TIDMMPL
RNS Number : 2762O
Mercantile Ports & Logistics Ltd
07 October 2021
07 October 2021
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 2020.
Highlights
-- Significant increase in revenues generated in FY 2020 to
GBP0.75m (FY 2019: GBP0.03m) following recommencement of operations
of the port in a very challenging environment
-- Tata-Daewoo JV, which is constructing the longest sea bridge
in India and is the first customer of the port, took over the
contracted land parcel in April 2020 to commence fabrication
activities for the bridge.
-- Advanced negotiations with numerous customers during the
period, culminating in the delivery of three new long-term
contracts post period end
Post Period End Highlights
-- Successfully raised GBP10.1 million in August 2021 to enable
the Company to secure further contracts, construct further storage
facilities, service debt and for general working capital
purposes
-- Completed debt restructuring with existing lenders on
favourable terms including a c400 bps reduction in interest rate
from 13.45% to 9.5%
-- Healthy pipeline of future potential business interacting
with some of the largest global companies as well as some of the
largest known companies in our region
While the audit was intended to be released on September 30th,
the auditors brought to the attention of management a tax provision
that had been stated in the previous years and queried whether that
provision continued to be required in light of a judgement in
favour of the Group given by the Income Tax Appellate Tribunal.
Upon challenge, management determined that evidence supporting the
release of the provisions was available at the time of filing the
2019 financial statements. The release of the audited financials
had to be delayed as the Group processed the financials to release
the provision, which represents a further strengthening of the
company's capital structure.
Jeremy Warner Allen, Chairman of MPL, commented:
"In 2020 we re-commenced operations of the port in a very
challenging environment caused due to the impact of Covid-19
pandemic, with the firm support of our stakeholders.
"At the same time, we continued to make progress with our
strategic objectives and continue to strive to sign long term
contracts with niche clients which will add value to our facility
as well as market standing. Our team has continued to make progress
with contract negotiations and other areas despite the lockdown
and, given the current capability of the facility and its location,
I believe that we are well positioned in every way to perform
strongly as restrictions are lifted and trading conditions
improve."
Enquiries:
Mercantile Ports & Logistics Jay Mehta
Ltd
C/O SEC Newgate
+44 (0)203 757 6880
Cenkos Securities plc Stephen Keys
(Nomad and Joint Broker) +44 (0)207 397 8900
SEC Newgate Elisabeth Cowell/ Isabelle Smurfit
(Financial PR) +44 (0)203 757 6880
mpl@secnewgate.co.uk
Chairman's Statement
2020 saw the coronavirus COVID-19 pandemic as a defining global
health crisis of our time and perhaps the greatest challenge the
world has faced since World War II. Despite this, progress at our
Karanja facility continued as the management team strived to
support the existing clients, including the Tata Projects and
Daewoo Engineering Joint Venture (the "JV").
As well as being a health crisis, the pandemic also caused a
socio-economic crisis and the Company's facility at Karanja was not
immune as the global economy witnessed an unprecedented slowdown.
I, however, remain optimistic on Indian Government's efforts to
revive the economy and Karanja port remains strategically important
to the region's growing cargo traffic demand from the
hinterland.
Revenue from the JV project started to flow from Q2 of 2020, as
scheduled and we are proud to be associated with the JV, which is
building a high profile connectivity infrastructure project in
Mumbai, India. Under this project, the JV is using our facility as
its port, logistics and engineering base to execute its work
streams for the construction of India's longest sea bridge - the
Mumbai Trans Harbour Link, which is one of the largest and most
complex engineering projects in India. The Company handed over the
dedicated berth and land portion on time and as contracted and,
despite majority of FY 2020 being impacted by lock-downs and
restrictions, the Company completed ground improvement works for
the JV.
The Company continued negotiations with potential customers,
although concluding these negotiations was, inevitably, delayed due
to travel restrictions preventing customers visiting the Facility
for much of the period. Negotiations took place with
well-established traders based in our region to handle products
such as sand, coal, steel coils and bars, cement, fly ash,
fertiliser, bentonite, edible oils, base oils and bitumen amongst
others. With 2020 firmly behind us, the Group has made a further
progress during 2021. We have announced the signing of three new
business contracts and have built a very healthy pipeline of future
potential business interacting with some of the largest global
companies as well as some of the largest known companies in our
region. We are also pleased that our debt facility has been
restructured with the decrease in interest on the debt facility,
which reflects the banks own confidence in the viability of our
business and we concluded an equity fundraising, raising
GBP10.1million (before expenses) to enable the Company to secure
further contracts, construct further storage facilities, service
debt and for general working capital purposes.
In conclusion, in 2020 we re-commenced operations of the port in
a very challenging environment caused due to the impact of Covid-19
pandemic, with the firm support of our stakeholders.
At the same time, we continued to make progress with our
strategic objectives and continue to strive to sign long term
contracts with niche clients which will add value to our facility
as well as market standing. Our team has continued to make progress
with contract negotiations and other areas despite the lockdown
and, given the current capability of the facility and its location,
I believe that we are well positioned in every way to perform
strongly as restrictions are lifted and trading conditions
improve.
Jeremy Warner Allen
Chairman
Mercantile Ports & Logistics Limited
06 October 2021
Operational Review
Indian Economy and Port Sector
COVID-19 spread globally, impacting billions of people around
the world with a severe negative bearing on the global economy.
With the rapid outbreak of the disease, the World Health
Organisation declared it a Global Pandemic in March 2020 and the
Government of India announced an unprecedented nation-wide lockdown
from 25th March, 2020.
The lockdown severely impacted India's manufacturing sector and
the overall GDP resulting into job losses and reduction in salaries
across various sectors. Companies across various sectors took cost
control measures to conserve cash and to ensure survival in the
Year 2020. Whilst the position has improved, there remains
uncertainty in the global growth forecast in view of several
unknown factors, including the trajectory of the pandemic in the
coming months, the spending pattern of the population, the
restoration of demand and the global supply chain.
Most countries have experienced a recession in their respective
economies, with a corresponding impact on global shipping. Whilst
there was insufficient cargo to carry, and to save on their
operating costs, many shipping lines have been skipping the port
calls to India.
Perhaps one of the most material long-term impacts of this
outbreak will be the move to diversify supply chains and the
avoidance of having the manufacturing concentrated in one country.
Though smaller countries like Vietnam and Indonesia have had
initial success in attracting a number of companies from China,
India too has a huge opportunity to attract companies to set up
their manufacturing facility. India's large captive market and its
geographical location for catering to global demand can be an
attractive proposition.
While the Central Government has announced several measures to
attract these companies, the State Governments also have an
important role in providing easy availability of land, improved
labour laws and transparent and efficient administration at the
ground level, if these companies are to set up their manufacturing
facility in the country.
A major portion of the all-important Western Dedicated Freight
Corridor (DFC) is likely to become operational by end of this
calendar year or early next year, depending upon how soon the
authorities are able to resume the work post the lifting of
COVID-19 related restrictions.
The Ports in Maharashtra will be connected on the corridor and
it should help in the major reduction of the inland logistics cost
for manufacturers located in western and central India, making them
competitive and helping them regain their lost market share in
exports. The DFC can also be a showcase project to the
international manufacturing companies exploring to locate to India.
During the lockdown, the rail evacuation was extremely efficient,
reliable and cost competitive. It should hopefully help the
railways to gain some market share from the road evacuation and
after commencement of DFC it could further strengthen the position
of railways in freight movement. With Karanja's proximity to rail
links, the Facility is well placed to benefit from these
dynamics.
Much of the dry bulk cargo on the west coast of India mainly
comprises coal and fertiliser imports. With India being amongst the
fastest growing economies, the demand for power supply will
continue to rise and is likely to create a gap between the rising
demand and supply of the domestic coal. Currently, the Company
continues to have a logistical disadvantage for coal transportation
by rail into northern hinterland. However, post commencement of
DFC, depending upon the freight rates, the Company expects to have
the ability to participate in some opportunities. In the case of
fertiliser cargo, whilst the country is focusing on becoming
self-sufficient by increasing its domestic production, in the short
to medium term, imports are likely to continue. The future growth
in import of fertiliser cargo would depend upon the government
policies and the price of cargo in international markets but the
Company is well situation to be a beneficiary of increased volumes
of dry bulk cargo in the region.
