Grameenphone : Quarter 2 2024 Financial Reports

About this update from Grameenphone Ltd.

Grameenphone Ltd. Audit report and interim condensed financial statements as at and for the six-month period ended 30 June 2024 Independent Auditor's Report To the Board of Directors of Grameenphone Ltd. Report on the Audit of the Financial Statements Opinion We have audited the interim condensed financial statements of Grameenphone Ltd. (the Company), which comprise the interim condensed statement of financial position as at 30 June 2024, and the interim condensed statement of profit or loss and other comprehensive income, interim condensed statement of changes in equity and interim condensed statement of cash flows for the six-month period then ended, and notes to the interim condensed financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 30 June 2024, and of its financial performance and its cash flows for the six-month period hen ended in accordance with International Financial Reporting Standards (IFRSs). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Bangladesh, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter We draw attention to Note 35 (a) to this interim condensed financial statements, with reference to the detailed disclosures made in Note 45(a) to the audited financial statements for the year ending 31 December 2023, wherein the management has explained the status of demand notice dated 02 April, 2019 for payment of BDT 125.80 billion (including BDT 40.86 billion related to National Board of Revenue), which was received from Bangladesh Telecommunication Regulatory Commission (BTRC) in relation to the information system audit conducted by BTRC, covering the period from the Company's inception in 1997 to 31 December 2014. As stated in the same note, Grameenphone filed a Title Suit against the demand in the District Court which is fixed on 29 September 2024 for mediation. In an appeal, arising out of the Title Suit, filed by Grameenphone the Hon'ble High Court Division (HCD) granted injunction on the demand which was later on upheld by the Hon'ble Appellate Division (AD) in a Civil Petition and in a Review Petition subject to deposit BDT 20 billion. The AD also directed BTRC to allow Grameenphone to carry on its business without any hindrance. As per order of the AD, Grameenphone deposited BDT 20 billion which is included in 'Other non-current assets', as stated in Note 8 to the interim condensed financial statements. The hearings of Review Petition and Appeal have not taken place yet at Hon'ble AD and HCD respectively which will take place as per accommodation of the courts. BTRC audit demand includes, inter alia, deductibility of VAT from BTRC payments and spectrum assignment fee regarding which a separate litigation was pending before the Hon'ble AD. Following the judgment in that litigation by the Hon'ble AD, Grameenphone has paid the entire principal amount to BTRC on 14 June 2023 (which includes BDT 3.92 billion as part of BTRC audit demand). Grameenphone is currently engaged in a without prejudice reconciliation exercise with BTRC. Detailed disclosures about the demand notice and court cases thereto have been given in Note 45(a) to the audited financial statements for the year ended 31 December 2023. Pending final outcome of the court proceedings, management has concluded that a significant uncertainty exists in order to enable any reliable estimation of relevant potential obligation, and no provision for these demands and consequential interest thereon has been made in the accompanying interim condensed financial statements except as disclosed in Note 45(a) to the audited financial statements for the year ending 31 December 2023. Our opinion is not modified in respect of the above matters. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the interim condensed financial statements for the period ending 30 June 2024. These matters were addressed in the context of the audit of the financial statements, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the interim condensed financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. Regulatory matters Referring to Note 35 to the interim condensed financial statements, with reference to the detailed disclosures made in Note 45 of the audited financial statements for the year ending 31 December 2023 , the Company is subject to a number of significant claims and litigations. The amounts of claims are significant and estimates of the