| Telecard Limited |
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| Annual
Report 2000 |
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| CONTENTS |
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| COMPANY
INFORMATION |
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| NOTICE
OF ANNUAL GENERAL MEETING |
|
| DIRECTORS'
REPORT |
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| CHIEF
EXECUTIVE'S REVIEW |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| BALANCE
SHEET |
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| PROFIT
& LOSS ACCOUNT |
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| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
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| NOTES
TO THE ACCOUNTS |
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| PATTERN
OF SHAREHOLDING |
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| COMPANY
INFORMATION |
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|
| BOARD
OF DIRECTORS |
Mr. Sultan-ul-Arfeen |
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|
Mr. Shahid Firoz |
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|
Mr. Khalid Firoz |
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|
Mr. Javaid Firoz |
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|
Mr. Brian Lee Bowen |
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|
Mr. Bo Ericsson |
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|
Dr. Dudley B. Christie |
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| CHIEF
EXECUTIVE |
Mr. Javaid Firoz |
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| COMPANY
SECRETARY |
Mr. Habib A. Farooqi |
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| BANKERS |
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Union Bank Ltd. |
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ABN - Amro Bank. |
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Muslim Commercial Bank
Ltd. |
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|
Habib Bank Ltd. |
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Bank Alfalah Ltd. |
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| AUDITORS |
|
Ford, Rhodes, Robson,
Morrow, |
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|
Chartered Accountants |
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| REGISTERED
OFFICE |
3rd Floor |
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|
World Trade Center |
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|
75, East Blue Area,
Fazal-ul-Haq Road |
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Islamabad, Pakistan |
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| CORPORATE
OFFICE |
7th Floor |
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|
World Trade Center |
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10, Khayaban-e-Roomi,
Clifton |
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Karachi, Pakistan |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 7th Annual General meeting of the shareholders of
the |
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| Company
will be held on Monday 18, December 2000 at 9.00 am at Islamabad Holiday |
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| Inn,
Islamabad to transact the following business. |
|
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| 1.
To confirm the minutes of the last Extra Ordinary General Meeting held on
July 22, 2000. |
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| 2.
To receive, consider and adopt the Audited Accounts of the Company for the
year |
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| ended
on June 30, 2000 together with the Directors' and Auditors' report thereon. |
|
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| 3.
To appoint Auditors of the Company and fix their remuneration. Present
Auditors M/s. |
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| Ford,
Rhodes, Robson, Morrow, Chartered Accountants retire and being eligible,
offer |
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| themselves
for re-appointment. |
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| 4.
To transact any other business with the permission of the Chair. |
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|
By order of the Board, |
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| Islamabad |
|
Habib A. Farooqi |
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| Dated:
November 28, 2000 |
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Company Secretary |
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| NOTES: |
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| 1.
The Share Transfer Book of the Company will remain closed from December 12,
2000 |
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| to
December 18, 2000 (both days inclusive). |
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| 2.
Any member of the Company entitled to attend and vote at the General Meeting
may |
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| appoint
another member as his / her proxy to attend and vote instead of him / her. A |
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| company
or corporation may, by means of a resolution of its directors, appoint a
person |
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| who
is not a member as proxy. Proxies / Nomination letters must be received at
the |
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| Registered
Office of the Company not less than 48 hours before the time of holding |
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| the meeting. |
|
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| 3.
Any change of address should be notified immediately to the Company's Share
Registrar |
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| Gangjees
Associates, 516 Clifton Centre, Clifton, Karachi. |
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|
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| 4.
