| PAK DATACOM LIMITED |
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| ANNUAL
REPORT 2004 |
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| BOARD
OF DIRECTORS |
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| 1. Mr. Perwaiz
Chairman |
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| 2. Mr. Mohammad Aslam Chief
Executive |
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| 3. Syed Mahmood Ahmad |
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| 4. Mr. Zafar Ali Chaudhry |
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| 5. Mr. Mehboob Ali |
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| 6. Mr. Mohammad Azeem |
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| 7. Mr. Amjad Hussain Qureshi |
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| SECRETARY |
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| Syed
Sajjad Hasan |
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| AUDIT
COMMITTEE |
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| 1. Mr. Mohammad Aslam |
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| 2. Syed Mahmood Ahmed |
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| 3. Mr. Amjad Hussain Qureshi |
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| REGISTERED
OFFICE |
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| 190,
Industrial Area, 1-9/2, Islamabad |
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| HEAD OFFICE |
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| 3rd,
Floor, Umar Plaza, Blue Area,
Islamabad. |
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| Tel
# (051) 2823677,2823504 - Fax # (051) 2823270 |
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| SHARES
DEPARTMENT |
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| 7-G,
Mushtaq Ahmad Gormani Road, Gulberg II, Lahore |
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| Tel
# (042) 5761661-2, Fax # (042)
5760521 |
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| AUDITORS |
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| Khalid
Majid Rehman, |
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| Chartered
Accountants, |
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| 3rd
Floor, Al-Malik Centre, Jinnah Avenue, Islamabad |
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| LEGAL
ADVISOR |
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| Khokhar
Law Chambers, |
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| 1-Wasil
Plaza # 105, Blue Area,
Islamabad |
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Note |
2004 |
2003 |
|
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| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
Rupees |
Rupees |
|
|
| Profit
for the period before taxation |
|
|
28,893,987 |
18,981,416 |
|
|
| Adjustment
for non-cash and other items: |
|
|
|
| Depreciation |
|
|
18,870,794 |
18,020,026 |
|
|
| Financial charges |
|
|
350,582 |
449,924 |
|
|
| Exchange
(gain) /loss |
|
|
154,130 |
96,667 |
|
|
| Book
value of assets charged to consumption |
|
6,636,789 |
|
|
|
| Bad
debts written off |
|
|
6,365,816 |
|
|
|
| Return
/ Interest on bank deposits |
|
|
-1,058,637 |
-676,141 |
|
|
| Provision
of gratuity |
|
|
2,337,661 |
8,008,866 |
|
|
| Provision
of earned leave |
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|
730,807 |
. |
|
|
|
|
34,387,942 |
25,899,342 |
|
|
| Operating
profit before working capital changes |
|
63,281,929 |
44,880,758 |
|
|
| (Increase)/decrease
in current assets |
|
|
|
|
| Trade debtors |
|
|
3,429,909 |
1,189,403 |
|
|
| Advances,
deposits, prepayments and other receivables |
|
-6,669,402 |
6,726,862 |
|
|
| Increase/
(decrease) in current liabilities |
|
-3,239,493 |
7,916,265 |
|
|
| Due
to associated undertakings |
|
|
-45,469 |
-715,008 |
|
|
| Creditors,
accrued and other liabilities |
|
16,032,885 |
20,119,896 |
|
|
|
|
15,987,416 |
19,404,888 |
|
|
|
|
76,029,852 |
72,201,911 |
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| Cash
generated from operations |
|
|
|
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| Taxes paid |
|
|
-11,596,725 |
-9,850,850 |
|
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| Gratuity paid |
|
|
-6,592,576 |
-1,819,442 |
|
|
| Exchange
(gain) /loss |
|
|
-154,130 |
-96,667 |
|
|
| Return
/ Interest on bank deposits and secured loans to employees |
1,058,637 |
676,141 |
|
|
| Financial
charges paid |
|
|
-350,582 |
-449,924 |
|
|
|
|
-17,635,376 |
-11,540,742 |
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| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
58,394,476 |
60,661,169 |
|
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| Fixed
capital expenditure |
|
|
-32,089,578 |
-47,415,422 |
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| Long
term deposits |
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|
-100,000 |
|
|
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| Sale
proceeds of fixed assets |
|
|
628,895 |
|
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| Net
cash flows in investing activities |
|
|
-32,189,578 |
-46,786,527 |
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| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
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| Dividend paid |
|
|
-8,764,342 |
-6,975,263 |
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| Long
term customers' deposits |
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|
12,180,005 |
4,147,427 |
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| Net
cash flows from financing activities |
|
3,415,663 |
-2,827,836 |
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| NET
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS |
29,620,561 |
11,046,806 |
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| CASH
AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD |
62,773,876 |
51,727,070 |
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| CASH
AND CASH EQUIVALENTS AT THE END OF THE PERIOD |
92,394,437 |
62,773,876 |
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| 1 LEGAL STATUS AND OPERATIONS |
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| 1.1 Pak Datacom Limited "the
Company", a subsidiary of Telecom Foundation, was
incorporated in |
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| Pakistan
on July 13, 1992 as private limited Company under the Companies Ordinance,
1984 and was |
|
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| converted
into a public limited Company on June 26,
1994. The Company started its commercial |
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| activities
on July 1, 1994. The Company is listed on all stock exchanges of Pakistan.
