalents, end of the year |
|
4,783 |
3,895 |
Consolidated Statement of Changes in Equity
for the Year ended 31 December 2021
|
|
Stated Capital |
Translation Reserve |
Retained Earnings |
Other Components of equity |
Non- controlling Interest |
Total Equity |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Balance at 1 January 2021 |
134,627 |
(26,564) |
(10,394) |
-- |
4 |
97,673 |
|
Issue of share capital |
10,102 |
-- |
-- |
-- |
-- |
10,102 |
|
Share Issue cost |
(878) |
-- |
-- |
-- |
-- |
(878) |
|
Transaction with owners |
143,851 |
(26,564) |
(10,394) |
-- |
4 |
106,897 |
|
Loss for the year |
-- |
-- |
(6,016) |
-- |
(5) |
(6,021) |
|
Foreign currency translation difference for foreign operations |
-- |
(673) |
-- |
-- |
-- |
(673) |
|
Re-measurement of net defined benefit liability |
-- |
-- |
-- |
8 |
-- |
8 |
|
Re-measurement of net defined benefit liability transfer to retained earning |
-- |
-- |
8 |
(8) |
-- |
-- |
|
Total comprehensive income for the year |
-- |
(673) |
(6,008) |
-- |
(5) |
(6,686) |
|
Balance at 31 December 2021 |
143,851 |
(27,237) |
(16,402) |
-- |
(1) |
100,211 |
|
|
|
|
|
|
|
|
|
Balance at 1 January 2020 |
134,627 |
(20,403) |
(3,826) |
-- |
15 |
110,413 |
|
Issue of share capital |
-- |
-- |
-- |
-- |
- |
-- |
|
Share Issue cost |
-- |
-- |
-- |
-- |
- |
-- |
|
Transaction with owners |
134,627 |
(20,403) |
(3,826) |
-- |
15 |
110,413 |
|
Loss for the year |
-- |
-- |
(6,564) |
-- |
(11) |
(6,575) |
|
Foreign currency translation difference for foreign operations |
-- |
(6,161) |
-- |
-- |
-- |
(6,161) |
|
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 |
-- |
(6,161) |
(6,568) |
-- |
(11) |
(12,740) |
|
Balance at 31 December 2020 |
134,627 |
(26,564) |
(10,394) |
-- |
4 |
97,673 |
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 1st Floor, Tudor House, Le Bordage Rd, Guernsey GY1 1DB. It was listed on the Alternative Investment Market ('AIM') of the London Stock Exchange on 7 October 2010.
The consolidated financial statements of the Company comprise of 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 2021, and presented in UK Sterling (£).
The principal activities of the Group are to develop, own and operate a port and logistics facilities. As of 31 December 2021, the Group had 63 (Sixty-three) (2020: 59 (Fifty-Nine)) 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
The financial statements have been prepared on a going concern basis as the Group has adequate funds to enable it to exist as a going concern for the near future. The Group has nearly finished the construction work at site and the Directors believe that they will have sufficient equity, sanctioned credit facilities from lenders and headroom in the capital structure for managing the balance work as well as Port operations at the Facility.
The Directors considered the cash forecasts prepared for the eighteen months ending 30th June, 2023, 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 has £4.78 million cash balance as at 31 December 2021 and £0.70 million of FITL drawdown on its revised Rupee term loan facility of INR 475.57 crore. Under the original terms of the loan facility the company was to start repayment of the principal amount from June 2020, which was revised to September, 2020 subsequently due to Covid 19 Lockdown vide RBI circular dated 6th August, 2020 the principal repayment has been deferred for a period of 24 months and now to commence from Oct. 2022 quarter onwards. The directors believe that the debt providers will continue to support the Group thereafter.
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 July 2021, as necessary reduction in all non-essential services.
In line with relief measures provided by the RBI to borrowers impacted by Covid-19 related distress, the lenders on 11 June 2021 sanctioned OTR (One Time Restructuring) scheme and implemented the same effective from Jun'21. Salient features of the OTR are as below:
1. Interest on term loan for a period March 2020 to August 2020 was converted in to Term Loan
2. Deferment of commencement of principal repayment by 24 months (October'2020 to October'2022)
3. Reduction in interest rate by c.400 bps (from 13.45% to 9.5%)
4. Moratorium on interest payments from Jan 2021 to Feb'2022
There is additional line of credit of 4.5 million from Hunch Ventures, to provide additional headroom for the Company's operations, the draw down is available from July 2022 to 31 December 2023, and repayment will start within 24 month from the draw down date and repayment can be extended mutually by both the parties.
Based on the above, the Board of Directors believe that the Group has adequate resources to continue in operational existence for the near future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
(b) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the results of the Company and entities controlled by the Company (its subsidiaries) up to 31 December 2021. Subsidiaries are 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 interest
Non-controlling interest, 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 interest.
(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 Incorporation |
% Voting Rights |
% Economic Interest |
|
Karanja Terminal & Logistics (Cyprus) Ltd |
Mercantile Ports & Logistics Limited |
Cyprus |
100.00 |
100.00 |
|
Karanja Terminal & Logistics Private Limited* |
Mercantile Ports & Logistics Limited |
Cyprus |
5.53 |
5.53 |
|
Karanja Terminal & Logistics Private Limited* |
Karanja Terminal & Logistics (Cyprus) Ltd |
India |
94.25 |
94.25 |
* Financial year end for KTLPL is April to March, as same is governed by Companies Act 2013, but for preparing group financials we have considered January to December period.
(d) FOREIGN CURRENCY TRANSLATION
The consolidated financial statements are presented in UK Sterling (£), 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
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the date 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 as an when 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, other ancillary port and logistics services are measured based upon cargo handled at rates specified under the contract and charged on per metric tonne basis.
The performance obligation is satisfied using the output method; this method recognises revenue based, on the value of services transferred to the customer, for example, quantity of cargo loaded and unloaded and/or transported.
Revenue is recognized in the accounting period in which the services are rendered and completed till reporting date.
Management determines if there are separate performance obligations from which customer are being able to benefit from, for example, barging, stevedoring or transportation.
Each of these services are distinct from the other. Customer may choose one or more of these distinct services and revenue recognition would be based on per metric tonne basis on satisfaction of each service obligation.
Income from long term leases
As a part of its business activity, the Group sub-leases land on long term basis to its customers. Leases are classified as finance lease whenever the terms of lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating lease. In some cases, the Group enters into cancellable lease / sub-lease transaction agreement, while in other cases, it enters into non-cancellable lease / sub-lease agreement. The Group recognises the income based on the principles of leases as set out in IFRS 16 "Leases" and accordingly in cases where the land lease / sub-lease agreement are cancellable in nature, the income in the nature of upfront premium received / receivable is recognised on operating lease basis i.e. on a straight line basis over the period of lease / sub-lease agreement / date of memorandum of understanding takes effect over lease period and annual lease rentals are recognised on an accrual basis.