Going Concern
The Board initially, post the outbreak of Covid-19, assessed the
Group's ability to operate as a going concern for the next 12
months from the date of signing the financial statements, based on
a financial model which was prepared as part of approving the 2021
budget.
The Directors considered the cash forecasts prepared for the
two-years ending 31 December 2022 (which includes the potential
impact of COVID-19), together with certain assumptions for revenue
and costs, to satisfy themselves of the appropriateness of the
going concern basis used in preparing the financial statements.
In June 2021 (Post year-end), MPL successfully managed to have
its debt facility re-structured with the existing lenders on
favourable terms including a c400 bps reduction in interest rate
from 13.45% to 9.5%, deferment of principal repayment by 24 months
and a moratorium on interest payment up to March 2022. The total
size of the restructured facility is c.GBP 47.6 million repayable
over 7 years in 28 quarterly installments starting October
2022.
The company further raised GBP10.1 million (GBP9 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, debt
servicing and general working capital requirements.
The Directors also took account of the principal risks and
uncertainties facing the business referred to above, a sensitivity
analysis on the key revenue growth assumption and the effectiveness
of available mitigating actions.
The uncertainty as to the future impact on the Group of the
recent Covid-19 outbreak has subsequently been considered as part
of the Group's adoption of the going concern basis. In the downside
scenario analysis performed, the Directors have considered the
impact of the Covid-19 outbreak on the Group's trading and cash
flow forecasts. In preparing this analysis, the Directors assumed
that the lockdown effects of the Covid-19 virus would peak in India
around the end of June 2021 and trading will normalize over the
subsequent few months, albeit attaining substantially lower levels
of revenue than budgeted, for at least the rest of the current
financial year.
A range of mitigating actions within the control of management
were assumed, including deferment in the Directors and all staff
salary by 35% from April 2020 onwards, a reduction in all
non-essential services and delay in building out the facility which
is not needed for the current three signed contracts until
significant revenue is being generated. The Directors have also
availed financial support by way of relief measures introduced by
RBI in India. The Group has successfully renegotiated its debt
facility with the lenders, resulting in a c.400 bps reduction in
the rate of interest, a moratorium on interest payment and
deferment of principal repayment by 24 months.
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 availment of bank facilities and other funding
options, its capital investment plans and forecast of gross
operating margins as and when the operations commence.
Based on the above indications, after taking into account the
impact of Covid-19 on the Group's future operations, the Board is
confident that they have implemented appropriate measures to
adequately mitigate the above risks and that the group is a going
concern for the foreseeable future.
Conclusion
Our Facility is well on its way to ramping up capacity
utilization and to achieve its targeted revenues. In the
TATA-Daewoo JV, we have a high profile partner and for which we are
delivering and intend to leverage off the experience and the track
record that has been gained through this relationship.
The impact of COVID-19 on India is well documented. However,
swift Government action and an aggressive vaccination program has
led to a faster economic recovery compared to the first wave of the
pandemic and we remain confident that the trajectory of this
recovery remains positive. Karanja lies at the heart of India's
trading gateway and, with India's macro fundamentals continuing to
remain robust, the Board continues to see enormous opportunities
available to the Group.
Consolidated Statement of Comprehensive Income
for the Year ended 31 December 2020
Notes Year ended Year ended
31 Dec
19
31 Dec (restated*)
20
GBP000 GBP000
CONTINUING OPERATIONS
Revenue 5 745 30
Cost of sales 6 (48) (47)
697 (17)
Administrative Expenses 7 (4,944) (4,351)
----------- -------------
OPERATING LOSS (4,247) (4,368)
Finance Income 8 104 19
Finance Cost 8 (1,976) (632)
----------- -------------
NET FINANCING COST (1,872) (613)
----------- -------------
LOSS BEFORE TAX (6,119) (4,981)
Tax (expense)/Income for the year 9 (456) 4,927
----------- -------------
Loss FOR THE YEAR (6,575) (54)
=========== =============
Loss for the year attributable to:
Non-controlling interest (11) 4
Owners of the parent (6,564) (58)
----------- -------------
LOSS FOR THE YEAR (6,575) (54)
=========== =============
Other Comprehensive (Loss)/income:
Items that will not be reclassified subsequently
to profit or (loss)
Re-measurement of net defined benefit liability 24 (4) 4
Items that will be reclassified subsequently
to profit or (loss)
Exchange differences on translating foreign
operations (6,161) (5,445)
----------- -------------
Other comprehensive expense for the year (6,165) (5,441)
----------- -------------
Total comprehensive expense for the year (12,740) (5,495)
=========== =============
Total comprehensive expense for the year attributable
to:
Non-controlling interest (11) 4
Owners of the parent (12,729) (5,499)
----------- -------------
(12,740) (5,495)
=========== =============
Earnings per share (consolidated):
Basic & Diluted, for the year attributable
to ordinary equity holders 11 (0.003p) (0.000p)
The accompanying notes on page 50 to 81 form part of these
consolidated financial statements.
(*) Refer to note 27 for full details of the restatement of
position at 31 December 2019
Consolidated Statement of Financial Position
as at 31 December 2020
Notes Year ended As at
31 Dec 20 31 Dec 19
GBP000 (restated*)
GBP000
Assets
Property, plant and equipment 12(a) 131,343 133,108
Intangible asset 12(b) 4 5
------------ -------------
Total non-current assets 131,347 133,113
------------ -------------
Trade and other receivables 13 18,771 16,658
Cash and cash equivalents 14 3,895 14,823
------------ -------------
Total current assets 22,666 31,481
Total assets 154,013 164,594
============ =============
Equity
Stated Capital 16 134,627 134,627
Retained earnings 16 (10,394) (3,826)
Translation Reserve 16 (26,564) (20,403)
------------ -------------
Equity attributable to owners
of parent 97,669 110,398
------------ -------------
Non-controlling Interest 4 15
------------ -------------
Total equity 97,673 110,413
------------ -------------
Liabilities
Non-current
Employee benefit obligations 17 7 4
Borrowings 18 34,729 35,989
Lease liabilities payables 20 1,716 2,460
Non-current liabilities 36,452 38,453
------------ -------------
Current
Employee benefit obligations 17 224 130
Borrowings 18 4,074 2,605
Current tax liabilities 19 384 140
Lease liabilities payable 20 694 930
Trade and other payable 20 14,512 11,923
------------ -------------
Current liabilities 19,888 15,728
------------ -------------
Total liabilities 56,340 54,181
------------ -------------
Total equity and liabilities 154,013 164,594
============ =============
The accompanying notes on page 50 to 81 form part of these
consolidated financial statements.
(*) Refer to note 27 for full details of the restatement of
position as at 31 December 2019
The consolidated financial statements have been approved and
authorized for issue by the Board on 06 October 2021
Jay Mehta
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Year ended 31 December 2020
Notes Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
CASH FLOW FROM OPERATING ACTIVITIES
Loss before tax (6119) (4,981)
Non cash flow adjustments 22 2,020 1,204
----------- -----------
Operating (loss)/profit before working
capital changes (4,099) (3,777)
Net changes in working capital 22 1,661 1,811
----------- -----------
Net cash from operating activities (2,438) (1,966)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and
equipment (8,390) (4,221)
Finance Income 8 73 15
Net cash used in investing activities (8,317) (4,206)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Issue of Share Capital 16 -- 8,287
Proceeds from borrowing 2,678 6,906
Interest paid on borrowing (1,520) (6,737)
Repayment of leasing liabilities
principal (845) (313)
Interest payment on leasing liabilities (188) (62)
Net cash from financing activities 125 8,081
----------- -----------
Net change in cash and cash equivalents (10,630) 1,909
Cash and cash equivalents, beginning
of the year 14,823 13,113
Exchange difference on cash and
cash equivalents (298) (199)
----------- -----------
Cash and cash equivalents, end of
the year 3,895 14,823
=========== ===========
The accompanying notes on page 50 to 81 form part of these
consolidated financial statements .
