| CRESCENT SPINNING MILLS LIMITED |
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| ANNUAL
REPORT 1997 |
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| CONTENTS |
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| Company
Profile |
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| Notice
of Annual General Meeting |
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| Directors'
Report |
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| Selected
Financial and Operational Data |
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| Auditors'
Report |
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| Balance
Sheet |
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| Profit
& Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| COMPANY'S
PROFILE |
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| Board
of Directors |
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| (In
alphabetical order) |
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|
Arshad Raza Rehman |
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Azhar-uI-Haq |
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(Nominee NIT) |
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Azam Saeed |
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Javid A. Sheikh (Nominee
Cres. Bank) |
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| Chief
Executive Officer |
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Muhammad Javed Amin |
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Qasim Raza |
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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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Azmat Saeed & Company |
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| Auditors |
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M. Yousuf Adil Saleem
& 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 |
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|
Zahoor Ahmad |
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| Registered
Office |
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Six Ghalib Road,
Gulberg-II, Lahore. |
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Tel: (042) 5762691 /
5763138 / 5710252 |
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Fax: (042) 5757238 |
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E. Mail: cmsl @
nexlinx.net.pk. |
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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 MEETING |
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| NOTICE
IS HEREBY GIVEN that the 10th Annual General Meeting of the shareholders of
the Company will be held |
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| on
Saturday the 16th May, 1998 at 03:00 P.M. at the registered office of the
company, Six Ghalib Road, Gulberg-II, |
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| Lahore
to transact the following business: |
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| 1.
To conform the Minutes of Extra Ordinary General Meeting of the Company, held
on 29th November, 1997. |
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|
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| 2.
To receive, consider and adopt Audited Accounts of the Company for the year
ended 30th September,1997 |
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| together
with the Auditors' and Directors' reports thereon. |
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| 3.
To appoint Auditors for the next year and fix their remuneration. M/S M.
Yousuf Adil Saleem & Co., the |
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| present
Auditors of the the Company offer themselves for re-appointment. |
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| 4.
To elect eight number of Directors fixed by the Board under the provisions of
Section 178 of Companies |
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| Ordinance
1984 for next three years term. The present Directors (1) Mr. Arshad Raza
Rehman (2) Mr. |
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| Azam
Saeed (3) Mr. Muhammad Javed Amin (4) Mr. Qasim Raza (5) Syed Nauman Shah (6)
Syed Qamar |
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| Haider
(7) Mr. Talat Shaffi (8) Sheikh Azhar-uI-Haq (9) Mr. Javed A. Shaikh retire
and are eligible for re- |
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| election.
The provisions regarding election of Directors do not apply to the Directors
nominated by NIT. |
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| 5.
To transact any other business which may be placed before the Meeting with
the permission of the Chair. |
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| NOTES: |
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| 1.
The Share Transfer Books of the Company will remain closed from 12th May,
1998 to 19th May, 1998 (both |
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| days
inclusive). |
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| 2.
A member entitled, to attend vote at this Meeting may appoint another member
as his/her proxy to attend |
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| and
vote instead of him/her. Proxies in order to be valid must be received by the
Company duly completed |
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| not
less than 48 hours before the Meeting. |
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| 3.
Shareholders are requested to promptly notify the Company at the above
address of any charge in their |
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| mailing
address. |
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| 4.
The nominations of candidates for election of directors and written consent
of the shareholder so nomi- |
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| nated
should reach the Registered Office at least 14 days earlier of the Meeting. |
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| Directors
Report to the Valued Investors |
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| In
the name of Allah, The Most Gracious, The Most Merciful |
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| The
management welcomes the valued investors to the Annual General meeting of the
company for the year |
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| ended
September thirtieth, nineteen hundred ninety-seven. During the year under
review, the company has made |
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| improvement
in operations, particularly in export sales and optimum utilization of
installed capacity of the project. |
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| Operating
Results |
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| During
the financial year under review, the company has significantly improved its
capacity utilization as compared |
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| to
preceding year. This Crescent Group Company by making lot of efforts by the
marketing, production, financial |
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| and
administrative team, has achieved sales to the tune of Rupees four hundred
nineteen million during this year, |
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| which
is thirty-five percent more than the preceding year. The management by taking
appropriate measures has |
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| achieved
reduction in operating expenses to a reasonable extent. Due to these cost
control measures, the |
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| management
has been able to bring much better results as compared to last four years of
operations. The man- |
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| agement
is pleased to inform that a post shipment finance of above Rupees ten million
has been obtained from |
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| a
foreign bank on lower mark up rate. By the grace of Almighty Allah, your
management has turned around the |
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| current
year operations by posting a profit of more than Rupees three million as
compared to last year's loss. |
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| Future
Prospects |
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| In
the start of cotton season 1997-98, the size of crop was estimated to be
above ten million bales which sub- |
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| sequently
turned out to be less than nine million. The quality of cotton crop is poor.