amounts of provisions or contingent liabilities are subject to significant management judgement. These claims and litigations matters were a key audit matter due to the amounts involved, potential consequences and the inherent difficulty in assessing the outcome. The assessment of whether a liability should be recognised involves judgment from management. How our audit addressed the key audit matter: We have gained an understanding of the process of identification of claims, litigations and contingent liabilities and identified key controls in the process. For selected controls we have performed tests of controls. Moreover, we have gained an understanding of management's decision process to disclose contingent matters in the financial statements. Our procedures also included among others: Review of the Risk Register and discussion of material legal cases with the Company's Legal Department. Analyzed responses in legal letters obtained from the external legal counsels of the Company. Reviewed and analysed management's detailed assessment of the probability of an outcome substantiated by those legal opinions. Reviewed the minutes of meetings of the Board of Directors and the Board Audit Committee. Analyzed contingent liabilities and changes in provisions for claims and litigations. Assessed the circumstances which contributed to the significant uncertainties in management estimate of provisions together with the impact of the outcome of each matter. Assessed disclosures in the interim condensed financial statements of material contingencies nature and their measurement. Revenue recognition Referring to Note 22 to the interim condensed financial statements , Revenue of BDT 81.56 billion is recognized in the interim condensed statement of profit or loss of Grameenphone Ltd. This material item is subject to considerable inherent risk due to the complexity of the systems necessary for properly recording and identifying revenue and the impact of ever-changing business, price and tariff models (including tariff structures, customer loyalty rewards, and bundled subscription-based products). Against this background, the proper application of the accounting standards is considered to be complex and to a certain extent based on estimates and assumptions made by management. How our audit addressed the key audit matter: In light of the fact that the high degree of complexity and estimates and assumptions give rise to an increased risk of accounting misstatements, we assessed the Company's processes and controls for recognizing revenue as part of our audit. Our audit approach included testing of the controls and substantive audit procedures. Assessed the integrity and functionality of the systems supporting revenue accounting. Conducted tests on IT controls and procedures that support revenue recognition. Evaluated the accuracy of invoicing and measurement systems up to their entries in the general ledger. Scrutinized customer contracts, invoices, and receipts to verify compliance with revenue recognition policies on a sample basis. Examined the revenue charging model in relation to regulatory guidelines on a sample basis. Additionally, we assessed the financial impact of new business and pricing models and reviewed the disclosures provided in the financial statements. Uncertain tax positions Referring to Note 35 of the interim condensed financial statements, with reference to the detailed disclosures made in Note 45 of the audited financial statements for the year ending 31 December 2023, the Company is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including indirect taxes and transaction related tax matters that could eventually require payments of taxes and possible additional charges. The assessment of uncertainty and risk of one or more unfavorable outcomes involve judgement from management. These uncertain tax positions were a key audit matter because of the amounts involved and because of the uncertainty in estimating the final outcome of these matters. The Company records provisions for uncertain liabilities, including tax contingencies, when it is more likely than not that a liability has been incurred, and the amount can be reliably estimated. How our audit addressed the key audit matter: We took into consideration the complexity of accounting and tax issues, internal controls; and gained an understanding over the entity's accounting for taxes and management's process for assessing the effectiveness of