| GENERTECH PAKISTAN LIMITED |
|
|
|
|
| ANNUAL
REPORT 2004 |
|
|
| CHAIRMAN
/ CHIEF EXECUTIVE |
Jahangir Elahi |
|
|
|
|
| DIRECTORS |
|
Jahangir Elahi |
|
|
Tanvir Elahi |
|
| BOARD
AUDIT COMMITTEE |
Amir Jahangir |
|
|
Shahrukh Elahi |
|
|
Sheikh Muhammad Ashraf |
|
|
Tariq Latif |
|
|
| CHIEF
FINANCIAL OFFICER |
Muhammad Ashfaq Nadeem |
|
| CORPORATE
SECRETARY |
Secretary - Tariq Latif |
|
| AUDITORS |
|
M/s Zahid Jamil & Co. |
|
|
Chartered Accountants |
|
|
(Member of IGAF
Worldwide) |
|
| LEGAL ADVISOR |
|
M/s. Rizvi & Company |
|
| BANKERS |
|
Faysal Bank Limited |
|
|
|
Muslim Commercial Bank
Limited |
|
|
The Bank of Punjab |
|
|
United Bank Limited |
|
| REGISTERED
OFFICE |
31/C-1, Ghalib Road,
Gulberg III, |
|
| PLANT |
|
Lahore - Pakistan. |
|
|
|
Tel: (042) 5710216-20 /
5751811-14 |
|
|
Fax: (042) 5712881 /
5756686 |
|
|
|
49th Kilometer, Lahore
Multan Road, |
|
|
Near Bhai Pheru, Tehsil
Chunian, |
|
|
District Kasur. |
|
| DIRECTOR'S
REPORT |
|
| The
directors of your company welcome you to the 14th Annual General Meeting of
the |
|
| company
and present their report together with the audited financial statement of the
company |
|
| for
the year ended June 30, 2004. |
|
|
| OPERATING
RESULTS |
|
|
| During
the year under review, your company registered a turnover of Rs. 663.854
million, with |
|
| a
Gross Profit of Rs. 68.010 million and a Net Profit of Rs. 15.009 million.
During the period the |
|
| company
generated 174,463 M WH of electricity while last year it was 165,855 MWH. |
|
|
| In
contrast with last, year, the HFO prices remained at an acceptable level most
of the year but |
|
| in
the last quarter prices surged to an all time high. At present petroleum
prices are still |
|
| increasing
touching new heights. On the other hand, WAPDA Tariff brought electricity
rates |
|
| downward
and affects almost seven months of the year under review. During the period,
your |
|
| company
performed well and increase in generation and effective cost management |
|
| contributed
towards profits, however, reduction in WAPDA Tariff and last quarter increase
in |
|
| HFO
prices curtailed profit for the year. |
|
|
| As
reported last year our efforts with our banks has resulted in massive
reduction in financial |
|
| expenses
and hope to reduce further in the coming years. |
|
|
| Inspite
of a volatile petroleum market your company has made a turn around in the
financial |
|
| results
in shape of a net profit, before tax, amounting to Rs. 15.009 million. We
assure our |
|
| members
that the management will continue our efforts to bring all cost to favorable
levels. |
|
|
| As
far as the operational activity of the plant is concerned, it is reported
with satisfaction that the |
|
| optimum
efficiency levels were maintained during the year. The overall plant
operation is well |
|
| under
control and plant management efficiently met all routine operational
activities. In addition |
|
| to
that, efficient and timely monitoring and maintenance activities also
contributed to overall |
|
| operation
and smooth customer relationship. |
|
|
| EARNINGS
PER SHARE |
|
|
| These
financial results brought Earnings Per Share from Rs. (2.77)toRs. 0.75. |
|
| FUTURE
PROSPECTS |
|
|
| If
the trend of rising HFO prices as witnessed in the last quarter and if there
is no corresponding |
|
| increase
in the WAPDA Tariff we foresee difficult times ahead. Since both HFO and
Tariff are |
|
| beyond
the control of the management we will have to wait for any further comment on
the |
|
| future. |
|
|
| CORPORATE
AND FINANCIAL REPORTING FRAMEWORK |
|
|
| The
management of the company is fully cognizant of its responsibilities as
recognized by the |
|
| Code
of Corporate Governance issued by the Securities and Exchange Commission of |
|
| Pakistan
(SECP). The following comments are acknowledgment of Company's commitment to |
|
| high
standards of Corporate Governance: |
|
|
| a) The financial statements, prepared by the
management of the company, present |
|
| fairly
the company's state of affairs, the result of its operations, cash flows and |
|
| changes
in equity. |