Consolid ated St atement of Changes in Equity
for the Year ended 31 December 2020
Stated Translation Retained Other Non- controlling Total
Capital Reserve Earnings Components Interest Equity
of equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- ------------ ---------- ------------ -----------------
Balance at
1 January 2020 (restated*) 134,627 (20,403) (3,826) -- 15 110,413
Issue of share capital -- -- -- -- - --
Share Issue cost -- -- -- -- - --
--------- ------------ ---------- ------------ ----------------- ---------
Transaction with owners 134,627 (20,403) (3,826) -- 15 110,413
--------- ------------ ---------- ------------ ----------------- ---------
Loss for the year -- -- (6,564) -- (11) (6,575)
Foreign currency translation
difference for foreign
operations -- (6,161) -- -- -- (6,161)
Re-measurement of net defined
benefit liability -- -- -- (4) -- (4)
Re-measurement of net defined
benefit liability transfer
to retained earning -- -- (4) 4 -- --
Total comprehensive income
for the year -- (6,161) (6,568) -- (11) (12,740)
--------- ------------ ---------- ------------ ----------------- ---------
Balance at
31 December 2020 134,627 (26,564) (10,394) -- 4 97,673
========= ============ ========== ============ ================= =========
Balance at
1 January 2019 134,627 (14,958) (3,772) -- 11 115,908
Issue of share capital -- -- - -- - --
Share Issue cost -- -- - -- - --
--------- ------------ ---------- ------------ ----------------- ---------
Transaction with owners 134,627 (14,958) (3,772) -- 11 115,908
--------- ------------ ---------- ------------ ----------------- ---------
Loss for the year (restated*) -- -- (58) -- 4 (54)
Foreign currency translation
difference for foreign
operations (restated*) -- (5,445) -- -- -- (5,445)
Re-measurement of net defined
benefit liability -- -- - 4 -- 4
Re-measurement of net defined
benefit liability transfer
to retained earning -- -- 4 (4) -- --
--------- ------------ ---------- ------------ ----------------- ---------
Total comprehensive income
for the year(restated*) -- (5,445) (54) -- 4 (5,495)
--------- ------------ ---------- ------------ ----------------- ---------
Balance at
31 December 2019 (restated*) 134,627 (20,403) (3,826) -- 15 110,413
========= ============ ========== ============ ================= =========
The accompanying notes on page 50 to 81 form part of these
consolidated financial statements .
(*) Refer to note 27 for full details of the restatement of
position as at 31 December 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
Mercantile Ports & Logistics Limited (the "Company") was
incorporated in Guernsey under The Companies (Guernsey) Law, 2008
with registered number 52321 on 24 August 2010. Its registered
office and principal place of business is Martello Court, Admiral
Park, St. Peter Port, Guernsey GY1 3HB. It was listed on the
Alternative Investment Market ('AIM') of the London Stock Exchange
on 7 October 2010.
The consolidated financial statements of the Company 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 2020,
and are presented in UK Sterling (GBP).
The principal activities of the Group are to develop, own and
operate a port and logistics facilities. As of 31 December 2020,
the Group had 59 (Fifty-Nine) (2019: 56 (Fifty-six) 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 foreseeable future. The Group has almost
completed 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
nineteen months ending 31(st) December,2022, 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 GBP3.9 million cash balance
as at 31 December 2020 and GBP9.36 million still to drawdown on its
the Rupee term loan facility of INR 480. 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 due to Covid 19 Lockdown and subsequently one more revision
with the RBI circular dated 6th August, 2020 the same 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 Mid- April 2021, a reduction in
all non-essential services and delay in building out the facility
which isn't needed for the current 4 signed customer contracts,
until significant revenue is again being generated. The Directors
have also considered the financial support commitment made by the
RBI in India. The Directors had productive discussions with its
lenders on the subject.
In line with relief measures provided by the RBI to borrowers
impacted by Covid-19 related distress, KTPL pursued with the
lenders in OTR (One Time Restructuring) which was sanctioned and
implemented in Jun'21. Salient features of the OTR are as
below:
1. Deferment of commencement of principal repayment by 24 months (Oct'20 to Oct'22)
2. Reduction in interest rate by c.400 bps (from 13.45% to 9.5%)
3. Moratorium on interest payments up to Feb'22
-- in August 2021 the company raised GBP 10.1 million (gross)
and the proceeds net of fundraise expense are GBP8.97 million, 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, debt servicing and general
working capital requirements. There is additional line of credit of
GBP4.5 million from Hunch Ventures, to provide additional headroom
for the Company's operations.
-- Based on the above, the Board of Directors believe that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
(b) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the results of
the Company and entities controlled by the Company (its
subsidiaries) up to 31 December 2020. Subsidiaries are all entities
over which the Company has the power to control the financial and
operating policies. The Company obtains and exercises control
through holding more than half of the voting rights. The financial
statements of the subsidiaries are prepared for the same period as
the Company using consistent accounting policies. The fiscal year
of (Karanja Terminal & Logistics Private Limited) KTPL ends on
March 31 and its accounts are adjusted for the same period as a
Company for consolidation.
Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
Non-controlling 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 % Voting Rights % Economic
Incorporation Interest
Karanja Terminal Mercantile
& Logistics (Cyprus) Ports & Logistics
Ltd Limited Cyprus 100.00 100.00
Karanja Terminal Karanja Terminal
& Logistics Private & Logistics
Limited* (Cyprus) Ltd India 95.88 95.88
* 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 (GBP), which is the Company's functional currency. The
functional currency for all of the subsidiaries within the Group is
as detailed below:
Karanja Terminal & Logistics (Cyprus) Ltd (KTLCL) - Euro
Karanja Terminal & Logistics Private Limited (KTLPL) -
Indian Rupees
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 when/as performance obligation(s) are
satisfied.
The total transaction price for a contract is allocated amongst
the various performance obligations based on their relative
standalone selling prices. The transaction price for a contract
excludes any amounts collected on behalf of third parties.
Revenue is recognised either at a point in time or over time,
when (or as) the Group satisfies performance obligations by
transferring the promised goods or services to its customers.
The Group recognises contract liabilities for consideration
received in respect of unsatisfied performance obligations and
reports these amounts as other liabilities in the statement of
financial position. Similarly, if the Group satisfies a performance
obligation before it receives the consideration, the Group
recognises either a contract asset or a receivable in its statement
of financial position, depending on whether something other than
the passage of time is required before the consideration is due.
Invoicing for services is set out in the contract.
The group does not believe there are elements of financing in
the contracts. There are no warranties or guarantees included in
the contract.
The specific recognition criteria described below must also be
met before revenue is recognised.
Port operation and logistics services
Revenue from port operation services including cargo handling,
storage, 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 determined 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 each 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
benefits from Provident Fund, which is a defined contribution plan.
Both the employee and employer make monthly contributions to the
plan, which is administrated by the government authorities, each
equal to the specific percentage of employee's basic salary. The
Group has no further obligation under the plan beyond its monthly
contributions. Obligation for contributions to the plan is
recognised as an employee benefit expense in the Consolidated
Statement of Comprehensive Income when incurred.
ii) Defined benefit plans (Gratuity)
In accordance with applicable Indian Law, the Group provides for
gratuity, a defined benefit retirement plan (the Gratuity Plan)
covering eligible employees. The Gratuity Plan provides a lump 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 enacted or substantively enacted by the end
of the reporting period.
Deferred tax
The accounting for income tax are accounted under the asset and
liability method, which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements. Under
this method, we determine deferred tax assets and liabilities on
the basis of the differences between the financial statement and
tax bases of assets and liabilities by using enacted tax rates in
effect for the year in which the differences are expected to
reverse. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in income in the period that includes
the enactment date.
Deferred tax assets are recognized to the extent that Management
believes that these assets are more probable than not to be
realized. In making such a determination, it considers all
available positive and negative evidence, including future
reversals of existing taxable temporary differences, projected
future taxable income, tax-planning strategies, and results of
recent operations. If it is determined that it would be able to
realize the deferred tax assets in the future in excess of the net
recorded amount, the necessary adjustment would be made to the
deferred tax asset valuation allowance, which would reduce the
provision for income tax.
(j) FINANCIAL ASSETS
The 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 40 year's period of Concession
Agreement by Maharashtra Maritime
board .
