| Telecard Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Annual
Report 1998 |
|
|
|
| CONTENTS |
|
|
| COMPANY
INFORMATION |
|
| NOTICE
OF ANNUAL GENERAL MEETING |
|
| DIRECTORS'
REPORT |
|
| CHIEF
EXECUTIVE'S REVIEW |
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| BALANCE
SHEET |
|
| PROFIT
& LOSS ACCOUNT |
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| NOTES
TO THE ACCOUNTS |
|
| PATTERN
OF SHARE HOLDING |
|
|
|
| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
Rear Admiral (Retd.) A.W.
Bhombal (Chairman) |
|
|
|
Mr. Sultan-ul-Arfeen |
|
|
|
Mr. Shahid Firoz |
|
|
|
Mr. Khalid Firoz |
|
|
|
Mr. Javaid Firoz |
|
|
|
Mr. Asghar Mehdi Abidi |
|
|
|
Dr. Dudley B. Christie |
|
|
|
| CHIEF
EXECUTIVE |
Mr. Saleh M. Tarin |
|
| COMPANY
SECRETARY |
Mr. Jawed Hasan Ansari |
|
|
| BANKERS |
|
Bank of America |
|
|
|
Prudential Commercial
Bank Ltd. |
|
|
|
Muslim Commercial Bank
Ltd. |
|
|
|
Habib Bank Ltd. |
|
|
|
Standard Chartered Bank
Ltd. |
|
|
|
|
| AUDITORS |
|
Ford, Rhodes, Robson,
Morrow, |
|
|
|
Chartered Accountants |
|
|
| REGISTERED
OFFICE |
3rd Floor |
|
|
|
World Trade Center |
|
|
|
75, East Blue Area,
Fazal-u1-Haq Road |
|
|
|
Islamabad, Pakistan |
|
|
|
| CORPORATE
OFFICE |
7th Floor |
|
|
|
World Trade Center |
|
|
|
Khayaban-e-Roomi, Clifton |
|
|
|
Karachi, Pakistan |
|
|
|
| Notice
of Annual General Meeting |
|
|
| Notice
is hereby given that the 5th Annual General Meeting of the Shareholders of
the |
|
| Company
will be held on Saturday, February 27, 1999 at 3:00 p.m., at Islamabad
Holiday Inn, |
|
| Islamabad
to transact the following business: |
|
|
| 1.
To confirm the minutes of the last Annual General Meeting held on February
28, 1998. |
|
|
|
|
| 2.
To receive, consider and adopt the Audited Accounts of the Company for the
year ended on |
|
| June
30, 1998 together with the Directors' and Auditors' report thereon. |
|
|
| 3.
To appoint Auditors of the Company and fix their remuneration. Present
Auditors M/s Ford, |
|
| Rhodes,
Robson, Morrow, Chartered Accountants retire and being eligible offer
themselves |
|
| for
re-appointment. |
|
|
| 4.
To transact any other business with the permission of the Chair. |
|
|
|
|
By order of the Board, |
|
|
|
|
|
|
|
Jawed Hasan Ansari |
|
|
|
Company Secretary |
|
| Islamabad |
|
| Dated:
February 5, 1999 |
|
|
| NOTES: |
|
|
| 1.
The share transfer books of the Company shall remain closed from February 26
to March 6, |
|
| 1999
(both days inclusive). |
|
|
|
| 2.
A member of the Company entitled to attend and vote may appoint another
member as his/ |
|
| her
proxy to attend and vote instead of him/her. Proxy in-order must be received
at the |
|
| Registered
Office of the Company not less than 48 hours before the time of holding
Annual |
|
| General
Meeting. |
|
|
| 3.
