TIDMMPL
RNS Number : 7095C
Mercantile Ports & Logistics Ltd
21 October 2020
21 October 2020
Mercantile Ports & Logistics Limited
("MPL", the "Group" or the "Company")
Interim Results and Board Change
Mercantile Ports & Logistics Limited (AIM: MPL), which is
operating and continuing to develop a modern port and logistics
facility in Navi Mumbai, Maharashtra, India, announces its interim
results for the period ended 30 June 2020.
Summary during and post period:
-- First revenues generated from Tata/Daewoo JV multi-year
contract worth in excess of GBP5.5 million over 40 months
-- Cash of GBP7.8 million and undrawn facilities of GBP10.1 million at 30 June 2020
-- Good platform and engagement around securing additional
contracts, although Covid-19 lockdown in Mumbai continues to cause
disruption
-- Board Change - Andrew Henderson has informed the board of his
intention to resign his position as CFO by 15 November 2020. Search
for a permanent replacement has commenced
Jeremy Warner Allen, Executive Chairman stated , "The global
dislocation from Covid-19 is still reverberating through the
system; nevertheless, the opportunity available to Karanja is
immense in the coming months and years. India's growth is dependent
on a modern logistics infrastructure and we know that the facility
we have built, and continue to build, will not only benefit the
region and country but also all our shareholders and
stakeholders.
"On behalf of the whole Board, I wish Andrew well with his
future endeavours and thank him for his hard work and
professionalism."
Jay Mehta, CEO stated, "We continue to analyse daily the immense
opportunities that lie ahead for our business. There is no doubt
that our development provides a much-needed solution for key
industries operating within India. We look forward in the coming
months to updating the market on new business that Karanja will be
undertaking for the coming years. Despite the extraordinary
backdrop of Covid-19 and the considerable issues it has created for
business and the regional economic environment, I am confident that
our operations at Karanja will stand the test of time."
Andrew Henderson, CFO stated, "I am leaving the Company as it
ramps up its operations and I am confident that MPL's facility at
Karanja will be something to be proud of. I have enjoyed the
challenge of being part of the project in its development phase and
leave a talented team who will take the business on to complete its
operational activities. I wish the Company well."
Enquiries:
Mercantile Ports & Logistics Jay Mehta
Ltd
C/O Newgate Communications
+44 (0)203 757 6880
Cenkos Securities plc Stephen Keys/Russell Cook
(Nomad and Joint Broker) +44 (0)207 397 8900
Zeus Capital Limited John Goold (Corporate Broking)
(Joint Broker) +44 (0)203 829 5000
Newgate Communications Adam Lloyd/Isabelle Smurfit
(Financial PR) +44 (0)203 757 6880
mpl@newgatecomms.com
Chairman's Statement
Undoubtedly the first half of 2020 was about navigating what
Covid-19 would mean to our business going forward. We mainly
concentrated on implementing the necessary work required to fulfil
our obligations with our first contract, a joint venture with Tata
Projects Ltd and Daewoo Engineering. As at 1 April, the Company
announced that works had been progressing according to plan and
some land was handed over to this customer to enable the contract
to commence and revenues to be generated from 1 April, as
scheduled. The balance of the land will be handed over following
completion of the groundworks, once Covid-19 restrictions are
lifted.
Update on operations during the Covid-19 lockdown
India, like most of the rest of the world, continues to see
infections from Covid-19 and the impact of the restrictions imposed
to tackle it. Unfortunately, India has been one of the worst
affected countries in the world. Local restrictions that affect our
business have been implemented and we foresee a near term
environment of additional restrictions and lock downs occurring.
Nevertheless, we believe we have all the resources, both from a
financial as well as personnel perspective, to continue to operate
during these challenging times and continue to engage with
customers to secure further contracts to fill capacity at the
facility.
Board Changes
Andrew Henderson, who has been with MPL since 2016 and a board
member since September 2017, has informed the board of his
intention to resign from the board of the Company and his position
as CFO by 15 November 2020 so that he can pursue other
opportunities. The MPL board has commenced a process to appoint a
replacement CFO candidate who will have both public market and
Indian corporate experience, and look forward to updating the
market with an appointment in due course.
Outlook
The long-term impact on the global economy of the Covid-19
outbreak is unclear and, whilst it is not possible to estimate the
full financial impact of the outbreak, we have taken proactive
measures to mitigate our operational risk and manage our business
and cash flow. The key focus for the year ahead is a closer focus
on revenue generation and closing contracts with end customers. We
feel confident that our facility at Karanja is well placed to take
advantage of the Indian recovery from Covid-19 restrictions and
there will be significant demand to use our facility.