The registered |
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| office
of the Company is located at 190, Industrial Area, 1-9/2, Islamabad. |
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| 1.2 The objective of the Company is to
set up, operate and maintain a network of data communication and to |
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| serve
the needs of the subscribers against approved tariff charges. The Company is
also engaged in |
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| establishing,
operating and maintaining data communication network in Bangladesh. |
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| 2 STATEMENT OF COMPLIANCE |
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| These
financial statements have been prepared in accordance with approved
accounting standards as |
|
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| applicable
in Pakistan, directive issued by the Securities and Exchange Commission of
Pakistan (SECP) and |
|
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| the
requirements of Companies Ordinance, 1984. Approved accounting standards
comprise of such |
|
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| International
Accounting Standards (IAS) as notified under the provisions of the Companies
Ordinance, |
|
|
| 1984.
Wherever, the requirements of the Companies Ordinance, 1984 or directives
issued by the SECP differ |
|
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| with
the requirements of these standards, the requirements of Companies Ordinance,
1984 or the said |
|
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| directives
take precedence. |
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| 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES |
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| 3.1 Accounting convention |
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| These
financial statements have been prepared under the historical cost convention. |
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| 3.2 Bmployees' retirement benefits |
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| 3.2.1 Gratuity |
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| The
Company has established an approved gratuity fund under defined contribution
plan covering all its |
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| employees
who have completed the minimum qualifying period of six months of the
service. The fund |
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| Operates
under a trust administered by the Board of Trustees. The amount of gratuity
admissible, shall be a |
|
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| sum
equal to last salary drawn immediately preceeding the date of his service of
the Company, for each |
|
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| completed
years of service in the Company. |
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| 3.2.2 Leave encashment |
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| The
Company provides a facility to its employee's for accumulating their annual
earned leave. Unutilized |
|
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| earned
leave can be used at any time subject to the Company's approval. Upto 100
days of accumulated leaves |
|
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| can
be encashed on retirement. |
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| Change
in accounting policy |
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| During
the year the Company changed its accounting policy relating to Leave
encashment from cash to |
|
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| accrual
basis. The adjustment of Rs 4.470 million relating to previous periods has
been adjusted against the |
|
|
| opening
balance of retained earnings. Comparative figures have not been restated as
it is impracticable to do |
|
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| so.