The members are requested to communicate with the Company of any change in
their address. |
|
|
|
| DIRECTORS'
REPORT |
|
|
| The
Directors of the Company submit their report together with the Audited
Accounts for the |
|
| year
ended June 30, 1998 |
|
|
| FINANCIAL
RESULTS |
|
|
|
1998 |
1997 |
|
|
|
RUPEES |
RUPEES |
|
|
|
|
| GROSS SALES |
|
|
268,288,200 |
173,552,484 |
|
| LESS:
DISCOUNT |
|
|
16,154,936 |
9,041,440 |
|
|
|
|
---------- |
---------- |
|
| NET SALES |
|
|
252,133,264 |
164,511,044 |
|
| COST
OF SALES |
|
|
181,256,862 |
139,398,685 |
|
|
|
|
---------- |
---------- |
|
| GROSS
PROFIT |
|
|
70,876,402 |
25,112,359 |
|
| ADMINISTRATIVE
AND SELLING EXPENSES |
|
|
54,220,519 |
36,940,600 |
|
|
|
|
---------- |
---------- |
|
|
|
|
16,655,883 |
(11,828,241) |
|
| OTHER
INCOME |
|
|
1,529,848 |
13,872,792 |
|
|
|
|
---------- |
---------- |
|
|
|
|
18,185,731 |
2,044,551 |
|
|
|
|
| FINANCIAL
CHARGES |
|
(14,098,876) |
(13,717,943) |
|
|
|
---------- |
---------- |
|
| NET
PROFIT/(LOSS) FOR THE YEAR |
|
4,086,855 |
(11,673,392) |
|
|
|
|
|
| PRIOR
YEAR ADJUSTMENT |
|
- |
(4,101,371) |
|
|
|
---------- |
---------- |
|
|
|
4,086,855 |
(15,774,763) |
|
| EXTRAORDINARY
ITEM |
|
|
|
|
| KARACHI
RELOCATION COST |
|
|
- |
(9,668,098) |
|
|
|
|
---------- |
---------- |
|
| NET
PROFIT/(LOSS) BEFORE TAXATION |
|
4,086,855 |
(25,442,861) |
|
|
|
|
| TAXATION
- CURRENT YEAR |
|
(1,260,666) |
(822,555) |
|
|
- PRIOR YEARS |
|
- |
(928,119) |
|
|
|
|
---------- |
---------- |
|
|
|
|
(1,260,666) |
(1,750,6740) |
|
|
|
|
---------- |
---------- |
|
| NET
PROFIT/(LOSS) AFTER TAXATION |
|
2,826,189 |
(27,193,535) |
|
| ACCUMULATED
LOSS BROUGHT FORWARD |
|
(65,382,700) |
(38,189,165) |
|
|
|
|
---------- |
---------- |
|
| ACCUMULATED
LOSS CARRIED FORWARD |
|
(62,556,511) |
(65,382,700) |
|
|
|
|
========== |
========== |
|
|
|
| CHIEF
EXECUTIVE'S REVIEW |
|
| The
review on three pages from 6 to 8 deals with business activities during the
year and the |
|
| future
out look of the Company. The Directors of the Company endorse the contents of
this |
|
| review. |
|
|
| PATTERN
OF HOLDING OF SHARES |
|
| The
pattern of holding is provided on page 31. |
|
|
| EARNING
PER SHARE |
|
| Earning
per share for the year ended on June 30, 1998 is Rs. 0.11. |
|
|
| AUDITORS |
|
| The
present Auditors M/s. Ford, Rhodes, Robson, Morrow, Chartered Accountants
retire and |
|
| being
eligible, offer themselves for re-appointment. |
|
|
|
|
By Order of the Board |
|
|
|
|
|
|
|
|
|
Saleh M. Tarin |
|
| Karachi:
February 05, 1999 |
|
Chief Executive |
|
|
|
| CHIEF
EXECUTIVE'S REVIEW |
|
|
| It
is indeed a pleasure to welcome you to the 5th Annual General Meeting and to
present |
|
| the
Annual Report and Financial Statements for the year ended June 30, 1998. |
|
|
| REVIEW
OF OPERATIONS |
|
| By
the Grace of Allah, for the year under review, your Company, for the first
time, entered |
|
| into
a profitable era and has achieved a net profit before tax of Rs. 4.086
million. The year |
|
| witnessed
a net profit after tax of Rs. 2.826 million as opposed to the net loss after
tax of |
|
| Rs.
