REPORT OF THE BOARD OF DIRECTORS

 

Dear Shareholders,

It is my proud privilege to welcome you all, once again, to the 40th Annual General Meeting of your Company and to present before you my statement on affairs of the Company along with Auditors report & Audited Accounts for the year ended on 30th June 2019 and its future plan.

 

Industry outlook and prospect:

Over the years, Bangladesh achieved considerable economic growth (GDP more than 7 percent) with the stable unemployment rate and a rise in foreign investments. As a result, the purchasing power of individuals has risen along with the demand for cars, motorbikes and commercial vehicles. The demand ranges from luxury inter-district buses to small sedans. To meet these demands, Bangladesh has to depend on imported vehicles as they are not manufactured in Bangladesh. A huge number of vehicles are imported every year. It is desired by the most of the imported car owner for conversion into CNG driven fuel car due to low cost and environment friendly fuel.

 

Compressed natural gas (CNG) as a vehicle fuels was first introduced to Bangladesh in 1982 through a World Bank pilot project. In 1999, four private companies obtained permission to set up about CNG refiling stations. Since the inception, the demand for CNG fuel is increasing trend. The major concern of this sector (CNG refuelling station) is uninterrupted gas supply from government. The cost of natural gas has been increased may be reluctant to vehicle conversation to CNG driven fuel.

 

The Board of Directors of the company decided in the board meeting dated 26.09.2018 to implement installation of LPG facilities in the existing premises or any other suitable location from our own resources to reduce the dependency on existing business. For this purposes, the company is planning to raise capital from the existing shareholders by issuing right share at the ratio of 1:1 at a premium of Tk. 100 per share subject to the approval of BSEC.

Business Performance:

Currently, the company has two segment of product line. During the year, by the grace of Allah, the performance of the company was better than the previous year. We, board of directors of the company, is desire to present summary of performace over the year is shown below:

 

SL

Segment name

Sales performance

Gross Profit

Profit after tax

(%)

In Value (BDT)

01

CNG conversion Service

17,512,050

7,550,410

3,634,871

55.02%

02

CNG Sale

79,139,944

5,783,384

2,971,869

44.98%

Total

96,651,994

13,333,794

6,606,741

 

 

Business Risks and concerns:

Risk management:

 

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s financial risk management. The responsibility also includes developing and monitoring the Company’s risk management policies. To assist the Board in discharging its oversight responsibility, management has been made responsible for identifying, monitoring and managing the Company’s financial risk exposures. The Company’s exposure to the risks and the risk management policies and procedures are summarized as follows:

 

Credit risk:

Credit risk is the risk that when one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss, without taking into account the fair value of any collateral. Concentrations of credit risk indicate the relative sensitivity of the Company‘s performance to developments affecting a particular industry. Credit risk of the Company arises principally from trade debts, loans and advances, and bank balances. The carrying amount of financial assets represents the maximum credit exposure.

 

Management assesses the credit quality of the customers, taking into account their financial position, past experience and other factors before allowing them (customer) credit facility. As at the balance sheet date, there are no past due Accounts Receivable balances. Advances are made to statutory authority and hence secured. For bank balances, financial institutions with strong credit ratings are accepted. Credit risk on bank balances is limited as these are placed with banks having good credit ratings.

 

Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. This arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or would have difficulty in raising funds to meet commitments associated with financial liabilities as they fall due.

 

The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company‘s reputation. The Company manages liquidity risk by maintaining sufficient cash and bank balances according to the treasury plan and availability of financing through banking arrangements like overdraft facility.

 

Market risk:

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company‘s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing returns.

 

Price risk:

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The company does have not any financial instrument that exposes the price risk.

 

Interest rate risk:

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Majority of the interest rate risk arises from long and short-term borrowings from financial institutions.

 

Currency risk:

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly where receivables and payables exist due to transactions entered in foreign currencies. The Company is exposed to foreign currency risk on sales, purchases and Foreign Currency loan, which, are entered in a currency other than BDT. The company’s currency risk is limited to very few import spare parts or capital machinery. Moreover, the transaction is settled by USD which is not fluctuating significantly, hence the company is facing very low risk in this respect.