Jeremy Warner Allan, Chairman
Mercantile Ports & Logistics Limited 21 October 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 30 June 2020
Note
6 months 6 months Year to
to 30 June to 30 June 31 Dec
2020 2019 2019
GBP000 GBP000 GBP000
CONTINUING OPERATIONS
Revenue 155 - 30
Operating costs (58) - (47)
Administrative expenses (2,046) (1,899) (4,351)
------------- ------------- -------------
OPERATING LOSS (1,949) (1,899) (4,368)
Finance income 44 10 19
Finance cost (695) (125) (632)
------------- ------------- -------------
NET FINANCING COST (651) (115) (613)
LOSS BEFORE TAX (2,600) (2,014) (4,981)
Tax expense for the period / year - - -
------------- ------------- -------------
LOSS FOR THE PERIOD /YEAR FROM
CONTINUNING
OPERATION (2,600) (2,014) (4,981)
Loss on closure of subsidiary
operations - (44) -
Tax expense of discontinued
operations - - -
------------- ------------- -------------
LOSS FOR THE PERIOD/YEAR (2,600) (2,058) (4,981)
Loss for the period / year
attributable
to:
Non-controlling interest (5) (3) (8)
Owners of the parent (2,595) (2,055) (4,973)
------------- ------------- -------------
Loss for the period / year (2,600) (2,058) (4,981)
============= ============= =============
Other comprehensive
income/(expense)
Items that will not be reclassified
to profit or( loss)
Re-measurement of net defined
benefit
liability - - 4
Items that may be reclassified to
profit
or loss
Exchange differences on translating
foreign operations 4 774 1,282 (5,256)
------------- ------------- -------------
Other comprehensive loss for the
period
/ year 774 1,282 (5,252)
------------- ------------- -------------
Total comprehensive loss for the
period
/ year (1,826) (776) (10,233)
============= ============= =============
Total comprehensive loss for the
period
/ year attributable to:
Non-controlling interest (5) (3) (8)
Owners of the parent (1,821) (773) (10,225)
------------- ------------- -------------
(1,826) (776) (10,233)
============= ============= =============
Loss per share (consolidated):
Basic & Diluted, for the
year/period
attributable to ordinary equity
holders ( GBP 0.001) ( GBP 0.001) ( GBP 0.003)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2020
Note Period Period Year ended
ended ended 31 Dec
30 June 30 June 2019
2020 2019
GBP000 GBP000 GBP000
Assets
Property, plant and equipment 8 139,022 138,926 133,108
Intangible asset 4 - 5
------------- --------------- --------------
Total non-current assets 139,026 138,926 133,113
------------- --------------- --------------
Trade and other receivables 22,787 27,938 18,729
Cash and cash equivalents 7,796 7,371 14,823
------------- --------------- --------------
Total current assets 30,583 35,309 33,552
Total assets 169,609 174,235 166,665
============= =============== ==============
Equity
Share capital and share premium 134,627 134,627 134,627
Retained earnings (11,336) (5,783) (8,741)
Translation reserve (19,440) (13,676) (20,214)
------------- --------------- --------------
Equity attributable to owners
of parent 103,851 115,168 105,672
------------- --------------- --------------
Non-controlling interest (2) 8 3
------------- --------------- --------------
Total equity 103,849 115,176 105,675
------------- --------------- --------------
Liabilities
Non-current
Borrowings 7 37,943 34,302 35,989
Employee benefit obligations 4 26 4
Lease liabilities payables 2,691 - 2,460
Trade and other payables - 2,591 -
------------- --------------- --------------
Non-current liabilities 40,638 36,919 38,453
------------- --------------- --------------
Current
Borrowings 3,753 60 2,605
Employee benefit obligations 159 41 130
Current tax liabilities 7,074 7,339 6,949
Leases Liabilities payable 739 - 930
Trade and other payables 13,397 14,700 11,923
------------- --------------- --------------
Current liabilities 25,122 22,140 22,537
------------- --------------- --------------
Total liabilities 65,760 59,059 60,990
------------- --------------- --------------
Total equity and liabilities 169,609 174,235 166,665
========= ============= ===============================
CONDENSED STATEMENT OF CASH FLOWS
for the period ended 30 June 2020
Note 6 months 6 months Year to
to 30 June to 31 Dec 2019
2020 30 June
2019
GBP000 GBP000 GBP000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax for the period / year (2,600) (2,058) (4,981)
Noncash flow adjustments 5 1,466 928 1,204
------------- --------------- --------------
Net cash generated/used from operating
activities (1,134) (1,130) (3,777)
------------- --------------- --------------
Net changes in working capital 445 - 1,811
------------- --------------- --------------
Net cash from operating activities (689) - (1,966)
------------- --------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (7,717) (4,541) (4,221)
Finance income 39 2 15
------------- --------------- --------------
Net cash used in investing activities (7,678) (4,539) (4,206)
------------- --------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of share capital - - 8,287
Proceeds from borrowing (net) 1,464 6 169
Repayment of lease liabilities principal (3) - (313)
Interest payment on lease liabilities (107) (62)
------------- --------------- --------------
Net cash generated from / (used in)
financing activities 1,354 6 8,081
------------- --------------- --------------
Net change in cash and cash equivalents (7,013) (5,663) 1,909
Cash and cash equivalents, beginning
of the period / year 14,823 13,113 13,113
Exchange differences on cash and cash
equivalents (14) (79) (199)
------------- --------------- --------------
Cash and cash equivalents, end of the
period / year 7,796 7,371 14,823
============= =============== ==============
Note :
1) The adjustments and working capital movements have been
combined in the above Statement of Cash Flows.