For identification, CDC account holders should present the Participants
National Identity |
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| Card,
and CDC Account Number. |
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| DIRECTORS'
REPORT |
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|
2000 |
1999 |
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|
|
Rupees |
Rupees |
|
|
| Sales |
|
|
543,377,937 |
284,330,998 |
|
| Cost of sales |
|
|
365,631,532 |
196,466,907 |
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|
|
------------------ |
------------------ |
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| Gross profit |
|
|
177,748,405 |
87,864,091 |
|
| Other
Operating income |
|
3,011,787 |
1,086,561 |
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|
------------------ |
------------------ |
|
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|
180,758,192 |
88,950,652 |
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| Administrative
and selling expenses |
|
115,065,578 |
67,426,734 |
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|
------------------ |
------------------ |
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|
65,692,614 |
21,523,918 |
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| Financial
charges |
|
35,909,156 |
18,004,800 |
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|
------------------ |
------------------ |
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| Net
profit before taxation |
|
29,783,458 |
5,519,118 |
|
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|
------------------ |
------------------ |
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| Taxation
- Current year |
|
2,717,620 |
1,421,830 |
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| - Prior years |
|
33,043 |
42,335 |
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|
------------------ |
------------------ |
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|
2,750,663 |
1,464,165 |
|
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|
------------------ |
------------------ |
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| Net
profit after taxation |
|
27,032,795 |
4,054,953 |
|
| Accumulated
loss as brought forward |
|
(58,501,558) |
(62,556,511) |
|
|
|
------------------ |
------------------ |
|
| Accumulated
loss as carried forward |
|
(31,468,763) |
(58,501,558) |
|
|
========== |
========== |
|
|
| CHIEF
EXECUTIVE REVIEW |
|
| The
review on page no 5 to 7 deals with business activities during the year and
the future outlook of the company. The |
|
| Directors
of the company endorse the contents of this review. |
|
|
| PATTERN
OF HOLDING OF SHARES |
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| The
pattern of share holding is attached on page no 32. |
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|
| EARNING
PER SHARE |
|
| Earning
per share for the year ended on June 30, 2000 is Rs. 1.081 |
|
|
| AUDITORS |
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| The
present auditors M/S Ford, Rhodes; Robson, Morrow, Chartered Accountants
retire, and being eligible, offer |
|
| themselves
for re-appointment. |
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|
By Order of the Board |
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|
Javaid Firoz |
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| Karachi:
November 24, 2000. |
|
Chief Executive |
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| CHIEF
EXECUTIVE'S REVIEW |
|
|
| It
is indeed a pleasure to present you the Audited Annual Report and Financial
Statements |
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| for
the year ended June 30, 2000. |
|
|
| Review
of Operations |
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| As
reported in last year's review, the management of your company decided to
undertake an |
|
| aggressive
expansion plan this year. It is with great satisfaction that I am able to
report to you |
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| that
the plan has been executed very successfully and we have achieved a
remarkable 91% |
|
| increase
in sales. The company posted sales of Rs. 543 million in the current
financial year, |
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| as
compared to Rs. 284 million in the previous period. After tax profit for the
current year |
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| was
over Rs. 27 million, compared to previous year profit of Rs 4 million,
depicting an |
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| increase
of more than 600% over 1999. |
|
|
| Being
the largest operator of outdoor payphones in Pakistan, your company devoted
this year |
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| to
establishing itself as a large player in the indoor payphone market as well.
The company |
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| successfully
introduced new, low cost payphone models during the year, which are more |
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| suitable
for the indoor payphone market. Along with the introduction of a more modern |
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| payphone
network management system, and upgrade of earlier models, the company has |
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| witnessed
benefits like lower capital costs per payphone, lower card cost and improved |
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| reliability
of the payphone network. At the same time, the company also aggressively
expanded |
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| its
operations in new geographical areas and with the help of effective marketing
has been |
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| successful
in generating a lot of demand for its services. |
|
|
| In
addition to accelerating new phone installations, your company also focused
on improving |
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| yield
per phone, controlling costs, and increasing the efficiency of the company.
Investments |
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| were
also made in modernization of the Management Information Systems of the
company. |
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| The
management is confident that these measures will have a positive impact on
the profitability |
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| of future years. |
|
|
| Having
achieved the sales target of half a billion Rupee, all efforts are now being
made to |
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| achieve
the next sales target of One Billion Rupees. The near 100% growth in the year
under |
|
| review
has helped demonstrate your company's ability to successfully manage these
high |
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| growth
rates. The management is committed to maintain this rapid expansion of the
payphone |
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| network,
both in the indoor as well as outdoor payphone segments. With the help of
streamlined |
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| procedures,
improved financial strength and a marketing momentum, higher installations |
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| levels
are expected to be achieved in the future. The company has successfully
installed |
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| payphones
against all pending applications as on 30th June for which advances had been |
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| received
from customers. |
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|
| On
the financial front, the company continued to strengthen its balance sheet,
and was able |
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| to
meet all its financial obligations arising out of restructuring from the
previous year. Due to |
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| heavy
financial commitments and sizable capital expenditure in the earlier part of
the year, |
|
| the
company had to forgo some discounts on its PTCL billing during the year,
having a negative |
|
| impact
on its bottom line. However, with an improved liquidity position, these
discounts are |
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| now
being availed. During the year a sizable amount of provisioning was also done
for items |
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| related
to previous years, dragging down the current profitability of the company.