Extra ordinary activity:

The long term loan from Mr. Giullano Vallini of Tk. 10,157,761 has been adjusted during the year as the lender gave up his claim. However, the effect of such loan adjustment did not affect the profit for the year rather it has been adjusted directly with changes in equity by restating the financial statements in accordance with IAS 8.

Transaction with related party:

During the year, the company, in normal course of business, has carried out following transactions with other entities that fall within the definition of related party contained in International Accounting Standard 24: "Related Party Disclosures". All transactions involving related parties arising in normal course of business are conducted on an arm’s length basis at commercial rates on the same terms and conditions as applicable to the third parties. The detail of related transaction during the year is given below:

 

Indusitry risk:

The Company’s refueling station is totoally depening on regular gas supply from Titas Gas Transmission & Distributing Co. Ltd. Without supply of natural gas from  Titas Gas Transmission & Distributing Co. Ltd. the company will be unable to run its operation. Moreover, the increased trend of price of natural gas will pose further risk. However, none of the condition is not under the control of the company.

 

Political risk:

Political risk refers to the risk that an entity’s returns could suffer as a result of political unrest, sudden change of government, changes in governance procedure. However, the political is extermly difficult to quantify or control.

Discussion on cost of sales and profitability margin:

SL

Item

CNG Refueling

CNG conversion service

2019

2018

Change (%)

2019

2018

Change (%)

1

Sales Revenue

79,139,944

92,995,680

(14.90)

17,512,050

16,225,516

7.35

2

Cost of sales

71,589,534

83,196,263

(13.95)

11,728,666

12,641,797

(7.22)

3

Gross profit

7,550,410

9,799,417

(22.95)

5,783,384

3,583,719

38.03

4

Profit after tax

2,971,869

3,959,018

(24.93)

3,634,871

1,931,120

46.87

5

Other comprehensive income

nil

nil

nil

nil

nil

nil

6

Gross profit margin

9.54%

10.53%

(9.40)

33.02%

22.08%

33.13

7

Net profit margin

3.76%

4.26%

(11.74)

20.76%

11.90%

42.68

Extra ordinary activity:

The long term loan from Mr. Giullano Vallini of Tk. 10,157,761 has been adjusted during the year as the lender gave up his claim. However, the effect of such loan adjustment did not affect the profit for the year rather it has been adjusted directly with changes in equity by restating the financial statements in accordance with IAS 8.

Transaction with related party:

During the year, the company, in normal course of business, has carried out following transactions with other entities that fall within the definition of related party contained in International Accounting Standard 24: "Related Party Disclosures". All transactions involving related parties arising in normal course of business are conducted on an arm’s length basis at commercial rates on the same terms and conditions as applicable to the third parties. The detail of related transaction during the year is given below:

 

Name of the party

Natuer of relationship

Nature of transaction

Transaction during the year

Balance

Dr.

Cr.

Dr./ Asset

Cr./ Liability

Mr. Mohammad Murad

Chairman

Rent

276,000

276,000

 

 

 

 

 

 

 

 

 

 

Analysing the quartely perforance:

Report based on analysis of quaterly performance.

SL

Name of the directors

1st Quarter

2nd Quarter

3rd Quarter

Total

1

Sales Revenue

27,099,520

22,073,560

23,825,740

72,998,820

2

Cost of sales

23,458,154

19,988,831

20,560,369

64,007,354

3

Gross profit

3,641,366

2,084,729

3,265,371

8,991,466

4

Profit after tax

1,937,072

824,579

1,789,360

4,551,014

5

Other comprehensive income

nil

nil

nil

nil

IPO Proceeds utilisation:

During the year, the company did not raise any capital through IPO or RPO or Right share offering or Direct listing. So, further discussion is not required in this respect.

Performance after utilisation of IPO or RPO or Right share offering or Direct listing:

During the year, the company did not raise any capital through IPO or RPO or Right share offering or Direct listing. So, further discussion is not required in this respect.