Owing to high moisture and |
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| trash
in cotton, the yield has also suffered considerably. But your management is
making vigorous efforts to achieve |
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| better
results through cost controls, better production strategy and by fetching
better sale price. |
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| Revaluation
of Fixed Assets |
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| The
Management has taken a positive step by getting the assets of your company
revalued from Rs. 506,927,000 |
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| to
Rs. 540,541,628 through M/S M.Yousaf Adil Saleem & Co., Chartered
Accountants resulting in improvement |
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| in
the assets of your company to the tune of Rs. 33,614,628. This does not only
highlight correct size of our |
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| projects,
on top of that, it has improved the break up value of the share from Rs. 9.35
to Rs. 12.51. |
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| Comments
on Auditors Observation |
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| 1)
As regards statement of accounts from banks and financial institutions as
referred in Note 13 and 17 of |
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| Accounts,
your management has made various requests to banks and financial institutions
for statement |
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| of
accounts, but these have not been supplied uptill thirtieth September
Nineteen hundred ninety seven. |
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| 2)
As Regard depreciation on revalued assets, the management is of the view that
the revaluation of |
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| the
assets has been done on the basis of depreciation replacement values as on
thirtieth September |
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| Nineteen
hundred ninety seven. Hence there is no question of charging depreciation on
revalued |
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| assets. |
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| 3)
Exchange Risk fee & Commission on suppliers credit are directly related
to purchase of machinery, |
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| therefore
it has been capitalized in line of the company's accounting policy. |
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| Auditors |
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| You
are requested to appoint auditors for year 1997-98 and fix their
remuneration. The present Auditors M/S |
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| M.
Yousuf Adil Saleem & Co., Chartered Accountants, retire and offer
themselves for reappointment. |
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| Acknowledgment |
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| we
wish to place on record, thanks to our customers, bankers, financial
institutions, all agencies, and valued |
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| shareholders
for their support. The Board of Directors also express their thanks for the
valuable team work, |
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| loyalty
and laudable efforts rendered by the executives, staff members and workers of
the company during |
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| the
period and hope that the same spirit shall prevail in future as well. |
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| SELECTED
FINANCIAL AND OPERATIONAL DATA |
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| Application
of Revenue Earned: |
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|
1997 |
1996 |
1995 |
1994 |
|
| SALE
(Rupees in thousand) |
418,924 |
310,283 |
183,277 |
61,715 |
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|
========== |
========== |
========== |
========== |
|
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|
% |
% |
% |
% |
|
|
|
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| (IN
TERM OF PERCENTAGE E) |
100.00 |
100.00 |
100.00 |
100.00 |
|
| Cost
of Sales |
|
89.44 |
97.49 |
116.95 |
106.74 |
|
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|
---------- |
---------- |
---------- |
---------- |
|
| GROSS
PROFIT/(LOSS) |
|
10.56 |
2.51 |
(16.95) |
(6.74) |
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|