With a |
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| healthier
balance sheet your management is confident of substantially raising the
profit margin |
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| in the next year. |
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| As
you know, the Government of Pakistan provided a relief package for the
operators affected |
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| by
the temporary ban on service in Karachi in 1995, which entails receiving
Relief Rebate |
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| from
the PTCL. The company has a dispute with the PTCL about the mechanics of
calculation |
|
| and
payment of this Rebate, and payments from PTCL have been consequently slow.
Your |
|
| company
has filed a suit against the PTCL for recovery of this amount in the Sindh
high court, |
|
| and
is very confident of a favorable outcome of the case. |
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|
| Future Outlook |
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| Despite
a general economic slowdown in the country, the payphone industry continues
to |
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| grow
and flourish. In fact, the payphone industry is one of the fastest growth
industries in the |
|
| country,
and the rate of growth has steadily increased over the last three years,
along with |
|
| an
improvement in the revenue per phone levels. As witnessed in the
telecommunications |
|
| industry
in other parts of the world, increased competition is creating more awareness
in the |
|
| market,
and contributing to the overall growth of the industry. The industry is still
in the growth |
|
| stage
and is far from maturity as there is a sizeable demand-supply gap for
payphones in the |
|
| country.
We feel that this trend in the industry will continue for some time in the
future. |
|
|
| The
current strategy of rapid network expansion will serve as a prelude to the
rollout of the |
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| Wireless
Payphone System being pursued by your company. I am pleased to report that |
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| substantial
progress has been made on the implementation of the project, after the
prolonged |
|
| wait
for a decision on the issue of frequency by the Frequency Allocation Board.
Your company |
|
| has
contracted with Motorola, a world leader in wireless networks, to supply
equipment and |
|
| financing
for the project. NDC Global Services, a subsidiary of Telstra of Australia,
has also |
|
| been
engaged by your company as project managers for this large undertaking. The
Wireless |
|
| Payphone
Project envisages the installation of around 125,000 wireless payphones
across |
|
| the
country over a period of three years. Once the wireless payphone network is
in place, |
|
| the
company will be able to increase its payphone capacity phenomenally. |
|
|
| Your
management is also cognizant of the planned deregulation of the
telecommunication |
|
| industry
in 2003 and is alive to the opportunities it will present to established
operators. It |
|
| believes
that the implementation of the Wireless Payphone Project will position your
company |
|
| to
quickly take advantage of new opportunities in the industry. |
|
|
| Appreciation |
|
| I
would take this opportunity to thank my company personnel whose efforts and
dedication |
|
| helped
in registering phenomenal growth and success of the company and without their |
|
| untiring
efforts, such remarkable progress would not have been possible. The company
will |
|
| continue
to invest in human resources, as the company fully understands the importance
of |
|
| quality
of people in changing the company's fortune. |
|
|
| We
also appreciate the co-operation given to us by Pakistan Telecommunication
Authority |
|
| and
Pakistan Telecommunications Corporation Limited in solving the various
issues, and all |
|
| the
financial institutions that deposed confidence in the company and management
and played |
|
| a
critical role in progress of the company. |
|
|
| I
also thank my beard members who prayed critical role in formulating the
corporate strategy |
|
| of
the company and their valuable input in solving key matters. |
|
|
| I
also express my sincere appreciation for the confidence and support of our
valued |
|
| shareholders. |
|
|
|
|
Javaid Firoz |
|
| Karachi:
November 24, 2000 |
|
Chief Executive |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of TELECARD LIMITED as at June 30, |
|
| 2000
and the related profit and loss account cash flow statement and statement of |
|
| changes
in equity 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 |
|
|
| It
is the responsibility of the company's management to establish and maintain a |
|
| system
of internal control. and prepare and present the above statements in |
|
| conformity
with the approved accounting standards and the requirements of the |
|
| Companies
Ordinance, 1984. Our responsibility is to express an opinion on these |
|
| statements
based on our audit |
|
|
| We
conducted our audit in accordance with the auditing standards as applicable
in |
|
| Pakistan.
