| Annual Report 1996 |
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| CRESCENT
SPINNING MILLS LIMITED |
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| COMPANY'S
PROFILE |
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(In alphabetical order) |
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| Board
of Directors |
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| Arshad
Raza Rehman |
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| Azhar-uI-Haq
(Nominee NIT) |
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| Javid
A. Sheikh (Nominee Cres. Bank) |
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| Muhammad
Javed Amin |
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|
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| Chief
Executive Officer |
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| Shahana
Javed Amin |
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| Sheikh
Moeen Waheed |
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| Syed
Nauman Shah |
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| Syed
Qamar Haider |
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| Talat
Shaffi |
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| Legal
Advisor |
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| Muhammad
Younas Khan Naul |
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| Auditors |
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| Manzoor
Hussain Mir & Co. |
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| Chartered
Accountants |
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| Bankers |
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| Citibank
N.A. |
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| Crescent
Investment Bank Ltd. |
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| Muslim
Commercial Bank Ltd. |
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| National
Bank of Pakistan. |
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| United
Bank Ltd. |
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| Union
Bank Ltd. |
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| The
Bank of Punjab. |
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| Allied
Bank of Pakistan Ltd. |
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| Stock
Exchange Listing |
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| The
Company is listed on the Karachi, |
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| Lahore
and Islamabad stock exchanges |
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| Company
Secretaries |
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| Ghulam
Rasool |
|
| Muhammad
Arif Hilal |
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| Registered
Office |
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| Six
Ghalib Road, Gulberg-II, Lahore. |
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| Tel:
(042) 5762691 / 5763138 / 5757238 |
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| Fax:
(042) 5753194 |
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| Works |
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| Eleventh
Kilometer, Faisalabad Road, Sheikhupura, |
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| Punjab,
Pakistan. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 9th Annual General Meeting of the shareholders of
Crescent spinning Mills |
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| Limited,
will be held on Thursday May 29th, 1997 at 3:30 p.m. at Six Ghalib Road,
Gulgerg II, Lahore, to |
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| transact
the following business. |
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| 1.
To confirm the minutes of the last annual general meeting. |
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| 2.
To receive and adopt the audited accounts for the year ended September 30,
1996" together with the |
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| Auditor's
and Director's reports thereon. |
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| 3.
To appoint auditors for the year ending September 30, 1997 and fix their
remuneration. The present |
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| auditors
Manzoor Hussain Mir & Co. Chartered Accountants, retire and being
eligible offer themselves |
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| for
reappointment. |
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| The
share transfer books of the company will remain closed from May 26th, t997 to
June 3rd, |
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| 1997
(both days inclusive). |
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| By
order of the board |
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| (GHULAM
RASOOL) |
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| Corporate
Secretary |
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| NOTES: |
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| 1.
A member eligible to attend and vote at this meeting may appoint another
member as his / her proxy to |
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| attend and vote instead of him / her.
Proxies in order to be effective must be received at the company's |
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| registered office not less than 48 hours
before the time for holding the meeting during working hours. |
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| 2.
Shareholders are requested to immediately notify the change of address, if
any. |
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| DIRECTORS'
REPORT TO THE VALUED INVESTORS |
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| We
welcome you to the company's Ninth Annual General Meeting and place the
Annual report and audited |
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| accounts
for the year ended September 30,1996 before our valued investors. |
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| The
gross profit for the year was Rupees 7,796,562 and the Company has incurred
an operating loss of |
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| Rupees
6,247704 that includes a depreciation of Rupees 14,839,593. |
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| FINANCIAL
RESULTS FOR THE YEAR: |
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|
1996 |
1995 |
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|
|
Rupees |
Rupees |
|
| Sales |
|
|
310,283,482 |
183,277,385 |
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| Gross
profit before depreciation |
|
22,017,066 |
1,585,820 |
|
| Operating
results excluding depreciation |
8,591,889 |
(8,425,905) |
|
| Depreciation' |
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|
14,839,593 |
14,581,827 |
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| Operating
loss |
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|
6,247,704 |
23,007,732 |
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| OPERATING
RESULTS |
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| During
the year under review, the difficulties of textile industry continued due to
shortage of availability of raw |
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| material
and persistent higher prices of cotton throughout the season. This trend
alongwith generally poor |
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| quality
of the crop has affected the profitability of many companies in the textile
sector. |
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| Despite
the above situation, our company has shown significant improvements both in
sales and operating |
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| results.