27.193 million of previous year. |
|
|
| The
year 1997-98 was a year of consolidation for your Company. Since the trauma
of |
|
| Karachi
closure had adversely impacted almost all aspects of your Company, it was
felt |
|
| imperative
that all procedures and operations be systematized and streamlined to
strengthen |
|
| the
foundation for eventual expansion. The success recorded in the financial
results, without |
|
| any
increase in capacity, is a manifestation of the desirability of this
approach. |
|
|
| The
most notable achievement was an increase this year of Rs. 94.7 million in
gross sales |
|
| over
last year, representing a further growth of 55% this year over the 35% growth
recorded |
|
| last
year. This was made possible by reviewing and revising the marketing strategy
and re- |
|
| assessing
the performance of all payphones for relocation to sites of higher yield.
Special |
|
| emphasis
was laid to restore the Karachi market which, consequently, contributed over |
|
| 40%
of gross sales compared to a mere 12% the previous year when services had
remained |
|
| suspended
for a major part of the year. |
|
|
| By
increasing gross sales to Rs. 268 million and restricting the cost of sales
to Rs. 181.25 |
|
| million,
your Company succeeded to improve the gross profit to Rs. 70.9 million which
is |
|
| about
three times the gross profit earned last year. This was achieved by keeping
cost of |
|
| sales
under control, despite devaluation of Pak Rupee and the imposition of
composite |
|
| rates
for imports. The predominant factor in this endeavor was the reduction in the
cost of |
|
| cards
from 21% of gross sales last year to 15.5% this year. Such a healthy
reduction was a |
|
| combined
result of the full impact of negotiated lower prices from the supplier and
the |
|
| optimization
of card mix. Another contributory factor was the increase in relief rebate, |
|
| allowed
by the Government of Pakistan. This was because of applicability of higher |
|
| discounts
on increased monthly sales. Besides the issue of this relief rebate and the
awaited |
|
| procedure
of its disbursement, bulk discount of 7% is now also being offered to other |
|
| operators.
Your Company will be taking up this matter as well with the concerned
authorities |
|
| for
the determination of the final rebate structure applicable. Primarily because
of these |
|
| factors,
the cost of sales, excluding depreciation, for the year under review was
restricted |
|
| to
57% of gross sales from 64% of last year. |
|
|
| For
effective implementation of marketing strategy and the institutional
strengthening of |
|
| the
Company, field force was reorganized and additional professionals were
inducted |
|
| particularly
in the zones to optimize distribution channels. The administrative and
selling |
|
| expenses,
correspondingly, increased from Rs. 36.9 million last year to Rs. 54.2
million |
|
| this
year, because of full-scale revival of the operation in Karachi. However,
these expenses, |
|
| as
a percentage of sales, showed a decline from 21.28% of last year to 20.2%
this year. |
|
|
| Your
Company had liquidated its foreign currency deposits in the latter part of
the fiscal |
|
| year
1996-97 which resulted in elimination of return on deposits this year, but
helped in |
|
| payment
of financial obligations and in keeping. the financial charges almost static. |
|
|
| Since
your Company is carrying accumulated tax loss, provision for taxation was
kept |
|
| equivalent
only to the turnover tax as is required under Income Tax Ordinance 1979. |
|
|
| The
net profit after tax of Rs. 2.82 million as opposed to the net loss of Rs.