|
---------- |
---------- |
---------- |
---------- |
|
| Administrative
expenses |
|
2.20 |
3.28 |
4.38 |
10.17 |
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| Selling
& Distribution expenses |
0.88 |
1.24 |
1.43 |
5.03 |
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---------- |
---------- |
---------- |
---------- |
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|
3.08 |
4.52 |
5.81 |
15.20 |
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---------- |
---------- |
---------- |
---------- |
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| OPERATING
PROFIT/(LOSS) |
|
7.47 |
(2.01) |
12.55) |
(32.15) |
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| Other Income |
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|
0.44 |
0.01 |
0.54 |
2.61 |
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|
---------- |
---------- |
---------- |
---------- |
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|
7.92 |
(2.00) |
(12.01) |
(34.76) |
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|
---------- |
---------- |
---------- |
---------- |
|
| Financial
Charges |
|
5.77 |
12.42 |
25.81 |
78.36 |
|
| Non-operating
expenses |
|
0.06 |
0.00 |
- |
- |
|
| Workers
profit participation fund |
0.10 |
- |
- |
- |
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|
---------- |
---------- |
---------- |
---------- |
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|
5.94 |
12.42 |
25.81 |
78.36 |
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|
---------- |
---------- |
---------- |
---------- |
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| PROFIT
BEFORE TAXATION |
|
1.98 |
(14.41) |
(37.82) |
(107.90) |
|
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|
|
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|
| Taxation |
|
0.87 |
- |
- |
- |
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|
---------- |
---------- |
---------- |
---------- |
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| PROFIT
AFTER TAXATION |
|
1.11 |
(14.41) |
(37.82) |
(107.90) |
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|
========== |
========== |
========== |
========== |
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| BREAKUP
OF SALARIES & BENEFITS |
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|
(Rupees in Thousand) |
|
|
|
1,997 |
1,996 |
1,995 |
1,994 |
|
| Salaries
& Wages |
|
19,676 |
15,570 |
9,110 |
7,019 |
|
| Bonus
/ Exgratia |
|
280 |
|
30 |
17 |
|
| Gratuity
Provision |
|
318 |
112 |
101 |
17 |
|
| Social
Security |
|
598 |
482 |
418 |
170 |
|
| Old
Age Benefits |
|
746 |
456 |
248 |
176 |
|
| Education
Cess |
|
37 |
35 |
42 |
65 |
|
| Group
Insurance |
|
93 |
83 |
81 |
46 |
|
| Medical
Expenses |
|
60 |
60 |
46 |
41 |
|
| Canteen
Subsidy |
|
192 |
127 |
92 |
39 |
|
| Other
Welfare Expenses |
|
135 |
131 |
106 |
50 |
|
| Total
Benefits |
|
2,457 |
1,486 |
1,162 |
752 |
|
|
|
---------- |
---------- |
---------- |
---------- |
|
| Total
Salaries, Wages & Benefits |
22,134 |
17,056 |
10,273 |
7,771 |
|
|
========== |
========== |
========== |
========== |
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|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of CRESCENT SPINNING MILLS LIMITED as
at September 30, |
|
| 1997
and the related profit and loss account and statement of changes in financial
position, together with the notes |
|
| forming
part thereof, for the year then ended and we state that: |
|
|
| 1)
We have not been able to confirm the balances outstanding as at September 30,
1997 from banks and |
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| financial
institutions as referred to notes No. 13 and 17. |
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|
|
|
| 2)
The management of the company has not provided depreciation pertaining to
building and plant and ma- |
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| chinery
during the year as result of revaluation as referred to note No. 3.1.2. |
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|
|
|
| 3)
Addition to plant and machinery include exchange risk fee and commission on
supplier's credit, which is |
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| being
capitalized as referred to note No. 3.1.3. |
|
|
| Subject
to the foregoing remarks and the contents of relevant notes, the extent to
which these may effect the |
|
| annexed
accounts, we state that 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, after due