|
|
| b) Proper books of accounts have been
maintained. |
|
|
| c) Appropriate accounting policies have been
consistently applied in preparation of |
|
| financial
statements and accounting estimates are based on reasonable and prudent |
|
| judgment. |
|
|
| d) International Accounting Standards, as
applicable in Pakistan have been followed in |
|
| preparation
of financial statements and departure, if any, has been adequately |
|
| disclosed. |
|
|
| e) The system of internal control is sound in
design and has been effectively |
|
| implemented
and is being monitored in the company. The review will continue in future |
|
| forthe
improvement in internal controls. |
|
|
| f) There are no significant doubts upon the
company's ability to continue as a going |
|
| concern. |
|
|
| g) There has been no material departure from the best
practices of Corporate |
|
| Governance,
as detailed in the listing regulations of Stock Exchanges in Pakistan |
|
| wherever
applicable to the company forthe year ended June 30,2004. |
|
|
| h)
There are no outstanding statutory payments on account of taxes, duties,
levies and |
|
| charges
except of a normal and routine nature. |
|
|
| i)
The retirement benefits of the employees of the company are covered with
funded |
|
| Provident
Fund. Independent auditors audited the fund at regular intervals. According |
|
| to
Audited Accounts as on June 30,2004, the value of fund stands at Rs. 9.93
million. |
|
|
| j)
During the year, there was no trade reported in the shares of the company,
carried out |
|
| by
directors, CEO, CFO, Company Secretary and their spouses and minor children. |
|
|
| a) Mr. TanvirElahi (Chairman) |
|
|
| b) Mr. JahangirElahi (Member) |
|
|
| c) Sheikh MuhammadAshraf (Member) |
|
|
| 2. The Board is elected for a term of three
years. |
|
|
| 3. No casual vacancy occurred in the Board
of Director during the year. |
|
|
| 4. None of the Director is serving as
director in more than ten listed companies, including |
|
| Generatech
Pakistan Limited. |
|
|
| 5. The company has prepared a Statement of
Ethics and Business Practices, which have been |
|
| signed
by directors and relevant employees of the company. |
|
|
| 6. The Board has developed a mission /
vision statement, overall corporate strategy and significant |
|
| policies
of the company. A complete record of particulars of significant policies
alongwith the |
|
| dates
on which they were approved has been maintained. |
|
|
| 7. During the year, there is no trade
reported in the shares of the company, carried out by directors, |
|
| CEO,
CFO, Company Secretary and their spouses and minor children. |
|
|
| 8. All the director of the Company are
registered as taxpayers and none of them has defaulted in |
|
| payment
of any loan to a banking company, a DPI or an NBFI or, being a member of
stock |
|
| exchange,
has been declared as a defaulter by that stock exchange. |
|
|
| 9. The Board of Directors of the company
meets at least once in every quarter of the financial year. |
|
| Chairman
presided these meetings. Written notices (including agenda) of meetings were |
|
| circulated
in time. The minutes of the meetings were appropriately recorded and
circulated in |
|
| stipulated time. |
|
|
| 10
All the powers of the Board have been duly exercised and decisions on
material transactions, |
|
| including
appointment and determination of remuneration and terms and conditions of |
|
| employment
of the CEO and other executive directors, have been taken by the Board. |
|
|
| 11. The CEO with the approval of the Board
determines the appointment and terms and conditions |
|
| of
employment of the Chief Financial Officer (CFO), the Company Secretary and
the Head of |
|
| Internal
Audit of the company. |
|
|
| 12. Company does not circulate and presents the
financial statements unless the CEO and the CFO |
|
| endorse
their respective signatures, for consideration and approval of the Board of
Directors |
|
| and
the Board after consideration and approval, authorize the financial
statements for issuance |
|
| and circulation. |
|
|
| 13. The Audit Committee of the company meets at