Had the Company not changed the accounting policy the profit for the year
would have increased by Rs.730,807.00 |
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|
|
|
Pak Rupees |
|
|
| Profit
for the year before taxation |
|
28,893,987 |
|
|
| Provision
for taxation |
|
8,719,638 |
|
|
| Profit
after taxation |
|
20,174,349 |
|
|
| Unappropriated
profit brought forward |
|
6,077,975 |
|
|
| Provision
for earned leave encashment for previous period |
|
-4,470,258 |
|
|
|
1,607,717 |
|
|
| Unappropriated
profit as restated before appropriations |
|
21,782,066 |
|
|
|
|
| APPROPRIATIONS |
|
|
| Transfer to General Reserves |
- |
|
|
| Proposed
Cash Dividend @ 20 % |
|
14,256,000 |
|
|
| Unappropriated
profit carried forward Total Earning per Share (EPS) |
|
7,526,066 |
|
|
|
|
21,782,066 |
|
|
|
|
2.83 |
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| Auditors |
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| The
retiring auditors, being eligible, offer themselves for re-appointment for
the year ending |
|
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| June 30,2005. |
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| Compliance
of Code of Corporate Governance |
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| Compliance
statement of code of Corporate Governance formulated by Securities and |
|
|
| Exchange
Commission of Pakistan is annexed with this report. |
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| Shareholding
Pattern |
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| Statement
showing the pattern of shareholding is annexed with this report. |
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| Acknowledgement |
|
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|
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| We
would like to convey our wholehearted thanks to the customers of the Company
for their |
|
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| continued
support and confidence reposed in us. We also express our thanks to the |
|
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| employees
of the Company for their commitment, hard work, dedication & concerted
efforts |
|
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| for
continuous improvement of the performance of the Company. |
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| NOTES
TO THE ACCOUNTS |
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| FOR
THE YEAR ENDED JUNE 30, 2004 |
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| Financial
assets mainly comprise long term deposits, trade debts, advances, deposits
and other receivables and |
|
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| bank
balances. Financial liabilities are classified according to the substance of
the contractual arrangements |
|
|
| entered
into. Significant liabilities are creditors, employees retirement benefits,
and other liabilities. |
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|
|
| All
financial assets and liabilities are initially measured at cost which is the
fair value of the consideration given |
|
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| and
received respectively. These financial assets and liabilities are subsequendy
measured at fair value, |
|
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| amortised
cost or cost, as the case may be. |
|
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|
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| A
financial asset and financial liability are offset and the net amount
reported in the balance sheet if the |
|
|
| Company
has a legally enforceable right to set off die recognised amounts and intends
either to settle on a net |
|
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| basis
or to realise the assets and setde the liability simultaneously. |
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|
|
| Creditors,
accrued and other liabilities |
|
|
|
|
| Liabilities
for trade and other amounts payable are carried at cost which is the fair
value of the consideration to |
|
|
| be
paid in the future for goods and services received, whether or not billed to
the Company. |
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|
|
| Segment
Reporting |
|
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|
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| A
geographical segment is a distinguishable component of the Company that is
engaged in providing services |
|
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| with
