| Telecard Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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| COMPANY
INFORMATION |
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| NOTICE
OF ANNUAL GENERAL MEETING |
|
| DIRECTORS'
REPORT |
|
| CHIEF
EXECUTIVE'S REVIEW |
|
| AUDITORS'
REPORT TO THE MEMBERS |
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| BALANCE
SHEET |
|
| PROFIT
& LOSS ACCOUNT |
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| NOTES
TO THE ACCOUNTS |
|
| PATTERN
OF SHAREHOLDING |
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|
|
| COMPANY
INFORMATION |
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|
| BOARD
OF DIRECTORS |
Rear Admiral (Retd.) A.W.
Bhombal Chairman) |
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|
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. Asghar Mehdi Abidi |
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|
Dr. Dudley B. Christie |
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| CHIEF
EXECUTIVE |
Mr. Saleh M. Tarin |
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| COMPANY
SECRETARY |
Mr. Jawed Hasan Ansari |
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| BANKERS |
|
Bank of America |
|
|
|
Prudential Commercial
Bank Ltd. |
|
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|
Muslim Commercial Bank
Ltd, |
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|
Habib Bank Ltd. |
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|
Standard Chartered Bank
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 6th Annual General Meeting of the Shareholders of
the |
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| Company
will be held on Friday, December 31, 1999 at 10:00 a.m., at Islamabad Holiday |
|
| Inn,
Islamabad to transact the following business. |
|
|
| I,
To confirm the minutes of the last Annual General Meeting held on February
27, 1999. |
|
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| 2.
To receive, consider and adopt the Audited Accounts of the Company for the
year ended on |
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| June
30, 1999 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. Ford, Rhodes, |
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| 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. |
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|
By order of the Board, |
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| Islamabad |
|
Jawed Hasan Ansari |
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| Dated:
December 10, 1999 |
|
Company Secretary |
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| NOTES: |
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| 1.
The share transfer books of the Company shall remain closed from December 30,
1999 to |
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| January
8, 2000 (both days inclusive). |
|
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| 2.
A member of the Company entitled to attend and vote may appoint another
member as his/her proxy |
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| to
attend and vote instead of him/her. Proxy in-order must be received at the
Registered Office of |
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| 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. |
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| DIRECTORS'
REPORT |
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| The
Directors of the Company submit their report together with the Audited
Accounts for the year |
|
| ended
June 30, 1999. |
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|
1999 |
1998 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| Sales |
|
|
284,330,998 |
252,133,264 |
|
| Cost of sales |
|
|
196,466,907 |
180,833,462 |
|
|
|
------------------ |
------------------ |
|
| Gross Profit |
|
|
87,864,091 |
71,299,802 |
|
| Other income |
|
|
1,086,561 |
1,529,848 |
|
|
|
------------------ |
------------------ |
|
| Administrative
and selling expenses |
|
88,950,652 |
72,829,650 |
|
|
|
67,426,734 |
54,643,919 |
|
|
|
------------------ |
------------------ |
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| Financial
charges |
|
21,523,918 |
18,185,731 |
|
| Net
profit before taxation |
|
16,004,800 |
14,098,876 |
|
|
|
------------------ |
------------------ |
|
|
|
5,519,118 |
4,086,855 |
|
|
|
------------------ |
------------------ |
|
| Taxation |
- Current year |
|
1,421,830 |
1,260,666 |
|
|
- Prior years |
|
42,335 |
-- |
|
|
|
------------------ |
------------------ |
|
| Net
profit after taxation |
|
1,464,165 |
1,260,666 |
|
|
|
------------------ |
------------------ |
|
| Accumulated
loss brought forward |
|
4,054,953 |
2,826.19 |
|
| Accumulated
loss carried forward |
|
(62,556,511) |
(65,382,700) |
|
|
|
------------------ |
------------------ |
|
|
|
(58,501,558) |
(62,556,511) |
|
|
|
|
========== |
========== |
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| CHIEF
EXECUTIVE REVIEW |
|
| The
review on page no. 5 to 7 attached herewith 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 |
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| The
pattern of share holding is attached on page no. 28. |
|
|
| EARNING
PER SHARE |
|
| Earning
per share for the year ended on June 30, 1999 is Rs.0.162 |
|
|
| 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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|
|
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|
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|
Saleh M. Tarin |
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| Karachi:
December 10, 1999 |
|
Chief Executive |
|
|
|
| CHIEF
EXECUTIVE'S REVIEW |
|
|
| It
is with pleasure that I welcome you to the 6th Annual General Meeting and to
present the Annual |
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| Report
and Financial Statements for the year ended June 30, 1999. |
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|
| REVIEW
OF OPERATIONS |
|
|
| During
the year under review, your Company continued to consolidate its operations
and financial |
|
| strength.