Interest income
Interest income is reported on an accrual basis using the effective interest method.
(f) Borrowing cost
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 under finance costs.
(g) EMPLOYEE BENEFITS
i) Defined contribution plans (Provident Fund)
In accordance with Indian Law, eligible employees receive benefit 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 sum 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 for 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 term 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 re-measurements 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 re-measures 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 re-measured 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 re-measured 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 re-measured 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 SOFP 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 lessee 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.
(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 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 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 |
|
Lease hold Land Development |
Over the period of Concession Agreement by Maharashtra Maritime board (MMB) . |
|
Marine Structure, Dredged Channel |
Over the period of Concession Agreement by Maharashtra Maritime board (MMB) . |
|
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 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. When impairment indicators exist the management compares the carrying value of the property, plant and equipment with the fair value determined as the higher of fair value less cost of disposal or value in use, also refer note 3.
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 at amortised costs, initially measured at the transaction price, which reflects fair value, and subsequently at amortised cost less impairment. In measuring the impairment, the Group has applied the simplified approach to expected credit losses as permitted by IFRS9. Expected credit losses are assessed by considering the Group's historical credit loss experience, factors specific for each receivable, the current economic climate and expected changes in forecasts of future events. Changes if any in expected credit losses are recognised in the Group income statement.
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 bank deposits that can easily be liquidated 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 and interpretation
There are no accounting pronouncements, which have become effective from 1 January 2021 that have a significant impact on the Group's consolidated financial statements.
(r) Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the group
Following new standards or amendments that are not yet effective and have been issued by the IASB which are not applicable or have material impact on the Group.
· IFRS 17 Insurance Contracts
· Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS 4)
· References to the Conceptual Framework
· Proceeds before Intended Use (Amendments to IAS 16)
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
· Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS 1, IFRS 9,IFRS 16, IAS 41)
· Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
· Deferred Tax related to Assets and Liabilities from a Single Transaction
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements.
Recognition of income tax liabilities
The group continues to retain the provision of tax liability for the assessment year 2011-12 & 2012-13 in as the matter is sub judice with the court in India. This includes interest on the provision up through December 2021.
In light of a recent ITAT judgement pronounced in favour of the Group for AY 2013-14, 2014-15 & 2015-16, the Group has accordingly estimated that the tax liability for those years is not likely to be paid to income tax department. The pronouncement applies to identical matters for all subsequent years. Hence the Group has reversed Income tax provision for AY 2013-14 onwards in December 2019. The Income tax department has preferred an appeal in higher court. In light of uncertainty of the outcome, the Group has disclosed this under the heading of contingent liability in note 25.
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, 2021, the carrying value of the port under construction is £131.35 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 as at 31 December 2021 behind the discounted cash flow are:
· Construction outflow of £2.96 Million, shall be utilized if requirement arises for additional reclamation basis demand for the same.
· Cash-flow projections have been run until 2059, the length of the lease of the land.
· The revenue capacity comprises of lease rentals, bulk and project cargo, which depends on the volume in Metric Ton.
· The company expect to commence its CFS container business with initial 16,000 container in year 1 which gradually increase 27,500 and 35,000 in year 2 & 3 and peaks out at year 7 to 74,000.
· Inflation 5%.
· Utilization rate at 10% in 2022, 20% in 2023, 30% in 2024.
· Revenue for each activity/service provided by Karanja Port (to its customers) is calculated by multiplying Throughput per annum with Tariff rates for each activity/service.
· Assumptions on costs are what we will incur to provide each activity/service. These Direct costs have been apportioned on the basis total costs expected to be incurred divided by Cargo throughput for that Commodity.
· The costs are set based on margins of 50-55%, based on margin of similar ports.
· Pre-tax rate derived from weighted average cost of capital (WACC) 17%
The group has carried out sensitivity analysis on our discounted cash flow analysis. If revenues in our model were to decrease by 20 %, there would be an impairment of £4.3 million. If the discount rate used in the model were 3% higher, than there would also be an impairment of £2.4 million.
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 100 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 presented.
5. REVENUE FROM OPERATION
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
|
|
|
|
Cargo handling income |
710 |
322 |
|
Lease income |
1,091 |
423 |
|
|
1,801 |
745 |
The Company has given certain land portions on operating lease. These lease arrangement is for a period 40 months. Lease is renewable for further period on mutually agreeable terms.
The total future minimum lease rentals receivable at the SOFP date is as under:
|
Payments falling due |
As on 31 Dec 21 INR in million |
As on 31 Dec 21 £ million |
|
2022 |
148.95 |
1.49 |
|
2023 |
102.81 |
1.02 |
|
2024 |
26.66 |
0.27 |
|
2025 |
9.6 |
0.10 |
|
Fifth year and above |
57.60 |
0.58 |
|
Total |
345.62 |
3.46 |
6. COST OF SALES
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
|
|
|
|
Wharf-age expense |
72 |
11 |
|
Other operation expense |
235 |
37 |
|
|
307 |
48 |
7. ADMINISTRATIVE EXPENSES
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
Employee costs |
577 |
571 |
|
Directors' remuneration and fees |
423 |
489 |
|
Operating lease rentals |
13 |
10 |
|
Foreign exchange gains/loss |
84 |
464 |
|
Depreciation |
3,132 |
1,777 |
|
Other administration costs |
4,144 |
1,633 |
|
|
8,373 |
4,944 |
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
|
|
|
|
Interest on bank deposits |
40 |
104 |
|
|
|
|
|
Gain from extinguishment of debt* |
5,408 |
-- |
8. (a) FINANCE INCOME
* During the financial year, group has received sanction from lenders for one-time restructuring (OTR) of loan. The Management has OTR has been tested for debt Modification under IFRS 9. The revised cash out flow discounted at original EIR 13.45% resulted in net gain of £ 5.41 million.
8. (b) FINANCE EXPENSES
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
|
|
|
|
Interest on term loan* |
1,977 |
1,636 |
|
Interest others |
2,599 |
340 |
|
|
4,576 |
1,976 |
* Interest on the term loan is capitalized against assets under construction up to March 2021. As major construction work is completed and assets under construction transferred into service, the capitalization of interest ceased on that part and interest expensed out to the profit and loss account from April 2021 onwards.
The capitalization rate used to determine the amount of borrowing costs to be capitalized is the weighted average interest rate applicable to the entity's general borrowings during the year, in this case 13.45% up to 10 June 2021 and 9.5% effective from 11 June 2021 (2020 - 13.54%).
