REG - Mercantile Ports&Log - Interim Results
30/09/2024 07:00
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RNS Number : 1622G Mercantile Ports & Logistics Ltd 30 September 2024
30 September 2024
Mercantile Ports & Logistics Limited
("MPL", the "Group" or the "Company")
Interim Results
Mercantile Ports & Logistics (AIM: MPL), which is operating and continuing
to develop a port and logistics facility in Navi Mumbai, Maharashtra, India,
announces its interim results for the period ended 30 June 2024.
Financial Summary:
· Group revenue of £1.05 million (H1 2023: £2.69 million)
· Operating loss of £1.02 million (H1 2023: EBITDA of £0.22
million)
· Loss Before Tax of £6.02 million (H1 2023: £5.38 million)
· Net asset value at 30 June 2024 of £68.32 million (H1 2023:
£90.99 million)
· Total assets of £124.67 million (H1 2023: £144.47 million)
· A debt-to-equity ratio of 0.77 (H1 2023: 0.47)
· Cash as at 30 June 2024 of £0.94 million (H1 2023: £6.40 million)
· Facility of £15 million remains undrawn
For further information, please visit www.mercpl.com or contact:
MPL c/o SEC Newgate
+44 (0) 20 3757 6880
Cavendish Capital Markets Limited Stephen Keys
(Nomad and Broker) +44 (0) 207 220 0500
SEC Newgate Elisabeth Cowell/ Bob Huxford
(Financial Communications) +44 (0) 20 3757 6880
mpl@newgatecomms.com (mailto:mpl@newgatecomms.com)
Operational Review - Jay Mehta, CEO
The Company's operations continued to build momentum, although this progress
was not reflected in revenue growth. As the period progressed, the timing of
the handling of significant volumes of container cargo was delayed beyond the
contingency built in by Board. Despite the Facility having the necessary
permits to handle containers, unexpected levels of government processes have
been encountered and the expected volumes have not, therefore, taken place.
Whilst this has been disappointing, this issue has been taken to the highest
level of Government and is expected to be resolved shortly.
In addition, a number of contracts have not commenced on their expected
timeframe. It has become apparent that the elections in Maharashtra, which are
predicted to be very close, have impacted levels of activity on some of the
infrastructure projects in the region. In particular, the Company had expected
to handle the cement for the largest ever residential rebuild project in
Mumbai. However, with major contractors electing to wait for the outcome of
the elections and certainty of contract terms, the revenue expected to be
generated by the Facility in servicing these contracts has been delayed.
Another example has been seen where the Company identified a replacement for
Tata/Daewoo as a tenant but now does not expect that contract to be signed
until after the election, which is expected to take place in November 2024.
Although the signing of new material contracts has been delayed, the Company
remains pleased with the levels of new enquiries and the volumes of coal
handling have remained robust and are expected to continue. With a clear view
on when the reason behind these delays will pass, and with a strong pipeline,
the Board is satisfied that the issues encountered are temporary in nature and
that the improvement in volumes that has been seen since the period end will
continue.
Period January to June January to August
2024 2023 2024 2023
Cargo handled 660,177 783,457 797,968 862,962
(in tonnage)
On 27 June 2024, the Group announced that it had entered into an unsecured
loan and credit facility agreement for £15 million with KJS Concrete Private
Limited (a subsidiary of the Group's strategic investor, Hunch Ventures) to
provide additional working capital headroom to the Company. As a result, the
Group remains confident in its working capital position for its current
requirements.
Trading Update & Outlook
The Company does maintain a degree of contingency when monitoring itself
against market forecasts and, as referred to above, it is pleasing to report
that trading levels have improved since the period end. However, whilst the
Board is confident that the Company will exceed the performance achieved and
reported for FY 2023, the Board has concluded that the improved trading levels
will not be sufficient to enable the Company to meet current market
forecasts for FY24.
The Company remains grateful for the ongoing support of its major shareholder,
Hunch Ventures, which has reconfirmed its continued backing of the Company and
endorsed its strategy. With this support, with the election induced slowdown
due to ease imminently and with record levels of customer enquiries, the Board
is confident of a strong finish to the year and beyond.
