By Tom Winnifrith, The Sheriff of AIM | Sunday 25 June 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
When AIM listed Mercantile Ports & Logistics (MPL) disappears up in smoke having sent tens of millions of UK Investor cash to money heaven, the stink will force Nomad Cenkos to show that it acted in a way that did not bring the Casino into disrepute, as it did when it allowed Quindell to commit wholesale fraud. Thus one shareholder, a veteran of the ports and logistics industry, is putting Cenkos on record now so that it can have no excuse at the death. letter one HERE raised clear questions of fraud. Letter two HERE showed more cases of how Mercantile misled investors. Now the shareholder has followed up again with a third letter to the head of corporate governance at Lagos Securities, Amber Wood, cc'ing in Redleaf, the PR to Mercantile as well as Quindell at the height of that fraud. Do Cenkos and fragrant Amber give a toss about clients lying to investors?
The letter is as follows
Dear Ms Wood,
For the record No 3.
After careful consideration, we believe the contents of the following Mercantile Ports & Logistics Financial and RNS Statements, warrants a formal complaint to AIM Regulation and the Serious Fraud office. What do you think?
30 June 2013 - INTERIM REPORT
'I am pleased to report that the Ground Breaking ceremony has taken place and that development work continues in line with management’s expectations. With the monsoon season drawing to a close, the project’s EPC contractor advises that activity ON THE SITE will accelerate as planned.'
Reality: THERE IS NO ON-SITE DEVELOPMENT WOTK OR ACTIVITY WHATSOEVER AND, THERE WILL NOT BE ANY ON-SITE DEVELOPMENT WORK UNTIL THE SINGLE LANE DIRT TRACK ACCESS ROAD, WHICH CURRENTLY ENDS AT THE EDGE OF A TIDAL CREEK SOME 50M SHORT OF THE DEVELOPMENT SITE AT KARANJA, IS EXTENDED BY BUILDING A SMALL BRIDGE TO SPAN THE TIDAL CREEK. Source: Google Earth Historic View
Work on extending the dirt track over the creek DID NOT BEGIN UNTIL late H2/2013 - Source: Google Earth Historic View
8 April 2014 - RNS - Closure of Debt Facility
'The SITE DEVELOPMENT WORKS at Karanja are progressing as per management's expectations and the project's EPC contractor is PLEASED with progress. The COMING MONTHS will see significant progress on the development of the APPROACH TRESTLES, REVETMENT, RECLAMATION, and PILING WORK for the jetty. Manpower ON-SITE continues to RAMP UP, with a labour force of approximately 400-500 people EXPECTED to be working onsite in the COMING MONTHS.'
Reality: BREATHTAKING DISHONESTY - the small road bridge to span the tidal creek is still in THE EARLY STAGES OF CONSTRUCTION and it will be another 8 MONTHS(DEC 2014), BEFORE IT IS COMPLETED AND, CONTRACTORS AND THEIR HEAVY MACHINERY GAIN FIRST ACCESS TO THE SITE. Calendar year 2014, IN FACT SAW NO WORK WHATSOEVER CARRIED OUT ON-SITE, BECAUSE THERE WAS NO MEANS OF ROAD ACCESS! Source; Google Earth Historic View.
30 June 2014 - INTERIM REPORT
'Chairman's Statement - I am pleased to report that the level of activity on the ground has continued in line with management's expectations and in accordance with the plans agreed with the Company's EPC contractor. DURING THE PERIOD and SINCE THE PERIOD END, WORK HAS CONTINUED TO PROGRESS on two of the three key areas of the build out, INCLUDING LAND RECLAMATION and dredging in the approach channel.'
Reality: BREATHTAKING DISHONESTY - AS REPORTED ABOVE - THERE WAS NO MEANS OF ACCESS TO THE PORT SITE UNTIL JAN 2015, FOLLOWING COMPLETION OF THE BRIDGE OVER THE CREEK AND GENERAL REPAIRS TO THE DIRT TRACK ACCESS 'ROAD'. SO HOW COULD LAND RECLAMATION WORK HAVE PROGRESSED DURING THE PERIOD UP TO 30 JUNE 2014 AND SINCE? - A BLATANT LIE. Source: Google Earth Historic View AND photographs taken from a light aircraft hired by a small group of shareholders at their own expense, to check management's claim, that the contractor’s workforce had mobilised on-site, and progress was being made with the development work!
Cash Position Timeline: Post £73m IPO:
8 April 2014 - RNS - Closure of Debt Facility
'The syndicated facility is for GBP 48 million for a term of ten years with interest payable at the base rates of the respective banks plus a range of 3 per cent to 3.55 per cent per annum, resulting in a present effective rate ranging between 13.2 per cent and 13.75 per cent per annum. The Company expects to make the initial draw down from the Debt Facility during the second quarter of this calendar year.'
30 June 2014 - INTERIM REPORT
'£45.5m Cash balance - DEBT DRAWDOWN: Zero
Cash position reflects the progress and costs that have been incurred ON-SITE and the Company has so far incurred Capex of GBP 21.15 million by the end of the period.'
Reality: THE COMPANY AND ITS PRINCIPAL CONTRACTOR IS YET TO GET ON-SITE! - THE ONLY CONSTRUCTION COSTS INCURRED TO DATE SHOULD HAVE BEBN THE SMALL BRIDGE UNDER CONSTRUCTION OVER THE CREEK - WHICH WE ESTIMATE AT £2M TO £3M.
Prelims - 31 Dec 2014
'The Group has conserved its resources during periods of lower than anticipated activity, with the Group’s operational spend accelerating in line with increased activity on site. The Board remains confident that the Group has adequate resources in order to complete the facility at Karanja, with cash at the end of 2014 standing at £41m.'
Reality: The year end £41m cash balance suggests a cash burn of £4.5m in H2/2014 - which seems a little high considering there was NO on-site activity during the entire year, other than to build a small bridge on the approach road to allow heavy machinery access to the terminal, which was completed in Dec 2014(Google Earth Historic View), together with some berth dredging, carried out using the low cost, low productivity, ‘stone age’ technology of a mobile crane equipped with a bucket grab mounted on a small floating pontoon, rather than a modern computer controlled, high performance suction dredger. INTERESTINGLY, THERE IS NO MENTION WHATSOEVER OF ANY DEBT DRAWDOWN IN THE CHAIRMAN’S STATEMENT.
However, buried AWAY on page 25 is this little gem:
'As at 31 December 2014, the Group’s non-derivative financial liabilities have contractual maturities (and interest payments) as summarised below: Within 1 year - loan interest payment of £2.97m!
Now this suggests that during July and Dec 2014, MPL made use of the £48m debt facility to drawdown somewhere between £15.5m and £22.5m; determined by the date it was drawn down between July 2014 and Dec 2014. Lets assume a mid period date of September 2014. This would indicate a bank loan drawdown of circa £19M @ the average 13.5% loan interest rate.
THIS WOULD SUGGEST AN OUTRAGEOUS AND TOTALLY IMPLAUSIBLE CAPEX/CASH BURN OF £44.6M (£21.1m + £4.5m + £19M), BEFORE THE COMPANY AND ITS PRINCIPAL CONTRACTOR COULD EVEN GAIN ACCESS TO THE SITE, NEVER MIND COMMENCE CONSTRUCTION OF THE TRESTLE, TO GAIN ACCESS TO THE 200 ACRE AREA OF FORESHORE AND INTERTIDAL ZONE ALLOCATED FOR LAND RECLAMATION AND BERTH CONSTRUCTION.
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