least once every quarter of the financial year. |
|
| These
meetings are held prior to the approval of interim results of the company by
Board of |
|
| Directors
and before and after completion of external audit. The terms of reference of
the |
|
| committee
have been formed and advised to the committee for compliance. |
|
|
| 14. The Board has set up an effective Internal
Audit function. |
|
|
| 15. According to list provided by Institute of
Chartered Accountants of Pakistan(ICAP), External |
|
| Auditors
of the company has been given a satisfactory rating under the Qaulity Control
Review |
|
| program
of the ICAP. IFAC Guidelines on code of ethics as adopted by ICAP. |
|
|
| 16. Company appoints its external auditors to
provide audit services and external auditors do not |
|
| perform
management functions or make management decisions, responsibility for which |
|
| remains
with the Board and management of the company. |
|
|
| 17. The Board of Directors of the company has
recommended appointment of external auditors for |
|
| the
financial year ending on June 30,2005, as suggested by the Audit Committee. |
|
|
| 18. There has been no material departure form
the best practices of corporate governance, as |
|
| detailed
in the listing regulations of relevant Stock Exchanges in Pakistan wherever
applicable |
|
| to
the company for the year ended June 30,2004. |
|
|
| 19. We confirm that all other material
principles contained in the Code have been complied with. |
|
|
| REVIEW
REPORT TO THE MEMBERS ON STATEMENT OF |
|
|
| COMPLIANCE
WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE |
|
|
| We
have reviewed the Statement of Compliance with the best practices contained
in the Code |
|
| of
Corporate Governance for the year ended June 30,2004, prepared by the Board
of Directors |
|
| of
Genertech Pakistan Limited to comply with the Listing Regulation No. 37 of
Karachi Stock |
|
| Exchange,
chapter XIII of Lahore Stock Exchange and Chapter XI of Islamabad Stock |
|
| Exchanges
where the company is listed. |
|
|
| The
responsibility for compliance with the Code of Corporate Governance is that
of the Board |
|
| of
Directors of the company. Our responsibility is to review, to the extent
where such |
|
| compliance
can be objectively verified, whether the Statement of Compliance reflects the |
|
| status
of the company's compliance with the provisions of the Code of Corporate
Governance |
|
| and
report if it does not. A review is limited primarily to inquiries of the
company personnel and |
|
| review
of various documents prepared by the company to comply with the Code. |
|
|
| As
part of our audit of financial statements we are required to obtain an
understanding of the |
|
| accounting
and internal control systems sufficient to plan the audit and develop an
effective |
|
| audit
approach. We have not carried out any special review of the internal control
system to |
|
| enable
us to express an opinion as to whether the Board's statement on internal
control covers |
|
| all
controls and the effectiveness of such internal controls. |
|
|
| Based
on our review, nothing has come to our attention which causes us to believe
that the |
|
| Statement
of Compliance does not appropriately reflect the company's compliance, in all |
|
| material
respects, with the best practices contained in the Code of Corporate
Governance for |
|
| theyearendedJune
30,2004. |
|
|
| We
have audited the annexed balance sheet of Genertech Pakistan Limited as at
June |
|
| 30,
2004 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 forthe purposes of ouraudit. |
|
|
| It
is the responsibility of the company's management to establish and maintain a
system of |
|
| internal
control, and prepare and present the above said 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 ouraudit. |
|
|
| 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 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) In our opinion, proper books of account
have been kept by the Company as required by |
|
| the
Companies Ordinance, 1984; |
|
|