verification thereof, we report that: |
|
|
| a)
in our opinion, proper books of account have been kept by the Company as
required by the Companies |
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| Ordinance,
1984; |
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|
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| b)
in our opinion: |
|
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| i)
the balance sheet and profit and loss account together with the notes thereon
have been drawn up |
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| in
conformity with the Companies Ordinance, 1984, and are in agreement with the
books of ac- |
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| count
and are further in accordance with accounting policies consistently applied; |
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|
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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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|
|
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| iii)
the business conducted, investments made and the expenditure incurred during
the year were in |
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| accordance
with the objects of the company. |
|
|
| c)
in our opinion and to the best of our information and according to the
explanations given to us, the balance |
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| sheet
and profit and loss account and the statement of changes in financial
position, together with the notes |
|
| forming
part thereof, give the information required by the Companies Ordinance, 1984,
in the manner so |
|
| required
and respectively give a true and fair view of the state of Company's affairs
as at September 30, |
|
| 1997
and of the profit and the changes in the financial position 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. |
|
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| Without
qualifying our opinion, we would like to draw your attention to the fact that
the Company is incurring heavy |
|
| losses
since last few years due to high cotton cost and low market prices of yarn
resulting in accumulated losses. |
|
| The
fixed assets of the Company have been revalued resulting in revaluation
surplus of Rs. 287,831,721/-. To |
|
| improve
the liquidity, the Company has requested the banks and financial institutions
to restructure the loans and to |
|
| renew
the borrowing facilities. |
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|
| Place:
Lahore |
|
M. Yousuf Adil Saleem
& Co. |
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| Date:
April 06, 1998 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT SEPTEMBER 30, 1997 |
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|
1997 |
1996 |
|
|
|
Note |
Rupees |
Rupees |
|
| FIXED ASSETS |
|
|
|
|
3 |
573,028,620 |
535,716,628 |
|
|
|
4 |
484,567 |
- |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
573,513,188 |
535,716,628 |
|
|
|
|
---------- |
---------- |
|
|
|
5 |
1,084,058 |
1,084,058 |
|
|
|
|
|
6 |
- |
54,300 |
|
| Long
term security deposits |
|
7 |
4,182,099 |
1,080,074 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
5,266,157 |
2,218,432 |
|
| CURRENT
ASSETS |
|
|
|
---------- |
---------- |
|
| Stores,
spares and loose tools |
|
8 |
2,363,052 |
753,597 |
|
| Stock
in trade |
|
|
9 |
11,692,789 |
9,915,305 |
|
| Trade
debts - Considered good |
|
10 |
18,300,142 |
3,837,774 |
|
| Advances,
deposits, prepayments |
|
|
| and
Other receivables |
|
11 |
23,741,750 |
17,554,000 |
|
| Cash
and bank balances |
|
|
12 |
567,714 |
869,673 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
56,665,447 |
32,930,349 |
|
| CURRENT
LIABILITIES |
|
|
|
---------- |
---------- |
|
| Short
term borrowings - Secured |
|
13 |
52,821,559 |
49,944,159 |
|
| Current
portion of long term liabilities |
14 |
20,322,231 |
35,972,626 |
|
| Creditors,
accrued and other liabilities |
15 |
160,891,150 |
134,203,512 |
|
| Provision
for taxation |
|
|
3,649,909 |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
237,689,848 |
220,120,297 |
|
|
|
|
---------- |
---------- |
|
| NET
WORKING CAPITAL |
|
|
(181,019,401) |
(187,189,948) |
|
|
|
|
---------- |
---------- |
|
| TOTAL
NET ASSETS |
|
|
397,759,944 |
350,745,112 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
16 |
- |
- |
|
| LONG
TERM LIABILITIES |
|
|
|
---------- |
---------- |
|
| Long
term loans - Secured |
|