9. INCOME TAX
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
|
|
|
|
Loss Before Tax |
(6,007) |
(6,119) |
|
Applicable tax rate in India* |
26.00% |
22.88% |
|
Expected tax credit |
(1,562) |
(1,400) |
|
Adjustment for non-deductible losses of MPL & Cyprus entity against income from India |
994 |
402 |
|
Adjustment for non-deductible expenses |
568 |
998 |
|
Interest provision on outstanding tax liability |
(14) |
(456) |
|
|
(14) |
(456) |
*Considering that the Group's operations are presently based in India, the effective tax rate of the Group of 26.00% (prior year 22.88%) 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.
Based on the recent judgement from the Income Tax tribunal in favour of the company the provision for the period from 2013 to 2017 have been reversed and interest provision for outstanding tax liability for year 2011 & 2012 are made.
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.
Due to uncertainty, that Indian entity will generate sufficient future taxable income to offset business losses incurred to realise deferred tax assets, the management has therefore not recognised the Deferred Tax Asset amounting to INR: 47.88 crore (£4.77 million)
10. 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 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
Audit Fees |
|
|
|
Fees payable to the auditor for the audit of the Group's financial statements |
130 |
107 |
|
Non-audit service: |
|
|
|
Interim Financial Statement Review |
9 |
9 |
|
Non -audit services |
80 |
- |
|
|
219 |
116 |
Audit fees related to prior year overruns during the year amount to £ 7,210 (2020: £23,278).
11. EARNINGS PER SHARE
Both basic and diluted earnings per share for the year ended 31 December 2021 have been calculated using the loss attributable to equity holders of the Group of £6.02 million (prior year loss of £6.56 million).
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
Loss attributable to equity holders of the parent |
£(6,016,000) |
£(6,564,000) |
|
Weighted average number of shares used in basic and diluted earnings per share |
26,000,334 |
19,050,221 |
|
|
|
|
|
EARNINGS PER SHARE |
|
|
|
Basic and Diluted earnings per share |
(0. 231p) |
(0.345p) |
On 9th September 2021 The group has successfully completed fund raise by placing 2,244,947,810 new Ordinary Shares at a price of 0.45 pence per share. Also on 13 September 2021 group has consolidated its share capital by way of issuing 1 share for every 100 shares held hence earning per share of comparative period is adjusted accordingly.
12 (a). PROPERTY, PLANT AND EQUIPMENT
Details of the Group's property, plant and equipment and their carrying amounts are as follows:
|
|
Computers |
Office Equipment |
Furniture |
Vehicles |
Plant & Machinery |
Port Asset |
Right of use
|
Capital Work in Progress |
Total |
|
|
Asset |
||||||||
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Gross carrying amount |
|
|
|
|
|
|
|
|
|
|
Balance 1 Jan 2021 |
41 |
136 |
262 |
577 |
25 |
50,214 |
1,733 |
80,801 |
133,789 |
|
Net Exchange Difference |
(1) |
(1) |
(2) |
(3) |
(1) |
(352) |
(12) |
(566) |
(938) |
|
Additions |
2 |
13 |
19 |
12 |
-- |
-- |
-- |
4,051 |
4,097 |
|
Transfers from CWIP ^ |
-- |
387 |
66 |
-- |
23 |
59,661 |
-- |
(60,137) |
-- |
|
Disposals |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
|
Balance 31 Dec 2021 |
42 |
535 |
345 |
586 |
47 |
109,523 |
1,721 |
24,149 |
136,948 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
Balance 1 Jan 2021 |
(30) |
(69) |
(64) |
(320) |
(3) |
(1,725) |
(235) |
-- |
(2,446) |
|
Net Exchange Difference |
(2) |
(1) |
-- |
2 |
1 |
(29) |
2 |
-- |
(27) |
|
Charge for the year |
(4) |
(45) |
(27) |
(44) |
(2) |
(2,914) |
(95) |
-- |
(3,131) |
|
Disposals |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
|
Balance 31 Dec 2021 |
(36) |
(115) |
(91) |
(362) |
(4) |
(4,668) |
(328) |
-- |
(5,604) |
|
Carrying amount 31 Dec 2021 |
6 |
420 |
254 |
224 |
43 |
104,855 |
1,393 |
24,149 |
131,344 |
^ During the year company has capitalized an additional 22 acres of land, 340 meter of jetty and various support infrastructure cost and accordingly £ 60,137 thousand has been transferred from CWIP to under various head i.e. Port Asset £ 59,661 thousand, plant and machinery £ 23 thousand, Furniture £ 66 thousand and office equipment £ 387 thousand.
The Group has leased various assets including land and buildings. As at 31 December 2021, the net book value of recognised right-of use assets relating to land and buildings was £ 1.39 million (2020: £ 1.49 million). The depreciation charge for the period relating to those assets was £ 0.09 million (2020: £ 0.15 million).
Amounts recognised in the statement of income are detailed below:
|
Particular |
£000 31 Dec 2021 |
£000 31 Dec 2020 |
|
Depreciation on right-of-use assets |
95 |
152 |
|
Interest expense on lease liabilities |
175 |
188 |
|
Expense relating to short-term leases |
13 |
9 |
|
Expense relating to low-value leases |
1 |
1 |
|
|
284 |
350 |
|
|
Computers |
Office Equipment |
Furniture |
Vehicles |
Plant & Machinery |
Port Asset |
Right of use
|
Capital Work in Progress |
Total |
|
|
asset |
||||||||
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Gross carrying amount |
|
|
|
|
|
|
|
|
|
|
Balance 1 Jan 2020 |
52 |
136 |
244 |
492 |
27 |
39,404 |
2,771 |
90,909 |
134,035 |
|
Net Exchange Difference |
(3) |
(8) |
(15) |
(30) |
(2) |
(2,419) |
(170) |
(5,582) |
(8,229) |
|
Additions |
-- |
8 |
5 |
124 |
- |
- |
-- |
8,731 |
8,868 |
|
Disposals |
-- |
-- |
-- |
(9) |
-- |
-- |
(868) |
-- |
(877) |
|
Transfers from CWIP ^ |
-- |
-- |
28 |
-- |
-- |
13,229 |
-- |
(13,257) |
-- |
|
Transfer from computer to software |
(8) |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
(8) |
|
Balance 31 Dec 2020 |
41 |
136 |
262 |
577 |
25 |
50,214 |
1,733 |
80,801 |
133,789 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
Balance 1 Jan 2020 |
(38) |
(42) |
(26) |
(290) |
(1) |
(329) |
(201) |
-- |
(927) |
|
Net Exchange Difference |
5 |
4 |
3 |
20 |
-- |
91 |
19 |
-- |
142 |
|
Charge for the year |
(5) |
(31) |
(41) |
(51) |
(2) |
(1,487) |
(159) |
-- |
(1,776) |
|
Disposals |
-- |
-- |
-- |
1 |
-- |
-- |
106 |
-- |
107 |
|
Transfer from computer to software |
8 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
8 |
|
Balance 31 Dec 2020 |
(30) |
(69) |
(64) |
(320) |
(3) |
(1,725) |
(235) |
-- |
(2,446) |
|
Carrying amount 31 Dec 2020 |
11 |
67 |
198 |
257 |
22 |
48,489 |
1,498 |
80,801 |
131,343 |
^ During the previous year company has capitalized additional 23 acres of land and capitalization of port is done on above line.