internal control over the significant income tax accounts and the related financial statement disclosures. Our procedures also included among others: Obtained a listing of all ongoing tax litigations. Discussed with the management regarding tax matters, tax jurisdictions and tax communications. Identified and tested relevant controls over tax accounts and financial statement disclosures. Obtained, read and analyzed opinions by the Company from the tax consultants and external counsels of the Company. Verified account reconciliations and traced demand amounts, amounts paid under protest and considered recoverable and amounts charged off on a sample basis to the underlying supporting demand notices, invoices, bank payments and trial balance. Analyzed the technical merits of each demand based on applicable tax provisions and considered settled tax positions in determining estimate of tax contingency made by the management. Obtained and read the disclosures made in the accompanying interim condensed financial statements. Other matters The financial statements of Grameenphone Ltd. for the year ended 31 December 2023, were audited by another auditor who expressed an unmodified opinion on those statements on 05 February, 2024. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, the Companies Act 1994, the Securities and Exchange Rules 2020 and other applicable laws and regulations and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company's financial reporting process. Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements In accordance with the Companies Act 1994 and the Securities and Exchange Rules 2020, we also report the following: 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 made due verification thereof; In our opinion, proper books of account as required by law have been kept by the company so far as it appeared from our examination of these books; The statement of financial position and statement of profit or loss and other comprehensive income dealt with by the report are in agreement with the books of account and returns; and The expenditure incurred was for the purposes of the Company's business. A. Qasem & Co. Chartered Accountants FRC Registration Number: CAF-001-129 Akhtar Sanjida Kasem FCA Engagement Partner ICAB Enrolment Number: 0643 Dhaka, 16 July 2024 Grameenphone Ltd. Interim condensed statement of financial position As at 30 June 2024 30 June 2024 31 December 2023 Notes BDT (000) BDT (000) Assets Non-current assets Property, plant and equipment 4 71,016,215 67,019,995 Intangible assets 5 4,255,862 4,396,001 Right-of-use assets 6 72,878,152 76,086,723 Contract cost 7 8,998,243 7,141,432 Other non-current assets 8 20,526,814 20,471,568 Deferred tax assets 16 1,913,008 - Total non-current assets 179,588,294 175,115,719 Current assets Inventories 9 441,874 591,449 Trade receivables and others 10 9,091,490 7,994,702 Cash and cash equivalents 11 15,125,519 16,718,338 Total current assets 24,658,883 25,304,489 Total assets 204,247,177 200,420,208 Equity and liabilities Shareholders' equity Share capital 13 13,503,000 13,503,000 Share premium 14 7,840,226 7,840,226 Capital reserve 15 14,446 14,446 Retained earnings 50,447,901 45,331,868 Total equity 71,805,573 66,689,540 Non-current liabilities Lease liabilities 39,801,877 40,212,825 Deferred tax liabilities 16 - 479,369 Employee benefits 589,705 384,470 Other non-current liabilities 17 528,433 456,235 Total non-current liabilities 40,920,015 41,532,899 Current liabilities Trade payables and others 18 31,954,123 29,619,417 Provisions 24,857,702 23,946,716 Lease liabilities 11,074,692 10,006,247 Loans and borrowings 19 1,657,704 3,119,599 Current tax liabilities 20 18,120,586 19,459,679 Other current liabilities 21 3,793,318 5,968,502 Unclaimed dividend 63,464 77,609 Total current liabilities 91,521,589 92,197,769 Total equity and liabilities 204,247,177 200,420,208 The annexed notes 1 to 36 form an integral part of these interim condensed financial statements. As per our report of same date. A. Qasem & Co. Chartered Accountants Director Director FRC Registration number: CAF-001-129 ____________________________ Chief Executive Officer Company Secretary Akhtar Sanjida Kasem, FCA Engagement Partner ICAB Enrolment Number: 0643 Dated: Dhaka, 16 July 2024 6 Grameenphone Ltd. Interim condensed statement of profit or loss and other comprehensive income For the six-month period ended 30 June 2024 01 January to 01 January to 01 April to 01 April