| ELAHI SPINNING & WEAVING MILLS LTD. |
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| ANNUAL
REPORT 1997 |
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| CONTENTS |
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| COMPANY
INFORMATION |
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| NOTICE
OF MEETING |
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| DIRECTORS'
REPORT |
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| AUDITORS'
REPORT |
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| BALANCE
SHEET |
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| PROFIT
AND LOSS ACCOUNT |
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| CASH
FLOW STATEMENT |
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| NOTES
TO THE ACCOUNTS |
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| PATTERN
OF HOLDING OF SHARES |
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| COMPANY
INFORMATION |
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| CHAIRMAN
& CHIEF EXECUTIVE |
Jahangir Elahi |
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| DIRECTORS |
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|
Alamgir Elahi |
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|
Tanvir Elahi |
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|
Ahmed Jahangir |
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|
Amir Jahangir |
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|
Akhlaq Ali Khan |
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|
Humayun Nabi Jan |
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| COMPANY
SECRETARY |
|
Humayun Nabi Jan |
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| GENERAL
MANAGER ACCOUNTS |
Nadir Ali Awan |
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| AUDITORS |
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M/s Zahid Jamil &.Co |
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Chartered Accountants |
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(An Independent Member of
BKR |
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International) |
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| LEGAL
ADVISOR |
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Sajjad Law Associates |
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Legal Advisors Advocates
Solicitors |
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| BANKERS |
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Allied Bank of Pakistan |
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Bankers' Equity Limited |
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Citi Bank N.A. |
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DEG - German Investment
and Development Co. |
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FMO - Netherlands
Development Finance Co. |
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Standard Chartered Bank |
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United Bank Limited |
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| REGISTERED
OFFICE |
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31/C- 1 Ghalib Road,
Gulberg III, Lahore, Pakistan |
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Tel: (9242) 571 0216- 20
/ 575 1811 - 5 |
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Fax: (9242) 571 2881 /
575 6686 |
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| PLANT |
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49lh Kilometer, Lahore
Multan Road, |
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Near Bhai Pheru, Tehsil
Chunian, District Kasur. |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the Tenth Annual General Meeting of the Shareholders of |
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| Elahi
Spinning & Weaving Mills Limited will be held at the Registered office of
the |
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| company
at 31/C - 1, Ghalib Road, Gulberg III, Lahore, on Monday March 30, 1998 at |
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| 4.00
P.M. to transact the following business: |
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| 1.
To confirm the minutes of the last General Meeting. |
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| 2.
To receive and adopt the audited accounts for the. year ended September 30,
1997 |
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| together
with the Auditors' and Directors' report thereon. |
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| 3.
To appoint auditors for the current year and fix their remuneration. The
present auditors |
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| M/s
Zahid Jamil & Co. Chartered Accountants, (An Independent Member of BKR |
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| International)
being eligible, have offered themselves for re-appointment. |
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|
| 4.
To elect Seven Directors, as fixed by the Board for the term of three years,
commencing |
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| from
March 30, 1998. The retiring Directors are: Mr. Jahangir Elahi, Mr. Alamgir
Elahi, Mr. |
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| Tanvir
Elahi, Mr. Ahmed Jahangir, Mr. Amir Jahangir, Mr. Akhlaq All Khan and Mr. |
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| Humayun
Nabi Jan. The retiring Directors are eligible for re-election. |
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| 5.
To fix the remuneration of Chief Executive Officer and or full time working
Directors. |
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| 6.
To discuss any other matter with the permission of the chair. |
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| NOTES: |
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| 1.
The Share Transfer Books of the Company shall remain closed from March 28,
1998 to |
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| April
03, 1998 (both days inclusive). Transfers received in order, at 31/ C - i
Ghalib Road, |
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| Gulberg
III, Lahore, the Share Department of the Company, at the close of Business on |
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| March
27, 1998 shall be treated in time. |
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|
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| 2.
A member entitled to attend and vote at the above meeting may appoint another |
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| member
as proxy. |
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| 3.
Proxies, in order to be effective, must be received at the Registered Office
of the Company |
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| not
later than forty eight hours before the time of meeting and must be duly
stamped, |
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| signed
and witnessed. |
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| 4.