| b) 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; |
|
|
| c) in our opinion and 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 conform with approved |
|
| accounting
standards as applicable in Pakistan, and, 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, 2004 and of the
profit, cash |
|
| flows
and changes in equity forthe year then ended; and |
|
|
| d) in our opinion, no Zakat was deductible at
source under the Zakat and Ushr Ordinance, |
|
| 1980,
(XVIII of 1980). |
|
|
|
|
NOTE |
2004 |
2003 |
|
| SHARE
CAPITAL AND RESERVES |
|
|
Rupees |
Rupees |
|
| Authorised
share capital |
|
3 |
200,000,000 |
200,000,000 |
|
|
|
|
|
|
|
|
|
198,000,000 |
198,000,000 |
|
| Reserves |
|
4 |
68,355,500 |
53,511,511 |
|
|
|
|
266,355,500 |
251,511,511 |
|
| NON
CURRENT LIABILITIES |
|
|
|
| LONG
TERM LOANS-SECURED |
|
5 |
216,930,998 |
204,379,903 |
|
| LIABILITIES
AGAINST ASSETS SUBJECT TO FINANCE LEASE |
6 |
40,068,346 |
58,198,651 |
|
| CURRENT
LIABILITIES Current portion of long term liabilities |
7 |
|
|
|
|
|
119,417,675 |
96,493,657 |
|
| Short
term bank borrowings - secured |
8 |
155,655,502 |
219,932,031 |
|
| Creditors
accrued and other liabilities |
|
|
60 395 682 |
6141205 |
|
| Unclaimed
dividend CONTINGENCIES AND COMMITMENTS |
10 |
2,247,697 |
2,302,166 |
|
|
|
|
337,716,556 |
380,139,907 |
|
|
|
|
861,071,400 |
894,229,972 |
|
|
|
|
|
|
|
| NON
CURRENT ASSETS |
|
|
|
|
|
| OPERATING
FIXED ASSETS |
|
11 |
|
593,664,095 |
|
| LONG
TERM DEPOSITS CURRENT ASSETS Stocks, stores,
spares and loose tools |
12 |
|
342,294 |
|
|
|
|
|
58,185,199 |
|
| Trade
debts - unsecured |
|
14 |
|
160,581,676 |
|
| Advances,
prepayments and other receivables |
15 |
|
79,979,550 |
|
| Cash
and bank balances |
|
16 |
|
1,477,158 |
|
|
|
|
|
300,223,583 |
|
|
|
|
|
894,229,972 |
|
|
|
|
|
|
|
|
NOTE |
|
|
|
| SALES - Net |
|
|
|
|
| COST OF SALES |
|
17 |
591,487,257 |
|
|
| GROSS PROFIT |
|
277,294 |
|
|
| OPERATING
EXPENSES Administrative expenses |
18 |
60,816,553 |
|
|
| OPERATING
PROFIT |
|
168,749,150 |
|
|
| Other income |
|
19 |
34,693,244 |
|
|
| OTHER
CHARGES |
|
5,047,902 |
|
|
| Financial charges |
|
20 |
269,306,849 |
|
|
| Workers
profit participation fund |
|
861,071,400 |
|
|
|
|
|
|
| NET
PROFIT/ (LOSS) BEFORE TAXATION |
NOTE |
2004 |
2003 |
|
| TAXATION
- Prior years |
|
21 |
663,853,669 |
626,198,173 |
|
| NET
PROFIT/ (LOSS) AFTER TAXATION |
|
595,843,278 |
592,417,694 |
|
| UNAPPROPRIATED
LOSS BROUGHT FORWA |
|
68,010,391 |
33,780,479 |
|
| UNAPPROPRIATED
LOSS CARRIED |
|
15,134,061 |
11,508,081 |
|
| FORWARD |
|
4 |
52,876,330 |
22,272,398 |
|
| Earnings
per share |
|
22 |
1,736,002 |
6,250,818 |
|
|
54,612,332 |
16,021,580 |
|
|
|
38,813,437 |
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
789,945 |
|
|
| Cash
generated from operations |
|
23 |
39,603,382 |
70,913,812 |
|
| Income tax paid |
|
|
15,008,950 |
-54,892,232 |
|
| Financial
charges paid |
|
|
164,961 |
|
|
| Net
cash generated from operating activities |
|
14,843,989 |
54,892,232 |
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
-226,434,239 |
-171,542,007 |
|
| Fixed
capital expenditures |
|
|
|
-31,885,713 |
|
| Long
term deposits |
|
|
-211,590,250 |
-226,434,239 |
|
| Sale
proceeds of fixed assets |
|
|
0.75 |
12,100,000 |
|
| Net
cash used in investing activities |
|
|
|
-19,635,713 |
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
2004 |
2003 |
|
| Repayment
of long term loans |
|
|
|
|
| Repayment
of lease liabilities |
|
123,566,153 |
104,260,217 |
|
| Dividend paid |
|
|
-164,961 |
|
|
| Net
cash used in financing activities |
|
-71,632,830 |
-32,324,860 |
|
| Net
Increase / (decrease) in cash and cash equivalents |
|
64,109,103 |
-27,250 |
|
| Cash
and cash equivalents at the beginning of the year |
|
|
1,504,408 |
|
| Cash
and cash equivalents at the end of the year |
|
-9,199,980 |
1,477,158 |
|
| 1 COMPANY STATUS AND OPERATIONS |
|
|
|
|
| Genertech
Pakistan Limited was incorporated on May 24, 1990 as a Public Limited |
|
| Company
under the Companies Ordinance, 1984. Its shares are listed on all three Stock |
|
| Exchanges