Marine Structure, Dredged Channel 40 Years as per concession agreement
Non Carpeted road other than RCC 3 Years
Office equipment 3-5 Years
Computers 2-3 Years
Computer software 5 Years
Plant & machinery 15 Years
Furniture 5-10 Years
Vehicles 5-8 Years
Depreciation methods, useful lives and residual value are
reassessed at each reporting date.
Gains or losses arising on the disposal of property, plant and
equipment are determined as the difference between the disposal
proceeds and the carrying amount of the assets are recognised in
profit or loss within other income or other expenses.
Impairment of Property, Plant and Equipment
Internal and external sources of information are reviewed at the
end of the reporting period to identify indications that the
property, plant and equipment may be impaired.
Property, plant and equipment is stated at cost, net of
accumulated depreciation and/or impairment losses, if any. There is
currently no impairment of property, plant and equipment.
(m) Trade receivables and payables
Trade receivables are financial assets 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 applicable from 1(st)
January 2020
The new standards, interpretations or amendments whose
application was mandatory for the Group effective for the fiscal
year beginning January 1, 2020 had no material impact on the
consolidated financial statements:
Amendments to References to Conceptual Framework in IFRS
Standards;
-- Amendments to IAS 1 and IAS 8 - Definition of Material;
-- Amendments to IFRS 3 - Definition of a business;
-- Amendment to IFRS 9, IAS 39 and IFRS 7 - Interest Rate
Benchmark Reform (Phase 1);
-- Amendments to IFRS 16 - COVID-19-related rent
concessions.
The 2019 IFRIC decision regarding the definition of the
enforceable contractual period of a lease under IFRS 16 had no
material impact on the Group
(q) Standards, amendments and interpretations to existing
standards that are not yet effective and have not been adopted
early by the group
A number of new standards, amendments to standards and
interpretations are not effective for annual periods beginning 1
January 2020, and have not been applied in preparing these
consolidated financial statements. Those which may be relevant to
the Group are set out below. The Group does not plan to adopt these
standards early.
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 2020.
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 (see note 27). 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 head of contingent
liability in note no 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., it's carrying amount may be higher than its
recoverable amount). As at 31 December, 2020, the carrying value of
the port under construction is GBP132 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 2020 behind the discounted
cash flow are:
-- Construction outflow of GBP10.06 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 only bulk and project which
depends on the volume in Metric Ton.
-- Inflation 5%.
-- Utilization rate at 8% in 2021, 22% in 2022, 30% in 2023.
-- 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 40-45%, based on margin of similar ports.
-- Pre-tax rate derived from weighted average cost of capital (WACC) 13.5%
The group has carried out sensitivity analysis on our discounted
cash flow analysis. If revenues in our model were to decrease by
10.3%, there would be an impairment. If the discount rate used in
the model were 2% higher, than there would also be an
impairment.
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 150 acres of land with a sea frontage of
1,000 meters.
4. SEGMENTAL REPORTING
The Group has only one operating and geographic segment, being
the project on hand in India and hence no separate segmental report
has been presented.
5. REVENUE FROM OPERATION
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Cargo handling income 322 30
Lease income 423 --
----------- -----------
745 30
=========== ===========
The Company has given certain land portions on operating lease.
These lease arrangement is for a period 40 months. Leases 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 20 31 Dec 20
INR in 000 GBP000
2021 120,189 1,207
2022 123,163 1,237
2023 108,874 1,093
2024 6,344 63
2025 -- --
------------ -----------
Total 358,570 3,600
============ ===========
6. COST OF SALES
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Wharf-age expense 11 8
Other operation expense 37 39
48 47
=========== ===========
7. ADMINISTRATIVE EXPENSES
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Employee costs 571 456
Directors' fees 489 402
Operating lease rentals 10 11
Foreign exchange gains/loss 464 39
Depreciation 1,777 608
Other administration costs 1,633 2,835
----------------- -----------------
4,944 4,351
----------------- -----------------
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Interest on bank deposits 104 19
--------------- --------------
104 19
--------------- --------------
8. (a) FINANCE INCOME
8. (b) FINANCE EXPENSES
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Interest on term loan* 1,636 366
Interest others 340 266
----------- -----------
1,976 632
=========== ===========
* Interest on the term loan is capitalized against assets under
construction. As assets under construction are transferred into
service, the capitalization of interest is ceased on that part and
that element of interest expense is then charged to the profit and
loss account. 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 13.54% (2019 - 13.31%).
Year ended Year ended
31 Dec 20 31 Dec 19
(restated)
GBP000 GBP000
Loss Before Tax (6,119) (4,981)
Applicable tax rate in India* 22.88% 22.88%
------------------- -------------------
Expected tax credit (1,400) (1,140)
Adjustment for non-deductible losses
of MPL & Cyprus entity against income
from India 402 391
Adjustment for non-deductible expenses 998 749
Interest provision on outstanding tax
liability (456) --
Reversal of prior year tax provision -- 4,927
------------------- -------------------
(456) 4,927
=================== ===================
9. INCOME TAX
*Considering that the Group's operations are presently based in
India, the effective tax rate of the Group of 22.88% (prior year
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 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 previous year statement of comprehensive income
and has made interest provision in current year for outstanding tax
liability of 2011 & 2012.
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.
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 20 31 Dec 19
GBP000 GBP000
Audit Fees
Fees payable to the auditor for the
audit of the Group's financial statements 107 87
Other fees payable to the auditor in
respect of:
Interim Financial Statement Review 9 9
Auditing of accounts of subsidiary undertakings - 3
Tax fees - 1
----------- -----------
116 100
----------- -----------
Audit fees related to prior year overruns during the year amount to GBP 23,278 (2019: GBP22,087).
11. EARNINGS PER SHARE
Both basic and diluted earnings per share for the year ended 31
December 2020 have been calculated using the loss attributable to
equity holders of the Group of GBP6.56 million (prior year loss of
GBP0.05 million).
Year ended Year ended
31 Dec 20 31 Dec 19
(restated)
Loss attributable to equity holders GBP(6,564,000) GBP(58,000)
of the parent
Weighted average number of shares
used in basic and diluted earnings
per share 1,905,022,123 1,905,022,123
EARNINGS PER SHARE
Basic and Diluted earnings per share (0.003p) (0.000p)
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.
12 (a). PROPERTY, PLANT AND EQUIPMENT
Details of the Group's property, plant and equipment and their
carrying amounts are as follows:
Computers Office Furniture Vehicles Plant & Port Right of Capital Total
Equipment Machinery Asset use Work in
Progress
asset
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------- --------
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 year company has capitalized additional 23 acres of
land and capitalization of port is done on above line.
* During the year company has capitalized CWIP to amounting to
13,257 thousand under various head i.e. Port Asset 13,229 thousand,
Furniture 28 thousand.
The Group has leases various assets including land and
buildings. As at 31 December 2020, the net book value of recognised
right-of use assets relating to land and buildings was GBP 1.49
million (2019: GBP 2.57 million). The depreciation charge for the
period relating to those assets was GBP 0.15 million (2019: GBP
0.20 million).
Amounts recognised in the statement of income are detailed
below:
Particular GBP000 GBP000
31 Dec 2020 31 Dec 2019
Depreciation on right-of-use
assets 152 201
---------------- ----------------
Interest expense on lease liabilities 188 215
---------------- ----------------
Expense relating to short-term
leases 9 10
---------------- ----------------
Expense relating to low-value
leases 1 1
---------------- ----------------
350 417
---------------- ----------------
Computers Office Furniture Vehicles Plant & Port Right of Capital Total
Equipment Machinery Asset use Work in
Progress
asset
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------- --------
Gross
carrying
amount
Balance 1 Jan
2019 40 58 34 474 -- -- -- 130,989 131,595
IFRS 16
Adoption -- -- -- -- -- -- 2,926 -- 2,926
Net Exchange
Difference (2) (3) (2) (29) -- -- (155) (6,911) (7,102)
Additions 4 4 - 47 -- -- -- 6,567 6,622
Disposals -- -- -- -- -- -- -- -- --
Transfers^ 10 77 212 -- 27 39,404 -- *(39,736) (6)
-------------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------- --------
Balance 31
Dec
2019 52 136 244 492 27 39,404 2,771 90,909 134,035
-------------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------- --------
Depreciation
Balance 1 Jan
2019 (35) (32) (19) (252) -- -- -- -- (338)
Net Exchange
Difference 1 2 1 14 -- -- -- -- 18
Charge for
the
year (4) (12) (8) (52) (1) (329) (201) -- (607)
Disposals -- -- -- -- -- -- -- -- --
-------------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------- --------
Balance 31
Dec
2019 (38) (42) (26) (290) (1) (329) (201) -- (927)
-------------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------- --------
Carrying
amount
31 Dec 2019 14 94 218 202 26 39,075 2,570 90,909 133,108
-------------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------- --------
^ During the previous year company has partially commenced its
port operations, after getting all necessary approvals from the
Government Authorities. Company has started utilizing 25 acres of
land and 250-meter jetty which is ready for use for carrying out
operations. Capitalization of port is done on in above line.