Consolid ated St atement of Changes in Equity
for the PERIOD ended 30 JUNE 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 2019 134,627 (14,958) (3,772) -- 11 115,908
Issue of share capital -- -- -- -- -- --
Transactions with
owners 134,627 (14,958) (3,772) -- 11 115,908
--------- ------------ ---------- ------------ ----------------- ---------
Loss for the year -- -- (4,973) -- (8) (4,981)
Foreign currency translation
differences for foreign
operations -- (5,256) -- -- -- (5,256)
Re-measurement of
net defined benefit
pension liability -- -- -- 4 -- 4
Re-measurement of
net defined benefit
pension liability
transfer to retained
earning -- -- 4 (4) -- --
Total comprehensive
income for the year -- (5,256) (4,969) -- (8) (10,233)
--------- ------------ ---------- ------------ ----------------- ---------
Balance at
31 December 2019 134,627 (20,214) (8,741) -- 3 105,675
========= ============ ========== ============ ================= =========
Balance at
1 January 2020 134,627 (20,214) (8,741) -- 3 105,675
Issue of share capital -- -- -- -- -- --
Transactions with
owners 134,627 (20,214) (8,741) -- 3 105,675
-------- --------- --------- --- ---- --------
Loss for the period -- -- (2,595) -- (5) (2,600)
Foreign currency
translation differences
for foreign operations -- 774 -- -- -- 774
-------- --------- --------- --- ---- --------
Total comprehensive
income for the period -- 774 (2,595) -- (5) (1,826)
-------- --------- --------- --- ---- --------
Balance at
30 June 2020 134,627 (19,440) (11,336) -- (2) 103,849
======== ========= ========= === ==== ========
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
1. Reporting entity
Mercantile Ports & Logistics Limited (the "Company") was
incorporated in Guernsey under the Companies (Guernsey) Law 2008 on
24 August 2010. The condensed interim consolidated financial
statements of the Company for the period ended 30 June 2020
comprise the Company and its subsidiaries (together referred to as
the "Group"). The Company has been established to develop, own and
operate port and logistics facilities.
2. General information and basis of preparation
The condensed interim consolidated financial statements are for
the 6 months' period ended 30 June 2020 and are not for full year
accounts. The condensed interim consolidated financial statements
are prepared under AIM 18 guidelines. They have been prepared on
the historical cost basis. They do not include all of the
information required in annual financial statements in accordance
with IFRS. The condensed interim consolidated financial statements
are not audited.
The condensed interim consolidated financial statements are
presented in Great British Pounds Sterling (GBP), which is the
functional currency of the parent company. The preparation of the
condensed interim consolidated financial statements requires
management to make judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ
from these estimates.
In preparing these, condensed interim consolidated financial
statements, the significant judgments made by management applying
the Group's accounting policies and the key sources of estimation
uncertainty are the same as those applied in the annual IFRS
financial statements. "The Company is confident of its ability to
raise further funds to meet cost overruns, project enhancements or
working capital requirements. The Company's financing effort to
date is considered sufficient to enable the Company to fund all
aspects of its operations. As a result, the condensed interim
consolidated financial statements have been prepared on a going
concern basis."
The condensed interim consolidated financial statements have
been approved for issue by the Board of Directors on 21 October,
2020.
3. Significant accounting policies
The interim financial statements have been prepared in
accordance with the accounting policies adopted in the Group's last
annual financial statements for the year ended 31 December 2019.