to 30 June 2024 30 June 2023 30 June 2024 30 June 2023 Notes BDT (000) BDT (000) BDT (000) BDT (000) Revenue 22 81,559,717 77,356,039 42,230,219 40,008,071 Cost of material and traffic charges 23 (4,968,511) (5,022,983) (2,578,530) (2,514,213) Salaries and personnel cost 24 (4,422,633) (3,992,230) (2,254,377) (1,911,151) Operation and maintenance 25 (3,421,113) (3,085,762) (1,797,468) (1,480,462) Sales, marketing and commissions 26 (8,263,922) (7,579,099) (4,361,998) (3,991,449) Revenue sharing and spectrum charges (6,215,044) (5,853,956) (3,209,168) (2,996,497) Other operating (expenses)/income 27 (4,848,684) (4,583,224) (2,556,649) (2,676,465) Depreciation and amortisation (16,924,132) (15,750,883) (8,556,822) (8,132,447) (49,064,039) (45,868,137) (25,315,012) (23,702,684) Operating profit 32,495,678 31,487,902 16,915,207 16,305,387 Finance (expense)/income 28 (2,232,371) (6,578,551) (1,151,927) (5,338,497) Foreign exchange gain/(loss) (611,708) (112,208) (802,531) 39,886 (2,844,079) (6,690,759) (1,954,458) (5,298,611) Profit before tax 29,651,599 24,797,143 14,960,749 11,006,776 Income tax expense 29 (7,656,816) (5,062,321) (6,346,357) 931,213 Profit after tax 21,994,783 19,734,822 8,614,392 11,937,989 Other comprehensive income - - - - Total comprehensive income for the period 21,994,783 19,734,822 8,614,392 11,937,989 Earnings per share Basic earnings per share (par value BDT 10 each in BDT) 30 16.29 14.62 6.38 8.84 The annexed notes 1 to 36 form an integral part of these interim condensed financial statements. As per our report of same date. A. Qasem & Co. _______________________ Chartered Accountants Director Director FRC Registration number:CAF-001-129 _______________________ ____________________________ Chief Executive Officer Company Secretary Akhtar Sanjida Kasem, FCA Engagement Partner ICAB Enrolment Number: 0643 Dated: Dhaka, 16 July 2024 7 Grameenphone Ltd. Interim condensed statement of changes in equity For the six-month period ended 30 June 2024 Share Share Capital Retained capital premium reserve earnings Total BDT (000) BDT (000) BDT (000) BDT (000) BDT (000) Balance as at 01 January 2023 13,503,000 7,840,226 14,446 24,853,086 46,210,758 Transactions with the equity holders: Final dividend for 2022 - - - (12,827,850) (12,827,850) Total comprehensive income for the six-month period ended 30 June 2023: Profit for the period - - - 19,734,822 19,734,822 Other comprehensive income - - - - - Balance as at 30 June 2023 13,503,000 7,840,226 14,446 31,760,058 53,117,730 Balance as at 01 January 2024 13,503,000 7,840,226 14,446 45,331,868 66,689,540 Transactions with the equity holders: Final dividend for 2023 - - - (16,878,750) (16,878,750) Total comprehensive income for the six-month period ended 30 June 2024: Profit for the period - - - 21,994,783 21,994,783 Other comprehensive income - - - - - Balance as at 30 June 2024 13,503,000 7,840,226 14,446 50,447,901 71,805,573 8 Grameenphone Ltd. Interim condensed statement of cash flows For the six-month period ended 30 June 2024 1 January to 1 January to 30 June 2024 30 June 2023 BDT (000) BDT (000) Cash flows from operating activities Cash receipts from customers 81,433,612 76,671,313 Payroll and other payments to employees (2,743,522) (2,749,081) Payments to suppliers, contractors and others (28,077,664) (26,669,994) Interest received 421,568 155,432 Interest paid (1,745,485) (2,078,890) Income tax paid (11,388,284) (18,117,312) (43,533,387) (49,459,845) Net cash generated by operating activities 37,900,225 27,211,468 Cash flows from investing activities Payment for acquisition of property, plant and equipment, right-of-use assets (12,024,481) (18,672,673) and intangible assets Proceeds from sale of property, plant and equipment 20,879 141,194 Net cash used in investing activities (12,003,602) (18,531,479) Cash flows from financing activities Proceeds from/(Payment of) short-term loan (1,558,211) 18,194,190 Payment of dividend (20,729,045) (6,827,193) Transfer of unclaimed dividend to Capital Market Stabilisation Fund (12,365) - Payment of lease liabilities (5,439,846) (7,822,772) Net cash used in financing activities (27,739,467) 3,544,225 Net change in cash and cash equivalents (1,842,844) 12,224,214 Cash and cash equivalents as at 01 January 16,718,338 3,325,922 Effect of exchange rate fluctuations on cash held 250,025 138,876 Cash and cash equivalents as at 30 June 15,125,519 15,689,012 9

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