For the year 1998-99, your company posted gross sales of Rs.312 million, up
from Rs.268 |
|
| million
last year with a pre tax profit of Rs. 5.52 million which represents an
increase of 37 % on |
|
| Rs.4.01
million declared the year before. |
|
|
| The
increase of 16% in annual sales was commendably achieved primarily by
improving yield on |
|
| base
capacity without any significant contribution from new installations which
only took place in |
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| the
later part of the year. The predominant factor in better performance was the
conscious effort to |
|
| upgrade
the quality of service and the continued endeavour to relocate low yielding
payphones to |
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| better
sites, particularly by extending geographical coverage to smaller cities and
more remote areas. |
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| However,
despite the full impact of the preparatory cost of the impending expansion
plan, increase |
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| in,
the selling and administrative expenses were restricted to only 23.7% to
enable declaration of a |
|
| higher profit. |
|
|
| Concurrent
with the plans to improve yield and to expand the geographical base in
preparation of |
|
| the
expansion phase, your Company continued in its drive to streamline and
consolidate its financial |
|
| profile
as displayed in the Balance Sheet. For this purpose, it painstakingly
undertook the review |
|
| and,
wherever necessary, the restructuring and redefining of all its financial
obligations to banks and |
|
| leasing
companies. Even the old PTCL dues were liquidated through an agreement
implemented in |
|
| April
1999. The overall results of these endeavours are reflected in the Balance
Sheet for the year |
|
| 1998-1999. |
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|
| The
process of consolidation also included an emphasis on revamping of financial
systems to |
|
| effectively
monitor timely collection of cash in transit as well as prompt receipt and
reconciliation |
|
| of
advances and receivables. Although your Company's performance for recovery of
credit/debt is |
|
| much
better than the industry average, efforts are being intensified to also
recover old outstanding |
|
| dues
which total Rs. 4 million only. Since a significant portion of this is owned
by a semi-Government |
|
| organisation,
your management feels confident of a substantial recovery. |
|
|
| After
protected discussions, an Interconnect Agreement was signed with PTCL
entitling your Company |
|
| to
receive a Bulk Discount of 7%. However, despite strenuous efforts, not much
progress can be reported |
|
| on
the issue of relief rebate receivable from PTCL, as agreed with the
Government of Pakistan in |
|
| January
1997. In ease our present efforts for an amicable resolution do not bear
early fruition, your Company |
|
| will
be compelled to escalate the level of pursuance to more formal channels. |
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|
|
| FUTURE
OUTLOOK |
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| After
prolonged negotiations, the much-awaited Agreement with PTCL was finally
signed |
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| on
13th May, 1999 for the installation of 125,000 Wireless Payphones. While
awaiting the allocation |
|
| of
requisite frequency, the company is in the process of finalizing the
implementation plans by |
|
| negotiating
with the main suppliers for the equipment. As the wireless payphone system
will |
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| necessitate
external financing, your company is in the process of evaluating various
options, including |
|
| supplier
financing and equity. The company expects to finalize its plan soon for an
early commissioning |
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| of the project. |
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|
| Subsequent
to the culmination of the Wireless Payphone Agreement, your Company
immediately |
|
| embarked
upon a very aggressive expansion programme. For this purpose, a
state-of-the-art, third |
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| generation
payphone alongwith a sophisticated network management system was selected.
This has, |
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| in
the meantime, been imported and is currently fully operational. Supply and
installation of these |
|
| payphones
has also begun with the current capacity already being 40% higher. than what
it was a |
|
| year
ago. To enlarge the area of availability of our services, a distributor
network has been |
|
| commissioned
at more remot locations to enhance revenues without a significant increase in
expenses. |
|
| Results
of these endeavours are already manifest in increase of average monthly sales
by over 50% |
|
| during
the initial months of the financial year 1999-2000. With expansion of the
network underway |
|
| your
management is confidently targeting a 100% revenue growth for the year
1999-2000. |
|
|
| It
is encouraging to realize that even much faster rollouts are envisaged after
the commissioning |
|
| of
the Wireless Payphone Project, as dependence on PTCL line availability will
be eliminated. It |
|
| will
then be possible to readily install payphones in remote areas much beyond the
footprint of PTCL |
|
| Exchange
Network. The future outlook, therefore, appears very heartening and, having
finally |
|
| overcome
the "pilot" stage and embarked upon the expansion phase, your
Company, by the grace of |
|
| Allah,
is geared up to meet the challenges of the new millennium. |
|
|
| The
newly selected payphones are, of course, fully Y2K compliant while the
payphones and |
|
| management
system installed earlier have been certified for Y2K compliance by our
Research |
|
| Laboratory.