in a different geographical area, which is subject to risk and rewards that
are different from those of other |
|
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| segments.
The Company is currently operating in two geographical segments, Pakistan and
Bangladesh. |
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|
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| Related
party transactions |
|
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|
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| Transactions
involving related parties arising in the normal course of business are
conducted at arm's length at |
|
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| normal
commercial rates on the same terms and conditions as third party transactions
using valuation modes |
|
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| as admissible. |
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| Provisions |
|
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|
|
| Provisions
are recognised when the Company has a legal or constructive obligation as a
result of a past event, |
|
|
| and
it is probable that outflow of resources embodying economic benefits will be
required to setde the |
|
|
| obligation
and a reliable estimate can be made of the amount of obligation. However,
provisions are |
|
|
| reviewed
at each balance sheet date and adjusted to reflect current best estimate. |
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|
|
| Impairment |
|
|
|
|
| The
carrying amount of the Company's assets are reviewed at each balance sheet
date to determine whether |
|
|
| there
is any indication of impairment. If any such indication exists, the
recoverable amount of such assets is |
|
|
| estimated
and impairment losses are recognised in the profit and loss account. |
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|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
|
| CREDITORS,
ACCRUED AND OTHER LIABILITIES |
|
|
|
| Advances
from customers |
|
|
24,783,615 |
21,617,376 |
|
|
| Creditors |
|
|
|
|
|
| Trade |
|
|
52,904,513 |
44,661,487 |
|
|
| Machinery |
|
|
8,820,348 |
4,062,922 |
|
|
|
|
61,724,861 |
48,724,409 |
|
|
|
|
|
|
|
| Royalty payable |
|
|
_ |
950,913 |
|
|
| License
fee payable |
|
|
1,774,272 |
2,286,016 |
|
|
| Less:
Written back |
|
|
- |
-1,744,161 |
|
|
|
|
1,774,272 |
1,492,768 |
|
|
| Accrued liabilities |
|
|
5,933,126 |
6,348,436 |
|
|
| Gratuity payable |
|
9.1 |
4,949,810 |
9,204,725 |
|
|
| Un-claimed
dividend |
|
|
970,017 |
824,359 |
|
|
|
|
100,135,701 |
88,212,073 |
|
|
| Gratuity payable |
|
|
|
|
|
| Opening balance |
|
|
9,204,725 |
3,015,301 |
|
|
| Add:
Provision for the year |
|
|
2,337,661 |
8,008,866 |
|
|
| Less: Payments |
|
|
- |
-318,442 |
|
|
|
|
11,542,386 |
10,705,725 |
|
|
| Less:
Contribution to Gratuity Fund |
|
|
-6,592,576 |
-1,501,000 |
|
|
|
|
4,949,810 |
9,204,725 |
|
|
|
|
| 10 CONTINGENCIES AND COMMITMENTS |
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|
|
| 10.1 Guarantees issued by the Bank on
behalf of the Company amounted to Rs. 4.213 million (2003: Rs. 0.850
million). |
|
| These
guarantees were issued in favour of customers of the Company. |
|
|
|
|
| 10.2 During the year 2003 the Company
entered into an agreement to provide VSAT services to a customer for a
minimum term of |
| two
years. The agreement was terminated by the customer on June 30,2003 after six
months of service on the ground of non- |
|
| compliance
with the agreement claiming Rs. 1 million, while the Company's equipment
valued at Rs. 1.294 (2003: 2.987 |
|
| million)
has been retained as a security against the claim. The Company has, however
made a counter claim of Rs. 1.357 |
|
| million(2003:
1.357 million). Pending outcome of this case, neither any provision is made
for customer's claim nor any |
|
| booking
is made for Company's claim. |
|
|
|
|
| 10.3 The Company has contested the demand
of Rs. 82.184 million along with 2% additional duty by the
Collectotate |
|
| of
Sales Tax and Central Excise Rawalpindi for not charging excise duty u/s 3 of
the Central Excise Act, 1944 |
|
|
| upto
August 31, 2000 and u/s 3 of Sales Tax Act 1990 from September 01, 2000 to
June 30, 2003 in respect of |
|
|
| data communication services.
Management believes that
data communication services
are neither subjected |
|
| to
Central Excise duty nor subjected to Sales Tax and does not anticipate any liability
towards such payments. |
|
|
| Accordingly
no liability is accounted for in these accounts. |
|
|
|
|