Shareholders are requested to promptly notify the Company of any change in
their |
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| addresses. |
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| DIRECTORS'
REPORT |
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| Dear
Shareholders, |
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| We
welcome you to the tenth Annual General Meeting of the company and present |
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| our
annual report together with audited accounts of the company for the year
ended |
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| September
30, 1997 |
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| OPERATING
RESULTS AND PROSPECTS |
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| We
are pleased to report that after three consecutive years of losses, your
company |
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| has
turned the corner this year, reporting a pre tax profit of Rs. 16.9 million
and an |
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| earning
per share of Rs. 1.09. The all round improved performance is mainly |
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| attributable
to better market conditions, improved production efficiencies and better |
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| financial
management. However considering the requirement of consolidation |
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| management
has recommended to pass over the dividend. |
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| Although
we anticipate these improved trends to continue in foreseeable future, yet |
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| the
important factors such as governmental policies, conditions of the bigger
Asian |
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| economies
vis-a-vis recent foreign exchange related turmoil and protective attitude of |
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| the
importing countries shall have a direct effect on the future performance of
the |
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| company.
Our governments now more than ever before need to rationalize economic |
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| policies
so as to provide a level playing field to the industry enabling them to
compete |
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| in
contemporary competitive free trade environment in world market place. |
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| MERGER-AN
UPDATE |
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| As
reported in previous year report, the proposed merger with associated listed |
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| company
Taj Textile Mills Limited was initiated during the year. The Lahore High
Court |
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| appointed
a Chairman for conducting Extra Ordinary General Meeting to consider |
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| and
approve Scheme of merger. Our consultants to the merger had completed all |
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| other
related requirements and with the submission of Chairman's report to the |
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| Honorable
Judge all necessary formalities have been completed. It is expected that |
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| the
Lahore High Court will shortly give it's ascent to the proposed scheme. |
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| PATTERN
OF SHARE HOLDING |
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| The
pattern of shareholding is annexed. |
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| AUDITORS |
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| The
present auditors Zahid Jamil & Company, Chartered Accountants, retire and |
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| being
eligible offer themselves for re-appointment. |
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| ACKNOWLEDGMENT |
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| The
directors wish to place on record their appreciation for the hard work and |
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| initiative
of all the staff and workers of the company. |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed balance sheet of ELAHI SPINNING 8,: WEAVING MILLS |
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| LIMITED
as at September 30, 1997 and the related profit and loss account and cash |
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| flow
statement, together with the notes forming part thereof, for the year then
ended |
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| and
we state that we have obtained all the information and explanations which to |
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| the
best of our knowledge and belief were necessary for the purposes of our audit
and |
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| after
due verification thereof, we report that: |
|
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| (a)
in our opinion, proper books of account have been kept by the company as |
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| required
by the Companies 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 |
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| thereon
have been drawn up in conformity with the Companies |
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| Ordinance,
1984 and are in agreement with the books of account and |
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| are
further in accordance with accounting policies consistently |
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| applied: |
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|
|
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| ii)
The expenditure incurred during the year was for the purpose of the |
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| company's
business; and |
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| iii)
the business conducted, investment made and the expenditure incurred |
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| during
the year were in accordance with the objects of the Company; |
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| (c)
in our opinion and to the best of our information and according to the |
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| explanations
given to us, except for the effect of the matter referred to in note |
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| 24
the balance sheet, profit and loss account. and the cash flow statement |
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| together
with the notes forming part thereof, give the information required by |
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| the
Companies Ordinance, 1984 in the manner so required and respectively |
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| give
a true and fair view of the state of the company's affairs as at September |
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| 30,
1997 and of the profit and cash flows lot the year then ended; and |
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| (d)
in our opinion, no zakat was deductible at source under the Zakat and Ushr |
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| Ordinance,
1980. |
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|
(ZAHID JAMIL & COMPANY) |
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| Lahore:
February 23, 1998 |
Chartered Accountants |
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| Balance
Sheet as at 30 September, 1997 |
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|
1997 |
1996 |
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NOTE |
RUPEES |
RUPEES |
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| SHARE
CAPITAL AND RESERVES |
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| Share
Capital |
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| Authorised |
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|
| 20,000,000
ordinary shares of |
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| Rs.