of Pakistan. The company is engaged in generation and supply of electricity. |
Rupees |
|
|
114,945,750 |
|
| 2 PRINCIPAL ACCOUNTING POLICIES |
|
- |
|
|
114,945,750 |
|
| 2.1 Accounting Convention |
|
- |
|
|
114,945,750 |
|
| These
financial statements have been prepared under the historical cost convention |
|
| modified
by capitalization of exchange differences as given in Note No. 2.7. |
|
|
| 2.2 Basis
of Preparation of Financial Statements |
|
|
| These
financial statements have been prepared in accordance with approved |
|
| accounting
standards as applicable in Pakistan and the requirements of Companies |
|
| Ordinance,
1984. Approved accounting standards comprise of such International |
|
| Accounting
Standards (lASs) as notified under the provisions of the Companies |
|
| Ordinance,
1984. Wherever the requirements of the Companies Ordinance, 1984 or |
|
| directives
issued by the Securities and Exchange Commission of Pakistan (SECP) |
|
| differ
with requirements of these standards, the requirements of the Companies |
|
| Ordinance,
1984 orthe requirements of the said directives take precedence. |
|
|
| 2.3 Retirement
Benefits |
|
|
| The
company operates a funded contributory Provident Fund scheme for all |
|
| permanent
employees. Equal monthly contributions at the rate of 8.33 percent of basic |
|
| pay
are made both by the company and employees. |
|
|
| 2.4 Fixed
Capital Expenditures |
|
|
| Operating
fixed assets are stated at cost less accumulated depreciation except land, |
|
| which
is stated at cost. |
|
| Depreciation
on the operating fixed assets are charged to profit and loss account |
|
| applying
the reducing balance method at the annual rates mentioned in Note No. 11 |
|
| Full
year's depreciation is charged on assets acquired during the year, except
standby |
|
| generating
facilities and major additions or extensions to generating facilities which |
|
| are
depreciated on pro-rata basis for the period of use during the year. No
depreciation |
|
| is
charged on assets deleted/disposed of during the year. |
|
| Maintenance
and normal repairs of assets are charged to income as and when |
|
| incurred,
major renewals and replacements are capitalized. Gain or loss on disposal of |
|
| fixed
assets is taken to profit and loss account. |
|
| 2.5 Lease
Hold Assets and Obligation under Finance Lease |
|
|
| The
company accounts for assets under finance lease by recording the assets and |
|
| the
related liability. The amounts are determined on the basis of the lower of
fair value |
|
| of
the assets and the present value of minimum lease payments. |
|
|
| Finance
charges are charged to profit and loss account using the internal rate of |
|
| return method. |
|
|
| Depreciation
is charged at the rates specified in Note No. 11 so as to write off the |
|
| assets
over their estimated useful lives in view of certainly of ownership of the
assets |
|
| at
the end of lease term. The security deposit paid against lease arrangements
will be |
|
| adjusted
at the end of the lease term. |
|
|
| 2.6 Capital Work in Progress |
|
|
| Capital
work in progress is shown at cost. These costs are transferred to fixed
assets |
|
| as
and when assets are available for intended use. |
|
|
| 2.7 Foreign Currency Translation |
|
|
| Assets
and liabilities in foreign currencies are translated into Pak Rupees at |
|
| exchange
rates approximating those prevailing on the balance sheet date except |
|
| where
forward exchange contracts have been entered into for repayment of
liabilities. |
|
| Exchange
differences and/or exchange risk fee in respect of foreign currency loans |
|
| obtained
for acquisition of fixed assets are incorporated in the cost of the relevant |
|
| assets.
All other exchange differences are taken to Profit and Loss Account. |
|
|
| 2.8 Deferred Cost |
|
| These
are being amortized over a period of five years from the year of incurrence. |
|
|
| 2.9 Stocks, Stores, Spares and Loose Tools |
|
|
| Stocks
are valued at lower of cost and net realizable value using the moving average |
|
| method. |
|
| Stores,
Spares and Loose Tools are valued at moving average cost. |
