GMG Airlines Limited - Janata Bank Limited Bangladesh
Transcription
GMG Airlines Limited - Janata Bank Limited Bangladesh
Table of Contents GMG Airlines Ltd. : An Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fleet Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • About the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Directors’ Involvement in other companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Family Relationships among Director’s and Top Five Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . • CIB Report relating to Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Shareholding Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • About the Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Management at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Involvement of directors and officers in legal proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related Transactions with directors and/or officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Competitive Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . An overview of the Aviation Industry in Bangladesh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bangladesh Air Travel Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Historical Market growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Interest Rate Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Exchange Rate Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Utility and Input Cost Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Industry Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Market Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Technology Related Risks Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Potential or Existing Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Description of the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Location of principal plants and other assets of the company and their condition . . . . . . . . . . . . . • Value of the assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • VAT, income tax and customs duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Funding Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Description of share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Historical Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Highlights of historical financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Determination of the offering price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Building Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market for Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Description of Securities Outstanding or Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Dividend, Voting and Pre-emption Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Conversion and Liquidation Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Right of Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • Shareholders Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Availability of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 6 6 7 7 7 7 8 8 11 12 12 12 12 12 13 14 14 14 15 16 16 16 16 18 18 18 19 20 20 20 20 22 22 23 24 26 27 28 28 29 29 29 29 30 31 35 GMG AIRLINES LIMITED INFORMATION DOCUMENT FOR ROAD SHOW FOR INITIAL PUBLIC OFFERING (IPO) OF 6,00,00,000 (SIX CRORE) ORDINARY SHARES OF TK 10 (TEN) EACH AT AN INDICATIVE PRICE OF TK 150 (TAKA ONE HUNDRED FIFTY) UNDER BOOK BUILDING METHOD Credit Rating at A3 by Credit Rating Agency of Bangladesh Registrar to the Issue: BANCO FINANCE & INVESTMENT LIMITED Issue Manager Janata Capital and Investment Ltd. General Information Janata Capital and Investment Ltd, the Issue manager, has prepared this Information Memorandum (IM) based on the information provided by GMG Airlines Limited (the Issuer Company) and the Managing Director and concerned executives of the Issuer Company. The Directors, including Managing Director of GMG Airlines Limited and Janata Capital and Investment Limited collectively and individually, having made all reasonable inquires, confirm that to the best of their knowledge and belief, the information contained herein is true and correct in all material aspects and that there are no other material facts, the omission of which would make any statement herein misleading. No person is authorized to give any information or to make any representation not contained in this IM, and if given or made, any such information or representation must not be relied upon as having been authorized by the Issuer Company or the Issue Manager. The Issue contemplated in this document is according to the laws of Bangladesh and is subject to the exclusive jurisdiction of the courts of Bangladesh. Forwarding this prospectus to any person resident outside Bangladesh in no way implies that the Issue is made in accordance with the laws of that country or is subject to the jurisdiction of the laws of that country. 1 Issuer : GMG AIRLINES LIMITED An Overview CORPORATE OFFICE Milestones Rebranding GMG Airlines is a private airline of Bangladesh whose corporate office is based near Dhaka airport. GMG Airlines is Bangladesh’s largest and oldest private carrier operating domestic, and international services, upholding the image of Bangladesh to the world. Its main bases are Hazrat Shahjalal International Airport, Dhaka and Shah Amanat International Airport, Chittagong. GMG Airline was established in 1997 and started operations on 6 April 1998. It is owned/managed by the industrial conglomerates, GMG Group and Beximco. It began with domestic operations and launched international services on 8 September 2004, with a service from Chittagong to Kolkata. It was the first private Bangladeshi airline to launch international services. In June 2009, the Beximco Group, Bangladesh’s largest conglomerate (www.beximco.com), bought a majority stake in GMG Airlines and invested substantially in the airline to improve financial strength and performance witha view to make GMG Airlines the major player in the region. GMG began regular flights to Bangkok, Delhi, and Kathmandu on 20 October 2006. It started services to Kuala Lumpur on 24 January 2007. The airline started its operation to the Middle East with daily flights to Dubai on 1 February 2008. On 1 May 2010, GMG Airlines initiated their new logo and livery with their newly acquired Boeing 767-300ER. After the rebranding, the main body of the planes is white. A small part of the engine is imprinted with colorful butterfly wings. The tail is also partially embedded with the colorful wings of a butterfly. On the nose, behind the cockpit the new logo of GMG airlines appears. In April 2010 GMG acquired its first wide bodied aircraft B 767-300ER and started operations to the Kingdom of Saudi Arabia. Information Memorandum 2 Issue Manager : Janata Capital and Investment Ltd. New Philosophy The new logo epitomizes the new corporate philosophy of GMG Airlines. The edge of imagination, backed up by a steely vision, ardent professionalism, and the relentless drive for perfection is where it wants its corporate culture placed today. Its customers are invited to embark with GMG and to explore new destinations where their imagination takes them. The new Managerial Team, representing decades of successful international experience in the aviation industry is comparable to that of the most successful airlines in the world. 3 Issuer : GMG AIRLINES LIMITED Fleet Information GMG Airlines, the largest private commercial carrier in Bangladesh has been successfully operating since 1998 and now serving 8 international destinations and 5 domestic routes. It is the largest private airline of Bangladesh. In their quest to be a major player in the global market, GMG is going through a planned expansion scheme by establishing new flights to the Middle East, Far East & Europe. GMG Airlines currently operates a fleet of Boeing 767-300ER, MD 80 (82, 83) and Bombardier Dash 8 aircraft. To accommodate an increasing demand of air transportation in Bangladesh, GMG is expanding its fleet & routes rapidly. Boeing 767-300ER MD 80 (82, 83) Bombardier Dash 8 GMG Airlines has acquired its newest assets, two Boeing 767-300ERs with a seating capacity of around 260 passengers. While our passengers take delight on embarking on journeys to new destinations with these B767300ERs, we are busy inducting more wide-bodied new aircraft. Two more B767-300ERs are expected to arrive by the 2nd half of 2011. The MD 80 (82, 83) has served GMG’s foray into the field of international flights ever since getting permission to operate globally from Civil Aviation Authority of Bangladesh (CAAB). The MD 82 and MD 83 have a seating capacity of around 150 seats in two class configuration. These aircraft are soon due for replacement by brand new state of the art narrow bodied aircraft such as the B737-800NG or the Airbus A320. The Bombardier Dash 8 turboprop, has a seating capacity between 37 to 50 passengers depending on the variant and is a globally renowned ideal aircraft for short haul flights. GMG operates the Dash 8s from Dhaka to destinations such as Chittagong, Cox’s Bazar, Jessore, Sylhet & Kolkata (India). These aircrafts will also soon be replaced by brand new state of the art 50 to 70 seat turboprops. Aircrafts Boeing 767 – 300ER Bombardier Dash 8 100 Bombardier Dash 8 300 Bombardier Dash 8 Q 300 McDonnell Douglas MD-82 McDonnell Douglas MD-83 Total Information Memorandum 4 In Fleet 02 01 01 01 02 01 08 Issue Manager : Janata Capital and Investment Ltd. Destinations GMG Airlines currently operates services to the following destinations (December 2010) Domestic Destinations (Bangladesh) Hazrat Shahjalal International Airport Dhaka Shah Amanat International Airport Chittagong Osmani International Airport Sylhet Jessore Airport Jessore Cox’s Bazar Airport Cox’s Bazar Indira Gandhi International Airport New Delhi Abu Dhabi International Airport Abu Dhabi Netaji Subhash Chandra Bose International Airport Kolkata Dubai International Airport Dubai Kuala Lumpur International Airport Kuala Lumpur Suvarnabhumi Airport Bangkok King Abdulaziz International Airport Jeddah Tribhuvan International Airport Kathmandu King Khalid International Airport Riyadh Jinnah International Airport Karachi International Destinations Apart from the above GMG plans to launch flights to Doha, Muscat, Kuwait, Bahrain, Damam, Medina, Milan, Frankfurt, London, Singapore, Hong Kong, Jakarta and Kunming within 2012. 5 Issuer : GMG AIRLINES LIMITED Board of Directors About the Directors Ahmed Shayan Fazlur Rahman, Chairman Mr Ahmed Shayan Fazlur Rahman, represents the Beximco Group, Bangladesh’s largest conglomerate with a market capitilazation of its listed companies valued at USD 2 billion. Mr Rahman plays an active role in the continuing progress of the Beximco Group. Mr Rahman completed his BBA with distinction from American University, Washington DC. Mr Rahman brings his expertise to the GMG Board in transforming GMG Airlines into an efficient and profitable enterprise. Mr Rahman is the son of Mr Salman F Rahman Vice Chairman of the Beximco Group. Shahab Sattar, Managing Director Mr Shahab Sattar, Managing Director of GMG Airlines Limited, is the Chairman of Samah Razor Blade Industries Ltd., and GMG Industrial Corporation Limited one of Bangladesh’s oldest industrial house established in 1952 by his father Mr Aziz Sattar. Mr Shahab Sattar is a pioneering figure in the Bangladesh aviation industry and has also played a key role in promoting various social and economic development programs. As founding Managing Director of GMG Airlines, Mr Sattar brings a wealth of experience and industry knowledge to the GMG Board. Ahmed Shahryar Rahman, Director Mr Ahmed Shahryar Rahman also represents the Beximco Group and plays an active role in the continuing progress of the Beximco Group. Prior to joining Beximco, he worked as a financial analyst with Merrill Lynch International Inc and Citigroup Asset Management Ltd in the UK. Mr Rahman completed BSc and MSc degrees with Honors from Imperial College of Science, Technology and Medicine in London, UK. Mr Rahman brings his expertise to the GMG Board in transforming GMG Airlines into an efficient and profitable enterprise. Mr Rahman is the son of Mr A S F Rahman Chairman of the Beximco Group. Osman Kaiser Chowdhury FCA, Director Mr Osman Kaiser Chowdhury is the Group Finance & Corporate Affairs Director of the Beximco Group and has been with Beximco since 1982. During his long tenure of nearly three decades he has played a key role and contributed significantly to Beximco’s success and growth. Prior to joining Beximco he worked in the UK for thirteen years in various management positions. Mr Chowdhury is an FCA (Member of the Institute of Chartered Accountants of England & Wales) and Fellow of the Institute of Chartered Accountants of Bangladesh. Mr Chowdhury is expected to bring decades of experience in financial management, planning & cost control systems to propel GMG into a diligently managed, highly profitable world class airline. Mohammad Lutfar Rahman, Director Mr Rahman is the Chairman, Executive Committee of the Board of Directors, IFIC Bank Limited. He heads his family’s securities company. He is also Director of NTV a leading Television Broadcasting Company of Bangladesh. His other interests include major share holdings in various financial institutions and listed companies. He has played an important role in the development of the Bangladesh capital market and has financed breakthrough projects in the insurance sector. Mr Rahman is actively involved in social and sports promotion in Bangladesh. Mr Rahman is expected to add the wealth of his financial experience in advising the GMG Airlines board. Information Memorandum 6 Issue Manager : Janata Capital and Investment Ltd. Directors’ Involvement in other companies Name Directorship in other Companies Position Mr Ahmed Shayan Fazlur Rahman, Chairman None None Mr Shahab Sattar, Managing Director GMG Industrial Corporation Ltd. Samah Razor Blades Ltd Chairman Chairman Mr O. K. Chowdhury FCA Beximco Pharmaceuticals Ltd. Bangladesh Export Import Co. Ltd. Beximco Synthetics Ltd. Shinepukur Ceramics Ltd. Beximco Media Ltd. Independent Television Ltd. Director Mr Ahmed Shahryar Rahman None None Mr Mohammad Lutfar Rahman IFIC Bank Ltd. International Television Ltd. (NTV) Latif Securities Ltd. Union Insurance Ltd. National Television Ltd. (RTV) Director Family Relationship among Directors and Top Five Officers Mr Ahmed Shayan Fazlur Rahman, Chairman and Mr Ahmed Shahryar