10/- each |
|
200,000,000 |
200,000,000 |
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|
========== |
========== |
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| Issued,
subscribed and paid up |
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| 15,491,190
ordinary shares |
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|
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| of
Rs. 10/-each fully paid in cash |
|
154,911,900 |
154,911,900 |
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| Revenue
reserves |
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|
31,000,000 |
31,000,000 |
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| Accumulated
Loss |
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|
(102,630,478) |
(119,579,577) |
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|
---------- |
---------- |
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|
83,281,422 |
66,332,323 |
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| LONG
TERM LOANS |
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3 |
115,087,022 |
112,037,181 |
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| LIABILITY
AGAINST ASSETS SUBJECT TO |
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| FINANCE
LEASE |
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4 |
449,334 |
0 |
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| DEFERRED
LIABILITIES |
|
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| Gratuity |
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|
4,010,311 |
4,282,486 |
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| CURRENT
LIABILITIES |
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| Short
term finances |
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5 |
230,109,958 |
302,022,607 |
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| Current
portion of long term |
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|
|
| liabilities |
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6 |
18,100,914 |
29,053,343 |
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| Creditors,
accrued and other |
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|
| liabilities |
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7 |
90,142,095 |
90,900,965 |
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|
---------- |
---------- |
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|
338,352,967 |
421,976,915 |
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| CONTINGENCIES
AND COMMITMENTS |
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8 |
- |
- |
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---------- |
---------- |
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|
541,181,056 |
604,628,905 |
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|
========== |
========== |
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| Auditor's
report to the members is annexed hereto. The annexed notes from 1 to 28 from |
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| an
integral part of these accounts. |
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| FIXED
CAPITAL EXPENDITURES |
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|
| Operating
fixed assets |
|
9 |
226,512,037 |
247,603,811 |
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| Capital
work in progress |
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|
0 |
372,355 |
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|
---------- |
---------- |
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|
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|
226,512,037 |
247,976,166 |
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| LONG
TERM DEPOSITS AND |
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| DEFERRED |
|
10 |
5,964,560 |
9,923,810 |
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|
|
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| CURRENT
ASSETS |
|
|
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|
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|
---------- |
---------- |
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| Stores
and spares |
|
11 |
9,437,995 |
10,666,230 |
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| Stock
in trade |
|
12 |
208,032,335 |
170,871,412 |
|
| Trade debts |
|
13 |
20,785,952 |
35,334,371 |
|
| Short
term investments |
|
14 |
7,202,000 |
44,508,298 |
|
| Advances,
deposits |
|
|
| and
prepayments |
|
15 |
29,266,905 |
21,507,173 |
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| Other
receivables |
|
16 |
30,071,247 |
59,275,474 |
|
| Cash
and bank balances |
|
17 |
3,908,025 |
4,565,971 |
|
|
|
|
---------- |