27.19 million |
|
| the
previous year corroborates the efficacy of the measures taken by your
management in |
|
| setting
your Company on course for a major expansion. |
|
|
| FUTURE
OUT LOOK |
|
| Having
succeeded in the establishment of an integrated field infrastructure, your
Company |
|
| is
now on the anvil of an aggressive expansion programme, by importing and
installing |
|
| new
generation equipment. Present equipment is also being upgraded to ensure
elimination |
|
| of
an otherwise minor Y2K inconvenience. As the fault-ratios have considerably
improved |
|
| on
payphones, your Company's sales team is geared towards enhancing revenues not
only |
|
| from
an enlarged network of payphones but also by maximizing yield from the
existing |
|
| locations.
With the overall market showing increasing acclimatization to payphone
culture, |
|
| your
Company is now poised, Insha Allah, to play. its rightful role in the
Telecommunication |
|
| sector
of Pakistan. |
|
|
| After
protracted negotiations with PTCL throughout last year, your Company is now
very |
|
| close
to signing a detailed agreement for implementation of Wireless Payphone
Service. |
|
| An
announcement in this respect is expected to be made shortly. |
|
|
| APPRECIATION |
|
| I
would like to record my appreciation for the dedication displayed by the
Company personnel in achieving |
|
| remarkable
results under exacting circumstances. As always, the talent development of
the available human |
|
| resources
will remain the fundamental principle in your Company's management policy. |
|
|
| I
must also acknowledge the understanding shown by the Pakistan
Telecommunication Authority, Pakistan |
|
| Telecommunication
Company Limited and the assistance provided by the financial institutions in
our pursuit of |
|
| consolidation
and growth. |
|
|
| I
am indebted to the Board of Directors for their involvement, time and
patience in guiding the management in |
|
| the
evolution of a corporate strategy and I must also express my sincere
appreciation for the confidence and |
|
| support
of our valued shareholders. |
|
|
|
|
By order of the Board |
|
|
|
|
|
|
|
|
|
Saleh M. Tarin |
|
| Karachi:
February 5, 1999 |
|
Chief Executive |
|
|
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of TELECARD LIMITED as at June 30,
1998 and |
|
| the
related profit and loss account and statement of changes in financial
position (cash flow |
|
| statement),
together with the notes forming part thereof, for the year then ended and we
state that |
|
| we
have obtained all the information and explanations which to the best of our
knowledge and |
|
| belief
were necessary for the purposes of our audit and, after due verification
thereof, we report |
|
| that: |
|
|
| (a)
cash in transit (note 21.1 to the accounts) includes an amount of Rs.2.925
million which |
|
| has
not been recovered from the branches to-date and remained unverified by us.
No |
|
| provision
against the above amount has been made in the accounts; |
|
|
| (b)
in our opinion, proper books of account have been kept by the company as
required by the |
|
| Companies
Ordinance, 1984; |
|
|
|
|
|
| (c)
in our opinion: |
|
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have |
|
| been
drawn up in conformity with the Companies Ordinance, 1984, and are in |
|
| agreement
with the books of account and are further in accordance with accounting |
|
| policies
consistently applied; |
|
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the company s |
|
| business;
and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during