Rahman, Director are cousins. No other directors and top five officers have family relationships amongst themselves. CIB Report of the Directors Neither the Company nor any of its directors or shareholders who hold 5% or more shares in the paid-up capital of the issuer is loan defaulter in terms of the CIB Report of the Bangladesh Bank. Shareholding Structure Name Mr Abdus Sattar Mr Shahab Sattar Mr A S F Rahman Mr Salman F Rahman Beximco & Associates Foreign Investors Local Institutions General Public Total Number of Shares % of Share holding 10,668,031 11,692,623 1000 1000 113,897,367 16,421,000 25,615,679 68,363,300 246,660,000 4.32% 4.74% 0.00% 0.00% 46.18% 6.66% 10.39% 27.71% 100.00% 7 Issuer : GMG AIRLINES LIMITED Management of the Company About the Management Mr Shahab Sattar Managing Director Michael Moriaty Chief Financial Officer John Jack Ekl Director Flight Operations Mr Shahab Sattar, Managing Director of GMG Airlines Limited completed his MBA from The Wharton School, University of Pennsylvania prior to joining his family business in 1985. His foray in the aviation industry started in 1997 as the co-founder of GMG Airlines. Mr Sattar is no stranger to Bangladesh’s aviation market and is considered by many as a pioneering figure responsible for re-shaping the deregulation of the airline industry in Bangladesh. Mr Sattar is also a licensed commercial pilot since 1981. Mr Michael Moriaty is a highly qualified professional with proven record of success in managing financial and project management in the airlines industry. He has had wide international exposure in leading finance departments of various organizations in USA, Japan, Thailand, Scandinavia, Netherlands and Colombia. Prior to joining GMG, he worked as a Business and Accounting Service Management Consultant. Mr Moriaty is responsible for overall financial control and overseeing the implementation of best accounting practices prevailing in the aviation industry. Mr Ekl began flying in 1962 and entered the US Naval Aviation Officer Candidate School in 1969. He was a member of the US Navy’s Flight Demonstration Squadron, “The Blue Angels”. After leaving the Navy, Mr Ekl accepted a position with Southwest Airlines where he held management positions of Director of Operations, Chief Pilot and Manager of Flight Operations. MrEkl was awarded the President’s award for developing flight department from 110 to over 4000 pilots. In 1999 Mr Ekl retired from Southwest Airlines to help found the new Ozark Air Lines where he was the Executive Vice President and Director of Operations. In August 2005, he became Director of Operations and Chief Pilot, for Spicejet Airlines in India where he managed the growth to 20 aircraft and over 450 pilots. MrEkl was the only foreign Designated Examiner on the B737NG aircraft in India. In 2008, he was promoted to the position of Executive Vice President. After successfully growing SpiceJet for four years, Mr Ekl joined RwandAir in 2009. He was the Chief Operating Officer and Director of Flight Operations in RwandAir prior to joining GMG Airlines. Information Memorandum 8 Issue Manager : Janata Capital and Investment Ltd. Capt Raghunandan Lal Kapur Chief of Flight Safety Varghese Samuel Director Engineering Thomas J Andino Deputy Director Engineering Capt Kapur a veteran pilot in early stages of his life started his flight safety career in 1981. He held key positions in Flight Safety department in many well reputed airlines in the region. Before joining GMG, Mr Kapur worked for four years as Chief of Flight Safety at Spicejet, India. He is responsible for the implementation of the policies concerning over all safety in the organization and liaising with the CAAB and other related agencies. He is also responsible for compiling the Flight Safety Manual, Ramp Safety Manual, Emergency Response Plan, SMS Manual and other safety related documents and presentations. Capt. Kapur also heads the team in GMG responsible for IOSA certification. Mr Samuel has 24 years of experience in aviation engineering. As Director of Engineering, Mr Samuel is responsible for all aspects of line and heavy maintenance control and technical services. He is responsible for ensuring safe, punctual and economic operations of all company flights by adhering to the strictest of international safety standards. Prior to joining GMG Airlines he was the CEO of Aero Intelligence. He served in various senior engineering management positions in Kingfisher Airlines, Deccan Airways, Virgin America, JetBlue Airways, Advance Avionics Modification Technology, Laker Airways, Air Europa, Ultra Air and Pan American Airways. Mr Andino is a highly skilled engineer having over 22 years of maintenance experience on different types of aircraft. Prior to joining GMG, he worked as Manager – Aircraft Maintenance, Florida West International Airways, Miami, USA. Mr Andino is responsible for bringing together and motivating talented individuals and teams to accomplish organizational objectives, setting standards of performance, effectively revitalizing workplace procedures and repositioning business strategies to maximize goals. He is also responsible for assisting the Director Engineering in establishing adequate maintenance policies and procedures as related to the company’s operation in line and heavy maintenance, planning, directing, and coordinating the activities of all maintenance personnel so as to effectively utilize all resources to increase production and efficiency. 9 Issuer : GMG AIRLINES LIMITED Management of the Company Lawrence Parris Manager, Quality Assurance Asif Ahmed Head of Marketing Shoeb Al Ashraf Director Human Resources Mr Parris is a licensed aviation engineer by training and has been working in the field of Aviation Quality Assurance since 1987 in key positions in different organizations and has earned a good reputation world-wide. He is responsible for quality assurance functions governing engineering, managing the internal audit program, maintaining an approved vendor listing and parts QA. He is also responsible for preparation and implementation of Quality Control Manual, ISO Manual and all other regulatory documentation. He is also the interface point of all technical communications with regulatory agencies, vendors, OEM and airlines. Mr Ahmed’s entire professional life has been dedicated to marketing. He started his career with Standard Chartered Bank followed by Unitrend Ltd (the Bangladesh affiliate of McCann Ericsson World Group), CityCell and British American Tobacco Ltd. Before joining GMG he was working for Warid Telecom which is now Airtel Limited. Mr Ahmed has proven his professionalism in all the organizations he has worked for. Mr Ahmed has been a significant contributor to the telecom services marketing from the very inception of the industry. At GMG he heads the marketing team and will play a significant role in promoting the GMG brand world ide. Mr Ashraf started his career in the Bangladesh Army. He has worked for 12 years in different key appointments in Army as well as in United Nations Peace Keeping Forces. He has worked as Head of HR in Beximco Pharmaceuticals for 5 years. His responsibility is to prepare analysis and evaluation of existing human resources policies, practices and procedures and dissemination of new human resources policies and guidelines to meet the evolving needs of the organization. His responsibility is to ensure timely delivery of all sorts of administrative support in accordance with the organizational need. His responsibility also includes safeguarding of the GMG’s aircraft, GMG’s stores and offices at airport and the Head office. Information Memorandum 10 Issue Manager : Janata Capital and Investment Ltd. Ashish R Chowdhury Head of Corporate Affairs Mizanur Rahman Siddique Director, Finance & Accounts Mr Ashish R Chowdhury has vast experience in different key appointments in various Airlines and travel agents. Responsibilities include liasing with Civil Aviation’s Authority, Ministry of Civil Aviation, and other government offices. Mr Mizanur Rahman Siddique has spent his entire working life in the area of Finance and Accounts. Mr Siddique started his career in GMG Industrial Corporation in 1981 and has been working in GMG Airlines since its inception in 1997. Mr Siddique has served in various key positions in field of accounts & finance for more than 29 years. He was involved in the initial design of company’s chart of accounts, computerization of the company’s accounting system and in setting up of various checks and balances in the department. Mr Siddique is also the key liaison person with respect to GMG’s dealing with all local banks and financial institutions. Management at Glance Name Designation Last Degree Experience with Company Total Experience Mr Shahab Sattar Mr Michael Moriaty Mr Mohammad Asad Ullah Mr Dane Lovell Dobbs Mr Varghese Samuel Mr Shoeb-AI-Ashraf Mr Pran S Dasan Mr Orlando Nicholas Lobo Mr Asif Ahmed Mr Ashish R Chowdhury Mr Mathew Regala Tamaray Mr Mujtaba Ali Khan Mr Rajiv Ghai Mr Laila Akhtar 12 Years 25 Years 5 months 1 Year New joined New joined 2 Years 4 Months 8 Months 6 Months 3 Years 8 Months 1 Year 7 months 3 Years 4 Years 31 Years 20 Years 26 Years 23 years 18 Years 20 years 20 Years 04 Years 21 Years 13 Years 21 years 26 Years 1s Years Managing Director &CED Chief Financial Officer Executive Director & Company Secretary Director Flight Operations Director-Engineering Director-Human Resource Head of Global Sales Head of Revenue Optimization Head of Corporate Communications Head of Corporate Affairs General Manager-Corporate Planning GM-Ground Service GM- Catering Manager-Customer & Cabin Service MBA with Distinction, The Wharton School, University of Pennsylvania BSC Hon(Economic) FCS Graduation-Aero Engineer MBA MBA MSC-Air Transport Management Graduation-Commerce BBA - MS-IT, MS-Industrial Economics Graduation Bachelor of Commerce M.A part1 11 Issuer : GMG AIRLINES LIMITED Involvement of directors and officers in legal proceedings No director or officer of GMG Airlines Limited was involved in any of the following types of legal proceedings in the last 10 (ten) years: a. Any bankruptcy petition filed by or against any company of which any officer or director of the Issuer Company filing the prospectus was a director, officer or partner at the time of the bankruptcy. b. Any conviction of director, officer in a criminal proceeding or any criminal proceeding pending against him. c. Any order, judgment or decree of any court of competent jurisdiction against any director, officer permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of any director or officer in any type of business, securities or banking activities. d. Any order of the Securities and Exchange Commission, or other regulatory authority or foreign financial regulatory authority, suspending or otherwise limiting the involvement of any director or officer in any type of business, securities or banking activities. Related Transactions with directors and/or officers The company has neither entered into during the last 2 (two) years nor has any plan to enter into any transaction with the following parties: 1. Any executive director or executive officer of the company; 2. Any director or officer; 3. Any person owning 5% or more of the outstanding stock of the issuer; 4. Any members of the immediate family (including spouse, parents, brothers, sisters, children and in-laws) of any above persons; 5. Any transactions or arrangement entered into by the Company for a person who is currently a director or in any way connected with a director of either the issuer company or any of its subsidiaries/associate companies, or who was a director or connected in any way with director at any time during the last three years prior to the publication of Information document; and 6. Any director holding any position, apart from being a director in the issuer company, in any company, society, trust, organization or proprietorship or partnership firm. Information Memorandum 12 Competitive Condition Industry Overview Background of Aviation Industry in Bangladesh Modern aviation in Bangladesh began when the British Empire built a military airstrip in Tejgaon during World War II to fly warplanes towards the battle fields of Kohima and war theaters in Burma. Other airstrips were built in Comilla, Feni, Chittagong, Cox’s Bazar, Chakaria, Sylhet, Jessore, Rajshahi and Lalmonirhat. When the war was over, the colonial government decided to build the Tejgaon Airport along with a landing strip at Kurmitola to meet the requirement of Royal Indian Air Force (RIAF) stationed in Dhaka. In 1946, the Mirza Ahmad Ispahani and his partners formed an airline - Orient Airways - which soon started using the airport as a civil airport. Shifting its base from Kolkata to Karachi when Pakistan was born, Orient Airways started DC-3 flights from Karachi to Dhaka on 7 June 1954, forming a critical connection between the capitals of geographically separated East and West Pakistan. On March 11 1955, Orient Airways merged with the government’s proposed airline, becoming Pakistan International Airlines Corporation, later rechristened as Pakistan International Airlines (PIA). The first Bangladeshi commercial passenger airline, Biman Bangladesh Airlines, was born in 1972 soon after the independence of Bangladesh. As the national flag carrier, Biman operated as a monopoly for over two decades and is fully owned by the state. Following deregulation, GMG Airlines pioneered the way forward for the private sector aviation industry. Bangladesh Air Travel Market Bangladesh aviation business grosses around US$ 4.5 billion, nearly 80% of which is earned by foreign airlines. Of this US$ 3 billion accounts for passenger revenue the balance being cargo revenue. As can be seen in the graph, the national flag carrier Biman Bangladesh Airlines Ltd has consistently failed to take advantage of the market growth allowing foreign airlines to take away the lion’s share of the market. |In recent years, Biman’s business has gradually declined to below 25%. This situation represents great potential for private Bangladeshi carriers to ride the growth curve. ! Issue Manager : Janata Capital and Investment Ltd. According to Civil Aviation authority, in 2009 more than 1 million passengers traveled with Biman Bangladesh Airlines Ltd, which is 6% lower than the previous year. On the other hand foreign airlines’ carried 2.8 million passengers, which is 16% higher than that of previous year. United Airways, Regent Air and GMG Airlines are