Chairman's Statement
Whilst MPL remains well placed to be a beneficiary of what continues to be a
vibrant domestic economy. Real GDP growth in the Indian economy was still 6.7%
in Q1 of Financial Year 24 (8.2% in the comparative period), with lower levels
of growth mainly due to poor performance of the agriculture and services
sectors.
The International Monetary Fund ("IMF") raised India's growth forecast for
FY24-25 to 7% in July 2024, up from 6.8%, following improving private
consumption, particularly in rural India. The IMF left its estimate for the
FY25-26 unchanged at 6.5%.
Against this backdrop, the Group's Facility at the Port of Karanja, located in
Mumbai is uniquely positioned in the most important State in the country which
acts as a gateway to multiple landlocked States.
A significant amount of management's resources have been directed at
renegotiating terms with the Group's consortium of lenders. The Company is
continuing to work with the lending consortium of state-owned banks in
restructuring its debt facility. While this process has taken longer than
originally envisaged, the Company continues to have an excellent relationship
with its banks and remains confident of a facility with much more attractive
terms being put in place. Management continues to engage positively with all
three Indian banks at both the Head Office and Branch level and expects a
definitive announcement to be made on this shortly. Hunch Ventures is working
alongside the Company towards concluding negotiations around the debt
facility.
While the Group's existing customers are pleased with the service levels and
the overall ease of undertaking business at the facility, the pipeline of new
customers looking to use our facility is robust as the Group aspires to
increase utilisation levels at the facility. Potential customers with whom we
are in discussions include one of India's major Oil & Gas exploration
companies, in addition to entities in the industrial users from the private
sector. Furthermore, in respect of a variety of bulk commodities, the Company
intends to increase the handling of liquids, containers and Oil & Gas
cargoes at the Facility. The Company is confident in signing major contracts
before the end of the year, which will have a positive impact on the
trajectory of the Company.
Notwithstanding the short term challenges in trading conditions the Group has
experienced, the Facility is expected to be busier in H2 2024, and the Board
remains confident for the remainder of the current financial year.
Jeremy Warner Allan, Chairman
Mercantile Ports & Logistics Limited
30 September 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2024
Note
6 months ended 6 months ended Year ended
30 June 2024 30 June 2023 31 Dec 2023
£000 £000 £000
CONTINUING OPERATIONS
Revenue 1,050 2,685 5,462
Operating costs (790) (1,234) (2,417)
Administrative expenses (1,284) (1,234) (3,266)
Operating (loss) / profit before depreciation and impairment loss 2 (1,024) 217 (221)
Depreciation 2 (2,360) (2,803) (5,581)
Impairment loss 2 - - (9,853)
Other income 935 - 590
OPERATING LOSS (2,449) (2,586) (15,065)
Finance income 18 15 25
Finance cost (3,590) (2,809) (6,225)
NET FINANCING COST (3,572) (2,794) (6,200)
LOSS BEFORE TAX (6,021) (5,380) (21,265)
Tax expense for the period - - -
LOSS FOR THE PERIOD (6,021) (5,380) (21,265)
Loss for the period attributable to:
Non-controlling interest (12) (10) (43)
Owners of the parent (6,009) (5,370) (21,222)
Loss for the period / year (6,021) (5,380) (21,265)
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Re-measurement of net defined benefit liability - - 27
Items that may be reclassified to profit or loss
Exchange differences on translating foreign operations 5 708 (3,108) (5,015)
Other comprehensive income / loss for the period / year 708 (3,108) (4,988)
Total comprehensive income / loss for the period / year (5,313) (8,488) (26,253)
Total comprehensive income / loss for the period / year attributable to:
Non-controlling interest (12) (10) (43)
Owners of the parent (5,302) (8,478) (26,210)
(5,313) (8,488) (26,253)
Loss per share (consolidated):
Basic and diluted, for the period attributable to ordinary equity holders (£0.017p) (£0.122p) (£0.105p)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
Note Period ended Period ended Year ended
30 June 2024 30 June 2023 31 Dec 2023
£000 £000 £000
Assets
Property, plant and equipment 8 104,553 120,256 105,355