the |
|
| year
were in accordance with the objects of the company; |
|
|
|
| (d)
in our opinion, except for the effect of the matter referred to in paragraph
(a) above which |
|
| would
decrease the profit for the year and increase accumulated loss by Rs.2.925
million. |
|
| to
the best of our information and according to the explanations given to us,
the balance |
|
| sheet,
profit and loss account and the statement of changes in financial position
(cash flow |
|
| statement),
together with the notes forming part thereof, give the information required
by |
|
| the
Companies Ordinance, 1984, in the manner so required and respectively give a
true and |
|
| fair
view of the state of the company s affairs as at June 30, 1998 and of the
profit and the |
|
| changes
in financial position for the year then ended; |
|
|
| (e)
in our opinion no Zakat was deductible at source under the Zakat and Ushr
Ordinance, |
|
| 1980; and |
|
|
|
|
| (f)
without further qualifying our opinion, we draw attention to the following
matters: |
|
|
| (i)
attention is drawn to note 19.1 to the accounts concerning outstanding
balance from |
|
| debtors
amounting to Rs.3.906 million. The ultimate outcome of actions taken by the |
|
| company
cannot presently be determined and no provision for any doubtful debts that |
|
| may
result has been made in these financial statements; and |
|
|
| (ii)
as shown in the financial statements the company s current liabilities
exceeded its |
|
| current
assets by Rs.90.387 million. These financial statements have been prepared |
|
| on
a going concern basis, the validity of which is dependent on the successful |
|
| outcome
of matters stated in note 27 to the accounts. |
|
|
| (iii)
supplier s credit and royalties amounting to Rs.29.391 million have been
treated as |
|
| deferred
liabilities on the basis of the reason given in note 5.5 to the accounts. |
|
|
| Karachi: |
|
|
Ford, Rhodes, Robson, Morrow |
|
| February
05, 1999 |
|
Chartered Accountants. |
|
|
|
|
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
|
|
1998 |
1997 |
|
|
|
Note |
Rupees |
Rupees |
|
| SHARE
CAPITAL AND RESERVE |
|
|
| Authorised |
|
|
|
| 25,000,000
ordinary shares of Rs. 10 each |
|
250,000,000 |
250,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
3 |
250,000,000 |
250,000,000 |
|
| Revenue
reserve |
|
|
|
|
| Profit
and loss account - adverse balance |
|
(62,556,511) |
(65,382,700) |
|
|
|
|
---------- |
---------- |
|
|
|
|
187,443,489 |
184,617,300 |
|
| DEFERRED
INCOME |
|
4 |
190,550 |
872,918 |
|
| DEFERRED
LIABILITIES |
|
5 |
72,075,964 |
67,347,089 |
|
| OBLIGATIONS
UNDER FINANCE LEASE |
|
6 |
5,063,765 |
20,894,332 |
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Short
term loans |
|
7 |
3,166,668 |
6,166,667 |
|
| Short
term finances |
|
8 |
44,106,216 |
31,065,189 |
|
| Supplier
s credit |
|
9 |
12,009,643 |
606,309 |
|
| Current
portion of long term liabilities |
10 |
40,307,281 |
46,725,888 |
|
| Creditors,
accrued and other liabilities |
11 |
71,120,424 |
43,455,062 |
|
|
|
|
---------- |
---------- |
|
|
|
|
170,710,232 |
128,019,115 |
|
| CONTINGENCIES
AND COMMITMENT |
|
12 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
435,484,000 |
401,750,754 |
|
|
|
|
========== |
========== |
|
|
|
|
| TANGIBLE
FIXED ASSETS |
|
|
|
|
| Operating
fixed assets |
|
13 |
206,167,948 |
234,607,431 |
|
| Capital
work-in-progress |
|
14 |
128,364,126 |
105,685,357 |
|
|
|
|
---------- |
---------- |
|
|
|
|
334,532,074 |
340,292,788 |
|
|
|
|
|
|
| DEFERRED
ADVERTISEMENT |
|
|
|
|
| EXPENDITURE |
|