currently operating in Bangladesh and are in various stages of growth. South Asian Airlines and SquareAir operate helicopter services. Historical Market growth Market growth out of Bangladesh continues to be robust. Following the economic crisis of 2008-2009 the total numbers of passengers out of Bangladesh have not significantly reduced when compared to other countries. This is because the main reduction worldwide has been due to reduction of leisure traffic and of business travelers in premium cabins like first class and business class. The profile of the Bangladeshi market is slightly different where the major share of the market consists of Bangladeshi workers working abroad with a smaller affluent percentage of leisure and business travelers. No real downturn in traffic volume is expected in the near future. Most travelers out of Bangladesh who can afford to travel on vacation or on business were also not seriously affected by the financial crisis. Market information Passenger Cargo Total Market Ex/To Bangladesh in 2000-01 Total Market Ex/To Bangladesh in 2002-03 Total Market Ex/To Bangladesh in 2003-04 Total Market Ex/To Bangladesh in 2004-05 Total Market Ex/To Bangladesh in 2005-06 Total Market Ex/To Bangladesh in 2006-07 Total Market Ex/To Bangladesh in 2007-08 Total Market Ex/To Bangladesh in 2008-09 Overall growth of Bangladesh Market over 6 yrs Foreign Carrier’s Growth 2.29 million 2.39 million 2.62 million 2.77 million 3.07 million 3.31 million 3.86 million 3.81 million 66.37% 100% 101,894 ton 105,956 ton 992,295 ton 104706 ton 118,806 ton 102,048 ton 112,956 ton 117,578 ton 15.4% 46.53% Source : CAAB 13 Issuer : GMG AIRLINES LIMITED Risk Factors Interest Rate Risk Exchange Rate Risk Interest rate risk is borne by interest bearing assets of an organization. Changes in the government’s monetary policy along with increased demand for loans/investments tend to raise interest rates. Such rises in interest rates mostly affect companies having floating rate loans or companies investing in long-term debt securities. Historically, GMG has succeeded in improving its gearing from 3.08x in 2008 to 0.39xs as of June 2010. With a healthy capital structure, GMG has moderately high interest coverage of 5.04x as of June 2010 on majority of its long-term debt obligations. This could further increase with the future cash flows of the company. Moreover, leverage of the company is expected to further increase as Debt/Equity and Debt/EBITDA is anticipated to increase in the future on account of Capital Expense and increase in net working capital requirements. In the event of monetary policy tightening by the government to combat increased economic growth and inflation, the company will require a prudent strategy to take the firm from incurring negative net cash flow from operations. Management Perception: The management of GMG is very aware of the interest rates at which the debts of the company are being financed. Management intends to finances long-term funds using fixed interest rate debt and finances short-term funds at reasonable competitive rates. The company has been repaying borrowed funds on a continuous basis to reduce such interest risk. Overall liquidity position of GMG has improved in 2010 and a net cash accruals/debt of 25.07% in June 2010 indicates the financial flexibility of the firm to tackle unfavorable interest rate fluctuations in the markets. Information Memorandum 14 Exchange rate risk occurs when business operations of a company are affected by fluctuations in exchange rates. Since GMG Airlines has international operations, it does have exposure in exchange rates such as the Taka/USD. Currently, Bangladesh Bank follows a managed floating exchange rate policy and therefore, the Taka/USD rates have remained within a tight band. However, as demand for the dollar grows with increased economic wellbeing and global competitiveness of the nation’s assets, exchange rate volatility is expected. Globally, dollar has been depreciating against other currencies due to unfavorable outlook growth of the American economy. Central Banks across the globe are losing confidence in the weakened dollar and fleeing to safety by increasing gold reserves for their treasuries. Therefore, predicting the anticipated movements of the dollar in a highly speculative market and the risks in hedging against exposure is quite crucial for the firm. Management Perception: GMG Airlines earns its revenues both in dollar & taka denominations. Recent depreciating trend of the Taka/USD has worked in GMG’s favor as it fetches more value when converted in to Taka. More importantly, the dollar denominated income has aided the company to offset their requirements for foreign purchases in USD denominations. Issue Manager : Janata Capital and Investment Ltd. Utility and Input Cost Risks Input cost risk is the risk of businesses when procuring materials or commodities in high global demand. Increasing demand and supply shortages create volatility in these commodity values therefore the timing, quantity and price of purchase must be closely planned. Input costs such as fuel, represent 34% of an airline’s operating costs in the industry. Similarly, fuel is the major operating utility for GMG Airlines. Direct costs peaked in 2008 due to increases in fuel prices. The global energy market witnessed price hikes in 2007 and 2008 which inflated cost structures and suppressed profitability of airlines across the globe. Jet fuel prices (charted above) are correlated with spot Light Crude prices. The volatility of oil prices in the recent months – moving from highs of US $145/ bbl in 2008 down to $60/bbl in 2009 and currently trading near $90/bbl – could make a significant difference to the company’s financials and our estimates. Currently, hedging strategies are being planned to cushion against oil price fluctuations. 15 Issuer : GMG AIRLINES LIMITED Risk Factors specifically targeting the migrant worker group. These include higher baggage allowances, personalized customer care both on ground and in the air keeping in view the special needs of migrant workers with respect to language and food habits. Management Perception: Management of GMG Airlines would hedge their exposure to fuel price volatility; however government regulators of Bangladesh make such an approval difficult to obtain. Therefore, GMG has channeled their losses (if incurred by fuel price hikes) to fuel surcharges portion of a passenger’s ticket price. Industry Risks The airline industry has witnessed challenges such as terrorist attacks, a historic fuel price peak, job cuts, bankruptcy, M&A, and impacts of drastic climate changes across the globe. It stands as one of the most challenging industries to operate in to date. Fortunately, the local industry does not have such a troubled backdrop and has immense opportunities for growth. The risks Bangladesh airlines share with its global players is vulnerability to economic cycles, seasonality, competition from regional LCCs, high profile brand value, and cost effectiveness of servicing the same routes. These may follow dampening air traffic, sales, and ultimately profitability and cash flow. Management Perception: Technology Related Risks Potential Management Perception: Management is optimistic about growth opportunities in Bangladesh. They believe they can target an untapped market of customers who are seeking global standards of quality service, reliability and punctuality and state of the art aircrafts. The largest market opportunity consists of business travelers and professionals who are expected to generate repeat sales once they have developed brand loyalty with GMG Airlines. Market Risks Market risk refers to the risk of adverse market conditions affecting the sales and profitability of the company. Mostly, the risk arises from falling demand for the service, which would harm the performance of the company. On the other hand, strong marketing and brand management would help the company increase their customer base. GMG has recently completed re-branding strategies to exemplify their image as the industry defining premium quality airline in Bangladesh. This quality also comes with a premium added to ticket prices, which may not be preferred by the emerging customer base in Bangladesh. One of Bangladesh’s largest airlines traveling customer base is the migrant worker group from regional countries such as Malaysia, Singapore, and the Gulf regions. Premium prices may not attract this customer base. This could prevent GMG from gaining market share from low cost carriers such as Biman. Management Perception: Management is fully aware of this market risk and has planned to act accordingly by offering special services and prices Information Memorandum 16 Technology always plays a vital role for each and every type of business. Better technology can increase productivity and reduce costs of production. Firms are exposed to technology risks when there are better technologies available in the market than the one used by the company, which may cause operational inefficiency. In the case of the airline industry and GMG, technology is crucial to monitor safety and conduct strict quality control of its fleet and equipments. Accidents due to equipment or aircraft failure are detrimental for an airliner’s reputation and business. GMG must also invest in state of the art worldwide reservation systems in order to increase sales and reach out to new customers. GMG administration is aware of technological changes and has adopted new technology according to its needs. Furthermore, routine and proper maintenance of equipments carried out by the company ensures longer service life for the existing equipment and facilities. GMG is committed to maintaining quality and brand image. Training of staff and officers and continuous technical evaluation of the aircrafts is routine protocol. GMG Airlines is connected to all major GDS system named Amadeus, Worldspan, Galileo, Sabre etc to fully market its destinations and capture sales. On the operations and engineering side GMG has implemented ARMS a state of the art system used by major airlines in the region. This includes modules for computerized flight planning, engineering planning, engineering quality control, stores and materials management and fuel management among others. GMG intends to persue a policy of upgrading its fleet with new aircraft periodically as and when new generation aircraft become available. In line with this policy GMG has initiated negotiations with both Boeing and Airbus for acquiring brand new, new generation narrow body and wide body aircraft with a view to finalize an agreement within 2011. Potential or Existing Government Regulations The Company operates under the Companies Act; 1994, Civil Aviation Authority of Bangladesh (CAAB) regulations and other related regulations, Income Tax Ordinance, 1984; Income Tax Rules, 1984; Customs Act, 1969; Value Added Tax (VAT) Act, 1991; and Value Added Tax (VAT) Rules, 1991. Any abrupt changes of the policies made by the regulatory authorities may adversely affect the business of the Company. Issue Manager : Janata Capital and Investment Ltd. GMG operates in a highly regulated market with registration of licenses, operational reviews and aircraft inspections required by CAAB and International Air Transport Association (IATA) periodically. Any negative reviews could cause fleets to be grounded for a prolonged period of time or require unexpected fleet renewal. Moreover, regulatory bodies control routes and approval for new routes is difficult to obtain. Management Perception: Therefore, to compensate for these abnormalities, airliner must maintain a healthy cash reserve. Management Perception: GMG has now planned to keep such reserve so that it can combat unforeseen uncertainties. Increased cash flow coming in from increased routes operation with the new aircraft being purchased will enable GMG to keep this reserve in the coming years. GMG is the first private airline in the country and the company follows all the rules and regulations. Change in regulations will bring changed strategies of doing business by the dynamic management of the company. Risk & Sensitivity to Events of Uncertainty The airline industry is highly sensitive to external shocks such as terrorist attacks, natural disasters, climate changes, etc. These unpredictable events can shut airports, cancel flights, and terminate services for airliners for a prolonged period of time and cause significant amount of losses for the company. 17 Issuer : GMG AIRLINES LIMITED Description of Assets Location of Aircrafts and other assets of the company and their condition The head office of the company is located at Nikunja, Dhaka and the main hub is located in Hazrat Shah Jalal International Airport, Dhaka. All the Aircrafts of the company are stationed in the main hub when not flying. Value of the Assets GMG Airlines owns the following assets and the table below represents the classifications of operating assets along with the written down value of the same as at 30 September 2010 and 1 January 2010. SI. Particulars Cost Depreciation Cost as on Addition Cost as on Depreciation Rate Charged Total Written down 01.01.10 30.09.10 as on 01.01.10 % during the year Depreciation Value on 30.09.10 As on 30.09.10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Building & Construction Aircraft Tools& equipment Electrical Equipment Renovation & Decoration Technical Manual Computer Reservation System Office Equipment Vehicle Furniture& Fixtures Crockeries & Cutleries Ground Support Equipment Aircraft-AAA Aircraft-ADX Aircraft-ADO Hi-Lift& Engine Total: 30.09.2010 Total: 31.12.2009 6,525,81 7 682,179,546 6,239,683 36,284,199 14,736,019 31,273,344 33,393,550 22,749,091 16,326,236 3,703,917 655,317,672 288,476,642 738,000,000 40,600,000 88,552,482 2,664,358,197 1,803,195,098 102,744 6,628,561 400,147,921 1,082,327,467 69,780 6,309,463 5,807,959 42,092,158 6,277,344 21,013,363 52,075,269 83,348,613 11,982,190 45,375,740 3,509,600 26,258,691 496,293 16,822,529 685,661 4,389,578 267,775,421 923,093,093 - 288,476,642 - 738,000,000 45,370,500 85,970,500 - 88,552,482 794,300,681 3,458,658,879 861,163,099 2,664,358,197 Operating Lease The Company has taken the following aircraft on operating lease: 1. 2 x B767-300ER 2. 2 x MD-82 3. 