Intangible asset 49 14 63
Non-current tax assets - 2,077 -
Total non-current assets 104,602 122,347 105,418
Inventory of traded goods - - 72
Current tax assets 2,995 - 2,114
Trade and other receivables 9 15,953 15,726 16,339
Investments 179 - 173
Cash and cash equivalents 937 6,398 2,881
Total current assets 20,065 22,124 21,579
Total assets 124,667 144,471 126,997
Liabilities
Non-current
Employee benefit obligations 24 56 35
Borrowings 7 35,320 36,047 36,399
Lease liabilities payables 1,242 763 1,457
Non-current liabilities 36,586 36,866 37,891
Current
Employee benefit obligations 128 481 276
Borrowings 7 15,531 4,113 10,672
Current tax liabilities 26 73 61
Leases Liabilities payable 533 1,490 335
Trade and other payables 3,546 10,457 4,131
Current liabilities 19,763 16,614 15,475
Total liabilities 56,349 53,480 53,366
Net assets 68,318 90,991 73,631
Equity
Share capital and share premium 152,354 151,949 152,354
Retained earnings (53,226) (31,392) (47,217)
Translation reserve (30,736) (29,537) (31,444)
Equity attributable to owners of parent 68,392 91,020 73,693
Non-controlling interest (74) (29) (62)
Total equity and liabilities 68,318 90,991 73,631
CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2024
Note 6 months ended 6 months ended Year ended
30 June 2024 30 June 2023 31 Dec 2023
£000 £000 £000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax for the period / year (6,021) (5,380) (21,265)
Non cash flow adjustments 6 5,831 5,600 21,548
(190) 220 283
Net cash generated/(used in) operating activities
Net changes in working capital 6 25 651 (224)
Taxes paid (869) (46) (6)
Net cash from operating activities (1,034) 825 53
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (870) (283) (1,651)
Sale proceeds of property, plant and equipment 4 - 6
Finance income 14 15 25
Net cash generated/(used in) investing activities (852) (268) (1,620)
CASH FLOWS FROM FINANCING ACTIVITIES
From issue of additional shares - 4,368 5,640
Fund raise cost - - (941)
Subscription money received (from the previous fund raise) - 1,951 797
Repayment of bank borrowing principal - (117) (99)
Interest paid on borrowing (2) (759) (749)
Repayment of leasing liabilities principal (net) (22) (160) (737)
Interest payment on leasing liabilities (16) -- (9)
Net cash generated / (used in) from financing activities (40) 5,283 3,902
Net change in cash and cash equivalents (1,926) 5,840 2,335
Cash and cash equivalents, beginning of the period 2,881 558 558
Exchange differences on cash and cash equivalents (18) -- (12)
Cash and cash equivalents, end of the period 937 6,398 2,881
Note:
1. The adjustments and working capital movements have been combined in
the above Statement of Cash Flows.
Consolidated Statement of Changes in Equity
for the PERIOD ended 30 JUNE 2024
Stated Translation Retained Other Non- controlling Interest Total
Capital Reserve Earnings Components of equity Equity
£000 £000 £000 £000 £000 £000
Balance at 1 January 2023 143,851 (26,429) (26,022) -- (19) 91,381
Issue of share capital 9,444 -- -- -- -- 9,444
Share issue cost (941) -- -- -- -- (941)
Transactions with owners 152,354 (26,429) (26,022) -- (19) 99,884
Loss for the year -- -- (21,222) -- (43) (21,265)
Foreign currency translation differences for foreign operations -- (5,015) -- -- -- (5,015)
-- -- -- 27 -- 27
Re-measurement of net defined benefit pension liability
Re-measurement of net defined benefit pension liability transfer to retained -- -- 27 (27) -- --
earning
Total comprehensive income for the year -- (5,105) (21,195) -- (43) (26,253)
Balance at 31 December 2023 152,354 (31,444) (47,217) -- (62) 73,631
Balance at 1 January 2024 152,354 (31,444) (47,217) -- (62) 73,631
Loss for the period -- -- (6,009) -- (12) (6,021)
Foreign currency translation differences for foreign operations -- 708 -- -- -- 708
Total comprehensive income for the period -- 708 (6,009) -- (12) (5,313)
Balance at 30 June 2024 152,354 (30,736) (53,226) -- (74) 68,318
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting entity
Mercantile Ports & Logistics Limited (the "Company") was incorporated in
Guernsey under the Companies (Guernsey) Law 2008 on 24 August 2010. The
condensed interim consolidated financial statements of the Company for the
period ended 30 June 2024 comprises the financial statement of the Company and
its subsidiaries (together referred to as the "Group"). The Company has been
established to develop, own and operate port and logistics facility.