| 10.4 Capital commitments
in respect of
purchase of equipment
outstanding at June 30,
2004 is Rs.
5.43 million |
|
| (2003:
Rs. 2.00 million) |
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
|
| 12
TRADE DEBTS-Unsecured |
|
|
|
|
|
| Considered good |
|
|
49,803,671 |
59,599,396 |
|
|
| Considered bad |
|
|
6,365,816 |
2,953,030 |
|
|
|
|
56,169,487 |
62,552,426 |
|
|
| Less:
Bad debts written off |
|
|
-6,365,816 |
-2,953,030 |
|
|
|
|
49,803,671 |
59,599,396 |
|
|
|
|
| 13 ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER
RECEIVABLES |
|
|
| Advances
- considered good to |
|
|
|
| Suppliers |
|
|
|
| - secured |
|
|
2,136,224 |
2,100,366 |
|
|
| - unsecured |
|
|
5,184,600 |
942,350 |
|
|
|
|
7,320,824 |
3,042,716 |
|
|
| Due
from holding Company-Telecom Foundation |
13.1 |
628,026 |
- |
|
|
| Employees
- unsecured |
|
13.2 |
3,216,347 |
2,870,201 |
|
|
|
|
11,165,197 |
5,912,917 |
|
|
| Trade deposits |
|
|
|
|
| Margin
against bank guarantee |
|
|
4,213,043 |
850,000 |
|
|
| Others |
|
|
7,631,525 |
7,306,701 |
|
|
|
|
11,844,568 |
8,156,701 |
|
|
| Prepayments |
|
|
3,530,493 |
5,757,214 |
|
|
| Other receivables |
|
|
244,000 |
244,000 |
|
|
| Interest receivable |
|
|
126,212 |
170,236 |
|
|
| Advance
Income tax |
|
|
28,239,676 |
17,557,423 |
|
|
|
|
55,150,146 |
37,798,491 |
|
|
|
|
| Advances
to employees |
|
|
1,921,364 |
1,413,496 |
|
|
| Due
from Executives |
|
1,294,983 |
1,456,705 |
|
|
| Due
from employees |
|
3,216,347 |
2,870,201 |
|
|
|
|
|
|
| CASH
& BANK BALANCES |
|
|
|
| Cash in hand |
|
|
|
|
|
| Cash at Bank in: |
|
14.1 |
21,102,217 |
13,605,147 |
|
|
| Current accounts |
|
14.2 |
70,321,232 |
48,343,400 |
|
|
| Deposit accounts |
|
|
970,988 |
825,329 |
|
|
| Dividend account |
|
|
92,394,437 |
62,773,876 |
|
|
|
|
|
|
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
|
| Revenue |
|
15 |
217,095,584 |
182,894,477 |
|
|
| Operating
Expenses |
|
16 |
-188,755,522 |
-165,824,787 |
|
|
| Operating Profit |
|
|
28,340,062 |
17,069,690 |
|
|
| Other Income |
|
17 |
904,507 |
2,361,650 |
|
|
|
|
29,244,569 |
19,431,340 |
|
|
| Financial Charges |
|
|
-350,582 |
-449,924 |
|
|
| Profit
before taxation |
|
|
28,893,987 |
18,981,416 |
|
|
| Provision
for taxation |
|
18 |
-8,719,638 |
-8,665,163 |
|
|
| Profit
after taxation |
|
|
20,174,349 |
10,316,253 |
|
|
| Unappropriated
profit brought forward |
|
|
6,077,975 |
4,659,324 |
|
|
| Transferred
from General Reserves |
|
|
- |
15,000,000 |
|
|
| Adjustment
due to change in accounting policy |
|
|
|
|
| relating
to deferred taxation |
|
|
- |
-14,987,602 |
|
|
| Provision
for earned leave encashment for previous periods |
3.2.2 |
-4,470,258 |
- |
|
|
|
|
1,607,717 |
4,671,722 |
|
|
| Unappropriated
profit as restated before appropriations |
|
21,782,066 |
14,987,975 |
|
|
| Appropriations: |
|
|
|
|
|
| Proposed
dividend @ 20% (2003: 12.5%) |
|
-14,256,000 |
-8,910,000 |
|
|
| Unappropriated
profit carried forward |
|
|
7,526,066 |
6,077,975 |
|
|
|
|
|
|
| Basic
earning per share |
|
20 |
2.83 |
1.45 |
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
|
| 18 PROVISION FOR TAXATION |
|
|
|
|
| Current Year |
|
|
9,641,783 |
914,472 |
|
|
| Deferred |
|
|
-922,145 |
7,750,691 |
|
|
|
18.1 |
8,719,638 |
8,665,163 |
|
|
|
|
|
|
| 18.1
Reconciliation of tax charge for the year Accounting Profit |
28,893,987 |
|
|
|
|
|
|
|
| Tax
on accounting profit at 35% |
|
|
10,112,895 |
|
|
|
| Tax
effect of expenses that are inadmissible |
|
|
|
| for tax purposes |
|
|
9,194,174 |
|
|
|
| Tax
effect of expenses that are admissible for tax purposes |
-9,665,286 |
. |
|
|
|
|
9,641,783 |
- |
|
|
| Due
to tax loss in 2003, provision was made @ 0.5% of gross revenue |
_ |
914,472 |
|
|
| Tax
effect of temporary differences between the |
|
|
|
| carrying
amount of assets and liabilities for |
|
-922,145 |
7,750,691 |
|
|
| financial
reporting |
|
|
8,719,638 |
8,665,163 |
|
|
|
|
|
|
|
|
| 18.2 The Taxation Officer has not yet framed re-assessments for the
years from 1997-98 to 1999-00 raising tax |
|
| demand of
Rs 5.187 million invoking the provision
of section 80C
of the Income Tax
Ordinance, 1979 |
|
|
| (Repealed), which
were set aside
by the Income
Tax Appellate Tribunal
(ITAT) for fresh
assessment. |
|
| The Income
Tax department is
in appeal against
ITAT orders before
the Honourable High
Court. |
|
|
|
| 18.3 The Company was assessed under
section 169 of the Income Tax Ordinance, 2001
(section 80C of Repealed |
|
| Income
Tax Ordinance, 1979) for the assessment years 2000-01 to 2002-03 and < |
