Technology & Communications: WORLDCALL COMMUNICATIONS LIMITED - Nine Months ended March 31, 2005 (Un-audited)
WorldCALL Communications Limited, (WCL) was incorporated in Pakistan on 14th December 1995 as a public limited company under the Companies Ordinance, 1984. WCL made a public offering during 2000 and is currently listed on the Karachi and Lahore Stock Exchanges. The principal activity of the company is the operation and maintenance of a public payphones network. Payphones are installed at various shops/commercial outlets. WCL also provides pre-paid calling card services. The present review is that of WCL alone, without consolidating with its subsidiaries.
Worldcall Telecommunications Group reportedly began life in 1995 when First Capital Securities Corporation Ltd (FCSCL) started incubating Worldcall Payphones, now WCL. The next few years were spent in expanding payphone network across Pakistan, creating new businesses and drawing investor attention to the value of Worldcall businesses. WCL claims to be the largest payphone operator in Pakistan. WCL is part of a larger conglomerate and along with FCSCL owns a mix of telecom, print & media, technology, financial services, retail and property development businesses with national and international coverage. Worldcall's strategy is to position itself in advance to gain a first mover advantage in various communications businesses.
WCL enjoys satisfactory financial position-both short term and long term. As against Total Assets of Rs 3,725 million, Total Equity is Rs 2,365 million (63 % of Total Assets). Operating Fixed Assets have declined from Rs 1,249 million at end March 31, 2004 to Rs 1,178 million as on March 31, 2005. As related to Total Assets, Operating Fixed Assets are now 32 % as against 35 % at the end of corresponding nine months last year.
The assets include a substantial amount in Goodwill, which according to the notes to the accounts represents the excess of the cost of acquisition over the fair value of net assets of WorldCALL Phonecards Limited acquired upon merger. Goodwill is being amortised over its estimated useful life at an annual rate of 10% per annum and is being charged to profit and loss account on a straight line basis.
Nearly 40 % of the Total Assets of WCL are tied up in investments-both short term and long term. WCL has equity stake in Worldcall Multimedia Limited (nearly 100 %), Worldcall Broadband Limited (30 %), Worldcall Telecom Limited (14 %), Total Media Limited (50%) and Worldcall Telecommunications Lanka (Pvt) Limited (71 %).
The notes to the financial statements state that (as explained in June 2004 financial statements) after obtaining all the necessary approvals, Wireless Local Loop (WLL) license has been transferred to WorldCALL Telecom Limited (WTL), which already holds Long Distance and International (LDI) license. WTL has successfully launched its LDI operations and is in the process of setting up its WLL network. During the period WTL issued its share capital. As WCL have power to elect more than 50% directors in WTL due to which it attains the status of holding company and accordingly consolidation of WTL is undertaken.
Total revenues of WCL for the nine-months ended March 31, 2005 were Rs 1,802 million as compared to Rs 1,931 million in the corresponding period last year. Decline in revenues resulted into decline in profitability margins. Gross margin declined from 20% for the previous nine months to 15 % for the nine months under review. Net profit to Equity also declined from 6% in the previous period to 5% for the period under review.
According to the Directors' Review, the company's consumption, in terms of minutes being generated from payphones & Hello calling cards, has increased as compared to the corresponding period last year. However, the gross profit fell due to reduction in sale price to the franchises. Net profit after-tax for the period under review at Rs 129 million is slightly lower to the profit at Rs 138 million for the corresponding period last year.
Performance statistics are enclosed.
WCL presently has competition with PTCL, DV Com, Callmate and Dancom in the Calling Cards offered by LDI Operators. With the privatisation of PTCL, WCL will be facing tougher competition from the private sector. WCL might be taking precautions and making plans to maintain its dominant position in the days to come. In this context, the policy for deployment of WCL assets and maintaining a number of subsidiaries might also be reviewed.
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Performance Statistics (Rs in 000) (Audited)
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Balance Sheet (Un-audited) March 31, June 30,
2005 2004
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Paid-up capital: 1,592,784 1,592,784
Capital Reserve (Share premium) 18,688 18,688
Un-appropriated profit: 753,673 624,841
Total Equity: 2,365,145 2,236,313
Liabilities, finance lease: 77,883 83,014
Redeemable Capital-Secured: 148,222 247,349
Long term Deposits: 107,480 163,084
Deferred Liabilities: 262,570 250,115
Total non current liabilities: 596,155 743,562
Capital Employed: 2,961,300 2,979,875
Total Current Liabilities: 763,767 582,406
Total Liabilities and Equity: 3,725,067 3,562,281
Operating Fixed Assets: 1,177,981 1,249,127
Goodwill and others: 83,268 92,977
Long term Investments: 1,335,482 1,231,654
Total non current assets: 2,596,731 2,573,758
Stock in trade: 6,099 24,717
Trade debts: 80,814 77,746
Other Current Assets: 1,041,423 886,060
Total Current Assets: 1,128,336 988,523
Total Assets: 3,725,067 3,562,281
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Ratios
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Current ratio: 1.48 1.70
Debt-Equity Ratio: 20:80 25:75
Book Val./share - Rs: 14.85 14.04
Quoted Share Price (10-6-05) Rs: 10.00 -
Price/Book Value Ratio: 0.67 -
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Income Statement (Un-audited): (Rs in 000)
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Nine Months ended March 31, 2005 2004
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Net Sales: 1,801,712 1,931,006
Gross Profit: 273,973 383,284
Operating Profit: 97,758 189,194
Profit before Taxation: 156,832 179,517
Profit after taxation: 128,832 138,517
Cash Dividends %: 0% 0%
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Ratios:
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Gross Profit to sales: 15% 20%
Operating profit to sales: 5% 10%
Profit after tax to sales: 7% 7%
Net profit to Equity -%: 5% 6%
ROA: 3% 4%
ROCE: 4% 5%
Earnings per share (Rs): 0.81 0.87
Inventory turnover (times): 295.41 78.12
Receivable turnover (times): 22.29 24.84
Price/Earning Ratio: 12.36 -
Asset Turnover (times): 0.48 0.54
Days Inventory: 1 5
Days Receivable: 16 15
Debt Service Coverage (times): 1.05 1.04
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COMPANY INFORMATION: Chairman & CEO: Salmaan Taseer; Director: Aamna Taseer;
Chief Financial Officer: Muhammad Naveed Tariq; Company Secretary: Muhammad Noaman Adil; Auditors: Taseer Hadi Khalid & Co, Chartered Accountants; Legal Advisors: Imtiaz Siddiqui & Associates, Advocates; Registered Office/Head Office: 103-C/II, Gulberg - III, Lahore, Pakistan; Web Address: www.worldcall.com.pk
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