These standards require that we plan and perform the audit to obtain |
|
| reasonable
assurance about Whether the above said statements are free of any |
|
| material
misstatement. An audit includes examining. on a test basis. evidence |
|
| supporting
the amounts and disclosures in the above said statements An audit also |
|
| includes
assessing the accounting policies and significant estimates made by the |
|
| management,
as well as. evaluating the overall presentation of the above said |
|
| statements
We believe that our audit provides a reasonable basis for our opinion |
|
| and,
after due verification, we report that - |
|
|
| (a)
Reference is made to note 214 to the accounts regarding the change in |
|
| accounting
policy in respect of income from indoor call points (ICP). In our |
|
| opinion
such treatment requires a modification of the existing ICP agreement |
|
| as
otherwise it amounts to a deviation from the International Accounting. |
|
| Standard
- 18 "Revenue Recognition" (IAS-18) because the contract requires |
|
| the
company to install payphones and income should be recognised at the time |
|
| of
installation of payphones. Had the company followed IAS 18 the income from |
|
| indoor
call points for the year would be Rs27 million instead of Rs.53 million |
|
| reported
in note 22 to the accounts. Accordingly the profit for the year would |
|
| reduce
by Rs26 million and accumulated loss would increase by the same |
|
| amount
As stated in note 214 to the accounts it is not practicable for the |
|
| company
to give the impact of the change retrospectively or the proforma |
|
| information
required by International Accounting Standard - 8. |
|
|
| (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 |
|
| except
for the matters stated in note 2.12 to the accounts with which we |
|
| concur
and note 2.14 to the accounts with which we do not concur as |
|
| explained
in (a) above; |
|
|
|
|
| (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.26 million, to the best of our information and according to the |
|
| explanations
given to us, the balance sheet, profit and loss account, cash flow |
|
| statement
and statement of changes in equity 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, 2000 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)
as stated in note 10.4 and 10.5 to the accounts the recovery of rebate |
|
| and
interconnect discount from Pakistan Telecommunication Company |
|
| Limited
(PTCL) amounting to Rs.119.39 million and Rs.6.34 million |
|
| respectively,
depends on the outcome of court's decision. 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 accounts. |
|
|
| (ii)
the total PTCL liability as per accounts amount to Rs.113.93 million, |
|
| however
the total amount payable to PTCL and the estimated liability of |
|
| untendered
cards amount to Rs.116.27 million, resulting in under charge |
|
| of
PTCL billing (note 23 to the accounts) by Rs.2.35 million. According to |
|
| the
management it has claims in excess of the above amount in respect |
|
| of
the excessive billing by PTCL against which claims have been lodged |
|
| with
the concerned authorities. The outcome of actions taken by the |
|
| company
cannot presently be determined hence no accrual for the |
|
|
| above
amount has been made in these accounts. |
|
|
|
| (iii)
attention is drawn to note 9.1 to the accounts concerning outstanding |
|
| balance
from debtors amounting to Rs.2.05 million primarily from Utility |
|
| Store
Corporation. 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 accounts. |
|
|
| (iv)
an amount of Rs.1 million is appearing under long term deposit (refer |
|
| note
5 to the accounts) given to PTA against permission to start voice |
|
| mail
and trunk radio services in Pakistan. These licences were issued in |
|
| 1996
but the company has not been able to start these services to date. |
|
| PTA
gave a notice to make payment of annual renewal fees and the |
|
| same
amounts to Rs.05 million. However. the company is of the view |
|
| that