1 x Dash8-300 Information Memorandum 18 5,616,270 20 54,402,150 15 4,599,584 15 15,876,869 15 5,395,746 10 12,315,104 10 15,958,074 15 9,189,293 20 7,985,621 10 717,369 10 38,635,398 15 36,764,642 4 29,520,000 4 - 4 38,950,419 15 275,926,539 136,610,590 136,432 70,624,957 184,511 2,295,825 700,520 1,421,868 1,961,491 2,033,970 625,546 223,991 69,376,756 7,551,360 21,254,400 1,218,000 5,580,232 185,189,859 139,315,949 5,752,702 125,027,107 4,784,095 18,172,694 6,096,266 13,736,972 17,919,565 11,223,263 8,611,167 941,360 108,012,154 44,316,002 50,774,400 1,218,000 44,530,651 461,116,398 275,926,539 875,859 957,300,360 1,525,368 23,919,464 14,917,097 69,611,641 27,456,175 15,035,428 8,211,362 3,448,218 815,080,939 244,160,640 687,225,600 84,752,500 44,021,831 2,997,542,481 2,388,431,659 Issue Manager : Janata Capital and Investment Ltd. VAT, Income Tax and Customs Duty 1. There are no VAT and/or Customs duties outstanding of the company. 2. Details of Income Tax Assessment Financial Year 31-12-2005 As per Income-Tax (IT) Return Income /(Loss) Cumulative for the year Income /(Loss) As per IT Assessment Income /(Loss) for the year Cumulative Assessed Income/(Loss) Status -54,154,410 -214,096,881 Finalised. -54,154,410 -54,154,410 31-12-2006 4,415,434 -49,738,976 4,415,434 -209,681,447 Finalised. 31-12-2007 58,251,018 8,512,042 199,377,506 -10,303,941 Under Appeal with Income-tax Tribunal 31-12-2008 -38,275,223 -29,763,181 - - Under Assessement. 31-12-2009 375,061,148 345,297,967 - - IT Return submited. 19 Issuer : GMG AIRLINES LIMITED Funding Requirement Description of share capital Types of share capital Number of Shares Amount (in Tk.) Authorized Share Capital* 500,000,000 5,000,000,000 Paid up share capital** 246,660,000 2,466,600,000 To be issued though IPO 60,000,000 600,000,000 Paid up capital (Post IPO) 306,660,000 3,066,600,000 * The Authorized share capital has been increased from Tk. 1,500,000,000 to Tk. 5,000,000,000 on April 11, 2010. In addition, the share denomination has been reduced from Tk. 100 to Tk. 10 on the same date. ** The paid up share capital has been increased from Tk. 2,266,600,000 to Tk. 2,466,600,000 on December 14, 2010. Capital Structure Particulars Shareholders’ Equity Share Capital Share Premium Account* Revaluation Surplus Retained Earnings Share money deposits Total as at 30 Sep 2010 as at 31 Dec 2009 2,266,600,000 2,400,000,000 330,195,439 788,725,982 - 600,000,000 330,195,439 23,385,362 380,000,000 5,785,521,421 1,333,580,801 *Share Premium Account has increased by Tk. 800,000,000 to Tk. 3,200,000,000 on December 14, 2010. Debts Long term loan Short term loan Total 422,457,253 110,964,704 533,421,957 716,026,704 1,257,896,577 1,973,923,281 Use of proceeds The Company is planning to raise about Tk. 9 billion from the capital market through IPO. The IPO proceeds will be utilized in the following manner: Usage of Proceeds Pre-Delivery Payment to Aircraft Suppliers Construction of Hanger and Related Equipment (Maintenance & Repair Facility for own & third party aircraft) Repayment of Loans Balance as Working Capital Total Information Memorandum 20 Amount in BDT 5,500,000,000 1,300,000,000 550,000,000 1,650,000,000 9,000,000,000 Issue Manager : Janata Capital and Investment Ltd. 1) Signing Fee and Down Payment to Aircraft Suppliers: IPO proceeds will be used for Signing Fee and Down Payment (15%) to the aircraft suppliers. GMG intends to purchase brand new aircraft and related spares and tooling as follows: a) Four Turbo Props, two each of 50 seats and another two of 70 seats; probable models being ATR 42-600/72-600 or Bombardier Dash8-400; list price USD 18 million and USD 21 million each respectively. These will replace its existing three Dash8 aircraft. b) Four new generation narrow body aircraft with options for three additional aircraft; probable models being Boeing 737-800 or Airbus A 320 with a capacity of around 180 seats; list price USD 70 million each. These will replace its existing three MD 80 aircraft. c) Four wide body aircraft with options for three additional aircraft; probable models being Boeing 777-200ER or Airbus A330-300 with a capacity of above 300 seats; list price USD 230 million and USD 180 million respectively. These will replace its existing and proposed B767-300ER aircraft. Balance 85% of the aircraft price is financed by US EXIM Bank in the case of Boeing and European Credit Agency (ECA) in the case of Airbus as along term soft loan. GMG management intends to negotiate vigorously with both Boeing and Airbus in order to finalize the purchase substantially below the list prices quoted above and intends to place the order to the most competitive bidder. Based on expected outcome of negotiations with Boeing and Airbus an estimated amount of Tk. 8,500,000,000 is required to be paid as signing fee and down payment prior to Aircraft delivery. An amount of Tk. 5,500,000,000 will be utilized out of the IPO proceeds and balance payment will be generated from own cash flow. 2) Construction of Hanger and Maintenance Facility: A portion of the IPO proceeds will be used for construction of a Hanger with full Maintenance and Repair facilities at Hazrat Shahjalal International Airport. This hanger will be able to give service to extend C check (which is a vital routine check for every aircrafts). After completion of this hanger, GMG’s own aircraft as well as third party aircrafts will be able get serviced from this facility. Considering the huge number of aircrafts coming in and going out from this airport GMG expects a good amount of revenue from this operation. GMG’s new hanger will be certified as a JAR 145 / EASA 145 (European Regulatory Approved) & FAA (USA Regulatory Approved) MRO (Maintenance & Repair Organization) ensuring highest level of safety standards. 3) Repayment of Long Term Loan: IPO proceeds will be used for repayment of entire long term loans which is currently in the form of finance lease. This includes payment for the outstanding balance from Dhaka Bank (Tk. 90.39 million) led consortium finance lease for one Dash-8 100 series aircraft and payment for IIDFC led consortium finance lease (Tk. 459.61 million) for one Dash-8 Q300 series aircraft. Lease finance outstanding against ground service equipment from Premier leasing will also be fully paid off. 4) GSE Equipment with Hanger: An amount of BDT 530 Million from the IPO proceeds will be to procure GSE Equipment with Hanger. Ground handling equipment is required to turn around aircraft during operations and includes tow trucks, air-starter carts, air-conditioning carts, catering trucks, ground power units, water and toilet servicing carts, stairs and a host of cargo loading / unloading equipment. This included tow bars and fly-away kits for both narrow body and wide body aircraft. In the future there may be a possibility of using this equipment for third party ground handling also. 5) Balance as Working Capital: A portion of the IPO amount will be utilized to cover the flotation cost for the IPO. The balance amount shall be used as working capital to meet costs of opening new routes and offices; and working assets. According to the worldwide aviation industry norms, airlines are required to keep at three to six months expenditures’ worth of free cash flows to meet cyclical trends and unforeseen calamities. Appropriate amount of working capital will be maintained to meet international operational standards of liquidity. 21 Issuer : GMG AIRLINES LIMITED Financial Performance Historical Financial Performance GMG’s revenue mainly comes from passenger flights and handling cargos and mails. GMG improved its financial performance in the first nine months of 2010 after experiencing a fall in revenues in 2009 from 2008 by 21.77%. The increase was propelled mainly by an increase in the number of business and leisure flights and the migration of labor to the Middle East and Malaysia. GMG is projected to end the year with the profit margins demonstrated in the graph above. After the fall in sales in 2009, sales have shown an upward trend and are expected to continue that trend for the foreseeable future. Growth in EBITDA was substantially higher in 2009 than in 2008 due to relatively lower operating costs in 2009. GMG also experienced a fall in COGS in the first nine months of 2010 and is expected to end the year with COGS being 57.02% of sales down from 77.80% from 2009. Although GMG did not face pressure from the global financial crisis like other global airlines that faced huge losses in 2008, GMG did make a loss of BDT 38 million in 2008 because of a spike in jet fuel prices and high aircraft lease expenses during that year. However in 2009 the company earned a net income of 326.47 million, the highest amount of net profit GMG ever made since its inception in 1998. GMG has projected to generate a much higher net income of BDT 1,185.93 million by the end of 2010. Overall Liquidity position of the company improved during the first nine months of 2010 as current maturity of long-term debt decreased in current liabilities. Its current assets, which include stocks and spares, receivables and cash all, increased substantially in the first nine months of 2010 from 2009 and 2008. Though negative, the net working capital to total assets has been gradually decreasing from -125.21% in 2005 to 28.04% in 2010. The inventory of the company which consists of spare parts, unsold tickets and catering stock showed an increasing trend over the last five years and in 2009 inventory balance almost doubled from 2008 mainly due to an increase in spare parts. 50.00% 30.00% 20.00% 10.00% 0.00% 22 2006 2007 2008 2009 2010 (P) 10 8 Sales Growth(%) EBITDA Growth (%) 6 4 2 0 2007 -2 2008 2009 2010 (P) 120 % 100% COGS as % of Sales 80 % 60 % 40 % 20 % 0% 2006 2007 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2008 2009 2010 (P) Sales EBITDA Net Profit net of Tax 2006 2007 -1,000 figure in million taka 2008 2009 2010 (P) 2.5 2 Current Ratios Quick Ratios Net Working Cap. To Total Assets 1.5 1 0.5 0 -0.5 -1 Information Memorandum Gross Profit margin Operating Profit margin Net profit margin 40.00% 2006 2007 2008 2009 2010 (P) Issue Manager : Janata Capital and Investment Ltd. Highlights of historical financial information a) Balance Sheet and Income Statement Caption Particulars 2006 2007 2008 Balance Sheet Caption Non Current Asset 238,177 293,663 1,947,667 Current Asset 195,664 538,677 738,607 Total Asset 433,841 832,340 2,686,274 Current Liabilities 629,215 960,707 1,889,906 Non Current Liabilities 36,372 45,955 469,258 Shareholder’s Equity (231,746) (174,322) 327,109 Share Premium account - - - Share Money Deposit - - 77,200 Revaluation Surplus - - 330,195 Proposed Stock Dividend - - - Liabilities & Shareholder’s Equity 433,841 832,340 2,686,273 Income Statement Caption Revenue 709,626 2,467,485 3,717,470 Gross Operating Profit 52,031 138,493 79,747 Net Profit Before Tax 7,964 63,592 94,037 Net Profit/(Loss) After Tax 4,415 57,423 94,037 (Amount in Tk. ‘000) 2009 2,705,500 1,533,123 4,238,623 2,188,360 716,682 1,333,581 - 380,000 330,195 - 4,238,623 2,908,066 647,041 375,061 326,472 30th Sep, 10 4,873,150 2,618,270 7,491,420 1,282,492 423,407 5,785,521 2,400,000 - 330,195 - 7,491,420 3,896,640 1,428,368 1,224,545 765,341 b) Growth Particular’s Revenue Gross Operating Profit Net Profit Before Tax Net Profit/(Loss) After Tax Non Current Asset Non Current Liabilities Shareholder’s Equity in % 2007 2008 2009 30th Sep, 10 Averages 247.72 166.17 698.49 1,200.63 23.30 26.35 (24.78) 50.66 (42.42) 47.88 63.76 563.23 921.13 (287.65) (21.77) 711.37 298.84 247.17 38.91 52.73 307.69 33.99 120.75 226.49 134.43 80.12 (40.92) 333.83 82.83 254.90 339.12 438.93 188.15 255.81 87.76 c) Selected Ratios in % Ratio 2006 2007 2008 2009 30th Sep, 10 Gross Profit Margin Operating Profit Margin Net Profit Margin Current Ratio (Times) Quick Ratio (Times) Total Asset Turnover Return on Assets (ROA-Ungeared) Return on Equity (ROE) 47.82 21.45 0.62 0.31 0.11 1.64 1.02 (1.51) 40.11 18.35 2.33 0.56 0.19 2.96 6.90 26.09 47.35 29.61 2.53 0.39 0.16 1.38 3.50 28.75 56.13 30.25 11.23 0.70 0.26 0.69 7.70 24.48 65.28 42.74 19.64 2.04 0.86 0.52 10.22 13.23 23 Issuer : GMG AIRLINES LIMITED Determination of the offering price GMG Airlines Limited is one of the leading market participants having about BDT 3.9 billion of operating revenue within 9 months of 2010 in the airline industry of Bangladesh. The leading private airline of the country is enjoying a high growth in revenue and net profit in the past couple of years. As shown in the previous part that revenue has an average growth rate of 77.65%. Gross profit and operating profit has grown by at an average rate of more than 50% & 25% per year respectively. Net profit after tax has a compounded annual growth rate of 81% (from 2006 to 2010). Moreover, company’s non current asset base has a high growth rate. The ungeared ROA in 2009 was 20.75% and in 2010 was 22.23%; average during the last 5 years was 34.70%. ROE was 24.48% in 2009 and 13.23% in 2010; this was negative in previous years. Overall ROA and ROE are compare favorably with other companies in this industry. GMG Airlines’s degree of leverage line is downward sloping starting from 7.21 in 2008 to only 0.29 in 2010. The interest coverage ratio remains above 3 for the last couple of years and reached as high as 11.09 in 2008, while the debt service coverage ratio remained in the single digit around unity. The derived indications of financial analysis show the financial stability of the company as well as proof of its earning consistency of past years. Based on the past trend of business growth and future earning generation capacity, four valuation methods were used by GMG in setting the Indicative Price of its shares. Earning-based Value that reflects earnings on the price of shares is the most important valuation method. Net Asset Value gives asset-backing to the shares of a Company is another important valuation method. Earnings-based Value and Book Value-based Value of similar stock have been taken to estimate a theoretical fair price that gives us good indication of market demand for the shares of a company. The weighted average price derived from the four valuation methods, giving equal weight, is the indicative offer price for the shares of GMG Airlines Limited to be issued through the IPO under Book Building Method. Share Price based on Net Asset Value (NAVPS) PARTICULARS TAKA Share Capital as at 30.09.2010 Share Premium Reserve and Surplus Total Shareholders Equity Number of Ordinary Shares as at 30.09.2010 226,66,00,000 240,00,00,000 111,89,21,421 578,55,21,421 22,66,60,000 Net Asset Value Per Share 25.53 Earning Based Value Per Share (EBVPS) Financial Year 2006 2007 2008 2009 Annualized 2010 Average