The accounting policies have been applied consistently throughout
the Group for the purposes of preparation of these interim
financial statements.
New standards, amendments and interpretations to existing
standards effective from January 1, 2020
IFRS 16 amendment - IASB published 'Covid-19-Related Rent
Concessions (Amendment to IFRS 16)' amending the standard to
provide lessees with an exemption from assessing whether a
COVID-19-related rent concession is a lease modification. The
amendment is effective for annual reporting periods beginning on or
after 1 June 2020.
IBOR reform Phase 1 amendment - IASB issued 'Interest Rate
Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)' as a
first reaction to the potential effects the IBOR reform could have
on financial reporting. The amendments are effective for annual
reporting periods beginning on or after 1 January 2020.
Definition of Materiality - IASB issued 'Definition of Material
(Amendments to IAS 1 and IAS 8)' to clarify the definition of
'material' and to align the definition used in the Conceptual
Framework and the standards themselves. The amendments are
effective annual reporting periods beginning on or after 1 January
2020.
Conceptual Framework - IASB issued 'Amendments to References to
the Conceptual Framework in IFRS Standards'. The amendments are
effective for annual periods beginning on or after 1 January
2020
IFRS 3 amendments - IASB issued 'Definition of a Business
(Amendments to IFRS 3)' aimed at resolving the difficulties that
arise when an entity determines whether it has acquired a business
or a group of assets. The amendments are effective for business
combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or
after 1 January 2020.
4. Going Concern
In accordance with Provision 31 of the 2018 revision of the UK
Corporate Governance Code. The Board initially, prior to the
outbreak of Covid-19, assessed the Group's ability to operate as a
going concern for the next 12 months from the date of issuing the
interim statements, based on a financial model which was prepared
as part of approving the 2020 budget.
The Directors considered the cash forecasts prepared for the
two-years ending 31 December 2021 (which includes the potential
impact of COVID-19), together with certain assumptions for revenue
and costs, to satisfy themselves of the appropriateness of the
going concern basis used in preparing the financial statements.
Regarding financing, the Group had available capital GBP17.9
million made up of a cash balance of GBP7.8m as at 30 June 2020 and
GBP10.1 million still to drawdown on its the Rupee term loan
facility of INR 480 Crore. Under the terms of the loan facility the
Company was to start repayment of the principal amount from June
2020 with GBP15.1 million of payments to be repaid in the 2 years
period from 1 January 2020 too 31 December 2021. In March 2020 a
payment holiday for 3 months as per RBI guideline was agreed with
the Banking consortium for March, April, May. As at 22 May the RBI
in India has provided a further 3-month payment holiday to August
2020. The directors believe that the debt providers will continue
to support the Group thereafter.
The Directors also took account of the principal risks and
uncertainties facing the business referred to above, a sensitivity
analysis on the key revenue growth assumption and the effectiveness
of available mitigating actions.
The uncertainty as to the future impact on the Group of the
recent Covid-19 outbreak has subsequently been considered as part
of the Group's adoption of the going concern basis. In the downside
scenario analysis performed, the Directors have considered the
impact of the Covid-19 outbreak on the Group's trading and cash
flow forecasts. In preparing this analysis, the directors assumed
that the lockdown effects of the Covid-19 virus would peak in India
around the end of June and trading will normalise over the
subsequent few months, albeit attaining substantially lower levels
of revenue than budgeted, for at least the rest of the current
financial year. This scenario will lead to a material reduction in
the Group's revenues and results for 2020.
A range of mitigating actions within the control of management
were assumed, including reductions in the Directors and all staff
salary by 35% from May 2020 until the end of the year, a reduction
in all non-essential services and delay in building out the
facility which isn't needed for the current 3 signed customer until
significant revenue is again being generated. The Directors have
also considered the financial support commitment made by the RBI in
India. The Directors have also assumed, having had productive
discussions with its lenders, that certain bank fees due to be paid
in October 2020, can be deferred to the end of the current
facility.
In this scenario, the Group would remain within its banking
facilities, although some of the financial covenants would require
a waiver from the lenders during the current financial year, in
order to avoid being breached. Further adverse changes arising from
Covid-19 would increase the challenge of complying with financial
covenants and remaining within banking facilities. The Directors,
as stated above, are still in discussions with its lenders and
expect to be able to provide a update shortly.
The Group continues to closely monitor and manage its liquidity
risk. In assessing the Group's going concern status, the Directors
have taken account of the financial position of the Group,
anticipated future utilisation of available bank facilities and
other funding options, its capital investment plans and forecast of
gross operating margins as and when the operations commence.