2. General information and basis of preparation
The condensed interim consolidated financial statements are for 6 months'
period ended 30 June 2024 and are not the full year accounts. The condensed
interim consolidated financial statements are prepared in accordance with IAS
34 Interim Financial Reporting as adopted by the European Union (EU) and under
AIM 18 guidelines. They have been prepared on a historical cost basis. They do
not include all of the information required in annual financial statements in
accordance with International Financial Reporting Standards ("IFRS") as issued
by the EU. The condensed interim consolidated financial statements are not
audited in accordance with International Standard on Review Engagements (ISRE)
2410.
The condensed interim consolidated financial statements are presented in Great
British Pounds Sterling (£), which is the functional currency of the parent
company. The preparation of the condensed interim consolidated financial
statements requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these
estimates.
In preparing these, condensed interim consolidated financial statements, the
significant judgements made by management applying the Group's accounting
policies and the key sources of estimation uncertainty are the same as those
applied in the annual IFRS financial statements. The condensed interim
consolidated financial statements have been prepared on a going concern basis.
The condensed interim consolidated financial statements have been approved for
issue by the Board of Directors on 27 September, 2024.
Operating (loss) / profit before depreciation
The above information is presented separately in the statement of
comprehensive income as a supplementary information. This information is a
primary measure used by the executive management and the Board to assess the
financial performance of the Group, as it provides a more comparable
assessment of the Group's year on year performance. It may also be a key
metric used by the investor community to assess the performance of our
year-on-year operations.
3. Significant accounting policies
The interim financial statements have been prepared in accordance with the
accounting policies adopted in the Group's last annual financial statements
for the year ended 31 December 2023. The accounting policies have been applied
consistently throughout the Group for the purposes of preparation of these
interim financial statements.
New standards, amendments and interpretations to existing standards are
effective from January 1, 2024
Lease accounting - When measuring a lease liability from a sale-and-leaseback
transaction, variable lease payments must be included on initial recognition.
Supplier finance arrangements - New disclosures are required to improve
transparency of supplier finance arrangements and their effects on an entity's
liabilities, cash flows, and exposure to liquidity risk.
Accounting estimates - The definition of accounting estimates is replaced with
a definition that clarifies that accounting estimates are monetary amounts in
financial statements that are subject to measurement uncertainty.
Non-current liabilities with covenants - Amendments improve the information an
entity provides when its right to defer settlement of a liability is subject
to compliance with covenants.
4. Going Concern
The Directors have considered the application of the going concern basis of
accounting.
In making this assessment, the Directors have considered the current and
projected cash balance, borrowing facilities available, ongoing debt
renegotiations with consortium banks, anticipated future utilisation of
available funds, the Company's ability to control the variable costs, Group's
capital investment plans and the projected operating performance of the
business for the 15 months post the signing of these financial statements.
The group had a cash balance in excess of £900K as at 30 June 2024, and an
additional line of unsecured credit from Hunch Ventures amounting to £15
million to mitigate funding risk as well as ensuring continuity in business.
The company will continue to use the cash generated from operations as well as
the balance subscription money receivable from Hunch Ventures of £2.95
million, to manage the projected costs until December 2025.
The Indian subsidiary and the board is in direct touch with the consortium of
lenders to expedite the proposal of restructuring of the term loan facility,
which has got abnormally delayed due to extended negotiations over certain
terms of the restructuring. The Management expects to achieve a break through
with the lenders over the coming weeks and will keep the shareholders informed
on the progress to that extent.
The fund raise in 2023 has placed the Directors in a position to believe that
it remains appropriate to continue to adopt the going concern in preparing the
forecasts.
However, the fact that the debt restructure has not been completed to date
represents the existence of a material uncertainty which may cast significant
doubt on the Group's ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the Group was
unable to continue as a going concern.