* During the previous year company has capitalized CWIP to amounting to 13,257 thousand under various head i.e. Port Asset 13,229 thousand, Furniture 28 thousand.
Assets provided as security
· The following asset are provided as security for lease liability payable as described in Note 20:
|
|
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Vehicles |
224 |
257 |
|
|
224 |
257 |
The vehicles, which are free from incumbrancer, will also form a part of hypothecation towards securitisation of debt
All other immovable and movable property with a carrying value of £ 131,124,000 (2020: £132,097,000) is under hypothecation in favour of the "Term lenders".
The Port facility being developed in India has been hypothecated by the Indian subsidiary as security for the bank borrowings (revised borrowing limit sanctioned as per OTR is INR 475.57 crore (£47.41 million) (2020 INR 480 crore (£48.19 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 until March 2021. During the year the Group has, capitalised borrowing cost of £0.86 million (2020: £4.18 million) and borrowing cost expensed out of £4.08 million (2020: £ 1.33 million).
The Indian subsidiary has estimated the total project cost of INR 1,404 crore (£138.10 million) towards construction of the port facility. Out of the aforesaid project cost, the contract signed with the major contractor is INR1,048 crores (£103.08 million). As of 31 December 2021, the contractual amount (net of advances) of INR 1.26 crores (£0.13 million) is still payable. There were no other material contractual commitments.
Karanja Terminal & Logistics Private Limited (KTPL), the Indian subsidiary has received revised sanction in the month of June 2021 as per OTR scheme of a Rupee term loan of INR 475.57 crore (£47.41 million) for part financing the port facility. The Rupee term loan has been sanctioned by three Indian public sector banks and the revised loan agreement was executed on 10 June 2021. As at 10 June 2021, the original term loan agreement was amended extending the tenure of the loan with repayment commencing from October2022 -December 2022 quarter, post implementation of one-time restructuring.
12 (b). Intangible Asset
|
|
Intangible Asset - Asset Software |
|
Software |
|
|
|
£000 |
|
Gross carrying amount |
|
|
Balance 1 Jan 2021 |
13 |
|
Exchange Difference |
(1) |
|
Additions |
2 |
|
Disposals |
-- |
|
Balance 31 Dec 2021 |
14 |
|
|
|
|
Depreciation |
|
|
Balance 1 Jan 2021 |
(9) |
|
Exchange Difference |
-- |
|
Charge for the year |
(1) |
|
Disposals |
-- |
|
Balance 31 Dec 2021 |
(10) |
|
Carrying amount 31 Dec 2021 |
4 |
|
|
Intangible Asset - Asset Software |
|
Software |
|
|
|
£000 |
|
Gross carrying amount |
|
|
Balance 1 Jan 2020 |
6 |
|
Exchange Difference |
(1) |
|
Transfer from computer to software group (regrouping) |
8 |
|
Additions |
-- |
|
Disposals |
-- |
|
Balance 31 Dec 2020 |
13 |
|
|
|
|
Depreciation |
|
|
Balance 1 Jan 2020 |
(1) |
|
Exchange Difference |
1 |
|
Transfer from computer to software group (regrouping) |
(8) |
|
Charge for the year |
(1) |
|
Disposals |
-- |
|
Balance 31 Dec 2020 |
(9) |
|
Carrying amount 31 Dec 2020 |
4 |
13. TRADE AND OTHER RECEIVABLES
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000
|
|
Deposits |
2,493 |
2,177 |
|
Advances |
|
|
|
- Related Party |
3,612 |
-- |
|
- Others |
12,077 |
16,338 |
|
|
|
|
|
Accrued Interest of fixed deposits |
2 |
5 |
|
Accrued Income |
16 |
-- |
|
Debtors |
|
|
|
- Related Party |
107 |
107 |
|
- Prepayment |
134 |
91 |
|
- Others |
43 |
53 |
|
|
18,484 |
18,771 |
Advances include payment to EPC contractor of £7.09 million (2020: £10.16 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 £ Nil million (2020: £0.05million) 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.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade and other receivable. To measure expected credit losses on a collective basis, trade and other receivables are grouped based on similar credit risk and aging. The assets have similar risk characteristics to the trade receivables for similar types of contracts.
The expected loss rates are based on the Group's historical credit losses experienced. The historical loss rates are then adjusted to reflect current and forward-looking information, any known legal and specific economic factors, including the credit worthiness and ability of the customer to settle the receivables.
The group renegotiations or modifications of contractual cash flows of a financial asset, which results in de-recognition, the revised instruments are treated as a new or else the group recalculates the gross carrying amount of the financial asset.
14. CASH AND CASH EQUIVALENTS
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
Cash at bank and in hand |
4,571 |
2,299 |
|
Deposits* |
212 |
1,596 |
|
|
4,783 |
3,895 |
Cash at bank earns interest at floating rates based on bank deposit rates. The fair value of cash and short-term deposits is £4.78 million (2020: £3.89 million).
Included in cash and cash equivalents is £0.74 million (2020: £2.43 million) that is within a bank account in the name of Hunch Ventures (Karanja), as a result of the 2018 and 2021 share sale. The Company is the beneficiary of the account. During the year, we have been able to draw money out of this account to cover working capital throughout the year.
*Deposit are placed under lien against Bank Guarantees issued by bank on behalf of the group to various Government Authorities and the Debt Service Reserve (DSR) as per the loan agreement with lenders.
The Management policy is to invest available cash on hand in short-term or deposit account of, Government banks and private banks with credit ratings of AAA and above.
15. 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. The Board of Directors carries out risk management.
(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 (£). The functional currency of its subsidiary Karanja Terminal & Logistics Private Limited (KTLPL) is INR and functional currency of Karanja Terminal & Logistics (Cyprus) Ltd.