And has also doubled its contribution to national exchequer in form of sales
tax & excise duty valuing |
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| Rupees
12.821 million as compared to Rupees 5.278 million in the previous year. ' |
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| The
sales of the company has increased by 69% as compared to the previous year. A
gross profit of |
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| Rupees
7.8 million has been achieved as compared to gross loss of Rupees 12.36
million in the previous |
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| year,
which has also improved the earning per share of the company. |
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| The
management has continued its relentless efforts to turnaround the operations
of the company through |
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| innovative
product mix improvement in quality of product, and tapping different markets
where the returns were |
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| higher.
Further as a part of the management strategy we have reduced our raw material
inventory which has |
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| decreased
the financial expenses to a reasonable level. |
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| FUTURE
PROSPECTS |
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| The
textile sector being the largest industrial as well as the foreign exchange
earning sector of the country |
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| be
the main catalyst of the economic development of Pakistan in the near future.
The government has already |
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| taken
positive measures to improve economic environment of the country and has
already taken some positive |
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| measures
for improving the textile sector. The government has confirmed that a textile
package will be |
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| announced
shortly to make the sector more competitive and address the liquidity crisis
of textile units. |
|
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| In
addition to above your management has further taken corrective measures to
enhance the sales and |
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| profitability
of the company by improving the quality of its yarn, control of expenses as
well as re-entering the |
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| export
market. At the time of presenting the report, I would like to add here that
we have already shipped our |
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| Cowboy
and Karakorum heights brand and our order book is improving, Insha-Allah by
the grace of Allah |
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| the
Almighty we are expecting much better gross profit for the period ending
March 1997. By the grace of |
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| Allah
we expect to continue improvement in our future sales and are committed to
make Crescent Spinning |
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| Mills
Ltd. Into a economically viable & financially strong profitable Company
for the year in progress. |
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| Comments
on Auditors Observations |
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| Agreement
in principal with commercial banks are under way for rescheduling and
restructuring under |
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| the
auspices of Federation of Pakistan Chambers of Commerce & Industry and
Pakistan Banking |
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| Council
that includes two Year grace period on payment of all loans. |
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| 2.
A regards the opinion of our Auditors in connection with the surplus reserves
for revaluation of assets, |
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| we want to clarify that the same is done as
per directive of State Bank of Pakistan BPRD circular No. 9 |
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| dated April 26,1995 which clearly states
that this reserve should be treated as part of the equity. |
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| However, other companies have also done the
same accordance with the State Bank of Pakistan |
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| directive. |
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| 3.
As regards Accounts Statements pertaining to Citibank N.A. & Crescent
investment bank limited for |
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| long
term and shod term finances given by them to our Company. These have not been
received |
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| inspite
of various requests made by us upto September 30, 1996 which we have already
reported to |
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| our
auditors well in time. |
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| 4.
As this amount is directly related to purchase of machinery, therefore it has
been capitalized in line of |
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| the
company's accounting policy. |
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| 5.