Remunaration paid to the directors:

No remunaration and board meeting fees is paid to the directors, during the year. Appropriate tax and VAT deduction has been made and deposited to the government authority accordingly. The details of board meeting fees is given below:

 

SL

Name of the directors

No. of meeting held by the company

Present in meeting by concerned director

Fee per meeting

Total

 

Mr. Mohammad Murad

4

4

Nil

 

 

Mrs. Rina Momtaj

4

4

Nil

 

 

Mrs. Rehmat Banu

4

3

Nil

 

 

Mr. Rahim Murad

4

1

Nil

 

 

Ms. Fahra Murad

4

Nil

Nil

 

 

Mr. Rafiqul Islam Dablu

4

4

Nil

 

Total

 

 

 

 

 

Prepartion of the financial statements fairly and in accordance with International Accounting Standards and other applicable laws and regulations:

 

The financial statements of the company have been prepared in accordance with International Accounting Standards (IASs)/ International Financial Reporting Standards (IFRSs) and complying with the requirement of relevant schedule of the Companies Act 1994 and other applicable laws and regulations. We further assure you, to the best of our knowledge, that the financial statements are present fairly in the state of the company’s affairs, the result of its operations, cash flows and the changes in equity.

 

Maintance of records:

The company has maintained adequate records in following respect:

 

  • All assets associated with title or acquisition documents that belongs to the company.
  • Maintance of fixed assets register.
  • All liability that are obligation for the company.
  • Residual interest of the shareholders.
  • all sums of money received and expended by the company and the matters in

respect of which the receipt and expenditure take place;

  • all sales and purchases of goods by the company;
  • the assets and liabilities of the company; and
  • All vouchers and ledger associated with supporting doucments are kept/preserved in

good order.

 

Accounting policy used for the preparation of the financial statements:

We have followed the International Accounting Standards (IASs)/ International Financial Reporting Standards (IFRSs) as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB) and complying with the requirement of relevant schedule of the Companies Act 1994 and other applicable laws and regulations. During the year, ICAB has decided to adopt full IAS/IFRS instead of BAS/BFRS. However, there has nothing difference beween this two. The accounting polices that adopted by the company are consistently appliled during the year.

 

The preparation of financial statements in conformity with IASs/IFRSs that requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Systems of internal control:

The company has robust system of internal control to manage risk to a reasonable level of failure to achieve expected results and strategic objectives of the company. The internal control system of the company is consisted of the policies and procedures established to provide reasonable assurance that specific entity objectives will be achieved. At least once a year, the board of directors review the system of internal control whether it is sufficient to achieve the company’s objectives.

 

Protection of the rights of interest of minority shareholders:

All material decision taken by the Board of Directors of the company are being well informed to the shareholders through the publishing the news of price sensitive information. Such information is also available to the DSE website. Moreover, the Board of Directors are desire to hear the voice of each shareholders in AGM or correspondence by the honorable shareholders to the company. Based on their suggestion, we made our work plan accordingly.

Going concern:

It is assumed that the company is going concern and it has ability to continue its operation for foreseeable future. On the other hand, the management has no plan to discontinue its operation. The board of directors assures you that there is no material uncertainty of the company for continuity of the company as going concern.

Significant variance of financial statements:

No significant variation occurred between quarterly and final results of the Company during the year ended June 30, 2019.

Performance of the company over the year:

SL

Item

Amount in BDT

2019

2018

Change (%)

1

Sales Revenue

96,651,994

109,221,196

(11.51)

2

Cost of sales

83,318,200

95,838,059

(13.06)

3

Net operating Cash Flows

9,805,339

8,090,654

21.19

4

Gross profit

13,333,794

13,383,137

(0.37)

5

Profit after tax

6,606,741

5,890,139

10.85

6

Other comprehensive income

0

0

0

7

Gross profit margin

13.80%

12.25%

11.23

8

Net profit margin

6.84%

5.39%

21.20

9

EPS

1.53

1.52

0.65

 

Key operating and financial data over last five years:

SL

Item

Amount in BDT ,000

2019

2018

2017

2016

2015

1

Sales Revenue

96,651

109,221

101,412

89,313

77,813

2

Cost of sales

83,318

95,838

89,429

80,768

67,147

3

Net operating Cash Flows

9,805

8,090

10,199

9,751

16,456

4

Gross profit

13,333

13,383

11,983

8,544

10,665

5

Profit after tax

6,606

5,890

3,549

1,477

1,276

6

Other comprehensive income

0

0

0

0

0

7

Gross profit margin

13.80%

12.25%

11.82%

9.57%

13.71%

8

Net profit margin

6.84%

5.39%

3.50%

1.65%

1.64%

9

Total asset

70,619

69,155

72,297

79,830

86,046

10

Total liability

38,416

42,407(restated)

61,597

56,247

63,893

11

Total equity

32,203

26,747(restated)

10,700

23,582

22,153

 

Dividend:

The Board of Directors of the company has decided to declare cash nil and 15% stock dividend, however compliance to the latest press release reference no. বিএসইসি/মুখপাত্র (৩য় খণ্ড)/২০১১/১২৯ dated 02nd October, 2019 of BSEC will be considered at the 40th AGM of our Company. Except that fact, no other dividend, such as interim dividend, has been declared or paid by directors during the year.

Board Meeting:

The company issues meeting notice to each director well before meeting held. The Board of Directors meets 4 (four) times during the year and the following Directors were attend those meetings as their following attendance:

Name


Title

Attended by concerned director

Mr. Mohammad Murad

Chairman

In the 4 meeting

Mrs. Rina Momtaj

Managing Director

In the 4 meeting

Mrs. Rehmat Banu

Director

In the 3 meeting

Mr. Rahim Murad

Director

In the 1 meeting

Ms. Fahra Murad

Director

Nil

Mr. Rafiqul Islam Dablu

Independent  Director

In the 4 meeting

 

Status of paid up share capital:

At the year end, the paid up capital of the company was Tk.43,260,130 and details of the shareholding is presented under:

1)            Shareholdings position by directors/individual shareholders, who hold more than 10% of total share outstanding:

 

No.

Name

Position in the company

No. of share holding

% of shareholdings

2019

2018

2019

2018

 

Shareholding by parent

N/A

N/A

N/A

N/A

N/A

 

Shareholding by Directors, CEO, CS, CFO, HOI and their spouse:

 

 

 

 

 

1

Mr. Mohammad Murad

Chairman

396,070

353,635

9.16

9.16

2

Mrs. Rina Momtaj

Managing Director/CEO

87,435

78,067

2.02

2.02

3

Mrs. Rehmat Banu

Director

246,606

329,470

5.70

8.53

4

Mr. Rahim Murad

Director

96,802

86,432

2.24

2.24

Spouse :

N/A

 

 

 

 

5

Ms. Fahra Murad

Director

206,447

184,328

4.77

4.77

Spouse :

N/A

 

 

 

 

6

Mr. Rafiqul Islam Dablu

Independent  Director

Nil

Nil

Nil

Nil

Spouse Name: Farida Yasmin

 

Nil

Nil

Nil

Nil

7

Mrs. Rozina Murad Ali Lakhani

Sponsor

224,645

200,576

5.19

5.19

Spouse Name: Karim Lakhani

 

Nil

Nil

Nil

Nil

8

Late. Mrs. Shirin Banu

Sponsor

45,097

40266

1.04

1.04

9

Late. Habib Charania

Sponsor

45,097

40,266

1.04

1.04

10

Late. Murad Ali Habib

Sponsor

184,495

164,728

4.26

4.26

11

Mr. Bimal Kumar Paul

Acting Company Secretary

Nil

Nil

Nil

Nil

Spouse Name:Tanusree Paul

 

Nil

Nil

Nil

Nil

12

Md. Mostaque Ahmed

CFO

Nil

Nil

Nil

Nil

Spouse Name: Nilufar Yasmin

 

Nil

Nil

Nil

Nil

13

Gopal Chandra Dhar

Head of Internal Audit

Nil

Nil

Nil

Nil

Spouse Name:

N/A

 

 

 

 

14

Insert the name of shareholders with 10% or more holdings, if any.