Software for our financial database is also similarly compliant. |
|
|
| ACKNOWLEDGMENTS |
|
| I
would like to avail this opportunity to express my sincere appreciation of
the hard work |
|
| put
in by all the Company personnel which numbered 239 on year end. Without their
relentless |
|
| efforts,
performed in cohesive teamwork, the results, as achieved, and the
implementation |
|
| of
the expansion programme would not have been possible. Likewise, I am thankful
for the |
|
| continued
active involvement of the Members of the Board and for the guidance received |
|
| from
them, individually and collectively. |
|
|
| I
must also gratefully acknowledge the support provided by the financial
institutions as well as the |
|
| understanding
shown by various Government institutions. |
|
|
| 1
am also highly appreciative of the confidence reposed in the management team |
|
| by
our esteemed shareholders. |
|
|
|
|
|
|
|
|
|
Saleh M. Tarin |
|
| Karachi:
December 10, 1999 |
|
Chief Executive |
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of TELECARD LIMITED as at June 30,
1999 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)
Other receivable (note 10.6 to the accounts) include an amount of Rs.6.451
million cash |
|
| in
transit which has not been recovered to date and remains 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.6.451
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, 1999, 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 9.1 to the accounts concerning outstanding balance
from |
|
|
| debtors
amounting to Rs.4.082 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 accounts |
|
|
|
|
| (ii)
as stated in note 10.4 to the accounts the recovery of rebate from Pakistan |
|
| Telecommunication
Company Limited (PTCL) amounting to Rs.55.230 million is slow, |
|
| 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. |
|
|
| (iii)
as stated in note 10.5 to the accounts the recovery of discount due from
Pakistan |
|
| Telecommunication
Company Limited (PTCL) is amounting to Rs.6.341 million |
|
| dependent
on completion of reconciliations and submission of the same to PTCL Head |
|
| Office
pending submission of the same and PTCL's response thereto it is not possible |
|
| to
state the recovery that will be effected and no provision that may result has
been |
|
| made
in these accounts. |
|
|
| (iv)
supplier's credit and royalties amounting to Rs.35.825 million have been
treated as |
|
| deferred
liabilities on the basis of the reason given in note 15.4 to the accounts. |
|
|
| Karachi, |
|
|
|
Ford, Rhodes, Robson, Morrow |
|
| December
10, 1999. |
|
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1999 |
|
|
|
|
|
|
|
|
1998 |
1999 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| ASSETS |
|
|
|
| FIXED
ASSETS - TANGIBLE |
|
|
|
| Operating
Assets |
|
3 |
242,442,864 |
206,167,948 |
|
| Capital
work-in progress |
|
4 |
82,441,945 |
128,364,126 |
|
| LONG
TERM DEPOSITS |
|
5 |
15,746,541 |
16,484,195 |
|
| DEFERRED
ADVERTISEMENT EXPENDITURE |
|
6 |
2,550,000 |
2,850,000 |
|
| DEFERRED
COST |
|
7 |
7,653,003 |
1,294,404 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stock-in-trade |
|
8 |
1,157,504 |
5,190,972 |
|
| Trade debt |
|
9 |
13,212,353 |
19,352,272 |
|
| Advances,
Deposits, Prepayments and Other Receivable |
10 |
102,870,387 |
45,796,127 |
|
| Cash
and bank balances |
|
11 |
16,492,840 |
7,900,735 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
133,733,084 |
78,240,106 |
|
|
|
|
|
------------------ |
------------------ |
|
| TOTAL
ASSETS |
|
|
484,567,437 |
433,400,779 |
|
|
|
|
========== |
========== |
|
|
|
|
|
| EQUITY
AND LIABILITIES |
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
| Authorised
capital |
|
|
|
| 25,000,000
ordinary shares of Rs. 10 each |
|
|
250,000,000 |
250,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
12 |
250,000,000 |
250,000,000 |
|
| Revenue
Reserve, |
|
|
|
|
|
|
| Profit
& loss account |
|
|
(58,501,558) |
(62,556,511) |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
191,498,442 |
187,443,489 |
|
|
|
|
|
| NON-CURRENT
LIABILITIES |
|
|
|
| Long-term loans |
|
|
13 |