17 |
224,809,285 |
220,087,197 |
|
| Liabilities
against assets subject to finance lease |
18 |
11,124,360 |
7,412,294 |
|
| Deferred
liabilities |
|
19 |
9,046,282 |
9,046,282 |
|
|
|
|
---------- |
---------- |
|
|
|
244,979,927 |
236,545,773 |
|
|
|
|
---------- |
---------- |
|
|
|
152,780,017 |
114,199,339 |
|
| NET WORTH |
|
|
========== |
========== |
|
| REPRESENTED
BY: |
|
|
| Authorized
capital |
|
|
| 20,000,000
ordinary shares of Rs. 10/- each |
|
200,000,000 |
200,000,000 |
|
| 12,214,800
ordinary shares of Rs. 10/- each |
|
========== |
========== |
|
| fully
paid in cash |
|
|
|
122,148,000 |
122,148,000 |
|
| Accumulated
loss |
|
(257,199,704) |
(261,846,493) |
|
|
|
---------- |
---------- |
|
| Shareholders'
equity |
|
(135,051,704) |
(139,698,493) |
|
| Surplus
on revaluation of fixed assets |
20 |
287,831,721 |
253,897,832 |
|
|
|
|
---------- |
---------- |
|
|
|
152,780,017 |
114,199,339 |
|
|
|
========== |
========== |
|
|
|
|
|
| The
annexed Notes from 1 to 32 form an integral part of these accounts. |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED SEPTEMBER 30, 1997 |
|
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| Sales - Net |
|
21 |
418,924,208 |
310,283,482 |
|
| Cost
of sales |
|
22 |
374,700,205 |
302,486,920 |
|
|
|
|
---------- |
---------- |
|
| Gross profit |
|
|
44,224,003 |
7,796,562 |
|
|
|
|
| Operating
expenses |
|
|
|
| Administration |
|
23 |
92,261,321 |
10,176,796 |
|
| Selling |
|
24 |
3,696,684 |
3,857,397 |
|
|
|
|
---------- |
---------- |
|
|
|
|
12,922,816 |
14,034,193 |
|
|
|
|
---------- |
---------- |
|
| Operating
profit/(Ioss) |
|
|
31,301,187 |
(6,237,631) |
|
|
|
|
| Other Income |
|
|
25 |
1,862,422 |
40,906 |
|
|
|
|
---------- |
---------- |
|
|
|
33,163,609 |
(6,196,725) |
|
|
|
|
---------- |
---------- |
|
| Financial
charges |
|
|
26 |
24,190,446 |
38,516,780 |
|
| Non
operating expenses |
|
27 |
239,797 |
10,073 |
|
| Workers'
profit participation fund |
|
|
436,668 |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
24,866,911 |
38,526,853 |
|
|
|
|
---------- |
---------- |
|
|
|
|
8,296,698 |
(44,723,578) |
|
|
|
|
| Taxation |
|
|
|
| Current |
|
2,098,900 |
- |
|
| Prior year |
|
1,551,000 |
- |
|
|
|
---------- |
---------- |
|
|
|
3,649,909 |
- |
|
|
|
---------- |
---------- |
|
| Profit/(Ioss)
after taxation |
|
4,646,789 |
(44,723,578) |
|
| Accumulated
loss brought forward |
|
(261,846,493) |
(217,122,915) |
|
|
|
---------- |
---------- |
|
| Accumulated
loss carried forward |
|
(257,199,704) |
(261,846,493) |
|
|
|
========== |
========== |
|
|
| The
annexed notes from 1 to 32 form an integral part of these accounts. |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1997 |
|
|
|
|
1997 |
1996 |
|
|
|
Rupees |
Rupees |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
| Profit/(Loss)
before taxation |
|
8,296,698 |
(44,723,578) |
|
| Adjustment
for |
|
---------- |
---------- |
|
| Depreciation |
|
1,541,058 |
14,839,593 |
|
| Deferred
costs amortized |
|
54,300 |
303,980 |
|
| Profit
on disposal of operating fixes assets |
|
(1,776,237) |
- |
|
| Provision
for WPPF |
|
436,668 |
- |
|
| Financial
charges |
|
24,190,446 |
38,516,780 |
|
|
|
---------- |
---------- |
|
| Operating
profit before changes in working capital |
|
32,742,933 |
8,936,775 |
|
| Changes
in working capital |
|
---------- |
---------- |
|
| (Increase)/decrease
in current assets |
|
|
|
| Stores,
spares and loose tools |
|
(1,609,455) |
1,001,940 |
|
| Stock
in trade |
|
(1,777,484) |
(6,654,371) |
|
| Trade Debts |
|
(14,462,368) |
(9,556,848) |
|
| Advances,
deposits and prepayments Other' receivables |
(5,658,708) |
5,244,414 |
|
|
|
|
| Increase/(decrease)
in current liabilities |
|
|
| Creditors,
accrued and other liabilities |
|
8,242,314 |
(8,928,824) |
|
| Cash
generated from operations |
|
17,477,231 |
9,156,782 |
|
| Financial
charges paid |
|
(6,181,789) |
(9,569,067) |
|
|
|
---------- |
---------- |
|
| NET
CASH FLOW FROM OPERATING ACTIVITIES |
|
11,295,442 |
(412,285) |
|
|
|
|
---------- |
---------- |
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
| Long
term security deposit |
|
(3,631,067) |
(32,500) |
|
| Additions
to operating fixed assets |
|
(6,418,925) |
(7,826,657) |
|
| Capital
Work in Progress |
|
(484,567) |
- |
|
| Sale
proceed of fixed assets |
|
3,276,000 |
- |
|
|
|
---------- |
---------- |
|
| NET
CASH USED IN INVESTING ACTIVITIES |
|
(7,258,559) |
(7,859,157) |
|
|
|
---------- |
---------- |
|