* During the previous year company has capitalised CWIP to
amounting to 39,736/- under various head i.e. Port Asset 39,404/-,
Plant & Machinery 27/-, Furniture 212/-, Office Equipment 77/-,
Intangible Asset Software 6/- and Computer 10/-.
The net exchange difference on the Group's property, plant and
equipment's carrying amount is a loss of GBP8.17 million (prior
year loss of GBP6.97 million). The net exchange difference on the
Group's property, plant and equipment carrying amount is on the
account of the foreign exchange movement.
Assets provided as security
-- The following asset are provided as security for lease
liability payable as described in Note 20:
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Vehicles 257 202
------------ ------------
257 202
------------ ------------
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 GBP132,097,000 (2019: GBP132,906,000) 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
(borrowing limit sanctioned INR 480 crore (GBP48.19 million) (2019
INR 480 crore (GBP51.35 million)) for part financing the build out
of the facility.
The borrowing costs in respect of the bank borrowing for
financing the build out of facility are capitalised for portion of
port which are still under construction under Capital Work in
Progress. During the year the Group has capitalised borrowing cost
of GBP4.18 million (2019: GBP4.03 million) and borrowing cost
expensed out of GBP1.325 million (2019: GBP 0.35 million).
The Indian subsidiary has estimated the total project cost of
INR 1,404 crore (GBP140.97 million) towards construction of the
port facility. Out of the aforesaid project cost, the contract
signed with the major contractor is INR1,048 crores (GBP105.22
million). As of 31 December 2020, the contractual amount (net of
advances) of INR 31.75 crores (GBP3.19 million) is still payable.
There were no other material contractual commitments.
Karanja Terminal & Logistics Private Limited (KTPL), the
Indian subsidiary has received sanction of a Rupee term loan of INR
480 crore (GBP48.19 million) for part financing the port facility.
The Rupee term loan has been sanctioned by four Indian public
sector banks and the loan agreement was executed on 28 February
2014. As at 29 September 2017 the agreement was amended extending
the tenure of the loan for 13 years and 6 months with repayment
beginning at the end of June 2020. Post implementation of one-time
restructuring by banks refer note 27 for revised terms of the
loan.
12 (b). Intangible Asset
Intangible
Asset -
Software
GBP000
------------------------------------------------------- -----------
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
------------------------------------------------------- -----------
Intangible
Asset -
Software
GBP000
----------------------------- -----------
Gross carrying amount
Balance 1 Jan 2019 --
Additions --
Disposals --
CWIP Capitalized 6
----------------------------- -----------
Balance 31 Dec 2019 6
----------------------------- -----------
Depreciation
Balance 1 Jan 2019 --
Charge for the year (1)
Disposals --
----------------------------- -----------
Balance 31 Dec 2019 (1)
----------------------------- -----------
Carrying amount 31 Dec 2019 5
----------------------------- -----------
13. TRADE AND OTHER RECEIVABLES
Year ended Year ended
31 Dec 20 31 Dec 19
(restated)
GBP000 GBP000
Deposits 2,177 2,241
Advances 16,338 14,218
Accrued Interest of fixed deposits 5 4
Debtors
- Related Party 107 96
- Prepayment 91 84
- Others 53 15
----------- ------------
18,771 16,658
----------- ------------
Advances include payment to EPC contractor of GBP10.16 million
(2019: GBP11.11 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 GBP 0.05
million (2019: GBP0.01million) 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 20 31 Dec 19
GBP000 GBP000
Cash at bank and in hand 2,299 14,676
Deposits* 1,596 147
----------- -----------
3,895 14,823
----------- -----------
Cash at bank earns interest at floating rates based on bank
deposit rates. The fair value of cash and short-term deposits is
GBP3.89 million (2019: GBP14.82 million).
Included in cash and cash equivalents is GBP2.43 million (2019:
GBP4.8 million) that is within a bank account in the name of Hunch
Ventures (Karanja), as a result of the 2018 share sale. The Company
is the beneficiary of the account and we have control over this
cash. 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. Risk management is carried
out by the Board of Directors.
(a)Market Risk
(i)Translation risk
Foreign currency risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market foreign exchange rates. The Company's functional
and presentation currency is the UK Sterling (GBP). The functional
currency of its subsidiary Karanja Terminal & Logistics Private
Limited (KTLPL) is INR and functional currency of Karanja Terminal
& Logistics (Cyprus) Ltd.
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 99.5974 for SOFP items and for
profit and loss item GBP 1: INR 95.1414
This balance is cumulatively a GBP26.12m loss to equity (2019:
GBP20.21m 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 GBP21.6m at 31 December 2013
and further increase in translation reserve from GBP21.6m to
GBP26.12m due to appreciation of GBP against INR during the period
2018 to 2020. The closing rate at 31 December 2020 was GBP1: INR
99.60, hence as compared to the translation loss reported between
2018-19, the same is insignificant in 2020. With the majority of
funding now in India this risk is further mitigated. During 2020,
the average and year end spot rate used for INR to GBP were 99.60
and 95.14 respectively (2019: 93.48 and 89.91).
Translation risk sensitivity
The Group's exposure to the risk of changes in foreign exchange
rates relates primarily to the cash and cash equivalents available
with the Indian entity of INR 97.88 million (GBP0.983 million) as
on reporting date (prior year INR 638.65 million (GBP6.832
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 2020 31 Dec 2019
(GBP)
INR +- 10% +- 10%
The following table details the Group's sensitivity to
appreciation or depreciation in functional currency vis-Ã -vis the
currency in which the foreign currency cash and cash equivalents
and borrowing are denominated:
Functional currency GBP GBP
(depreciation by10%) (appreciation
by 10%)
GBP000 GBP000
Cash and cash equivalent
31 December 2020 379.18 (310.24)
31 December 2019 759.07 (621.06)
Borrowing
31 December 2020 (4,311.47) 3,527.57
31 December 2019 (4,288.28) 3,508.59
If the functional currency GBP had weakened with respect to
foreign currency (INR) by the percentages mentioned above, for year
ended 31 December 2020 then the effect will be change in profit and
equity for the year by GBP3.93 million (2019: GBP3.53 million). If
the functional currency had strengthened with respect to the
various currencies, there would be an equal and opposite impact on
profit and equity for each year. This exchange difference arising
due to foreign currency exchange rate variances on translating a
foreign operation into the presentation currency results in a
translation risk.
(ii) Interest rate risk
Interest rate risk is the risk that the future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. The Group's exposure to the risk of changes in
market interest rates relates primarily to the Group's long-term
debt obligations with floating interest rates.
KTPL has successfully tied-up a rupee term loan of INR 480 crore
(GBP48.19 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 varies from 12.75% to 14.45% based on
respective banks MCLR (2019: 13.20% to 13.45%) and remains
effective as on the SOFP date
However, due to the Covid 19 impact and based on the
notifications issued by Reserve Bank of India to all financial
institutions, our lenders too have taken into consideration our
request for reducing the Rate of Interest from 13.45% to 9.50% p.a.
which will be effective from April 2021.
The base rate set by the bank may be changed periodically as per
the discretion of the bank in line with Reserve Bank of India (RBI)
guidelines. Based on the current economic outlook and RBI Guidance,
management expects the Indian economy to enter a lower interest
rate regime as moderating inflation will allow the RBI and thus the
banks to lower its base rate in the coming quarters.