97,412,915 |
-- |
|
| Obligation
under finance lease |
|
14 |
-- |
5,063,765 |
|
| Deferred
liabilities |
|
15 |
51,795,139 |
72,075,964 |
|
| Long-term
deposits |
|
16 |
17,945,900 |
-- |
|
| Deferred income |
|
|
|
-- |
190,550 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
167,153,954 |
77,330,279 |
|
| CURRENT
LIABILITIES |
|
|
|
|
| Current
portion of - long term liabilities |
|
17 |
47,742,079 |
40,307,281 |
|
| Short term loans |
|
|
18 |
-- |
3,166,668 |
|
| Short
term finances |
|
19 |
5,994,359 |
44,106,216 |
|
| Supplier's credit |
|
|
20 |
10,462,561 |
12,009,643 |
|
| Creditors,
accrued and other- liabilities |
|
21 |
61,716,042 |
69,037,203 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
125,915,041 |
168,627,011 |
|
| CONTINGENCY
AND COMMITMENT |
|
22 |
------------------ |
------------------ |
|
| TOTAL
EQUITY AND LIABILITIES |
|
|
484,567,437 |
433,400,779 |
|
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts |
|
|
|
Saleh M. Tarin |
|
Shahid Firoz |
|
|
Chief Executive |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
1999 |
1998 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
|
|
| Sales |
|
23 |
284,330,995 |
252,133,264 |
|
| Cost of sales |
|
24 |
196,466,907 |
180,833,462 |
|
|
|
|
------------------ |
------------------ |
|
| Gross Profit |
|
|
87,864,091 |
71,299,802 |
|
| Other income |
|
25 |
1,086,561 |
1,529,848 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
88,950,652 |
72,829,650 |
|
| Administrative
and selling expenses |
|
26 |
67,426,734 |
54,643,919 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
21,523,918 |
18,185,731 |
|
| Financial
charges |
|
27 |
16,004,800 |
14,098,876 |
|
|
|
|
------------------ |
------------------ |
|
| Net
profit after taxation |
|
5,519,118 |
1,260,666 |
|
|
|
------------------ |
------------------ |
|
|
|
1,421,830 |
1,260,666 |
|
| Taxation |
- Current year |
|
42,335 |
-- |
|
|
|
------------------ |
------------------ |
|
|
- Prior years |
|
1,464,165 |
1,260,666 |
|
|
|
------------------ |
------------------ |
|
| Net
profit after taxation |
|
4,054,953 |
(2,826,189) |
|
| Accumulated
loss brought forward |
|
62,556,511 |
(65,382,700) |
|
|
|
------------------ |
------------------ |
|
| Accumulated
loss carried down |
|
(58,501,558) |
(62,556,511) |
|
|
|
========== |
========== |
|
| Basic
earning per share |
|
0.162 |
0.113 |
|
|
|
|
|
|
| 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, 1999 |
|
|
|
|
|
|
|
|
1999 |
1998 |
|
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| Net
profit/(1oss) before taxation and extraordinary item |
|
5,519,118 |
4,086,855 |
|
|
|
|
|
| Adjustments
for: |
|
|
|
| Depreciation |
|
33,269,390 |
31,614,630 |
|
| Deferred cost |
|
731,320 |
731,320 |
|
| Deferred income |
|
(190,550) |
(682,368) |
|
| Deferred
advertisement expenditure |
|
300,000 |
300,000 |
|
| Profit
on sale of fixed assets |
|
(861,011) |
(712,824) |
|
| Financial
charges |
|
16,004,800 |
14,098,876 |
|
|
|
------------------ |
------------------ |
|
|
|
49,253,949 |
45,349,634 |
|
|
|
------------------ |
------------------ |
|
| Operating
profit before working capital changes |
|
54,773,067 |
49,436,489 |
|
|
|
|
|
| Changes
in working capital: |
|
|
|
| (Increase)/decrease
in current assets |
|
|
| Stores,
spares and stocks |
|
4,033,468 |
(1,469,504) |
|
| Trade debts |
|
|
6,139,919 |
(14,926,129) |
|
| Advances,
deposits, prepayments and other receivables |
|
(53,825,593) |
(25,037,595) |
|
|
|
------------------ |
------------------ |
|
|
|
(43,652,206) |
(41,433,228) |
|
| Increase/(decrease)
in current liabilities |
|
(6,761,568) |
39,028,365 |
|
| Increase
in deferred liabilities |
|
(20,280,825) |
7,874,410 |
|
|
|
------------------ |
------------------ |
|
|
|
(15,921,532) |
54,906,036 |
|
| Taxes paid |
|
|
(4,712,832) |
(937,994) |
|
| Financial
charges paid |
|
18,111,475 |
(20,556,346) |
|
| Deferred cost |
|
|
(7,089,919) |
-- |
|
|
|
------------------ |
------------------ |
|
| Net
cash from/(used)in operating activities |
|
Total C/f. |
(45,835,758) |
33,4 l 1,696 |
|
|
|
|
|
|
|
|
|
|
1999 |
1998 |
|
|
|
|
|
Rupees |
Rupees |
|
|
|
|
