REG - Mercantile Ports&Log - Final Results
30/06/2022 07:16
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RNS Number : 7270Q Mercantile Ports & Logistics Ltd 30 June 2022
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 Year ended
31 Dec 21 31 Dec 20
£000 £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)
(6,686) (12,740)
Total comprehensive expense for the year
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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 31 Dec 20
£000 £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 16 9,224 --
shares
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
923 (10,630)
Net change in cash and cash equivalents
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 Translation Retained Other Non- controlling Interest Total
Capital Reserve Earnings Components of equity Equity
£000 £000 £000 £000 £000 £000
Balance at 134,627 (26,564) (10,394) -- 4 97,673
1 January 2021
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)
-- -- -- 8 -- 8
Re-measurement of net defined benefit liability
-- -- 8 (8) -- --
Re-measurement of net defined benefit liability transfer to retained earning
-- (673) (6,008) -- (5) (6,686)
Total comprehensive income for the year
Balance at 143,851 (27,237) (16,402) -- (1) 100,211
31 December 2021
Balance at 134,627 (20,403) (3,826) -- 15 110,413
1 January 2020
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)
-- -- -- (4) -- (4)
Re-measurement of net defined benefit liability
-- -- (4) 4 -- --
Re-measurement of net defined benefit liability transfer to retained earning
-- (6,161) (6,568) -- (11) (12,740)
Total comprehensive income for the year
Balance at 134,627 (26,564) (10,394) -- 4 97,673
31 December 2020
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 30(th) 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 Year ended
31 Dec 21 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 As on
31 Dec 21 31 Dec 21
INR in million £ 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 Year ended
31 Dec 21 31 Dec 20
£000 £000
Wharf-age expense 72 11
Other operation expense 235 37
307 48
7. ADMINISTRATIVE EXPENSES
Year ended Year ended
31 Dec 21 31 Dec 20
£000 £000
577 571
Employee costs
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 Year ended
31 Dec 21 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 Year ended
31 Dec 21 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 Year ended
31 Dec 21 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 994 402
from India
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 Year ended
31 Dec 21 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 Year ended
31 Dec 21 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 £000
31 Dec 2021 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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 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 Year ended
31 Dec 21 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 Equity, net of tax
£000 £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 Year ended
31 Dec 21 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 Year ended
31 December 21 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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 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 Year ended
31 Dec 21 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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 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 - 2 2 - 3 3 - 4 4 - 5 After 5 Total
1 year Year Year Year Year Year
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): Cyprus
Karanja Terminal & Logistics (Cyprus) Ltd India Holding Company 100% Ordinary
Karanja Terminal & Logistics Private Ltd Operating company -Terminal Project 5.53% 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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 31 Dec 20
£000 £000
Non-Executive Directors fees
- Jeremy Warner Allen 40 40
- Lord 40 40
Flight
- 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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 31 Dec 20
£000 £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 Year ended
31 Dec 21 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 Year ended
31 Dec 21 31 Dec 20
£000 £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:
As at As at
31 Dec 21
31 Dec 20
Particulars £000 £000
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
31 Dec 21
31 Dec 20
£000 £000
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 46 40
Statement of Financial Position
Particulars As at As at
31 Dec 21
31 Dec 20
£000 £000
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
31 Dec 21
31 Dec 20
£000 £000
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 4,416 4,444
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.
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 Current maturity of long term borrowing Interest on long term borrowing Leased Total
£000 £000 £000 liabilities
£000 £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 Current maturity of long term borrowing Interest on long term borrowing Leased Total
£000 £000 £000 liabilities
£000 £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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