(a) The tax liability under section 80-D is not accepted by the company and
the matter is subjudice with the |
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| Supreme
Court. |
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| (b)
Advances to suppliers Rupees 1.208 are recoverable we will try to recover the
above amount from |
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| current
bills of suppliers. As we have already recovered significant amount during
the year. |
|
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| (c)
Restructuring of lease facilities obtained from the leasing companies is
successfully being carried out |
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| and
agreement in principle to waive the penalty charges have been made. |
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| (d)
As regards amount pertaining to excise duty mentioned under Note 11.4 it is
still pending in the |
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| Supreme
Court therefore, we are unable to settle the same at our end. |
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| In
connection with Note No. 11.5 the bank interest pertaining to Citibank N.A.
is under negotiation with |
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| the
bank concern as the same is lying pending in the Banking Tribunal. Efforts
are being made for |
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| settling
the matter with the bank at the same time and we are very positive that it
will be amicably |
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| resolved. |
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|
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| As
far as Note No. 11.6 is concerned the matter is resolved by the High Court
and payments are being |
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| made
in accordance with the directive of the High Court and nothing is disputed
with the party |
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| concerned. |
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| In
Note No. 11.7 we want to clarify that certain disputes are pending with the
Associated Concerns with |
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| ujala
Cotton Mills and Crescent Jute Products Ltd. Which are still not settled,
therefore, we cannot |
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| accept
the claims given by our Associated Companies as we have also made certain
claims on them |
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| unless
amicable settlement is done with them. |
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| ACKNOWLEDGMENT |
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| We
appreciate the guidance and constant support of the Board of Directors,
investors and our bankers |
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| for
their valued confidence reposed in the company. Our special thanks to our
staff and workers for |
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| their
continuous support valuable contribution and hard work towards achieving our
objectives. |
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| On
behalf of the Board |
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|
|
| Muhammad
Javed Amin |
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| Chief
Executive Officer |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed balance sheet of CRESCENT SPINNING MILLS LIMITED as
at 30 September, |
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| 1996
and the related profit and loss account and cash flow statement, together
with the notes forming part |
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| thereof,
for the year then ended and we state that we have obtained all the
information and explanations which |
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| to
the best of our knowledge and belief were necessary for the purposes of our
audit and after due verification |
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| thereof,
and subject to the observations expressed in the annexure to this report, and
the extent to which the |
|
| notes
referred to may effect, we report that : |
|
|
| (a)
In our opinion, proper books of account have been kept by the company as
required by the companies |
|
| ordinance, 1984; |
|
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| (b)
In our opinion; |
|
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| (i)
The balance sheet and profit and loss account together with notes thereon
have been drawn |
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| up
in conformity with the companies ordinance, 1984, and are in agreement with
the books of |
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| account
and are further in accordance with accounting policies consistently applied; |
|
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| (ii)
The expenditure incurred during the year was for the purpose of the company's
business; and |
|
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| (iii)
The business conducted, investments made and the expenditure incurred during
the year were |
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| in
accordance with the objects of the company; |
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|
|
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| (c)
In our opinion and to the best of our information and according to the
explanations given to us, the |
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| balance
sheet, profit and loss account and cash flow statement, together with the
notes forming part |
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| thereof,
give the information required by the companies ordinance, 1984, in manner so
required and |
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| respectively
give a true and fair view of the state of the company's affairs as at 30
September, 1996 |
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| and
of the loss and cash flow for the year then ended; and |
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|
|
|
| (d)
In our opinion, no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
|
|
| (MANZOOR
HUSSAIN MIR & co.) |
|
| Chartered
Accountants |
|
|
|
|
| ANNEXURE
TO AUDITORS' REPORT |
|
| 1.
With out qualifying our report it is pointed out that due to continuous
losses sustained by the company, |
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| its
liquidity has been badly affected and current liabilities have exceeded the
current assets by Rs. |
|
| 390.661
million. The conception of going concern will be valid if the company can get
rescheduling and |
|
| re-structuring
of long term liabilities and as well as of short term loans and arrange for
further working, |
|
| capital
for which necessary proposals have been made to lenders. The matter is
reported under |
|
| negotiation. |
|
|
|
|
| 2.