PTA has not allotted the required frequencies to start the service |
|
| and
hence no renewal fee can be paid. The ultimate outcome of the |
|
| negotiations
between PTA and the company cannot presently be |
|
| determined
and no accrual of annual renewal fee that may become |
|
| payable
has been made in these accounts. |
|
|
| (v)
supplier's credit amounting to Rs.21.72 million have been treated as |
|
| deferred
liabilities on the basis of the reason given in note 15.2 to the |
|
| accounts. |
|
|
|
| Karachi - |
|
|
| November 24, 2000 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 2000 |
|
|
|
|
|
2000 |
1999 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| NON-CURRENT
ASSETS |
|
|
|
| FIXED
ASSETS - TANGIBLE |
|
| Operating
assets |
|
3 |
300,246,450 |
242,442,864 |
|
| Capital
work-in-progress |
|
4 |
84,588,063 |
82,441,945 |
|
| LONG
TERM DEPOSITS |
|
5 |
13,442,303 |
15,746,541 |
|
| DEFERRED
ADVERTISEMENT EXPENDITURE |
6 |
2,250,000 |
2,550,000 |
|
| DEFERRED
COST |
|
7 |
12,527,405 |
7,653,003 |
|
|
|
|
|
| CURRENT
ASSETS |
|
| Trade debts |
|
9 |
32,494,068 |
13,212,353 |
|
| Advances,
Deposits, Prepayments and Other Receivables |
10 |
187,005,838 |
102,870,387 |
|
| Cash
and bank balances |
|
11 |
16,813,843 |
16,492,840 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
241,609,711 |
133,733,084 |
|
|
|
|
------------------ |
------------------ |
|
| TOTAL
ASSETS |
|
|
654,663,932 |
484,567,437 |
|
|
|
|
========== |
========== |
|
| EQUITY
AND LIABILITIES |
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
| Authorised
capital |
|
| 100,000,000
ordinary shares of Rs.10 each |
|
1,000,000,000 |
250,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
12 |
250,000,000 |
250,000,000 |
|
| Revenue
Reserve |
|
|
| Profit
and loss account |
|
(31,468,763) |
(58,501,558) |
|
|
|
------------------ |
------------------ |
|
|
|
218,531,237 |
191,498,442 |
|
|
| NON-CURRENT
LIABILITIES |
|
| Long-term
loans |
|
13 |
123,568,214 |
97,412,915 |
|
| Obligation
Under Finance Lease |
|
14 |
29,905,136 |
-- |
|
| Deferred
Liabilities |
|
15 |
44,344,200 |
37,727,025 |
|
| Long-term
Deposits |
|
16 |
39,882,499 |
17,945,900 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
237,700,049 |
153,085,840 |
|
|
|
|
| CURRENT
LIABILITIES |
|
| Current
portion of long-term liabilities |
17 |
42,959,367 |
47,742,079 |
|
| Short
Term Finance |
|
18 |
-- |
5,994,359 |
|
| Supplier's
Credit |
|
19 |
16,251,802 |
10,462,561 |
|
| Creditors,
accrued and other liabilities |
20 |
139,221,477 |
75,784,156 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
198,432,646 |
139,983,155 |
|
| CONTINGENCIES
AND COMMITMENTS |
21 |
-- |
-- |
|
|
|
|
------------------ |
------------------ |
|
| TOTAL
EQUITY AND LIABILITIES |
|
654,663,932 |
484,567,437 |
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
CHIEF EXECUTIVE |
|
DIRECTOR |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2000 |
|
|
|
|
2000 |
1999 |
|
|
Note |
Rupees |
Rupees |
|
|
| Sales |
|
22 |
543,377,937 |
284,330,998 |
|
| Cost of sales |
|
23 |
365,631,532 |
196,466,907 |
|
|
|
|
------------------ |
------------------ |
|
| Gross profit |
|
|
177,746,405 |
87,864,091 |
|
| Other income |
|
24 |
3,011,787 |
1,086,561 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
180,758,192 |
88,950,652 |
|
|
| Administrative
and selling expenses |
25 |
115,065,578 |
67,426,734 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
65,692,614 |
21,523,918 |
|
| Financial
charges |
|
26 |
35,909,156 |
16,004,800 |
|
|
|
|
------------------ |
------------------ |
|
| Net
profit before taxation |
|
|
29,783,458 |
5,519,118 |
|
|
| Taxation
- Current year |
|
27 |
2,717,620 |
1,421,830 |
|
| - Prior years |
|
33,043 |
42,335 |
|
|
|
------------------ |
------------------ |
|
|
|
2,750,663 |
1,464,165 |
|
|
|
------------------ |
------------------ |
|
| Net
profit after taxation |
|
27,032,795 |
4,054,953 |
|
|
| Accumulated
loss brought forward |
|
(58,501,556) |
(62,556,511) |
|
|
|
|
------------------ |
------------------ |
|