EPS Net Profit After Tax No. Of Share Earning Per Share 4,415,434 17,138,500 0.26 6,007,723 94,036,520 326,471,623 765,340,619 17,138,500 22,280,500 42,454,584 99,072,912 0.35 4.22 7.69 10.31 4.56 The restated average EPS stands at Tk. 4.56. If we consider the share price of the company on the basis of Price Earning multiple of 10 the earning based value of shares of the Company stands at Tk. 45.60. Information Memorandum 24 Issue Manager : Janata Capital and Investment Ltd. Share Price Based on PE Ratio of Similar Stocks (Service Sector) Name of the Company Face Value EPS One Year Average Market Price* PE (X) Samorita Hospitals Ltd. 100 27.77 1205.94 43.43 Eastern Housing Ltd. 100 18.28 1038.59 Summit Alliance Port Ltd. 10 3.66 220.67 Ocean Container Ltd. 10 3.39 177.19 United Air Ltd. 100 7.80 545.55 Total Average PE (X) 56.82 60.29 52.27 69.94 282.74 56.55 * December 2009- November 2010, Source : DSE Database Annualized EPS 10.31 Representative PE Multiple (X) 56.55 Fair Value = 10.31 X 56.55 = 583.03 Share Price Based on P/BV Ratio of Similar Stocks (Service Sector) Name of the Company Face Value EPS NAV One Year Average Market Price* P/BV Ratio Samorita Hospitals Ltd. 100 27.77 138.48 1205.94 8.71 Eastern Housing Ltd. 100 18.28 153.96 1038.59 6.75 Summit Alliance Port Ltd. 10 3.66 30.81 220.67 7.16 Ocean Container Ltd. 10 3.39 49.62 177.19 3.57 United Air Ltd. 100 7.80 102.59 545.55 5.32 Total 31.51 Average P/BV Ratio 6.30 * December 2009- November 2010, Source : DSE Database Net Asset Value Per Share Representative P/BV Multiple Fair Value = 25.53 = 6.30 = 160.84 Pricing under Book Building Method: Specific Value Weightage Weighted Value Net Asset Value Per Share (NAVPS) 25.53 25% 6.38 Earning Based Value Per Share (EBVPS) 45.60 25% 11.40 Share Price Based on PE Ratio of Similar Stocks (Service Sector) 583.03 25% 145.76 Share Price Based on P/BV Ratio of Similar Stocks (Service Sector) 160.84 25% 40.21 203.75 Therefore, from a conservative viewpoint, an Indicative Price of Tk 150 is recommended. Disclaimer: Estimates and projections herein are our own and are based on assumptions that we believe to be reasonable. Information presented herein, while obtained from sources we believe to be reliable, is not guaranteed either as to accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any security. As it acts for public companies from time to time, JCIL may have a relationship with the above-mentioned company(s). This report is intended for distribution in only those jurisdictions in which JCIL is registered. Redistribution of this report in any format, to any recipient other than initially intended by the Firm, is strictly prohibited. 25 Issuer : GMG AIRLINES LIMITED Book Building Method Book Building is a process through which an issuer attempts to determine the price to offer its security based on demand from institutional investors. Under the process, the price of an IPO share will be determined through an automated bidding to be participated by different financial institutions and then the share will be opened for the IPO participant at the cut-off price determined during the book building process. The bidding will be handled through a uniform and integrated automated system of the stock exchanges, or any other organization as decided by the Commission, especially developed for book building method. The entire procedure of price discovery under book building method is delineated below: a) The issuer/issue manager shall issue invitation to the eligible institutional investors, both in writing and through publication in at least 5 (five) widely circulated national dailies, giving at least 10 (ten) working days time, to the road show/ presentation/seminar indicating time and venue of such event. b) The invitation letter shall accompany an information document containing all relevant information covering the proposed issue of the issuer. The eligible institutional investors shall submit indicative price to the issuer/issue manager, signed jointly by the Chief Executive Officer (CEO) and the Financial Analyst, highlighting the factors taken into consideration in support of the indicative price, within the next 3(three) working days of the said road show/ presentation/seminar; c) The indicative price band will be fixed based on the past performance, expected future earnings of the issuer and the P/E ratio of other peer companies in the industry and the determination of indicative price involves the following institutional investors registered with or approved by SEC in this regard • • • • • • • • Merchant Bankers except the issue manager of the proposed issue Foreign institutional investors Recognized pension funds and provident funds Banks and NBFIs under regulatory control of Bangladesh Bank Insurance Companies regulated under Insurance Act, 1938 Institutional venture capital and institutional investors Stock Dealers Any other artificial juridical person permitted by the SEC for this purpose d) Issuer in association with issue manger and eligible institutional investors quote an indicative price in the prospectus with the rationale for such price and submit the prospectus to the Commission with copy to the stock exchanges. e) The indicative price range shall be determined as per price indications obtained from at least 15 (fifteen) eligible institutional investors covering at least 3 (three) different categories including at least 5 (five) merchant banks of such investors. Information Memorandum 26 f) Eligible institutional investors bidding shall commence after getting consent from the Commission for this purpose. Institutional bidding period will be 3 to 5 (Three to Five) working days which may be changed with the approval of the Commission. g) Eligible institutional investors (EIIs) shall not be allowed to participate in the bidding unless they participate and quote in the Road Show for setting the indicative price. The EII participating in the Road Show and quote price must also participate in the bidding. The issuer and issue manager will jointly submit the attendance sheet and the quoted price by the EII along with the draft prospectus to SEC. h) Prospectus will be posted on the Websites of the Commission, stock exchanges, issue manager and issuer at least 2 (two) weeks prior to the start of the bidding to facilitate investors to know about the company and all aspect of offering. i) The indicative price shall be the basis for formal price building with an upward and downward band of 20% (Twenty Percent) of indicative price within which eligible institutional investors shall bid for the allocated amount of security. j) If institutional quota is not cleared at 20% (Twenty Percent) below indicative price, the issue will be considered cancelled unless the floor price is further lowered within the face value of security. Provided that the issuer’s chance to lower the price shall not be more than once. k) No institutional investor shall be allowed to quote for more than 10% (Ten Percent) of the total security offered for sale, subject to maximum of 5 (Five) bids. l) The volume and value of bid at different prices will be displayed on the monitor of the said system without identifying the bidder. m) The institutional bidders will be allotted security on pro-rata basis at the weighted average price of the bids that would clear the total number of securities being issued to them. n) Institutional bidders shall deposit their bid with 20% (Twenty Percent) of the amount of bid in advance to the designated bank account and the rest amount to settle the dues against security to be issued to them shall be deposited within 5 (Five) working days prior to the date of opening subscription for general investors. o) In case of failure to deposit remaining amount that is required to be paid by institutional bidders for full settlement of the security to be issued in their favor, 50% (Fifty Percent) of bid money deposited by them shall be forfeited by the Commission. The securities earmarked for the bidder who defaulted in making payment shall be added to the general investor quota. p) The time gap between closure of bidding by Eligible Institutional Investors and subscription opening for general investors is 25 working days or as may be determined by the Commission. q) The securities will be offered to the general investors, NRBs and Mutual Funds at the cut-off price determined during the book building process. Issue Manager : Janata Capital and Investment Ltd. Market for Securities Being Offered The issuer shall apply to all the stock exchanges in Bangladesh within seven working days from the date of consent accorded by the Commission to issue prospectus. DECLARATION ABOUT THE LISTING OF SHARES WITH THE STOCK EXCHANGE(S) None of the stock exchange(s), if for any reason, grants listing within 75 days from the closure of subscription, any allotment in terms of this Prospectus shall be void and the Company shall refund the subscription money within fifteen days from the date of refusal for listing by the stock exchange(s), or from the date of expiry of the said 75 days, as the case may be. In case of non-refund of the subscription money within the aforesaid fifteen days, the Company’s Directors, in addition to the issuer company, shall be collectively and severally liable for refund of the subscription money, with interest at the rate of 2% (two percent) per month above the bank rate, to the subscribers concerned. The issue manager, in addition to the issuer company, shall ensure due compliance of the above mentioned conditions and shall submit compliance report thereon to the Securities and Exchange Commission within seven days of expiry of the aforesaid fifteen days time period allowed for refund of the subscription money. 27 Issuer : GMG AIRLINES LIMITED Description of Securities Outstanding or Being Offered Dividend, Voting and Preemption Right In case of any declaration of cash/stock dividend by the Company or distribution of any property of the Company, all the shareholders shall be entitled to it in proportion to their shareholdings on the date of the book closure or record date for the purpose. The Company will follow a dividend policy, which will allow it to provide a fair return on its shareholders’ investment and simultaneously allow for building up of the retained earnings and reserves as a rule that would sustain growth of the Company. The share capital of the Company is divided into Ordinary Shares, carrying equal rights to vote and receive dividend in terms of the relevant provisions of the Companies Act 1994 and the Articles of Information Memorandum 28 Association of the Company. All shareholders shall have the usual voting right in person or by proxy in connection with, among others, election of Directors and Auditor(s) and other usual agenda of General Meeting – Ordinary or Extra ordinary. On a show of hand, every shareholder present in person and every duly authorized representative of a shareholder present at a General Meeting shall have one vote and on a poll every shareholder present in person or by proxy shall have one vote for every share heldby him or her. In case of any additional issue of shares for raising further capital the existing shareholders shall be entitled to Rights Issue of shares in terms of the guidelines issued by the Securities and Exchange Commission from time to time. Issue Manager : Janata Capital and Investment Ltd. Conversion and Liquidation Right The Company in its General Meeting may convert paid-up shares to any denomination. No special preferences or privileges shall be attached to this conversion. If the company at any time issues Preference Shares or Debentures or Bonds with the consent of SEC, such holders of securities shall be entitled to convert such securities into ordinary shares if it is so determined by the company. In case of winding- up or liquidation of the Company, all shareholders have the same privileges and advantages as ordinary shareholder as regards participation in profits and voting at meetings of the Company. Right for Transfer In terms of the provisions of the Companies Act 1994, Articles of Association of the Company and other relevant rules in force, the shares of the Company are transferable. The Company shall not charge any fee other than Government duties for registering transfer of shares. No shares shall be transferred to an infant or a person of unsound mind. Dividend Policy I. The profits of the Company, subject to any special right relating thereto created or authorized to be created by the Memorandum of Association and subject to the provision of the Articles of Association, shall be divisible among the members in proportion to the amount of capital paid -up on the shares held by them respectively. II. No larger dividend shall be declared than is recommended by the directors, but the Company in its General meeting may declare a smaller dividend. If preference share dividend is not paid in one year, such unpaid dividend shall be carried forward to the next year or years; and become cumulative. III. The declaration of directors as to the amount of net profit of the company shall be conclusive. profits and general reserves. Dividend shall not carry interest as against the Company. V. The Directors may from time to time pay off the members such interim dividend as appear to the Directors to be justified by the profits of the Company. VI. A transfer of shares shall not pass the right to any dividend declared thereon after such transfer and before the registration of the transfer. VII.There is no limitation on the payment of dividends to the common stockholders. Other Rights of Shareholders The shareholders shall have the right to receive all periodic reports and statements, audited as well as unaudited, published by the company from time to time. The directors shall present the financial statements as required under the law and International Accounting Standards and International Financial Reporting Standards as adopted by the Institute of Chartered Accountants of Bangladesh. Financial statements will be prepared in accordance with International Financial Reporting/Accounting Standards, consistently applied throughout the subsequent periods and present with the objective of providing maximum disclosure as per law and international Financial Reporting/Accounting Standard to the shareholders regarding the Financial and operational position of the company. In case of any declaration of stock dividend through issue of Bonus Shares, all shareholders shall be entitled to it in proportion to their shareholdings on the date of book closure or record date for the purpose. The shareholders holding not less than 10% of the issued/fully paid up capital of the Company shall have the right to requisition Extra-Ordinary General Meeting (EGM) of the Company as provided under Section 84 of the Companies Act, 1994. IV. No dividends shall be paid otherwise than out of the profits of the year or any other undistributed 29 Issuer : GMG AIRLINES LIMITED Availability of Securities Particulars Number of Shares 30% of IPO of Ordinary Shares is reserved for Eligible Institutional Investors through Book Building Method 18,000,000 10% of IPO of Ordinary Shares is reserved for Mutual Funds 6,000,000 10% of IPO of Ordinary Shares is reserved for Non-Resident Bangladeshis (NRB) Remaining 50% of IPO of Ordinary Shares is reserved for General Public Total 60,000,000 1) 20% of the total public o?ering shall be reserved for the Eligible Institutional Investors (EII), 10% shall be reserved for mutual funds, 10% for non-resident Bangladeshi (NRB) and the remaining 60% shall be open for subscription by the general public. 