Classification of surplus on revaluation of fixed assets under the head
"Share Capital and Reserves" |
|
| disclosing
it as a pad of share holders equity, in our opinion is not in consonance of
provision of |
|
| section
235 and fourth schedule of the companies ordinance, 1984, which state that
such surplus shall |
|
| be
shown after "Share Capital and Reserves". The share holders equity
is over stated by Rs, 253.898 |
|
| million. |
|
|
|
|
|
| 3.
a) Bank statements of Citibank were not produced to us to reconcile the loan
balances and verify |
|
| the
interest claimed by bank indicated at Note 9,5 and 11.5 respectively, Such
statements were |
|
| stated
to be not available with the management. |
|
|
|
|
| b)
Loan from Crescent Investment Bank Limited at Note 9.1 and securities there
a9ainst |
|
| remained
un-confirmed by the bank. |
|
|
|
|
| c)
Attention is invited to Note No. 9.4, 9.6 & 9.7. |
|
|
|
|
| 4.
Exchange Risk Fee and Commission amounting to Rs. 3.772 million at Note No.
12.1.2 capitalised |
|
| towards Plant & Machinery, in our
opinion, should have been charged to profit & loss account and |
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| results for the year are affected
accordingly. Attention is also invited to Note No. 122.2. |
|
|
|
| 5.
No Provision is made in these financial statements in respect of; |
|
|
| a)
Minimum tax liabilities U/S 80 D and additional tax aggregating to Rs. 8.007
million. |
|
|
| b)
Advances to suppliers amounting to Rs. 1.208 million at Note No. 19.1 (iii)
considered doubtful |
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| of
recovery. |
|
|
|
|
| c)
Additional financial charges estimated at Rs. 8.224 million on over due
installments of Leasin9 |
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| Companies. The issue for the waiver of
these charges taken up with the Leasing Companies, |
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| is stated to be yet pending. |
|
|
|
| d)
Various claims and demands raised by the Financial Institutions and Trade
Creditors at Note |
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| No. 11.4, 11.5, 11.6, & 11.7, which are
either subjudice with the competent courts or under |
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| consideration with the parties. |
|
|
| (MANZOOR
HUSSAIN MIR & co.) |
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| Chartered
Accountants |
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|
| BALANCE
SHEET AS |
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| AT
SEPTEMBER 30, 1996 |
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| CAPITAL
AND LIABILITIES |
|
NOTE |
1996 |
1995 |
|
|
|
Rupees |
Rupees |
|
| SHARE
CAPITAL |
|
|
| Authorised |
|
| 20,000,000
ORDINARY SHARES OF RS. 10/- EACH |
200,000,000 |
200,000,000 |
|
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|
============= |
============= |
|
|
|
|
|
|
|
| ISSUED,
SUBSCRIBED AND PAID UP |
3 |
122,148,000 |
122,148,000 |
|
| ACCUMULATED
LOSS |
|
|
|
(261,846,493) |
(217,122,915) |
|
| REVALUATION
SURPLUS |
|
4 |
253,897,832 |
253,897,832 |
|
|
|
|
------------- |
------------- |
|
|
|
|
|
114,199,339 |
158,922,917 |
|
|
|
|
|
|
|
| LONG
TERM LOANS |
|