Interest rate sensitivity
At 31 December 2020, 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% (2019: +/-
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
GBP000 GBP000
---------------------- ---------------------
+1% -1% +1% -1%
------------------ ------------ -------- ------------ -------
31 December 2030 - - - -
------------------ ------------ -------- ------------ -------
31 December 2029 - - - -
------------------ ------------ -------- ------------ -------
31 December 2028 (24) 24 (19) 19
------------------ ------------ -------- ------------ -------
31 December 2027 (101) 101 (78) 78
------------------ ------------ -------- ------------ -------
31 December 2026 (178) 178 (137) 137
------------------ ------------ -------- ------------ -------
31 December 2025 (251) 251 (194) 194
------------------ ------------ -------- ------------ -------
31 December 2024 (324) 324 (250) 250
------------------ ------------ -------- ------------ -------
31 December 2023 (383) 383 (295) 295
------------------ ------------ -------- ------------ -------
31 December 2022 (428) 428 (330) 330
------------------ ------------ -------- ------------ -------
31 December 2021 (442) 442 (341) 341
------------------ ------------ -------- ------------ -------
(b) Credit risk
Credit risk is the risk that a counterparty fails to discharge
an obligation to the Group. The Group's maximum exposure (GBP15.38
million (2019: GBP17.94 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 (GBP48.19 million) out of which INR 386.47 crore (GBP38.80
million) are disbursed and GBP3.89 million as at December 2020 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 2020, the Group's non-derivative financial
liabilities have contractual maturities (and interest payments) as
summarized below:
Principal payments Interest payments
Payment falling due INR in Crore GBP000 INR in Crore GBP000
============= ======= ============= =======
Within 1 year 40.58 4,074 69.56 7,311
1 to 5 year's 232.85 23,379 142.56 14,985
After 5 year's 113.04 11,350 57.00 5,991
------------- ------- ------------- -------
Total 386.47 38,803 269.12 28,287
------------- ------- ------------- -------
The present composite rate of interest ranges from 12.75% to
14.45% and closing exchange rate has been considered for the above
analysis. Principal and interest payments are after considering
future drawdowns of term loans.
In addition, the Group's liquidity management policy involves
considering the level of liquid assets necessary to meet the
funding requirement; monitoring 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)
Year ended Year ended
Note 31 Dec 20 31 Dec 19
GBP000 GBP000
Financial Assets 2
Cash and Cash Equivalents 14 3,895 14,823
Loan and receivables 13 584 1,583
----------- -----------
4,479 16,406
=========== ===========
Financial Liability
Borrowings 18 38,803 38,594
Trade and other payables 20 16,922 15,313
Employee benefit obligations 17 231 134
----------- -----------
55,956 54,041
=========== ===========
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 20 31 December 19
-------------------------- --------------------------
No of shares GBP000 No of shares GBP000
---------------- -------- ---------------- --------
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 (net of
share issue costs) -- -- -- --
---------------- -------- ---------------- --------
Closing number of shares 1,905,022,123 134,627 1,905,022,123 134,627
------------------------------- ---------------- -------- ---------------- --------
The stated capital amounts to GBP134.63 million (2019: GBP134.63
million) after reduction of share issue costs. Holders of the
ordinary shares are entitled to receive dividends and other
distributions and to attend and vote at any general meeting. During
the year the Company has allotted Nil (prior year Nil) equity
shares to various institutional and private investors, by way of a
rights issue.
16.2 Other Components of Equity
Retained Earnings
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 (restated)
GBP000
Opening Balance (3,826) (3,772)
Addition during the year (6,564) (58)
Re-measurement of net defined benefit liability (4) 4
----------- ------------
Closing balance (10,394) (3,826)
----------- ------------
Accumulated losses of GBP 10.40 million (2019: GBP3.83 million)
include all current year retained profits.
Translation Reserve
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 (restated)
GBP000
Opening Balance (20,403) (14,958)
Addition during the year (6,161) (5,445)
----------- ------------
Closing balance (26,564) (20,403)
----------- ------------
The translation reserve of GBP26.56 million (2019: GBP20.40
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 20 31 Dec 19
GBP000 GBP000
Non- Current
Pensions - defined benefit plans 7 4
----------- -----------
7 4
----------- -----------
Current
Wages, salaries 191 105
Pensions - defined benefit plans 33 25
224 130
----------- -----------
18. BORROWINGS
Borrowings consist of the following:
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Non-Current
Bank loan (refer note 26) 34,729 35,989
----------- -----------
34,729 35,989
----------- -----------
Current
Bank loan (refer note 26) 4,074 2,605
4,074 2,605
----------- -----------
Borrowing
Karanja Terminal & Logistics Private Limited (KTPL), the
Indian subsidiary, has obtained a term loan facility of INR 480
crore (GBP48.19 million). The Rupee term loan has been sanctioned
by four Indian public sector banks and the loan agreement was
executed on 28 February 2014. 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 RBI via circular dated May 23, 2020
permitted all lending institutions to extend moratorium on payment
of all instalments in respect of term loans to 31st August 2020.
Further, on 6th August 2020 RBI announced additional measures under
a circular called "Resolution Framework for COVID-19-related
stress" for providing relief to borrowers affected by economic
fallout on account of COVID-19 pandemic, which had led to
significant financial stress for companies across the board. The
circular was aimed at providing relief to borrowers on their loan
obligations and allowed for lenders to extend residual tenor of
loan moratorium for a period of two years.
A lenders consortium meeting was called for in November, 2020
and lender principally approved invoking the Resolution Plan and
subsequently signed the Inter Creditor Agreement (ICA).
Subsequent to yearend, in June 2021, the Group has received
final approval from lead banker for restructuring of term loan. The
Salient features of the same are as follow:
a. Reduction in the rate of interest of principal term loan,
from 13.45% to 9.5%;
b. Moratorium on Interest repayment until February 2022;
c. Deferment of principal term loan repayment for a period of 24
months. Principal Repayment commencing from 31 December 2022
quarter.
KTLPL has utilised the Rupee term loan facility of INR 386.47
crore (GBP38.80 million) (2019: INR 360.79 crore (GBP38.59
million)) as at the reporting date.
The Port facility is hypothecated as security for the bank loan
availed by group for construction of the port.
19. current tax liabilities
Current tax liabilities consist of the following:
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 (restated)
GBP000
Duties & taxes 8 177
Provision for Income Tax* 376 (37)
Current tax liabilities 384 140
----------- ------------
The carrying amounts and the movements in the Provision for
Income Tax account are as follows:
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 (restated)
GBP000
Carrying amount 1 January 2,034 7,149
Reversal of tax provision for earlier years -- (4,927)
Interest provision on outstanding tax liability 456 --
Exchange difference (146) (188)
----------- ------------
Carrying amount 31 December 2,344 2,034
Taxes paid (1,968) (2,071)
----------- ------------
376 (37)
----------- ------------
The Group recognises liabilities for anticipated tax issues
based on estimates of whether additional taxes will be due. Where
the final outcome of assessment by the Income Tax department on
these matters is different from the amounts that were initially
recorded, such differences will impact the income tax provisions in
the period in which such determination is made. The Group
discharges the tax liability on the basis of income tax
assessment.
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 previous year statement of comprehensive income
and has made interest provision in current year for outstanding tax
liability of 2011 & 2012.
20. TRADE AND OTHER PAYABLES
Trade and other payables consist of the following:
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Non-Current
----------- -----------
Lease liability (refer note 26) 1,716 2,460
----------- -----------
Current
Lease Liability - ( refer note 26) 694 930
----------- -----------
Sundry creditors* 11,311 11,535
Interest payable 3,201 388
----------- -----------
14,512 11,923
----------- -----------
* Sundry creditors are purely in nature of material and services
availed for port construction.