2) The Institutional Investors will be allotted security on a pro-rata basis at the weighted average price of the bids that would clear the total number of securities being o?ered to the Institutional investors. 3) The securities o?ered to the Mutual Funds, NRBs and General Public would be at the cut-o? price determined during the Book Building Process. 4) In case of over-subscription under any of the categories mentioned in the above table, the Issue Manger shall conduct an open lottery of all the applications received under each category separately in accordance with the letter of consent issued by the Securities and Exchange Commission. 5) In case of under-subscription under any of Mutual Funds or NRB category as mentioned in the above table, the unsubscribed portion shall be added to the general public category, and, if after such addition there is oversubscription in the general public category the issuer and the issue manager shall jointly conduct an open lottery of all the applicants added together. 6) In case of under-subscription of the public o?ering, the unsubscribed portion of shares shall be taken up by the underwriter(s). 7) The lottery as stated in clause (5) and (6) should be conducted in the presence of the representatives of Issuer, stock exchange(s) and the applicants, if there be any. Information Memorandum 30 6,000,000 30,000,000 Issue Manager : Janata Capital and Investment Ltd. Corporate Directory GMG Airlines Limited Registered Office: ABC House (9th Floor) 8 Kamal Ataturk Avenue Banani C/A, Dhaka - 1213 Plot no. 1 & 3,, Road 21, Nikunja - 2, Dhaka - 1229 Tel: +88-02-8922248, 8924274, Fax: +88-02-8924390 Email: [email protected], Website: www.gmgairlines.com Auditor: S. F. Ahmed & Co Chartered Accountants House 25, Road 13A, Block D, Banani, Dhaka 1213 Legal Advisor: The Legal Minds Barristers, Advocates & Associates House No. 44, Road 3/A, Dhanmondi R/A, Dhaka - 1209 Manager to the Issue: Janata Capital & Investment Limited 57 Purana Paltan, Dhaka-1000 Phone: 88 (02) 7176421, 7176720 Fax: 88 (02) 7110496 E-mail: [email protected] Registrar to the Issue: BANCO FINANCE & INVESTMENT LIMITED ISPAHANI BUILDING (3RD FLOOR) 14-15 MOTIJHEEL C/A, DHAKA-1000 Shahab Sattar Managing Director GMG Airlines Limited 31 Issuer : GMG AIRLINES LIMITED Financials Information Memorandum 32 Issue Manager : Janata Capital and Investment Ltd. Auditors’ Report To the Shareholders of GMG AIRLINES LIMITED We have audited the accompanying Balance Sheet of GMG Airlines Limited as at 30 September 2010 and the related Income Statement, Cash Flow Statement and Statement of Changes in Equity for the year then ended along with Notes thereto. The preparation of these Financial Statements is the responsibility of the company’s management. Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by the management as well as evaluating the overall presentation of the Financial Statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Financial Statements, prepared in accordance with Bangladesh Accounting Standard (BAS), give a true and fair view of the state of the company’s affairs as of 30 September 2010 and of the results of its operations and its Cash Flow for the year then ended and comply with the Companies Act, 1994 and other applicable laws and regulations. We also report that: (a) 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; (b) 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 those books; and (c) the company’s Balance Sheet, Income Statement and Cash Flow Statement dealt with by the report are in agreement with the books of account. (d) the expenditure incurred was for the purpose of the company’s business. Dated, Dhaka; 01 November, 2010 S. F. Ahmed & Co. Chartered Accountants 35 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Balance Sheet as at 30 September 2010 Amount in Taka Notes 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 SOURCES OF FUND Shareholders’ fund: 5,785,521,421 1,333,580,801 Share capital Share premium account Share money deposit Reserve & surplus 3 4 5 6 2,266,600,000 2,400,000,000 - 1,118,921,421 600,000,000 380,000,000 353,580,801 Long Term fund: 423,407,401 716,681,850 Secured Long-term loans net off current maturity 7 422,457,253 716,026,704 Unsecured Security deposit from travel agencies 8 950,148 655,146 Total: 6,208,928,822 2,050,262,651 9 10 2,997,542,481 1,875,607,729 2,388,431,659 317,068,639 APPLICATIONS OF FUND Long -term Assets: Fixed assets at cost less accumulated depreciation Intangible assets 4,873,150,210 2,705,500,297 11 12 13 14 713,076,606 896,590,252 796,820,173 211,783,413 462,063,132 547,212,336 493,400,763 30,446,273 Current liabilities & provisions: 1,282,491,832 2,188,360,150 Short term loans 15 Accounts & other payables 16 Provision for taxation 110,964,704 663,733,859 507,793,270 1,257,896,577 881,874,048 48,589,525 Net current Assets 1,335,778,612 (655,237,647) Total: 6,208,928,822 2,050,262,651 25.53 15.89 Stores and spares Accounts & other receivables Advances, deposits & prepayments Cash in hand & bank balances Net Asset Value Per Share (NAVPS) 17 The accompanying notes form an integral part of this financial statement and are to be read in conjunction therewith. Chairman GMG Airlines Limited Director (F&A) GMG Airlines Limited Managing Director GMG Airlines Limited Signed in terms of our report of even date. Dated, Dhaka; 01 November, 2010 36 S. F. Ahmed & Co. Chartered Accountantsants Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Income Statement for the nine month’s from 01 January 2010 to 30 September, 2010 Notes Amount in Taka 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 3,896,639,971 2,908,066,425 Operating revenue 18 Less: Operating expenses 19 2,468,272,098 2,261,025,238 Gross operating profit/(loss) 1,428,367,873 647,041,187 20 189,748,363 253,214,016 Preliminary expenses written off 5,723,365 7,631,160 Amortization of deferred revenue expenses 8,351,154 11,134,863 Less: Financial expenses 203,822,882 271,980,039 Net operating profit /(loss) before tax 1,224,544,991 375,061,148 Less: Provision for tax 459,204,372 48,589,525 Net operating profit after tax 765,340,619 326,471,623 Accumulated profit brought forward 23,385,362 (303,086,261) Profit carried forward to Balance Sheet 788,725,981 23,385,362 7.73 7.69 Earning Per Share (EPS) for the period 21 The accompanying notes form an integral part of this financial statement and are to be read in conjunction therewith. Chairman GMG Airlines Limited Director (F&A) GMG Airlines Limited Managing Director GMG Airlines Limited Signed in terms of our report of even date. Dated, Dhaka; 01 November, 2010 S. F. Ahmed & Co. Chartered Accountantsants 37 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Statement of Changes in Equity for the nine month’s from 01 January 2010 to 30 September, 2010 Amount in Taka Particulars Share Capital Share Premium Share Money Account Deposit Revaluation Surplus Retained Earnings Total Equity 600,000,000 - 380,000,000 330,195,439 23,385,362 1,333,580,801 - - - - 765,340,619 765,340,620 1,286,600,000 - - - - 1,286,600,000 Balance as on 01 January 2010 Net profit/ (loss) for the year Issue of shares Share money deposit transfer 380,000,000 - - - - 2,400,000,000 - - - 2,400,000,000 Balance as at 30 September2010 2,266,600,000 2,400,000,000 - 330,195,439 788,725,981 5,785,521,421 Share premium Chairman GMG Airlines Limited - (380,000,000) Director (F&A) GMG Airlines Limited Managing Director GMG Airlines Limited Signed in terms of our report of even date. Dated, Dhaka; 01 November, 2010 38 S. F. Ahmed & Co. Chartered Accountantsants Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Cash Flow Statement for the nine month’s from 01 January 2010 to 30 September, 2010 Amount in Taka 9 month’s ended Year ended 30 Sept’ 2010 31 Dec’ 2009 A. Cash from Operating Activities : Operating revenues Operating expenses Net cash inflow from operation Financial expenses Net Cash used by Operating Activities (A): 3,896,639,971 (3,403,940,355) 492,699,616 (189,748,363) 302,951,253 2,908,066,425 (2,645,270,536) 262,795,889 (268,964,016) (6,168,127) B. Cash from Investing Activities : Acquisition of fixed assets Deferred expenses for C-Check Net Cash used by Investing Activities (B): (794,300,681) (1,573,707,109) (2,368,007,790) (861,163,099) (39,002,509) (900,165,608) C. Cash from Financing Activities: Issue of shares including premium Long term loan ( repaid)/ received Security deposit from /( refunded to) travel agency Short term loan (repaid)/ received 3,686,600,000 (293,569,451) 295,002 (1,146,931,874) 680,000,000 284,443,839 (37,020,197) (25,861,558) 2,246,393,678 901,562,084 Net Cash used by Financing Activities (C): Net Increase/ (Decrease )in Cash & Cash Equivalents (A+B+C): 181,337,140 (4,771,651) Opening Cash & Cash Equivalents 30,446,273 35,217,924 Closing Cash & Cash Equivalents 211,783,413 30,446,273 4.97 6.19 Operating Cash Flow Per Share ( OCFPS) Chairman GMG Airlines Limited Director (F&A) GMG Airlines Limited Managing Director GMG Airlines Limited Signed in terms of our report of even date. Dated, Dhaka; 01 November, 2010 S. F. Ahmed & Co. Chartered Accountantsants 39 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 1 Background, Legal Status and Nature of the Company: 1.1 Background and legal status GMG Airlines Ltd., was established as a private company, limited by shares, under the Companies Act, 1994 (Act XVIII of 1994) to carry on the business of Air Transport Services including Passenger, Cargo, Mail, Air Ambulance, Charter, Ferrying, Rescue Evacuation and Training of Pilots, Technicians, Engineers, Ground Handling (own & third party) handling of Ground Support Equipment etc. and started operation initially under the Air Transport Operating License No. 8 issued by the Civil Aviation Authority, Bangladesh, on 6th May 1998 for a period of one year subsequently renewable every year. Afterwards on 10th January 2004, the Civil Aviation Authority, Bangladesh, issued License No. 24 to start operation on international routes. The company has been converted into a Public Limited Company effective on 11 April 2010. On 6`h of April 1998, GMG Airlines first took to the skies with a slogan “First Class All the Way” and since then has been providing committed services. The GMG-fleet is equipped now with 3 (three) modern state of the art DASH 8 series aircrafts manufactured by Bombardier of Canada; 3 (three) MD82/83 aircrafts manufactured by McDonnell Douglas, a subsidiary of the Boeing Company of USA; and 01 (one) B-767-300 3Q8ER aircraft manufactured by the Boeing Company. The Company has presently 04 (four) domestic and 08 (eight) international destinations. 1.2 Nature of Business The principal activities of the company are to provide all kinds of airlines services to customers at home and abroad. 2 Basis of preparation 2.1 Basis of Accounting The financial statements have been prepared on a going concern basis under historical cost convention on accrual basis and in accordance with Generally Accepted Accounting Principles (GAAP). The accounting polices have been consistently followed. 2.2 Basis of Preparation and Presentation of the Financial Statements: The financial statements have been prepared and the disclosures of information therein have been made in accordance with the requirements of Bangladesh Accounting Standard (BAS) as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB) and the Companies Act, 1994 (as amended) and other the applicable laws, rules and regulations. 2.3 Significant Accounting Policies 2.3.1 Principle Accounting Policies Specific accounting policies were selected and applied by the company’s management for significant transactions and events that have material effect within the framework of BAS-1: ‘Preparation of Financial Statements’ in preparation and presentation of financial statements. The previous period’s figure was presented according to the same accounting principles. 2.3.2 Basis of Measurement The financial statements have been prepared using the Historical Cost basis. 2.3.3 Statement of Compliance The financial statements of the company under reporting have been prepared under historical cost convention in a going concern concept and on accrual basis in accordance with generally accepted accounting principles and practice in Bangladesh in compliance with the Companies Act 1994, The Securities and Exchange Rules 1987, The Listing Regulations of Dhaka Stock Exchange Ltd. (DSE) and Chittagong Stock Exchange (CSE), International Accounting Standards (IAS), as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB), as Bangladesh Accounting Standards (BAS) and other applicable laws and regulations. 2.3.4 Responsibility for Preparation and Presentation of Financial Statements The Board of Directors is responsible for preparation and presentation of Financial Statements under the section 183 of the Companies Act 1994 and as per the provision of ‘The Framework for the Preparation and Presentation of Financial Statements’ issued by the International Accounting Standards Board (IASB). 2.3.5 Date of Authorization The Board of Director of GMG Airlines Ltd. has approved these financial statements on 18th October, 2010 for preparation of the prospectus and include in the said prospectus in order to submit the prospectus and Audited Financial Statements to The Securities and Exchange Commission (SEC) for public issue of shares of the Company. 