|
5 |
16,616,390 |
31,446,316 |
|
|
|
|
|
|
|
| LIABILITIES
AGAINST ASSETS SUBJECT TO |
|
| FINANCE
LEASE |
|
6 |
7,412,294 |
2,837,731 |
|
|
|
|
|
|
| DEFERRED
LIABILITIES |
|
7 |
9,046,282 |
9,046,282 |
|
|
|
| CURRENT
LIABILITIES |
|
| CURRENT
PORTION OF LONG TERM LIABILITIES |
8 |
49,097,626 |
53,771,288 |
|
| SHORT
TERM RUNNING FINANCES |
9 |
240,289,966 |
216,492,975 |
|
| CREDITORS,
ACCRUALS AND OTHER LIABILITIES |
10 |
134,203,512 |
114,184,623 |
|
|
|
|
------------- |
------------- |
|
|
|
|
423,591,104 |
384,448,886 |
|
|
|
|
|
|
| CONTINGENCIES
AND COMMITMENTS |
11 |
- |
- |
|
|
|
|
------------- |
------------- |
|
|
|
|
570,865,409 |
586,702,132 |
|
|
|
============= |
============= |
|
|
|
|
|
|
| The
annexed notes (1) to (30) form an integral part of these financial
statements. |
|
|
| Auditors'
Report |
|
| (As
Annexed) |
|
|
| PROPERTY
AND ASSETS |
|
NOTE |
1996 |
1995 |
|
|
|
|
Rupees |
Rupees |
|
|
| FIXED
CAPITAL EXPENDITURE |
|
12 |
535,716,628 |
542,729,564 |
|
| LONG
TERM INVESTMENTS |
|
13 |
1,084,058 |
1,051,558 |
|
| DEFERRED
COST |
|
|
14 |
54,300 |
358,280 |
|
| LONG
TERM SECURITY DEPOSITS |
15 |
1,080,074 |
1,577,256 |
|
|
|
| CURRENT
ASSETS |
|
| STORES,
SPARES AND LOOSE TOOLS |
16 |
753,597 |
1,755,537 |
|
| STOCK
IN TRADE |
|
17 |
9,915,305 |
3,260,934 |
|
| TRADE
DEBTS |
|
18 |
3,837,774 |
13,394,622 |
|
| ADVANCES,
DEPOSITS, PREPAYMENTS |
|
| AND
OTHER RECEIVABLE |
|
19 |
17,554,000 |
22,301,232 |
|
| CASH
AND BANK BALANCES |
|
20 |
869,673 |
273,149 |
|
|
|
|
------------- |
------------- |
|
|
|
|
32,930,349 |
40,985,474 |
|
|
|
|
|
|
|
|
|
------------- |
------------- |
|
|
|
570,865,409 |
586,702,132 |
|
|
|
============= |
============= |
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED SEPTEMBER 30, 1996. |
|
|
|
|
|
|
Note |
1996 |
1995 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| SALES |
|
|
21 |
310,283,482 |
183,277,385 |
|
| COST
OF GOODS SOLD |
|
22 |
302,486,920 |
195,638,171 |
|
|
|
|
|
------------- |
------------- |
|
| GROSS
PROFIT / (LOSS) |
|
|
7,796,562 |
(12,360,786) |
|
|
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
| ADMINISTRATIVE |
|
23 |
10,186,869 |
8,026,490 |
|
| SELLING
AND DISTRIBUTION |
|
24 |
3,857,397 |
2,620,456 |
|
|
|
|
|
------------- |
------------- |
|
|
|
|
14,044,266 |
10,646,946 |
|
|
|
|
|
|
|
|
|
|
------------- |
------------- |
|
| OPERATING
(LOSS) |
|
|
(6,247,704) |
(23,007,732) |
|
|
|
|
|
|
|
| OTHER
INCOME |
|
25 |
40,906 |
989,973 |
|
|
|
|
|
------------- |
------------- |
|
|
|
|
|
(6,206,798) |
(22,017,759) |
|
|
|
|
|
|
|
| FINANCIAL
CHARGES |
|
26 |
38,516,780 |
47,299,350 |
|
|
|
|
|
------------- |
------------- |
|
| NET
(LOSS) FOR THE YEAR |
|
|
(44,723,578) |
(69,317,109) |
|
|
|
|
|
|
|
| (LOSS)
BROUGHT FORWARD |
|
|
(217,122,915) |
(147,805,806) |
|
|
|
|
|
------------- |
------------- |
|
| ACCUMULATED
(LOSS) |
|
| CARRIED
TO BALANCE SHEET |
|
|
(261,846,493) |
(217,122,915) |
|
|
|
|
|
|
============= |
============= |
|
|
|
|
|
|
| The
annexed notes (1) to (30) form an integral part of these financial
statements. |
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1996 |
|
|
|
|
1996 |
1995 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| (Loss)