5. Comprehensive income
The comprehensive loss for the period is calculated after crediting a gain of
£ 0.71 million, which arises on the translation of foreign operations to
Great British Pounds Sterling (£), which is the functional currency of the
Company. (INR/GBP exchange rate at 30 June 2024 of 105.46, 31 December 2023:
106.11 and 30 June 2023: 103.51 are used).
6. Cash flow adjustments and changes in working capital
The following non-cash flow adjustments and adjustments for changes in
working capital made to profit before tax to arrive at operating cash flow:
Period ended Period ended Year ended
30 Jun 2024 30 Jun 2023 31 Dec 2023
£000 £000 £000
Adjustments and changes in working capital
Depreciation 2,360 2,803 5,581
Impairment loss -- -- 9,853
Finance income (18) (15) (25)
Balances written back (88) -- (190)
Finance cost 3,590 2,809 6,225
Re-measurement of net defined benefit liability -- -- (27)
Provision for Gratuity (14) 3 17
Loss on disposal of PPE 1 -- 7
Provision for doubtful advances -- -- 107
5,831 5,600 21,548
Change in trade and other payables (196) 705 49
Change in trade and other receivables 155 (150) *(124)
Change in inventory 72 96 24
Change in current investments (deposits with bank) (6) -- (173)
25 651 (224)
7. Loan facility
The Indian subsidiary has an ongoing term loan facility which was sanctioned a
term loan of INR 480 crores (£46.63 million) by a consortium of lenders, the
loan agreement for which was executed on 28th February, 2014.
MPL is currently in negotiation with its lenders to restructure the loan,
particularly seeking an extension of repayment tenor from 7 years to 14 years
amongst other things.
Outstanding balance as at 30 June 2024 are as follows:
Particulars Amount in Amount in
INR Crore £ Million
Current 163.79 15.53
Non-current 372.50 35.32
Balance as at 30 June, 2024 536.29 50.85
The Indian subsidiary, had approached the consortium of lenders to reconsider
the term loan facility repayment period from 7 years to 14 years, including
the moratorium of 2 years on Principal term loan as well as Interest. The
proposal is still pending for disposal at the respective HO's of the lenders
for consideration. However, the management has prepared a plan B to mitigate
the risk of abnormal delay in sanctioning of the facility.
Repayment of schedule of above outstanding loan based on OTR sanction are as
follow:
Payment falling due Repayment amount
INR in Crore GBP in Million
Within 1 year 163.79 15.53
1 to 5 years 342.50 32.48
After 5 years 25.42 2.41
Total *531.71 *50.42
* Loan repayment is stated at gross amount, excluding gain on debt
modification £2.68 million (INR 28.26 crore).
The rate of interest is a floating rate linked to the Canara bank base rate
(7.40%) with an additional spread of 215 basis points. The present composite
rate of interest is 9.55%. Above borrowings are secured by the hypothecation
of the port facility and pledge of its shares as well as a personal guarantee
by the Nikhil Gandhi. The carrying amount of the above bank borrowing
considered as a reasonable approximation of the fair value.
8. Property, plant and equipment
As at 30 June 2024, the carrying amount of facility yet to be capitalized was
£16.31 million (30 June 2023: £24.22 million).
During the 6 months ended 30 June 2024, additions to property plant and
equipment are £0.61 million and positive impact of £0.88 million was on
account of exchange fluctuation as GBP became stronger against INR (INR/GBP
exchange rate at 30 June 2024 of 105.46, 31 December 2023: 106.11)
Depreciation on the property plant and equipment is included in the
administrative expenses.
9. Trade and other receivables
Trade and other receivable consist of following:
Particular As at As at As at
30-Jun-24 30-Jun-23 31-Dec-23
£000 £000 £000
Trade receivables 945 568 1,883
Deposits 1,034 1,230 1,043
Other receivables 13,974 13,928 13,413
(Advances to contractors, prepayment, accrued interest)
15,953 15,726 16,339
10. Event Subsequent to the reporting period
The Indian subsidiary has successfully obtained a short-term contract with
Freight Wings India Private Limited for the storage of steel composite spans
for a coastal road project for Government of Maharashtra.
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