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 100.3014 for SOFP items and for profit and loss item GBP 1: INR101.6676
This balance is cumulatively a £27.31m loss to equity (2020: £26.12m loss). This is primarily due to a movement from approximately 1:70 to 1:100 between 2010 to 2013 and the translation reserve reaching a loss of £21.6m at 31 December 2013 and further increase in translation reserve from £21.6m to £27.31m due to appreciation of GBP against INR during the period 2018 to 2021. The closing rate at 31 December 2021 was GBP1: INR 100.30, hence as compared to the translation loss reported between 2018-19, the same is insignificant in 2021. With the majority of funding now in India this risk is further mitigated. During 2021, the average and year-end spot rate used for INR to GBP were 100.30 and 101.67 respectively (2020: 99.60 and 95.14).
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 and INR denominated balance of MPL in India amounting to INR 106.12 million (£1.06 million) as on reporting date (prior year INR 97.88 million (£0.983 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 2021 |
31 Dec 2020 |
|
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 and borrowing are denominated:
|
Functional currency |
£ (depreciation by10%) |
£ (appreciation by 10%) |
|
|
£000 |
£000 |
|
Cash and cash equivalent |
|
|
|
31 December 2021 |
117.56 |
(96.19) |
|
31 December 2020 |
379.18 |
(310.24) |
|
|
|
|
|
Borrowing |
|
|
|
31 December 2021 |
(5,144.55) |
4,209.18 |
|
31 December 2020 |
(4,311.47) |
3,527.57 |
If the functional currency GBP had weakened with respect to foreign currency (INR) by the percentages mentioned above, for year ended 31 December 2021 then the effect will be change in profit and equity for the year by £4.11 million (2020: £3.93 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.
During the year KTPL has successfully done One Time Restructuring (OTR) of a rupee term loan of INR 475.57 crore (£47.41 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 present composite rate of interest from all lender and type of borrowing varies from 7.95% to 10.50% based on respective banks MCLR (2021: 7.35%) and remains effective as on the SOFP date
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 may lower its base rate in the coming quarters.
Interest rate sensitivity
At 31 December 2021, 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% (2020: +/- 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 Year £000 |
Equity, net of tax £000 |
||
|
|
+1% |
-1% |
+1% |
-1% |
|
31 December 2022 |
(461) |
461 |
(314) |
314 |
|
31 December 2023 |
(447) |
447 |
(331) |
331 |
|
31 December 2024 |
(412) |
412 |
(305) |
305 |
|
31 December 2025 |
(368) |
368 |
(272) |
272 |
|
31 December 2026 |
(299) |
299 |
(221) |
221 |
|
31 December 2027 |
(218) |
218 |
(161) |
161 |
|
31 December 2028 |
(130) |
130 |
(96) |
96 |
|
31 December 2029 |
(38) |
38 |
(28) |
28 |
|
31 December 2030 |
- |
- |
- |
- |
|
31 December 2031 |
- |
- |
- |
- |
(b) Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group's maximum exposure (£15.63 million (2020: £15.38 million)) to credit risk is limited to the carrying amount of financial assets recognised at the reporting date.
The group determines credit risk by checking a company's creditworthiness and financial strength both before commencing trade and during the business relationship at initial recognition and subsequently. 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's policy is to deal only with creditworthy counterparties. The Group has no significant concentrations of credit risk.
The Group considers default to be when there is a breach of any of the terms of agreement.
The Group writes off a financial asset when there is no realistic prospect of recovery and all attempts to recover the balance have been exhausted. An indication that all credit control activities have been exhausted and where the asset due is greater than 365 days old or where there are insolvency issues relating to the Trade and other receivables.
The Group does not concentrate any of its deposits in one bank. This is seen as being prudent and credit risk is managed by the management having conducted its own due diligence. The balances held with banks are on a short-term basis. Management reviews quarterly 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 (47.86 million) which was revised vide OTR sanctioned by consortium bank on 11 June 2021 to INR 475.57 crore (£47.41 million) out of which INR 464.41 crore (£46.30 million) are disbursed and £4.78 million as at December 2021 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. However, due to the Covid 19 pandemic impact on business, the Reserve Bank of India had instructed all financial institutions to provide relief by way of reduction in the Rate of interest, as well as considering One Time Restructuring (OTR) of the term loan along with interest due and defer the same for a further period of two years.
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 2021, the Group's non-derivative financial liabilities have contractual maturities (and interest payments) as summarized below:
|
Payment falling due |
Principal payments |
Interest payments |
||
|
INR in Crore |
£000 |
INR in Crore |
£000 |
|
|
Within 1 year |
10.40 |
1.04 |
44.36 |
4.42 |
|
1 to 5 year's |
202.04 |
20.14 |
145.95 |
14.55 |
|
After 5 year's |
251.97 |
25.12 |
36.94 |
3.68 |
|
Total |
464.41 |
46.30 |
227.25 |
22.65 |
The present composite rate of interest ranges from 7.95% to 10.50% 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 SOFP liquidity ratio against internal requirements and maintaining debt financing plans. As a part of monitoring SOFP 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) |
|
|||
|
|
Note |
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
|
|
£000 |
£000 |
|
|
Financial Assets |
2 |
|
|
|
|
Cash and Cash Equivalents |
14 |
4,783 |
3,895 |
|
|
Loan and receivables |
13 |
4,263 |
584 |
|
|
|
|
9,046 |
4,479 |
|
|
Financial Liability |
|
|
|
|
|
Borrowings |
18 |
40,969 |
38,803 |
|
|
Trade and other payables |
20 |
12,529 |
16,922 |
|
|
Employee benefit obligations |
17 |
492 |
231 |
|
|
|
|
53,990 |
55,956 |
|
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.
16. EQUITY
16.1 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 31 December 21 |
Year ended 31 December 20 |
||||
|
No of shares |
£000 |
No of shares |
£000 |
|
||
|
Shares issues and fully paid: |
|
|
|
|
|
|
|
Beginning of the year |
1,905,022,123 |
134,627 |
1,905,022,123 |
134,627 |
|
|
|
Addition in the year# |
2,244,947,810 |
10,102 |
-- |
-- |
|
|
|
Share issue cost |
-- |
(878) |
-- |
-- |
|
|
|
Reduction of old shares due to consolidation of shares# |
(4,149,969,933) |
-- |
-- |
-- |
|
|
|
1 New shares issued for every 100 shares # |
41,499,699 |
-- |
-- |
-- |
|
|
|
Closing number of shares |
41,499,699 |
143,851 |
1,905,022,123 |
134,627 |
|
|
The stated capital amounts to £143.85 million (2020: £134.63 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 2,244.95 million (prior year Nil) equity shares to various institutional and private investors, by way of a rights issue.