Nil

Nil

Nil

Nil

Nil

15

Others

 

2,793,319

2,384,744

64.57

61.75

 

Total

 

43,26,013

38,62,512

100

100

Please note that:

1. Honorable Chairman and Managing Director of the company are the spouse of each other.

2. Honorable Director Mrs. Rehmat Banu and Sponsor Late. Murad Ali Habib  of the company are the spouse of each other.

3. Honorable Sponsor Late Shirin Banu and Sponsor Late. Habib Charania of the company are the spouse of each other.

Retirement of directors and their reappointment:

During the year, Mr.Rahim Murad, and Ms. Fahra Murad has been retired from the board of directors as by rotation as per the companies act, 1994 and eligible for re-appointment. The brief resume and nature of expertise of them is given in the profile of Board of Directors.

 

Appointment of Auditors:

The tenure of the Auditors,of M/S Shiraz Khan Basak & Co. Chartered Accountants,R.K Tower, 86, Bir Uttam C.R Datta Road (312, Sonargaon Road) Dhaka-1205 expires at the 40th Annual General Meeting and Malek Siddiqui Wali , Chartered Accountants, 9-G,Motijheel C/A, Dhaka-1000 and M/S Shiraz Khan Basak & Co. Chartered Accountants,R.K Tower, 86, Bir Uttam C.R Datta Road (312, Sonargaon Road) Dhaka-1205  has offered for appointment as Auditor of the Company for the year 2019-2020. It is here by requested to shareholders to appoint one Auditors, as Auditors of the Company and fixes their remuneration for the year 2019-2020.

 

Accounting policy adopted by the company:

Accounting policies are the rules used by an entity to ensure that transactions are recorded properly and financial statements produced correctly. These policies ensure that accounting activities are handled consistently over time.

 

The institute of Chartered Accountants of Bangladesh (ICAB) has recently adopted the full IAS/IFRS. The preparation of the financial statements of the company is based on those applicable IAS/IFRS. Our accounting policy has been designed in compliance with those IAS/IFRS as well as taking into accounts of relevant schedule or section of the Companies Act 1994, the Bangladesh Securities and Exchanges Commission Rules, 1987 and other applicable laws and regulations, where applicable.

 

The accounting policies adopted by the company are consistently used on year by year. Any changes thereon must be made in accordance with IAS 8 with adequate disclosure in the financial statements as required concerned IAS.

 

The financial statements of the company is contain with comparative information in respect of preceding period for all amounts reported in the current period’s of financial statements. Such comparative information may include narrative and descriptive information if is considered relevant for understanding the current period’s financial statements.

Risk and concern:

The financial risk and concern was adequately described in earlier of this report that, we believe, was sufficient in this circumstances.

 

Future plan of the company: The Company has recommended to purchase land at Cumilla for business expansion and possibility to implement installation of LPG facilities in the existing premises or any other suitable location.

Compliance with the code of corporate governance:

The status of the Compliance of Securities & Exchange Commission’s Notification No-SEC/CMRRCD/2006-158/134/ADMIN/44 dated 07.08.2012 (subsequently amended dated June 3, 2010) is attached with annual Report for kind information of valued shareholders & other holders. An independent report on such compliance status has also been attached with the annual report of the company.

Compliance the board minutes with Bangladesh Secretarial Standards (BSS) as adopted by ICSB: Complied.

 

Acknowledgement:

The success was only possible to achieve because of the collective effort of the valuable Shareholder, Employees of the Company, Financial Institution, Government Agencies, Regulatory Bodies, the general people-buyer of our product and everyone of the company interacting in conducting the business. We are grateful to our shareholders for extending at all times the invaluable support and co-operation to bring the Company to the level it has reached today.

I avail this opportunity to express my sincere thanks to all concerned and look forward for the continued support and co-operation in the future as well.

 

 

On behalf of the Board

 

Dhaka

November 02, 2019

Sd/

Mr. Mohammad Murad

Chairman