Future minimum lease payments at 31 December 2020 were as
follows
Minimum lease payments due
-------------------- --------------------------------------------------------------------------------------
Within 1 - 2 2 - 3 - 4 4 - 5 After Total
1 year Year 3 Year Year 5
Year Year
-------------------- -------- -------- --------- ------------ ------------ ---------- ---------------
Lease payments 891 324 220 211 213 5,799 7,658
-------------------- -------- -------- --------- ------------ ------------ ---------- ---------------
Finance charges (197) (185) (178) (174) (169) (4,345) (5,248)
-------------------- -------- -------- --------- ------------ ------------ ---------- ---------------
Net present values 694 139 42 37 44 1,454 2,410
-------------------- -------- -------- --------- ------------ ------------ ---------- ---------------
21. RELATED PARTY TRANSACTIONS
The consolidated financial statements include the financial
statements of the Company and the subsidiaries listed in the
following table:
Country Ownership Type of
Name of Incorporation Field Activity Interest share Held
------------------------- ------------------ ------------------- ---------- ------------
Cyprus Holding Company 100% Ordinary
HELD BY The Company
(MPL):
Karanja Terminal &
Logistics (Cyprus)
Ltd
HELD BY Karanja Terminal
& Logistics (Cyprus)
Ltd:
Karanja Terminal & Operating Company
Logistics Pvt. Ltd India -Terminal Project 99.75% Ordinary
The Group has the following related parties with whom it has
entered into transactions with during the year.
a) Shareholders having significant influence
The following shareholders of the Group have had a significant
influence during the year under review:
-- SKIL Global Ports & Logistics Limited, which is 100%
owned by Mr. Nikhil Gandhi, holds 5.16% of issued share capital as
at 31 December 2020 (as at 31 December 2019 - 5.16%) of Mercantile
Ports & Logistics Limited.
-- Lord Howard Flight holds 0.74% of issued share capital as on
31 December 2020 (as on 31 December 2019 - 0.26%) of Mercantile
Ports & Logistics Limited at the year end. Lord Howard Flight
had acquired additional shares of GBP0.03 million, (GBP0.02 million
in December 2019).
-- Jay Mehta holds 0.50% of issued share capital as on 31
December 2020 (as on 31 December 2019 - 0.28%) of Mercantile Ports
& Logistics Limited at the year end. Jay Mehta had acquired
additional shares of GBP0.001 million, (Nil in December 2019)
-- John Fitzgerald holds 0.30% of issued share capital as on 31
December 2020 (as on 31 December 2019 - 0.12%) of Mercantile Ports
& Logistics Limited at the year end. John Fitzgerald had
acquired additional shares of GBP0.001 million, (Nil in December
2019)
-- Andrew Henderson holds 0.03% of issued share capital as on 31
December 2020 (as on 31 December 2019 - 0.03%) of Mercantile Ports
& Logistics Limited at the year end.
-- Jeremy Warner Allen holds 0.83% of issued share capital as on
31 December 2020 (as on 31 December 2019 - 0.40 %) of Mercantile
Ports & Logistics Limited at the year end. Jeremy Warner had
acquired additional shares of GBP0.074 million, (Nil in December
2019)
-- Karanpal Singh via Hunch Ventures and Investment Limited
holds 21.75% of issued share capital as on 31 December 2020 (as on
31 December 2019 - 21.75%) of Mercantile Ports & Logistics
Limited at the year end.
b) Key Managerial Personnel of the parent
Non-executive Directors
- Lord Howard Flight
- Mr. John Fitzgerald
- Jeremy Warner Allen (appointed Chairman from 16 January 2020)
- Karanpal Singh
Executive Directors
- Mr. Nikhil Gandhi (Step down as Chairman from 16 January 2020)
- Mr. Jay Mehta (Managing Director)
- Mr. Andrew Henderson (up to 15 Nov 2020)
c) Key Managerial Personnel of the subsidiaries
Directors of KTLPL (India)
- Mr. Nikhil Gandhi (Chairman)
- Mr. Jay Mehta
- Mr. M L Meena (up to 30 Sept 2020)
- Mr. Mr. Rakesh Bajaj (appointed on 06 Feb 2020)
- Mr. Alexander John Joseph (appointed on 06 Feb 2020)
Directors of Karanja Terminal & Logistics (Cyprus) Ltd -
KTLCL (Cyprus)
- Ms. Andria Andreou
- Ms. Olga Georgiades
- Mr. Andrew Henderson (up to 15 Nov 2020)
d) Other related party disclosure
Entities that are controlled, jointly controlled or
significantly influenced by, or for which significant voting power
in such entity resides with, directly or indirectly, any individual
or close family member of such individual referred above.
- SKIL Infrastructure Limited
- JPT Securities Limited
- KLG Capital Services Limited
- Grevek Investment & Finance Private Limited
- Carey Commercial (Cyprus) Limited
- Henley Trust (Cyprus) Limited
- Athos Hq Group Bus. Ser. Cy Ltd
- Henderson Accounting Consultants Limited (up to 15 Nov 2020)
- John Fitzgerald Limited
- KJS Concrete Private Limited
e) Transaction with related parties
The following transactions took place between the Group and
related parties during the year ended 31 December 2020:
Nature of transaction Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Athos Hq Group Bus. Ser.
Cy Ltd Administrative fees 14 25
----------- -----------
14 25
----------- -----------
The following table provides the total amount outstanding with
related parties as at year ended 31 December 2020:
Transactions with shareholder having significant influence
Nature of transaction Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
SKIL Global Ports & Logistics Limited
Debtors Advances 107 96
----------- -----------
107 96
----------- -----------
Transactions with Key Managerial Personnel of the
subsidiaries
See Key Managerial Personnel Compensation details as provided
below
Advisory services fee
None
Compensation to Key Managerial Personnel of the parent
Fees paid to persons or entities considered to be Key Managerial
Personnel of the Group include:
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Non-Executive Directors fees
- Jeremy Warner Allen 40 40
- Lord Flight 40 40
- John Fitzgerald 45 45
----------- -----------
- Karanpal Singh - -
----------- -----------
125 125
----------- -----------
Executive Directors Fees
- Jay Mehta 95 100
- Andrew Henderson 77 75
- Nikhil Gandhi 192 102
----------- -----------
364 277
----------- -----------
Total compensation paid to Key Managerial Personnel 489 402
----------- -----------
Compensation to Key Managerial Personnel of the subsidiaries
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Directors' fees
KTLPL - India 6 202
KTLCL - Cyprus 3 3
----------- -----------
9 205
----------- -----------
Sundry Creditors
As at 31 December 2020, the Group had GBP3.29 million (2019:
GBP3.56 million) as sundry creditors with related parties.
Year ended Year ended
31 Dec 20 31 Dec 19
GBP000 GBP000
Grevek Investment & Finance Pvt Ltd 3,292 3,555
----------- -----------
3,292 3,555
----------- -----------
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 20 31 Dec 19
GBP000 GBP000
Non-cash flow adjustments
Depreciation 1,777 608
Finance Income (74) (19)
Unrealised exchange (gain)/loss 13 (5)
Finance cost 321 620
Gain on modification of lease (34) --
Re-measurement of net defined benefit liability (4) --
Provision for Gratuity 16 --
Loss on sale of car 5 --
2,020 1,204
----------- -----------
Increase/(Decrease) in trade payables 994 1,330
Increase/Decrease in trade & other receivables 667 481
----------- -----------
1,661 1,811
----------- -----------
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 20 31 Dec 19
GBP000 GBP000
Contribution to Provident Fund 8 8
Contribution to ESIC 1 2
----------- -----------
9 10
----------- -----------
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
INR2 Million w.e.f from 20 Feb 2020 (2019: INR 1 million).