# During the year the company has raised £10.1 million (£9 million after costs) in August 2021 via subscription, share placing and Primary Bid. Proceeds of the fund raise are expected to be utilized for business development, servicing new and existing contracts, and debt servicing and general working capital requirements. During the year the company has consolidated its share capital by way of issuing 1 share for every 100 shared held.
16.2 Other Components of Equity
Retained Earnings
|
|
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Opening Balance |
(10,394) |
(3,826) |
|
Addition during the year |
(6,016) |
(6,564) |
|
Re-measurement of net defined benefit liability |
8 |
(4) |
|
Closing balance |
(16,402) |
(10,394) |
Accumulated losses of £ 16.40 million (2020: £10.40 million) include all current year retained profits.
Translation Reserve
|
|
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Opening Balance |
(26,564) |
(20,403) |
|
Addition during the year |
(673) |
(6,161) |
|
Closing balance |
(27,237) |
(26,564) |
The translation reserve of £ 27.24 million (2020: £26.56 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.
17. EMPLOYEE BENEFIT OBLIGATIONS
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
Non- Current |
|
|
|
Pensions - defined benefit plans |
43 |
33 |
|
|
43 |
33 |
|
Current |
|
|
|
Wages, salaries |
446 |
191 |
|
Pensions - defined benefit plans |
3 |
7 |
|
|
449 |
198 |
18. BORROWINGS
Borrowings consist of the following:
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
Non-Current |
|
|
|
Bank loan (refer note 26) |
39,932 |
34,729 |
|
|
39,932 |
34,729 |
|
Current |
|
|
|
Bank loan (refer note 26) |
1,037 |
4,074 |
|
|
1,037 |
4,074 |
Borrowing
Karanja Terminal & Logistics Private Limited (KTPL), the Indian subsidiary, has obtained a term loan facility of INR 480 crore (£48.19 million). The Rupee term loan has been sanctioned by four Indian public sector banks and the loan agreement was executed on 28 February 2014. Due to the merger of Syndicate bank with Canara bank and the takeover of Vijaya bank by Bank of Baroda, three lenders sanctioned the current lending. On 29 September 2017 the terms of sanction were amended, extending original tenure of the loan to 13 years and 6 months with repayment commencing from the end of June 2020.
In view of the extension of lockdown and continuing disruption on account of COVID -19, the group has applied for one time restructuring plan as approved by RBI with the lender. The lender principally approved invoking the Resolution Plan and subsequently signed the Inter Creditor Agreement (ICA). On 10 June 2021, the Group has received final approval from lender for restructuring of term loan. The Salient features of OTR scheme are as follow:
a. Interest on term loan for the March 2020 to August 202. has been converted to term loan
b. Reduction in the rate of interest of principal term loan, from 13.45% to 9.5%;
c. Moratorium on Interest repayment for the period January 2021 to February 2022 and same will be converted to FITL;
d. Deferment of principal term loan repayment for a period of 24 months. Principal Repayment commencing from 31 October 2022 quarter.
e. Interest on FITL to is 10.50%.
Due to above change in terms and condition of original loan, resulted in substantial debt modification. The group has calculated present value of outstanding principal and interest as on the modification date and derecognised old loan resulting in gain of INR: 53.61 crore (£5.27million) on extinguishment of old loan. For a new loan, the grouped has calculated effective interest rate of 12.41%.
KTLPL has utilised the Rupee term loan facility of INR 464.41 crore (£46.30 million) (2020: INR 386.47 crore (£38.80 million)) as at the reporting date.
The Port facility is hypothecated as security with lenders for the bank loan availed by the group for construction of the port facility.
19. current tax liabilities
Current tax liabilities consist of the following:
|
|
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Duties & taxes |
59 |
8 |
|
Provision for Income Tax |
356 |
376 |
|
Current tax liabilities |
415 |
384 |
The carrying amounts and the movements in the Provision for Income Tax account are as follows:
|
|
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Carrying amount 1 January |
2,344 |
2,034 |
|
Interest provision on outstanding tax liability |
14 |
456 |
|
Exchange difference |
(16) |
(146) |
|
Carrying amount 31 December |
2,342 |
2,344 |
|
Taxes paid |
(1,986) |
(1,968) |
|
|
356 |
376 |
The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the 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 based on income tax assessment.
Based on recent judgement from the Income Tax tribunal in favour of the company the provision for the period from 2013 to 2017 has been reversed in earlier year statement of comprehensive income and has made interest provision in current year for outstanding tax liability of 2011 & 2012.
Due to uncertainty, that Indian entity will generate sufficient future taxable income to offset business losses incurred to realise deferred tax assets, the management has therefore not recognised the Deferred Tax Asset amounting to INR: 47.88 crore (£4.77 million)
20. TRADE AND OTHER PAYABLES
Trade and other payables consist of the following:
|
|
Year ended 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
Non-Current |
|
|
|
Lease liability (refer note 26) |
1,562 |
1,716 |
|
|
|
|
|
Current |
|
|
|
|
|
|
|
Lease Liability - ( refer note 26) |
795 |
694 |
|
|
|
|
|
Sundry creditors |
10,174 |
11,311 |
|
Interest (prepaid)/payable |
(3) |
3,201 |
|
|
10,171 |
14,512 |
Future minimum lease payments at 31 December 2021 were as follows
|
|
Minimum lease payments due |
||||||
|
|
Within 1 year |
1 - 2 Year |
2 - 3 Year |
3 - 4 Year |
4 - 5 Year |
After 5 Year |
Total |
|
Lease payments |
980 |
219 |
210 |
211 |
170 |
5,578 |
7,368 |
|
Finance charges |
(185) |
(176) |
(173) |
(168) |
(167) |
(4,142) |
(5,011) |
|
Net present values |
795 |
43 |
37 |
43 |
3 |
1,436 |
2,357 |
21. RELATED PARTY TRANSACTIONS
The consolidated financial statements include the financial statements of the Company and the subsidiaries listed in the following table:
|
Name |
Country of Incorporation |
Field Activity |
Ownership Interest |
Type of share Held |
|
HELD BY The Company (MPL) : Karanja Terminal & Logistics (Cyprus) Ltd Karanja Terminal & Logistics Private Ltd
|
Cyprus India |
Holding Company Operating company -Terminal Project |
100% 5.53% |
Ordinary Ordinary |
|
HELD BY Karanja Terminal & Logistics (Cyprus) Ltd : |
|
|
|
|
|
Karanja Terminal & Logistics Private. Ltd |
India |
Operating company -Terminal Project |
94.25% |
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 2.37% of issued share capital as at 31 December 2021 (as at 31 December 2020 - 5.16%) of Mercantile Ports & Logistics Limited.