2.3.6 Reporting currency and level of precision 40 Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 The figures in the financial statements represent Bangladeshi Taka, which have been rounded off to the nearest taka except where indicated otherwise & Figures of the year 2009 have been rearranged whenever considered necessary to ensure comparability with the current period. 2.3.7 Reporting Period The financial period of the company covers the period from 01 January to 30 September 2010 (nine month’s). 2.4 Fixed Assets and Depreciation a) Fixed assets are stated at cost or valuation less accumulated depreciation. Depreciation has been charged on acquisition following “reducing balance method” at the applicable rates and no depreciation has been charged on the addition during the financial year irrespective of the date of purchase. b) The applicable rates of depreciation for each type/category of assets are as follows: i) ii) iii) iv) Building & Constructions, Vehicles Aircraft Tools, Electrical Equipment, Renovations & Decoration, Office Equipment, Ground Support Equipment, Hi-Lift & Engine Technical Manual, Computer Reservation System, Furniture & Fixture, Crockeries & Cutleries Aircraft 20% 15% 10% 4% c) The air crafts, engines, lifts and handling equipment acquired on “finance lease” basis, have been capitalized rather than, charging depreciation and interest, instead of “lease rental”. d) Re- valuation performed by M/s. Cabot Aviation Service Ltd., an International Firm specializes in aircraft remarketing, at current cost of the two aircrafts of GMG at 31 December 2008 valued at USD 14,663,952 (Taka 1,000,200,000), resulted in a revaluation surplus of Tk. 330,195,439 and transferred to the equity as per provision of BAS-16. 2.5 Intangible Assets Preliminary expenses, deferred revenue expenses and deferred lease rent, deferred expenses for C-Check are written off @ 10% based on actual hours flown after C- Check incurred for long-term benefit on each year. 2.6 Inventory In compliance with the requirement of BAS–2 “Inventories”, inventories are stated at the lower of cost and net realizable value. Cost is determined on a normal average basis for consumable stores, Aircraft spares (Rotable Items) and Catering items. Cost comprises the aggregate of purchase price plus other related expenses incurred to bring the inventories to their present condition and locations. 2.7 Disposal of Fixed Assets An asset is recognized on disposal when no future economic benefits are expected from its use and subsequent disposal. Gain or loss arising from the retirement or disposal of an asset is determined as the difference between the net disposal proceeds and the carrying amount of the assets and is recognized as gain or loss from disposal of assets under other income in the profit & loss account. 2.8 Cash and Cash Equivalents: Cash and Cash equivalents include cash in hand and cash at bank, which are held and available for use by the company without any restriction. There is insignificant risk of changes in value of these current assets. 41 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 2.9 Impairment In accordance with the provision of “BAS-36” Impairment of assets, the carrying amount of non financial assets other than Inventories are reviewed to determine whether there is any indication of impairment. No such indication of impairment has been raised till the date of our audit. 2.10 Revenue Recognition Sales of passenger tickets are recognized based on operating revenue after these are availed off/ flown away by the passengers within the period of their validity or on the average basis where validity of such tickets has expired. Tickets sold but remaining unused represents a liability and are shown as provision for unavailed tickets or unearned revenue. Other operating revenues represent the invoice value of the services rendered net of rebate, if any. 2.11 Cash Flow Statement: The Statement of Cash Flow is prepared principally in accordance with the requirements of BAS- 7 “Cash Flow Statement” under direct method as required by the Securities and Exchange Rules, 1987 and considering the provisions that “Enterprises are encourage to report cash flow from operating activities using the direct method.” 2.12 Basic Earning Per Share (EPS): Earning per Share (EPS) is calculated in accordance with Bangladesh Accounting Standard BAS-33 “ Earning per share” by dividing the basic earning by weighted average number of ordinary shares that remained outstanding during the year. Since there was no factor & scope to determine the diluted EPS, only basic EPS has been disclosed in the Income Statement. Basic of Earning Per Share Earning Per Share (EPS) has been calculated by dividing the earning attributable to the number of ordinary shares held by the members during the year period under audit. 2.13 Commission The company management charged commission as revenue expenditure against the sale of tickets from different agents as per formal agreement with them varying from 4% to 9% based on the relationship which is renewable in each year. 2.14 Employee Benefits The company has not introduced any employees benefit plan as per BAS-19 “Employee’s benefits”. 2.15 Borrowing Cost Financial expenses (Borrowing Costs) incurred during the year was recognized as revenue expenses in accordance with BAS -33 “Borrowing Cost”. 2.16 Provision for taxation Current taxation Provision for current income tax has been made @ 37.5% as prescribed in the Finance Act, 2010 on the accounting profit made as per income tax law incompliance with BAS-12 “Income Taxes”. Deferred taxation The Company is not required to recognize any deferred tax assets and liabilities as per BAS-12 “Income Taxes”. 2.17 Components of the Financial Statements 42 According to the Bangladesh Accounting Standard BAS-1 ‘Presentation of Financial Statements’ the complete set of Financial Statements includes the following components: a) b) c) d) e) Balance Sheet as at 30th September 2010. Profit and Loss Account for the nine month’s from 1st January 2010 to 30th September 2010. Statement of Changes in Equity for the same period. Cash Flow Statement for the same period. Accounting policies and explanatory notes. Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 2.18 Risk and uncertainties for use of estimates in preparation of financial statement The preparation of financial statements in conformity with the International Accounting Standards require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of affecting financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Estimates are used for accounting of certain items such as long term contracts, depreciation and employees benefit plans, taxes, reserves and contingencies. 2.19 Provision The preparation of financial statements in conformity with the Bangladesh Accounting Standards BAS-37 ‘Provisions, Contingent Liabilities and Contingent Assets’ require management to make estimates and assumption that affect the reported amounts of revenues and expenses, assets and liabilities, and the disclosures requirements for contingent assets and liabilities during and at the date of the financial statements. In accordance with the guidelines prescribed by BAS-37 provisions were recognised in the following situations: • When the company has a present obligation as a result of past event • When it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • Reliable estimates can be made of the amount of the obligation. We have shown the provision in the balance sheet at an appropriate level with regard to an adequate provision for risk and uncertainties. An amount recorded as a provision represents the best estimate of the probable expenditure required to fulfil the current obligation on the balance sheet date. 2.20 Creditors and Accruals Liabilities are recognised for amounts to be paid in the future for aviation services received, whether or not billed by the supplier. 2.21 Foreign Currency Translation Translations in foreign currencies are translated into Bangladeshi taka at the exchange rate prevailing on the date of transactions in accordance with BAS-21 ‘The effect of changes in foreign currencies rate’. Bank deposit in foreign currency has been translated into taka at the period end at the rate of exchange ruling on the date. 2.22 Compliance with local laws The financial statements have been prepared in compliance with the requirements of the Companies Act, 1994, Securities and Exchange Rules, 1987 and other relevant local laws and rules. 2.23 Related Party Disclosure Related party is considered if the party is related to the company and exert significant influence over the day to day transactions of the subject gain as per BAS-24. 2.24 Comparative Information Financial statements are presented as per BAS-1 “Presentation of Financial Statements” and previous year’s figures have been rounded of due to changes in some accounting policies as per BAS-8 “Accounting Policies, Changes in Accounting Estimates and Errors”. 43 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 2.25 Compliance of Bangladesh Accounting Standards (BAS) transformed into Bangladesh Financial Reporting Standards (BFRS): Title of BAS Presentation of Financial Statements Inventories Statement of Cash Flows Accounting Policies, Changes in Accounting Estimates and Errors Events after the Reporting Period Construction Contracts Income Taxes Segment Reporting Property, Plant and Equipments Leases Revenue Employee Benefits Accounting for Govt. Grants and disclosures of Govt. Assistances The Effects of Changes in Foreign Exchange Rates Borrowing Costs Related Party Disclosures Consolidated and Separate Financial Statements Investments in Associates Disclosures in Financial Statements of Banks and Similar Financial Institutions Interests in Joint Ventures Earnings Per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Investment Property BAS No. Status 1 2 7 8 10 11 12 14 16 17 18 19 20 21 23 24 27 28 30 31 33 34 36 37 38 40 Applied Applied Applied Applied Applied N/A Applied N/A Applied Applied Applied Applied N/A Applied Applied Applied N/A N/A N/A N/A Applied Applied Applied Applied Applied N/A 2.26 Brand Value 44 The Company did not incorporate in the accounts the potential value of its brand “GMG Airlines” (i.e., Strategic Brand Value) estimated at Tk. 10,454,674,938 by Brand Finance (India) Pvt. Ltd., a subsidiary of Brand Finance PLC, United Kingdom. Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 3 Amount in Taka 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 2,266,600,000 600,000,000 5,000,000,000 1,500,000,000 2,266,600,000 600,000,000 Percentage Amount in Taka Amount in Taka 5.15 5.16 0.00 0.00 13.23 76.46 - - 116,680,310 116,926,230 10,000 10,000 299,980,000 1,732,993,460 - - 100 2,266,600,000 600,000,000 Share premium account: 2,400,000,000 - - 380,000,000 Share Capital: 3.1 Authorised The authorised share capital of the company is Taka 5,000,000,000 (2009: Taka 1,500,000,000) divided into 500,000,000 (2009:150,000,000) shares of Tk. 10 each 3.2 Issued, subscribed & paid-up capital 4 226,660,000(2009:60,000,000) Ordinary shares of Taka 10 each (Restated) Details of Shares Holding position are as under: Name of Shareholders Mr. Abdus Sattar Mr. Shahab Sattar Mr. A S F Rahman Mr. Salman F Rahman Bangladesh Export Import Co. Ltd. General Public & Institutions Mr. Saleem Sattar Mrs. V.A. Sattar Total: 135,297,100 135,295,400 - 300,000,000 29,057,400 350,100 This represents share premium on 60,000,000 shares at Tk. 40 each. 5 Share money deposit: 6 Reserve & surplus: 1,118,921,421 353,580,801 Revaluation surplus (Note-6.1) Retained earnings (Note- 6.2) 330,195,439 788,725,982 330,195,439 23,385,362 1,118,921,421 353,580,801 6.1 Revaluation surplus: 330,195,439 330,195,439 The detail break up is as follows: Aircraft-ADX Aircraft-AAA 216,136,601 114,058,838 216,136,601 114,058,838 330,195,439 330,195,439 Share money deposit has been transfered to share capital during this period. Re-valuation by M/s. Cabot Aviation Service Ltd., an International Firm who specializes in aircraft remarketing, at current cost of the two aircrafts of GMG at 31 December 2008 at USD 14,663,952 (Taka 1,000,200,000), resulted in a revaluation surplus of Tk. 330,195,439. 45 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 6.2 Retained earnings: 788,725,982 23,385,362 (45,923,034) (18,504,355) (31,165,130) (51,838,903) (75,264,401) (71,702,143) (58,144,749) (55,003,223) 4,415,434 6,007,723 94,036,520 326,471,623 765,340,619 (45,923,034) (18,504,355) (31,165,130) (51,838,903) (75,264,401) (71,702,143) (58,144,749) (55,003,223) 4,415,434 6,007,723 94,036,520 326,471,623 - 788,725,982 23,385,362 422,457,253 716,026,704 - 433,659,140 74,122,978 16,269,609 352,103,515 489,180,649 94,990,236 24,996,001 524,051,727 961,270,401 - 62,328,865 32,937,084 6,328,525 114,228,000 75,490,118 47,820,876 7,704,703 101,594,474 245,243,697 422,457,253 716,026,704 950,148 655,146 The movement of the above balance is given below: Opening balance as on 01.01.10 Add: Additions during the period Less: Adjustment made during the period 655,146 339,918 995,064 44,916 37,675,343 11,700,001 49,375,344 48,720,198 950,148 655,146 The above balance is made-up as follows: Particulars Loss- 1998 Loss- 1999 Loss- 2000 Loss- 2001 Loss- 2002 Loss- 2003 Loss- 2004 Loss- 2005 Profit-2006 Profit-2007 Profit-2008 Profit-2009 Profit Sept-2010 7 Long-term loan: The above balance is made-up as follows : Sonali Bank Ltd. Term Loan A/C Payable for Lease Finance-ADX Payable for Lease Finance-AAA Payable for Lease Finance-Hi-lift & Engine Less: Current maturity Payable for Sonali Bank Term Loan (Note-15) Payable for Lease Finance-ADX (Note-15) Payable for Lease Finance-AAA (Note-15) Payable for Lease Finance-Hi-lift & Engine (Note-15) 8 46 Amount in Taka Security deposit from travel agencies: Closing balance as on 30.09.10 Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 9 Fixed Assets: Taka: 2,997,542,481 SI. Particulars CostDepreciation Cost as on Addition Cost as on Depreciation Rate Charged Total 01.01.10 30.09.10 as on 01.01.10 % during the year Depreciation As on 30.09.10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Building & Construction Aircraft Tools& equipment Electrical Equipment Renovation & Decoration Technical Manual Computer Reservation System Office Equipment Vehicle Furniture& Fixtures Crockeries & Cutleries Ground Support Equipment Aircraft-AAA Aircraft-ADX Aircraft-ADO Hi-Lift& Engine Total: 30.09.2010 Total: 31.12.2009 6,525,81 7 682,179,546 