15 |
2,850,000 |
3,150,000 |
|
| DEFERRED
COST |
|
16 |
1,294,404 |
2,025,724 |
|
| LONG
TERM DEPOSITS |
|
17 |
16,484,195 |
16,419,097 |
|
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
| Stock-in-trade |
|
18 |
5,190,972 |
3,721,468 |
|
| Trade debts |
|
19 |
19,352,272 |
4,426,143 |
|
| Advances,
deposits, prepayments and |
|
|
|
| other
receivables |
|
20 |
44,952,975 |
21,980,038 |
|
| Cash
and bank balances |
|
21 |
10,827,108 |
9,735,496 |
|
|
|
|
---------- |
---------- |
|
|
|
|
80,323,327 |
39,863,145 |
|
|
|
|
---------- |
---------- |
|
|
|
435,484,000 |
401,750,754 |
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
Saleh M. Tarin |
|
SHAHID FEROZ |
|
|
Chief Executive |
|
Director |
|
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
|
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
|
| Gross sales |
|
|
268,288,200 |
173,552,484 |
|
| Less:
Discount |
|
|
16,154,936 |
9,041,440 |
|
|
|
|
---------- |
---------- |
|
| Net sales |
|
|
252,133,264 |
164,511,044 |
|
| Cost
of sales |
|
22 |
181,256,862 |
139,398,685 |
|
|
|
|
---------- |
---------- |
|
| Gross
profit |
|
|
70,876,402 |
25,112,359 |
|
| Administrative
and selling expenses |
|
23 |
54,220,519 |
36,940,600 |
|
|
|
|
---------- |
---------- |
|
|
|
|
16,655,883 |
(11,828,241) |
|
| Other
income |
|
24 |
1,529,848 |
13,872,792 |
|
|
|
|
---------- |
---------- |
|
|
|
|
18,185,731 |
2,044,551 |
|
| Financial
charges |
|
25 |
(14,098,876) |
(13,717,943) |
|
|
|
|
---------- |
---------- |
|
| Net
profit/(loss) for the year |
|
|
4,086,855 |
(11,673,392) |
|
| Prior
year adjustment |
|
|
- |
(4,101,371) |
|
|
|
|
---------- |
---------- |
|
|
|
|
4,086,855 |
(15,774,763) |
|
| Extraordinary
item - Karachi Relocation Cost |
|
- |
(9,668,098) |
|
|
|
|
---------- |
---------- |
|
| Net
profit/(loss) before taxation |
|
|
4,086,855 |
25,442,861 |
|
|
|
|
---------- |
---------- |
|
| Taxation
- Current year |
|
|
|
(1,260,666) |
(822,555) |
|
| - Prior years |
|
|
- |
(928,119) |
|
|
|
|
---------- |
---------- |
|
|
|
|
(1,260,666) |
(1,750,674) |
|
|
|
|
---------- |
---------- |
|
| Net
profit/(loss) after taxation |
|
|
2,826,189 |
(27,193,535) |
|
| Accumulated
loss brought forward |
|
|
(65,382,700) |
(38,189,165) |
|
|
|
|
---------- |
---------- |
|
| Accumulated
loss carded forward |
|
|
(62,556,511) |
(65,382,700) |
|
|
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
Saleh M. Tarin |
|
SHAHID FIROZ |
|
|
|
Chief Executive |
|
Director |
|
|
|
|
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) |
|
|
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
| Net
profit/(1oss) before taxation and extraordinary item |
4,086,855 |
(15,774,763) |
|
| Adjustments
for: |
|
|
|
|
|
| Depreciation |
|
|
|
31,614,630 |
31,300,702 |
|
| Deferred
cost |
|
|
|
731,320 |
731,320 |
|
| Deferred
income |
|
|
|
(682,368) |
(682,368) |
|
| Deferred
advertisement expenditure |
|
|
300,000 |
300,000 |
|
| Profit
on sale of fixed assets |
|
|
(712,824) |
(41,132) |
|
| Financial
charges |
|
|
|
14,098,876 |
13,717,943 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
45,349,634 |
45,326,465 |
|
|
|
|
|
|
---------- |
---------- |
|
| Operating
profit before working capital changes |
49,436,489 |
29,551,702 |
|
|
|
|
|
|
|
|
| Changes
in working capital: |
|
|
|
| (Increase)/decrease
in current assets |
|
|
| Stores,
spares and stocks |
|
|
(1,469,504) |
(1,419,645) |
|
| Trade debts |
|
|
|
(14,926,129) |
(2,126,512) |
|
| Advances,
deposits, prepayments and other receivables |
(22,111,222) |
(9,608,323) |
|
|
|
|
---------- |