• Lord Howard Flight holds 0.56% of issued share capital as on 31 December 2021 (as on 31 December 2020 - 0.74%) of Mercantile Ports & Logistics Limited at the year end. Lord Howard Flight had acquired additional shares of £0.04 million, (£0.03 million in December 2020).
• Jay Mehta holds 0.50% of issued share capital as on 31 December 2021 (as on 31 December 2020 - 0.50%) of Mercantile Ports & Logistics Limited at the year end. Jay Mehta had acquired additional shares of £0.05 million, (£0.001 million in December 2020)
• John Fitzgerald holds 0.14% of issued share capital as on 31 December 2021 (as on 31 December 2020 - 0.30%) of Mercantile Ports & Logistics Limited at the year end. John Fitzgerald had acquired additional shares of Nil, (£0.001 million in December 2020)
• Jeremy Warner Allen holds 1.25% of issued share capital as on 31 December 2021 (as on 31 December 2020 - 0.83 %) of Mercantile Ports & Logistics Limited at the year end. Jeremy Warner had acquired additional shares of £0.05 million, (£0.074 million in December 2020)
• Karanpal Singh via Hunch Ventures and Investment Limited holds 28.48% of issued share capital as on 31 December 2021 (as on 31 December 2020 - 21.75%) of Mercantile Ports & Logistics Limited at the year end. Karanpal Singh had acquired additional shares of £ 3.45 million (£Nil in December 2020)
b) Key Managerial Personnel of the parent
Non-executive Directors
- Lord Howard Flight
- Mr. John Fitzgerald
- Jeremy Warner Allen
- Karanpal Singh
Executive Directors
- Mr. Nikhil Gandhi
- Mr. Jay Mehta (Managing Director)
c) Key Managerial Personnel of the subsidiaries
Directors of KTLPL (India)
- Mr. Nikhil Gandhi - Resigned on 16 April 2021
- Mr. Jay Mehta
- Mr. Mr. Rakesh Bajaj
- Mr. Alexander John Joseph
Directors of Karanja Terminal & Logistics (Cyprus) Ltd - KTLCL (Cyprus)
- Ms. Andria Andreou
- Ms. Olga Georgiades
d) Other related party disclosure
Entities that are controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual or close family member of such individual referred above.
- SKIL Infrastructure Limited
- JPT Securities Limited
- KLG Capital Services Limited
- Grevek Investment & Finance Private Limited
- Carey Commercial (Cyprus) Limited
- Henley Trust (Cyprus) Limited
- Athos Hq Group Bus. Ser. Cy Ltd
- John Fitzgerald Limited
- KJS Concrete Private Limited
- Himangini Singh
e) Transaction with related parties
The following transactions took place between the Group and related parties during the year ended 31 December 2020:
|
|
Nature of transaction |
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
|
|
|
|
|
Athos Hq Group Bus. Ser. Cy Ltd |
Administrative fees |
14 |
14 |
|
|
|
14 |
14 |
The following table provides the total amount outstanding with related parties as at year ended 31 December 2021:
Transactions with shareholder having significant influence
|
|
Nature of transaction |
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
SKIL Global Ports & Logistics Limited |
|||
|
Debtors |
Advances |
107 |
107 |
|
Hunch Ventures and Investment Limited* |
|
|
|
|
Advances recoverable in cash or in kind |
Advances |
3,562 |
-- |
|
Jay Mehta
|
|
|
|
|
Advances recoverable in cash or in kind |
Share Subscription |
50 |
-- |
|
|
|
3,719 |
107 |
*At the time of the Placing and Subscription in August 2021, the Company intended for the proceeds of the fundraising to be held in the Company's bank account in Guernsey. The Subscription monies from Hunch Ventures required Reserve Bank of India ("RBI") approval in order to be remitted to Guernsey. However, at the time of the Company's General Meeting on 9th September 2021, the Company confirmed that it had directed Hunch Ventures to transfer the Subscription monies to one of the Company's Indian bank accounts and that was done.
Subsequently, the Board resolved that it did wish the funds to be transferred to Guernsey and, as a result, requested that Hunch Ventures pursue the "RBI approval" route once more. In pursuing this, Hunch Venture's bank required the Subscription monies to be transferred to Hunch Venture's account so that application could be made for the funds to be moved to Guernsey.
The Company is able to rely on the support documentation to the RBI process, put in place at the time of Hunch Ventures' original investment in 2018. It should be noted that the Company continues to have access to the Subscription monies and, since the period end, has accessed these funds.
Given the time being taken to receive RBI approval, the Company and Hunch Ventures have received advice on an alternative structure to achieve the Company's desired treasury requirements, without the requirement to receive RBI approval.
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 Key Managerial Personnel of the Group include:
|
|
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Non-Executive Directors fees |
|
|
|
- Jeremy Warner Allen |
40 |
40 |
|
- Lord Flight |
40 |
40 |
|
- John Fitzgerald |
45 |
45 |
|
- Peter Mill |
29 |
- |
|
- Karanpal Singh
|
- |
- |
|
|
154 |
125 |
|
Executive Directors Fees |
|
|
|
- Jay Mehta |
89 |
95 |
|
- Andrew Henderson |
- |
77 |
|
- Nikhil Gandhi |
180 |
192 |
|
|
269 |
364 |
|
Total compensation paid to Key Managerial Personnel |
423 |
489 |
Compensation to Key Managerial Personnel of the subsidiaries
|
|
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Directors' fees |
|
|
|
KTLPL - India |
- |
6 |
|
KTLCL - Cyprus |
3 |
3 |
|
|
3 |
9 |
Sundry Creditors
As at 31 December 2021, the Group had £3.25 million (2020: £3.29 million) as sundry creditors with related parties.
|
|
Year ended 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Grevek Investment & Finance Pvt Ltd |
3,254 |
3,292 |
|
|
3,254 |
3,292 |
Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party.
22. 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 31 Dec 21 |
Year ended 31 Dec 20 |
|
|
£000 |
£000 |
|
Non-cash flow adjustments |
|
|
|
Depreciation |
3,132 |
1,777 |
|
Finance Income |
(16) |
(74) |
|
Unrealised exchange (gain)/loss |
-- |
13 |
|
Finance cost |
4,459 |
321 |
|
Gain on modification of lease |
-- |
(34) |
|
Re-measurement of net defined benefit liability |
(8) |
(4) |
|
Advance written off* |
3,000 |
-- |
|
Gain from extinguishment of debt (refer note 8(a)) |
(5,407) |
-- |
|
Provision for Gratuity |
14 |
16 |
|
Loss on sale of car |
-- |
5 |
|
|
5,174 |
2,020 |
|
Increase/(Decrease) in trade payables |
(668) |
994 |
|
Increase/Decrease in trade & other receivables |
(4,018) |
667 |
|
|
(4,686) |
1,661 |
*Amount paid to contractor by way of shares, which was valued £3 million were written off due to non-acceptance/confirmation by contractor due substantial fall in price of shares.