6,239,683 36,284,199 14,736,019 31,273,344 33,393,550 22,749,091 16,326,236 3,703,917 655,317,672 288,476,642 738,000,000 40,600,000 88,552,482 2,664,358,197 1,803,195,098 102,744 6,628,561 400,147,921 1,082,327,467 69,780 6,309,463 5,807,959 42,092,158 6,277,344 21,013,363 52,075,269 83,348,613 11,982,190 45,375,740 3,509,600 26,258,691 496,293 16,822,529 685,661 4,389,578 267,775,421 923,093,093 - 288,476,642 - 738,000,000 45,370,500 85,970,500 - 88,552,482 794,300,681 3,458,658,879 861,163,099 2,664,358,197 5,616,270 20 54,402,150 15 4,599,584 15 15,876,869 15 5,395,746 10 12,315,104 10 15,958,074 15 9,189,293 20 7,985,621 10 717,369 10 38,635,398 15 36,764,642 4 29,520,000 4 - 4 38,950,419 15 275,926,539 136,610,590 136,432 70,624,957 184,511 2,295,825 700,520 1,421,868 1,961,491 2,033,970 625,546 223,991 69,376,756 7,551,360 21,254,400 1,218,000 5,580,232 185,189,859 139,315,949 Written down Value on 30.09.10 5,752,702 875,859 125,027,107 957,300,360 4,784,095 1,525,368 18,172,694 23,919,464 6,096,266 14,917,097 13,736,972 69,611,641 17,919,565 27,456,175 11,223,263 15,035,428 8,611,167 8,211,362 941,360 3,448,218 108,012,154 815,080,939 44,316,002 244,160,640 50,774,400 687,225,600 1,218,000 84,752,500 44,530,651 44,021,831 461,116,398 2,997,542,481 275,926,539 2,388,431,659 Note: Aircraft-ADO converted from operating lease to Finance lease during last year and no depreciation was charged on addition as per our accounting policy. Depreciation charged for 9 months during the period of Jan-Sep’10 on written down value of last year. 47 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 10 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 1,875,607,729 317,068,639 90,407,670 1,669,184,779 75,951,750 40,063,530 93,694,074 95,477,670 82,110,000 45,786,895 1,875,607,729 317,068,639 10.1 Deferred revenue expenses: 90,407,670 93,694,074 93,694,074 6,246,000 89,078,936 15,750,000 99,940,074 104,828,936 9,532,404 90,407,670 11,134,862 93,694,074 10.2 Deferred expenses for C-check: 1,669,184,779 95,477,670 95,477,670 1,596,164,185 56,475,161 49,720,502 1,691,641,855 106,195,663 Less: Charged during the period Closing balance as on 30.09.10 22,457,076 1,669,184,779 10,717,993 95,477,670 10.3 Deferred expenses for lease rent 75,951,750 82110000 82,110,000 6,158,250 75,951,750 82,110,000 82,110,000 10.4 Preliminary expenses 40,063,530 45,786,895 Opening balance as on 01.01.10 less : Written off during the period 45,786,895 5,723,365 53,418,055 7,631,160 Closing balance as on 30.09.10 40,063,530 45,786,895 713,076,606 462,063,132 708,540,086 4,064,940 471,580 456,992,579 4,064,939 1,005,614 713,076,606 462,063,132 Intangible assets: Deferred revenue expenses (Note-10.1) Deferred expenses for C-Check (Note-10.2) Deferred expenses for Lease Rent (Note-10.3) Preliminary expenses (Note-10.4) Opening balance as on 01.01.10 Add: Addition during the period 11 48 Less : Written off during the period Closing balance as on 30.09.10 Opening balance as on 01.01.10 Add: Addition during the period Opening balance as on 01.01.10 Less : Written off during the period Closing balance as on 30.09.10 Stores and spares: The above balance is made-up as follows: i) Spare Parts Inventory iii) Stock of Air Tickets iii) Catering Stock Amount in Taka The Company has carried out detail verification & inventory of stores and spares as at 30 September 2010 in order to determine the physical existence of those consumable assets. Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 12 Accounts & other receivables: Accounts receivable Other receivable Amount in Taka 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 896,590,252 794,762,700 101,827,552 547,212,336 547,212,336 - 896,590,252 547,212,336 These are considered good and appear fully realizable. No amount was written off as bad debts and no debt was considered doubtful of recovery as explained by the management. 13 Advances, deposits & pre-payments: The movement of the above balance is given below: Opening balance as on 01.01.10 Add: Addition during the period 796,820,173 493,400,763 493,400,763 303,419,410 203,760,380 775,890,920 796,820,173 982,355,923 Less: Adjustment made during the period Closing balance as on 30.09.10 - 796,820,173 486,250,537 493,400,763 211,783,413 30,446,273 55,937,617 155,845,796 8,222,263 22,224,010 211,783,413 30,446,273 14 Cash in hand & bank balances: The above balance is made up as follows: Cash in hand Cash at banks Detailed break-up of cash in hand and bank balances are given in Annexure-A/1 & Annexure-A/2 attached herewith the report. 15 Short-term loans: Sonali Bank Ltd. O/D A/C Sonali Bank Ltd. CC-Hypo Dhaka Bank Ltd. loan O/D A/C Habib Bank Ltd. O/D A/C Standard Bank Ltd. Dhaka Bank Ltd. Term loan A/C Long-term loan (current portion) : Sonali Bank Term Loan (Note-7) Payable for Lease Finance-ADX-Current Maturity (Note-7) Payable for Lease Finance-AAA-Current Maturity (Note-7) Payable for Lease Finance-Hi-lift & Engine (Note-7) 110,964,704 1,257,896,577 - - - - 9,370,230 - 664,383,683 31,107,012 185,563,019 23,070,232 18,715,425 89,813,509 - 62,328,865 32,937,084 6,328,525 114,228,000 75,490,118 47,820,876 7,704,703 110,964,704 1,257,896,577 Secured overdraft availed by the Company from Sonali Bank Ltd. , Local Office, Dhaka for a period of one year ended on 31 December 2009 which was subsequently renewed for next one year to 31 December 2010. 49 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 16 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 663,733,859 881,874,048 94,120,106 12,141,655 26,216,375 12,670,119 37,633,914 (14,608,764) 108,187,818 188,546,633 79,376,186 24,088,034 34,568,793 23,070,138 3,435,812 1,024,993 33,262,047 65,296,926 12,874,235 121,293,510 14,142,936 26,501,923 102,490,284 174,841,800 80,128,216 10,166,357 11,695,282 6,905,907 3,306,715 252,229,956 663,733,859 881,874,048 25.53 15.89 5,785,521,421 226,660,000 953,580,801 60,000,000 25.53 15.89 Operating revenue: 3,896,639,971 2,908,066,425 Passenger Mail, EBT & Cargo Handling 3,774,713,613 121,926,358 2,791,546,871 116,519,554 3,896,639,971 2,908,066,425 2,468,272,098 2,261,025,238 1,353,042,608 614,548,472 191,250,057 309,430,961 1,275,771,969 468,363,590 291,905,380 224,984,299 2,468,272,098 2,261,025,238 Accounts & other payables The above balance is made up as follows: i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) xiii) xiiii) xv) For Local services For Local goods For Foreign services For Foreign goods For Oil Companies Insurance & fuel surcharges Embarkation fee, WO/PSF tax Departure travel tax Insurance premium Tax payable- employees & others IATA Clearing House Unearned revenue VISA charges BSP commission ORC Others 17 Net assets value per share (NAVPS) The computation of NAVPS is given below: Total Equity Total no. of Shares 18 19 Operating expenses : Direct expenses 19.1 Fixed expenses 19.2 Marketing expenses 19.3 Administrative & financial expenses 19.4 50 Amount in Taka Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 19.1 Direct expenses: Aircraft fuel GSE fuel In-flight services Landing, parking & security Consumption & maintenance Supplementary rent Aircraft engine rent “C” Check expenses Pax carrying cost Hotac & training Engineering & procurement department expenses Operation department expenses Ground service, cargo & security department expenses Ground & cargo handling charges Amount in Taka 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 1,353,042,608 1,275,771,969 804,319,274 2,480,722 56,776,767 102,551,825 102,835,451 89,440,043 34,313,659 38,647,685 18,413,776 30,046,534 9,098,082 20,191,416 7,770,924 36,156,450 707,861,717 67,679,293 161,843,444 46,824,608 129,023,321 27,161,399 10,244,471 30,058,615 16,862,399 6,596,263 5,945,885 11,137,716 54,532,840 1,353,042,608 1,275,771,969 19.2 Fixed expenses: 614,548,472 468,363,590 Aircraft lease rent Foreign expatriate salary Salary for ops, engg., procurement and GS & S. service Insurance for aircraft Airport office rent 214,873,386 145,609,630 94,066,437 153,272,542 6,726,477 189,239,960 47,556,602 88,341,160 132,778,288 10,447,580 614,548,472 468,363,590 191,250,057 291,905,380 11,247,746 179,256 26,700,197 64,650,930 58,492,476 17,766,885 - 10,628 12,201,939 1,387,663 2,611,086 22,397,407 103,172,426 145,096,967 8,135,355 13,620 1,511,973 7,578,883 191,250,057 291,905,380 19.3 Marketing expenses: Advertisement, publicity & promotional expenses Phone, fax & communication expenses Salary - sales, marketing & reservation GDS reservation Travel agency commission, sales tax and VAT Sales office rent Training expenses Air ticket used Sales office & reservation dept. expenses 51 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 19.4 9 month’s ended 30 Sept’ 2010 Year ended 31 Dec’ 2009 Administrative & financial expenses: 309,430,961 224,984,299 Salary-accounts, finance & administration Directors’ remuneration Depreciation IATA expenses General fees & taxes Uniform and protective clothing Audit fees Utility & other charges Staff canteen expenses Staff compensation Bonus paid Relief, charity & donation Travelling, conveyance & car maintenance General advertisement Finance & administration department expenses 12,957,024 17,052,780 185,189,859 25,072,739 15,564,722 2,278,638 529,686 2,401,052 681,966 415,650 8,503,746 368,734 1,936,695 4,071,303 32,406,367 20,934,820 4,800,000 139,315,949 11,687,083 21,693,288 2,160,364 721,486 2,210,558 6,061,407 471,990 14,927,354 309,430,961 224,984,299 189,748,363 253,214,016 73,358,472 14,128,716 21,714,635 65,778,770 14,767,770 140,933,578 4,214,517 13,538,230 82,153,030 12,374,661 189,748,363 253,214,016 7.73 7.69 765,340,619 99,072,912 326,471,623 42,454,584 7.73 7.69 20 Financial expenses: This is made up as follows Bank Interest on OD loan Bank interest on CC Hypo. loan Bank interest on demand loan Lease finance interest on aircrafts Bank charges & commission 21 Basic earning per share: The computation of EPS is given below: a) Net profit (loss) during the period b) Weighted average number of shares (21.b (1) & 21.b(2) Basic Earning Per Share (a/b) 21.b (1). Calculation of Weighted Average number of shares: (30 September 2010) No. of shares alloted 20 May 2010 XOutstanding period 365 75,996,800 X 132 3 65 No. of shares alloted 30 May 2010 XOutstanding period 365 30,663,200 X 122 365 No. of shares alloted 17 August 2010 XOutstanding period 365 11,375,000 X 43 365 Opening no. of shares Total Weighted average no. of shares 52 Amount in Taka = 27,483,774 =1,0249,070 =1,340,068 =60,000,000 =99,072,912 Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Notes to the Financial Statements for the nine month’s from 01 January 2010 to 30 September 2010 21.b (2). Calculation of Weighted Average number of shares: (31 December 2009). No. of shares alloted 05 March 2009 XOutstanding period 365 7,719,950 X 301 365 = 6,366,315 No. of shares alloted 16 July 2009 XOutstanding period 365 30,000,000 X 168 365 Opening no. of shares Total Weighted average no. of shares=42,454,584 22 = 13,808,219 =22,280,050 Contingent liabilities The above head represent claims raised by Civil Aviation Authority of Bangladesh (CAAB) for Landing, Parking and Space Rent aggregating to Tk. 127,198,041 at 31 December 2008. which was not settled up to 30 September 2010. 53 Issuer : GMG AIRLINES LIMITED GMG Airlines Limited Annexure-A/1 Detailed break up of Cash in Hand as on 30.09.10 SL. No. Name of offices 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Head Office, Dhaka Benapole Chittagong- Agrabad Rajshahi Cox’s Bazar Chittagong Airport Banani Counter Senakalyan Sonargaon Counter Dhaka Airport Counter Nikunja Counter Chittagong City Counter Sylhet City Counter Jessore Airport Khulna Counter Delhi Kolkata Airport Kolkata City Kualalampur Katmandu- Airport Katmandu- City Office Jeddah-City office Bangkok Dubai 9 month’s ended 30 Sept’ 2010 38,329 12,160 672,181 80 30,353 2,232,194 291,100 2,180,348 184,191 1,520,090 456,602 55,674 152,195 267,015 122,739 145,603 1,892,117 4,048,499 1,954,965 79,347 2,978,974 10,399,642 788,327 16,280,005 Total: 46,782,731 54 Issue Manager : Janata Capital and Investment Ltd. GMG Airlines Limited Annexure-A/2 Detailed break up of Cash at Bank as on 30.09.10 SL. Bank Name Branch Name A/c No. No. 01 Sonali Bank Banani Branch.Dhaka 825/7 02 Sonali Bank Sonargoan Br.Dhaka 33002948 03 Sonali Bank Shahjalal International Airport 12833002357 04 Sonali Bank Patenga Br. Chittagong 109 05 Sonali Bank Panchlaish Br.Chittagong 986 06 Sonali Bank Agrabad Branch 488 07 Sonali Bank Zindabazar 562733008829 08 Sonali Bank Khatungonj 12411100002874 09 Sonali Bank Osmani Apt 93 10 Sonali Bank Garib Shah G-1113 11 Sonali Bank Banapole Br 230633005608 12 Sonali Bank CXB Br 3511100000633 13 Sonali Bank BZL Br 200000337 14 Sonali Bank RJH 461733004435 15 Sandard Chartered Bank CCU 324-0-503392-7 16 Standard Chartered Bank DMST 01-1153692-01 17 IFIC Bank JSR Br 6133022702 18 Dhaka Bank DMST 2061006590 19 AB Bank CGP 4110-382841-430 20 Hongkong Br DMST 001-007665-011 21 Islami Bank DMST 1073601 22 Sonali Bank( Current A/c) DMST 33187266 23 Prime Bank DMST 11007390 24 Sonali Bank CCU CI1002CA1352 25 HDFC Bank CCU 3828640000316 26 Nabil Bank- FC A/C KTM 103217500066 27 Nabil Bank- NPR A/C KTM 101017500607 28 Global Bank-NPR A/C KTM 201010000446 29 Bangkok (Current A/c) BKK 1013394141 30 Bangkok Bank -FCD A/c BKK 8401010018009260000 31 IndusInd Bank Ltd CCU 515614797060 32 Vijaya Bank CCU 722700301000143 33 Standard Chartered Bank KHI 1498026301 34 May Bank Current A/c Old KUL 514039011482 35 May Bank Current A/c New KUL 514356725023 36 Standard Bank Principal Br, Dhaka 33010988 37 Janata Bank Current A/C DXB 4968 38 Bank Asia MCB Br. Dhaka 833007595 39 IFIC Bank Banani Branch.Dhaka 1096297288001 40 Trust Bank Gulshan Br. Dhaka 41 Janata Bank Current A/C Local office, Dhaka 010233061684 42 Sonali Bank Ltd. Local Office Total : 9 month’s ended 30 Sept’ 2010 299,146 38,892 79,838 486,749 9,649 2,089 3,377 111,219 8,012 13,751 25,161 36,915 23 21 13,537,353 10,877,116 150 379,228 5,246 19,758 9,950 45,842 582,454 4,527,176 195,775 604,535 4,988,752 56,203,652 2,000 191,990 297,240 655,978 542,853 17,789 130,503 699,288 31,285,638 10,000 100,000 100,100 20,135,281 17,740,196 165,000,683 55 Issuer : GMG AIRLINES LIMITED Notes 56 printed by : McCoy Multi Media Ltd. Phone : +880 2 9671014 www.gmgairlines.com GMG Airlines Limited Corporate Office Plot no. 1 & 3,, Road 21, Nikunja - 2, Dhaka - 1229 Tel: +88-02-8922248, 8924274, Fax: +88-02-8924390 Email: [email protected], Website: www.gmgairlines.com