Based on the above indications, after taking into account the
impact of Covid-19 on the Group's future trading, the Directors
believe that it remains appropriate to continue to adopt the going
concern in preparing the financial statements.
However, the downside scenario detailed above would indicate the
existence of a material uncertainty, which may cast significant
doubt on the Group's ability to continue as a going concern.
5 . Comprehensive income
The comprehensive loss for the period includes a gain of GBP0.77
million from the retranslation of foreign operations to Great
British Pounds Sterling (GBP), which is the functional currency of
the Company. (INR/GBP exchange rate at 30 June 2020 of 92.69, 31
December 2019: 93.48 and 30 June 2019: 87.34 were used).
6. 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:
Period ended Period ended Year ended
30 Jun 2020 30 Jun 2019 31 Dec 2019
GBP000 GBP000 GBP000
Adjustments and changes in working
capital
Depreciation 801 142 608
Finance income (39) (2) (19)
Unrealized exchange loss 13 - (5)
Finance cost 691 - 620
------------- ------------- ------------
1,466 140 1,204
------------- ------------- ------------
Change in trade and other payables 22 2 080 1,330
Change in trade and other receivables 423 (1,292) 481
445 788 1,811
------------- ------------- ------------
7. Loan facility
Karanja Terminal & Logistics Private Limited (KTLPL), the
Indian subsidiary has in place a rupee term loan of INR 480 crore
(GBP 51.79 million) for part financing the port facility out of
same bank has disbursed only INR 386.47 crore (GBP 41.70 million).
The rupee term loan was sanctioned by 4 Indian public sector banks
and the loan agreement was executed on 28(th) February, 2014.
On 29 September 2017 the terms of sanction were amended,
extending the tenure of the loan for 13 years and 6 months with
repayment commencing from the end of June 2020.
The emergence of the COVID-19 pandemic has brought a drastic
financial challenge to various business across the board,
worldwide. In India, Reserve Bank of India (RBI) had proactively
granted moratorium on interest as well as principal repayment
initially for a period of 3 months, which later they extended
further up to August, 2020, which KTPL has availed. Numerous
petitions have been filed at both Hon'ble High Court as well as
Supreme Court of India, by various corporates and individuals
seeking further relief and to extend the moratorium period till
December 31, 2020. Pending disposal of above petitions, the Supreme
Court of India has directed all Banks and financial institution to
stop recovery of loan EMI until the case is disposed. Due to above
development we have calculated repayment presuming instalments to
be due from October 2020 and repayment is calculated accordingly as
follow:
Repayment amount
Payment falling GBP in Million
due INR in Crore
Within 1 year 34.78 3.75
1 to 5 year's 231.88 25.02
After 5 year's 119.81 12.93
Total 386.47 41.70
============= ===============
The rate of interest will be a floating rate linked to the
Canara bank base rate (8.65%) with an additional spread of 480
basis points. The present composite rate of interest is 13.45%. The
borrowings are secured by the hypothecation of the port facility
and pledge of its shares as well as a personal guarantee by the
chairman, Nikhil Gandhi. The carrying amount of the bank borrowing
is considered to be a reasonable approximation of the fair
value.
KTLPL has utilised the rupee term loan facility of INR 386.47
crore ( GBP 41.70 million) as at 30 June 2020 (1 crore = 10 Million
Rupees). (30 June 2019: INR 298.45 crore (GBP34.17 million)) as of
the reporting date.
8. Property, plant and equipment
During the six months ended 30 June 2020, the Group progressed
construction of the remaining facility and the carrying amount at
30 June 2020 was GBP 97.13 million (30 June 2019: GBP 138.93
million) as 25% of the port facility was capitalised on 1 October
2019 was GBP 39.75 million. The amount of borrowing costs
capitalised during the six months ended 30 June 2020 was GBP 2.10
million (31 December 2019: GBP 2.36 million). The weighted average
rate used to determine the amount of borrowing costs during the
period eligible for capitalisation was 13.39%, which is the
effective interest rate of the specific borrowing. (INR/GBP
exchange rate at 30 June 2020 of 92.69, 31 December 2019: 93.48 and
30 June 2019: 87.34 were used).
9. Event Subsequent to the reporting period.
Lockdown in Mumbai has been extended until 31 October. The RBI
moratorium for Term loan repayment & interest was extended
until September 2020 which the company has taken advantage of. On 6
August the RBI released a Circular allowing Restructuring Term Loan
and PIL is underway in Supreme Court for further relief in
Moratorium. As explained in note 7 proceedings are still underway
in the Supreme court.
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