23. 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 of Financial Position and in Note 16.
24. 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 31 Dec 21 £000 |
Year ended 31 Dec 20 £000 |
|
Contribution to Provident Fund |
8 |
8 |
|
Contribution to ESIC |
1 |
1 |
|
|
9 |
9 |
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 INR 2 Million w.e.f from 20 Feb 2020 (2020: INR 2 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:
|
Particulars |
As at |
As at |
|
Statement of Comprehensive Income |
|
|
|
Net employee benefit expense recognised in the employee cost |
|
|
|
Current service cost |
12 |
9 |
|
Past service cost |
- |
- |
|
Interest cost on defined benefit obligation |
2 |
2 |
|
Total expense charged to loss for the period |
14 |
11 |
|
Amount recorded in Other Comprehensive Income (OCI) |
|
|
|
Opening amount recognised in OCI |
|
|
|
Re-measurement during the period due to : |
|
|
|
Actuarial loss / (gain) arising from change in financial assumptions |
(3) |
- |
|
Actuarial (gain) / loss arising on account of experience changes |
(5) |
4 |
|
Amount recognised in OCI |
(8) |
4 |
|
|
|
|
|
Closing amount recognised in OCI |
(8) |
4 |
|
|
|
|
|
Reconciliation of net liability / asset |
|
|
|
Opening defined benefit liability |
40 |
29 |
|
Translation diff in opening balance |
- |
(2) |
|
Expense charged to profit or loss account |
14 |
11 |
|
Amount recognised in Other Comprehensive (Income)/expense |
(8) |
4 |
|
Benefit Paid |
- |
(2) |
|
Closing net defined benefit liability |
46 |
40 |
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 |
|
Opening defined benefit obligation |
40 |
29 |
|
Translation diff in opening balance |
- |
(2) |
|
Current service cost |
11 |
9 |
|
Past service cost |
- |
- |
|
Interest on defined benefit obligation |
3 |
2 |
|
|
|
|
|
Re-measurement during the period due to : |
|
|
|
Actuarial (gain) / loss arising on account of experience changes |
(5) |
4 |
|
Actuarial loss / (gain) arising from change in financial assumptions |
(3) |
- |
|
Benefits paid |
- |
(2) |
|
Closing defined benefit obligation liability recognised in Consolidated Statement of Financial Position |
46 |
40 |
|
Particulars |
As at |
As at |
|
Net liability is bifurcated as follows : |
|
|
|
Current |
3 |
7 |
|
Non-current |
43 |
33 |
|
Net liability |
46 |
40 |
25. CONTINGENT LIABILITIES AND COMMITMENTS
|
Particulars |
As at |
As at |
|
Bank guarantee issued to Maharashtra Pollution Control Board |
30 |
30 |
|
The Commissioner Of Customs - Jawaharlal Nehru Custom House |
100 |
100 |
|
Capital Commitment not provided for (Net of advances) |
126 |
Nil |
|
The Income Tax Liability to the tune of INR 44.29 crores (amount is exclusive of any interest or penalties) has been reversed in 2019 based on the ITAT judgement. However, the Income Tax department has filed an appeal and hence the group considers this as Contingent in nature. |
4,416 |
4,444 |
26. 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 borrowing £000 |
Current maturity of long term borrowing £000 |
Interest on long term borrowing £000 |
Leased liabilities £000 |
Total
£000 |
|
1 January 2021 |
34,729 |
4,074 |
3,201 |
2,410 |
44,414 |
|
|
|
|
|
|
|
|
Cash-flows: |
|
|
|
|
|
|
- Repayment |
(641) |
-- |
(810) |
(203) |
(1,654) |
|
- Proceeds |
984 |
-- |
-- |
-- |
984 |
|
- Accrued during period |
-- |
-- |
4,980 |
168 |
5,148 |
|
Non-cash: |
|
|
|
|
|
|
- Exchange difference |
(227) |
-- |
(51) |
(18) |
(296) |
|
- Interest on term loan converted in to term loan |
4,441 |
-- |
(4,441) |
-- |
-- |
|
- Interest on term loan converted to FITL |
2,882 |
-- |
(2,882) |
-- |
-- |
|
- Gain on debt modification# |
(5,407) |
-- |
-- |
-- |
(5,407) |
|
- Interest on term loan EIR adjustment# |
134 |
-- |
-- |
-- |
134 |
|
- Reclassification* |
3,037 |
(3,037) |
- |
-- |
-- |
|
31 December 2021 |
39,932 |
1,037 |
(3) |
2,357 |
43,323 |
*refer note 18 ( borrowings)
#refer note 8(a) ( finance income)
|
Particulars |
Long-term borrowing £000 |
Current maturity of long term borrowing £000 |
Interest on long term borrowing £000 |
Leased liabilities £000 |
Total
£000 |
|
1 January 2020 |
36,096 |
2,646 |
387 |
3,390 |
42,519 |
|
|
|
|
|
|
|
|
Cash-flows: |
|
|
|
|
|
|
- Repayment |
-- |
-- |
(2,766) |
(930) |
(3,696) |
|
- Proceeds |
2,678 |
-- |
|
123 |
2,801 |
|
- Accrued during period |
-- |
-- |
5,839 |
-- |
5,839 |
|
Non-cash: |
|
|
|
|
|
|
- Exchange difference |
(2,416) |
(201) |
(259) |
(173) |
(3,049) |
|
- Reclassification* |
(1,629) |
1,629 |
|
-- |
-- |
|
31 December 2020 |
34,729 |
4,074 |
3,201 |
2,410 |
44,414 |
27. EVENTS SUBSEQUENT TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATE
The group has received additional line of unsecured credit from Hunch Ventures amounting to £4.5 million to mitigate funding risk as well as ensuring continuity in business
28. AUTHORISATION OF FINANCIAL STATEMENTS
The consolidated financial statements for the year ended 31 December 2021 were approved and authorised for issue by the Board of Directors on 29 June 2022.
Enquiries:
|
Mercantile Ports & Logistics Ltd |
Jay Mehta |
|
|
C/O SEC Newgate |
|
|
+44 (0)203 757 6880 |
|
Cenkos Securities plc |
Stephen Keys |
|
(Nomad and Joint Broker) |
+44 (0)207 397 8900 |
|
Zeus Capital Limited |
John Goold (Corporate Broking) |
|
(Joint Broker) |
+44 (0)203 829 5000 |
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