for the year |
|
|
(44,723,578) |
(69,317,109) |
|
| Adjustment
for: |
|
|
| Depreciation |
|
|
14,839,593 |
14,581,827 |
|
| Deferred
Cost amortized |
|
|
303,980 |
303,979 |
|
| (Profit)
on disposal of fixed assets |
|
- |
(199,000) |
|
| (Profit)
on disposal of investment |
|
- |
(65,440) |
|
| Financial
charges |
|
|
38,516,780 |
47,299,350 |
|
|
|
|
------------- |
------------- |
|
| Operating
profit/(loss) before |
|
|
|
| working capital changes |
|
8,936,775 |
(7,396,393) |
|
| (Increase)
/ Decrease in stores and spares |
1,001,940 |
610,684 |
|
| (Increase)
/ Decrease in stocks |
|
(6,654,371) |
6,398,023 |
|
| (Increase)
/ Decrease in trade debtors |
9,556,848 |
1,249,084 |
|
| (Increase)
/ Decrease in advances and deposits |
5,244,414 |
1,342,890 |
|
| Increase
/ (Decrease)in creditors |
|
(8,928,824) |
(7,627,706) |
|
|
|
|
------------- |
------------- |
|
| Cash
flow from operations |
|
|
9,156,782 |
(5,423,418) |
|
| Financial
charges paid |
|
|
(9,569,067) |
(15,548,203) |
|
| Income
tax paid |
|
|
- |
(55,500) |
|
| Long
term deposit received |
|
- |
79,000 |
|
|
|
|
------------- |
------------- |
|
| Net
cash flow form operating adivities |
(412,285) |
(20,948,121) |
|
|
|
|
|
|
|
|
|
|
|
| Cash
flow from investing activities |
|
|
|
| Fixed
capital expenditure |
|
|
(7,826,657) |
(5,091,131) |
|
| Investments |
|
|
(32,500) |
(180,480) |
|
| Sale
proceeds of investments |
|
- |
137,400 |
|
| Sale
proceeds of fixed assets |
|
- |
752,800 |
|
|
|
|
------------- |
------------- |
|
| Net
cash used in investing activities |
|
(7,859,157) |
(4,381,411) |
|
|
|
|
|
|
| Cash
flow from financing adivities |
|
|
|
| Repayment
of long term loans |
|
(15,843,426) |
(39,741,504) |
|
| Shod
term loans |
|
|
23,796,991 |
51,260,732 |
|
| Re
payment lease |
|
|
(99,099) |
(558,448) |
|
| Share
money deposit |
|
|
- |
13,605,080 |
|
| Director's
loan |
|
|
1,013,500 |
- |
|
|
|
|
------------- |
------------- |
|
| Net
cash generated in financing activities |
8,867,966 |
24,565,860 |
|
| Net
increase / (decrease) in cash |
|
596,524 |
(763,672) |
|
| Cash
and bank balance as at October 1, |
273,149 |
1,036,821 |
|
|
|
|
------------- |
------------- |
|
| Cash
and bank balance as at September 30, |
869,673 |
273,149 |
|
|
============= |
============= |
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED |
|
| SEPTEMBER 30, 1996 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
| The
Company was incorporated on September 2, 1987 as a Public Limited Company.
Its shares are quoted at |
|
| Karachi.
Lahore and Islamabad Stock Exchanges in Pakistan. The Principal activity of
the Company is to |
|
| manufacture
and sell yam. |
|
|
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
| 2.1
Accounting Convention |
|
| These
accounts have been prepared under the historical cost convention except where
stated otherwise. |
|
|
| 2.2
Taxation |
|
| - Current |
|
| Turn-over
tax levied U/S 80-D of the Income-Tax Ordinance, 1979 is not provided for
since it is ultra vires of |
|
| constitution
of Pakistan. It is the tax on income which can be charged under the Ordinance
and not on sales |
|
|
|
| -
Deferred |
|
| The
Company has not accounted for deferred tax |