The following tables summaries the components of net benefit
expense recognised in the Consolidated Statement of Comprehensive
Income and the funded status and amounts recognised in the
Consolidated Statement of Financial Position for the gratuity
plan:
As at As at
Particulars 31 Dec 20 31 Dec 19
GBP000 GBP000
Statement of Comprehensive Income
Net employee benefit expense recognised in
the employee cost
Current service cost 9 7
Past service cost - -
Interest cost on defined benefit obligation 2 2
Total expense charged to loss for the period 11 9
Amount recorded in Other Comprehensive Income
(OCI)
Opening amount recognised in OCI
Re-measurement during the period due to :
Actuarial (gain) / loss arising on account
of experience changes 4 (4)
----------- -----------------
Amount recognised in OCI 4 (4)
Closing amount recognised in OCI 4 (4)
=========== =================
Reconciliation of net liability / asset
Opening defined benefit liability 29 25
Translation diff in opening balance (2) (1)
Expense charged to profit or loss account 11 9
Amount recognised in Other Comprehensive (Income)/expense 4 (4)
Benefit Paid (2) --
----------- -----------------
Closing net defined benefit liability 40 29
=========== =================
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 20 31 Dec 19
GBP000 GBP000
Opening defined benefit obligation 29 25
Translation diff in opening balance (2) (1)
Current service cost 9 7
Past service cost - -
Interest on defined benefit obligation 2 2
Re-measurement during the period due to :
Actuarial (gain) / loss arising on account
of experience changes 4 (4)
Benefits paid (2) --
----------- -----------------
Closing defined benefit obligation liability
recognised in Consolidated Statement of Financial
Position 40 29
=========== =================
Particulars As at As at
31 Dec 20 31 Dec 19
GBP000 GBP000
Net liability is bifurcated as follows :
Current 7 4
Non-current 33 25
----------- ------------------
Net liability 40 29
----------- ------------------
25. CONTINGENT LIABILITIES AND COMMITMENTS
Particulars As at As at
31 Dec 20 31 Dec 19
GBP000 GBP000
Bank guarantee issued to Maharashtra Pollution
Control Board 30 27
----------- -----------
The Commissioner Of Customs - Jawaharlal Nehru
Custom House 100 107
----------- -----------
Capital Commitment not provided for construction
of port
(Net of advances) Nil 6,138
----------- -----------
The Income Tax Liability to the tune of INR
44.29 crores (amount is exclusive of any interest
or penalties) has been reversed in 2019 based
on the ITAT judgement. However, the Income
Tax department has filed an appeal and hence
the group considers this as Contingent in nature. 4,444 4,738
----------- -----------
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 Current maturity Interest Leased Total
borrowing of long term on long liabilities
GBP000 borrowing term borrowing GBP000 GBP000
GBP000 GBP000
----------- ----------------- ---------------- ------------- --------
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
======================= =========== ================= ================ ============= ========
*refer note 18 ( borrowings)
Particulars Long-term Current maturity Leased Total
borrowing of long term liabilities
GBP000 borrowing GBP000 GBP000
GBP000
----------- ----------------- ------------- --------
1 January 2019 33,830 59 185 34,074
----------- ----------------- ------------- --------
Adoption of IFRS 16 - - 2,926 2,926
----------- ----------------- ------------- --------
Opening lease current
liability - - 740 740
----------- ----------------- ------------- --------
Revised 1 January
2019 33,830 59 3,851 37,740
----------- ----------------- ------------- --------
Cash-flows:
- Repayment (2) (58) (347) (407)
- Proceeds 6,970 -- 34 7,004
----------- ----------------- ------------- --------
Non-cash:
- Exchange difference (2056) (1) (148) (2,205)
- Reclassification (2,646) 2,646 -- --
----------- ----------------- ------------- --------
31 December 2019 36,096 2,646 3,390 42,132
======================= =========== ================= ============= ========
27. PRIOR YEAR ADJUSTMENT
In prior years, the Group had provided for an income tax
liability on interest income accrued for the assessment years
2013-14 to 2017-18 which was treated as a non-taxable capital
receipt in the Income Tax Return of the respective year that was
filed with the Indian tax authorities. However, the tax department
rejected the treatment applied by the company. The Group filed an
appeal with the Income Tax Appellate Tribunal (ITAT), which
pronounced the decision in favour of the Group by its order during
2019. This was followed by the ruling becoming effective in June
2020 when the taxing authority recorded this in their systems
When considering the effect of the ruling becoming effective in
2020, management has reassessed whether it was appropriate to
recognise the uncertain tax liability at 31 December 2019. In doing
so, management have concluded that the recording of the ITAT
decision by the tax authorities in June 2020 provided evidence that
confirmed that it was not probable that the income tax liability
would become payable. In making this judgement, management
concluded that until the tax authorities had updated the tax
records, which occurred in June 2020, it remained probable that an
income tax liability may have become payable. This had not
previously been taken into account prior to approving the 2019
annual report and accounts. As such, the Directors have restated
the statement of Financial Position, Statement of Comprehensive
Income and all other elements of the financial statements so
affected, to give effect to the reversal of the tax provision. This
constitutes an error in accounting treatment adopted in the prior
period financial statement and has accordingly been treated as
prior year adjustment. In doing so, the impact to the financial
statements for the prior period back to 31 December 2019 is
summarised as below:
The effect on the Consolidated Statement of Financial Position
as at 31 Dec 2019 was as follows
Particulars Previously Restated Impact of
reported 31 Dec19 Restatement
31 Dec19 GBP000 31 Dec19
GBP000 GBP000
-------------------------- ------------------------ ---------------------
Trade and other receivables 18,729 16,658 (2,071)
-------------------------- ------------------------ ---------------------
Retained earnings (8,741) (3,826) 4,915
-------------------------- ------------------------ ---------------------
Translation Reserve (20,214) (20,403) (189)
-------------------------- ------------------------ ---------------------
Equity attributable to owners of
parent 105,672 110,398 4,726
-------------------------- ------------------------ ---------------------
Non-controlling Interest 3 15 12
-------------------------- ------------------------ ---------------------
Total equity 105,675 110,413 4,738
-------------------------- ------------------------ ---------------------
Current tax liabilities 6,949 140 (6,809)
-------------------------- ------------------------ ---------------------
The effect on the Statement of Comprehensive Income for the year
ended 31 Dec 2019 was as follows
Particulars Previously Restated Impact of
reported 31 Dec19 Restatement
31 Dec19 GBP000 31 Dec19
GBP000 GBP000
------------------------ -------------------------- -----------------------------
Tax expense for the year - 4,927 4,927
------------------------ -------------------------- -----------------------------
Loss for the year (4,981) (54) 4,927
------------------------ -------------------------- -----------------------------
Loss for the year attributable
to:
------------------------ -------------------------- -----------------------------
Non-controlling interest (8) 4 12
------------------------ -------------------------- -----------------------------
Owners of the parent (4,973) (58) 4,915
------------------------ -------------------------- -----------------------------
Loss for the year (4,981) (54) 4,927
------------------------ -------------------------- -----------------------------
Exchange differences on
translating
foreign operations (5,256) (5,445) (189)
------------------------ -------------------------- -----------------------------
Total Comprehensive
Income/(Expense)
for the year (10,233) (5,495) 4,738
------------------------ -------------------------- -----------------------------
Non-controlling interest (8) 4 12
------------------------ -------------------------- -----------------------------
Owners of the parent (10,225) (5,499) 4,726
------------------------ -------------------------- -----------------------------
Earnings per share (GBP0.003) (GBP0.000) GBP0.003
(consolidated):
------------------------ -------------------------- -----------------------------
The effect on the Statement of Changes in Equity as at 31 Dec
2019 was as follows
Particulars Previously Restated Impact of
reported 31 Dec19 Restatement
31 Dec19 GBP000 31 Dec19
GBP000 GBP000
-------------------------- ------------------------ ---------------------
Retained earnings (8,741) (3,826) 4,915
-------------------------- ------------------------ ---------------------
Translation Reserve (20,214) (20,403) (189)
-------------------------- ------------------------ ---------------------
Non-controlling Interest 3 15 12
-------------------------- ------------------------ ---------------------
28. EVENTS SUBSEQUENT TO THE CONSOLIDATED STATEMENT OF FINANCIAL
POSITION DATE
a) The group has successfully done the restructuring of term loan with following key highlights.
Ø Rate of interest reduced from 13.45% to 9.5%
Ø Principal repayment start date shifted from October 2020 to
October 2022.
Ø Moratorium on interest payments until February 2022
b) The company further raised GBP10.1 million (GBP9 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,
debt servicing and general working capital requirements.
c) On 13 September 2021 group has consolidated its share capital
by way of issuing 1 share for every 100 shares held.
d) Hunch Ventures has provided additional line of credit of
GBP4.5 million through KJS Concrete Private Limited, to provide
additional headroom for the Company's operations.
e) Post year end, an additional disbursement of INR 10 crore
(GBP 1Million) was made on 30 March 2021, by one of consortium bank
under Guaranteed Emergency Credit Line (GECL) scheme and rate of
interest charged on same is 7.95% p.a.
29. AUTHORISATION OF FINANCIAL STATEMENTS
The consolidated financial statements for the year ended 31
December 2020 were approved and authorised for issue by the Board
of Directors on 06 October 2021.
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