---------- |
|
|
|
|
308,704,459 |
346,728,929 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
541,181,056 |
604,628,905 |
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|
|
|
========== |
========== |
|
|
|
| Profit
and loss account for the year ended 30 September 1997 |
|
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|
|
|
| SALES |
|
18 |
659,656,687 |
564,141.92 |
|
| COST
OF SALES |
|
19 |
543,066,743 |
499,101,866 |
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|
|
|
---------- |
---------- |
|
| GROSS PROFIT |
|
|
116,589,944 |
65,040,056 |
|
|
|
|
| OPERATING
EXPENSES |
|
|
| Administration
and general |
|
20 |
12,683,741 |
13,325,126 |
|
| Selling
and distribution |
|
21 |
26,116,155 |
25,294,374 |
|
|
|
|
---------- |
---------- |
|
|
|
|
38,799,896 |
38,619,500 |
|
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
77,790,048 |
26,420,556 |
|
| OTHER INCOME |
|
22 |
9,968,316 |
13,987,896 |
|
|
|
|
---------- |
---------- |
|
|
|
|
87,758,364 |
40,408,452 |
|
| OTHER
CHARGES |
|
|
| Financial |
|
23 |
69,435,124 |
77,868,624 |
|
| Amortization
of deferred cost |
|
|
482,083 |
802,252 |
|
| Workers
profit participation fund |
|
|
892,058 |
0 |
|
|
|
|
---------- |
---------- |
|
|
|
|
70,809,265 |
78,670,876 |
|
|
|
|
---------- |
---------- |
|
| PROFIT/(LOSS)
FOR THE YEAR - Before taxation |
|
16,949,099 |
(38,262,424) |
|
| Taxation |
|
24 |
0 |
0 |
|
|
|
|
---------- |
---------- |
|
| PROFIT/(LOSS)
AFTER TAXATION |
|
|
16,949,099 |
(38,262,424) |
|
| ACCUMULATED
PROFIT/(LOSS) BROUGHT FORWARD |
|
(119,579,577) |
(81,317,153) |
|
|
|
|
|
| ACCUMULATED
PROFIT/(LOSS) CARRIED FORWARD |
|
---------- |
---------- |
|
| TO
BALANCE SHEET |
|
|
(102,630,478) |
(119,579,577) |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes from 1 to 28 form an integral part of these accounts. |
|
|
|
| Cash
Flow Statement for the year ended 30 September, 1997 |
|
|
|
|
|
|
1997 |
1996 |
|
|
|
|
RUPEES |
RUPEES |
|
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
| Net
profit before taxation |
|
16,949,099 |
(38,262,424) |
|
| ADJUSTMENTS
FOR:- |
|
|
|
| Depreciation |
|
24,265,160 |
26,586,848 |
|
| Amortization
of deferred cost |
|
4,220,011 |
4,215,823 |
|
| Provision
for gratuity |
|
(272,175) |
1,709,269 |
|
| (Profit)/loss
on sale of fixed assets |
|
165,412 |
(11,806,133) |
|
|
|
---------- |
---------- |
|
|
|
28,378,408 |
20,705,807 |
|
|
|
---------- |
---------- |
|
| Cash
flows from operating activities |
|
|
| before
working capital changes |
|
45,327,507 |
(17,556,617) |
|
|
|
|
---------- |
---------- |
|
| (INCREASE)/DECREASE
IN CURRENT ASSETS: |
|
|
| Stores
and spares |
|
1,228,235 |
(1,143,101) |
|
| Stock
in trade |
|
(37,160,923) |
23,085,380 |
|
| Trade debts |
|
14,548,419 |
(21,246,363) |
|
| Advances,
deposits and prepayments |
|
(7,759,732) |
2,100,034 |
|
| Other
receivables |
|
29,204,227 |
(33,433,880) |
|
|
|
---------- |
---------- |
|
|
|
60,226 |
(30,637,930) |
|
|
|
---------- |
---------- |
|
|
|
45,387,733 |
(48,194,547) |
|
| INCREASE/(DECREASE)
IN CURRENT LIABILITIES |
|
---------- |
---------- |
|
| Short
term running finances |
|
(71,912,649) |
35,461,000 |
|
| Creditors,
accrued and other liabilities |
|
(758,870) |
(23,517,716) |
|
|
|
---------- |
---------- |
|
|
|
(72,671,519) |
11,943,284 |
|
|
|
---------- |
---------- |
|
| NET
CASH FROM OPERATING ACTIVITIES |
|
(27,283,786) |
-36,251,263 |
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
| Fixed
capital expenditure |
|
(3,558,766) |
(4,332,394) |
|
| Sale
proceeds of fixed assets |
|
592,323 |
20,204,229 |
|
| Long
term deposits |
|
(260,761) |
(789,935) |
|
| Short
term investment |
|
37,306,298 |
21,122,400 |
|
|
|
---------- |
---------- |
|
|
|
|
34,079,094 |
36,204,300 |
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
| Repayment
of lease rental |
|
|
(950,232) |
(2,546,354) |
|
| Repayment
of long term loans |
|
|
(7,195,022) |
0 |
|
| Proceeds
from finance lease |
|
|
692,000 |
0 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
(7,453,254) |
(2,546,354) |
|
|
|
|
|
---------- |
---------- |
|
| NET
INCREASE IN CASH AND CASH EQUIVALENTS |
|
(657,946) |
(2,593,317) |
|
| CASH
AND CASH EQUIVALENTS AT THE |
|
|
|
|
| BEGINNING
OF THE YEAR |
|
|
|
4,565,971 |
7,159,288 |
|
| CASH
AND CASH EQUIVALENTS AT THE |
|
|
---------- |
---------- |
|
| END
OF THE YEAR |
|
|
|
3,908,025 |
4,565,971 |
|
|
|
========== |
========== |
|
|
| NOTES
TO THE ACCOUNT |
|
|
| 1.
THE COMPANY AND ITS ACTIVITIES |
|
| Elahi
Spinning And Weaving Mills Limited is a public limited company, incorporated |
|
| in
Pakistan under the Companies Ordinance 1984 on August 27,1987 and is listed
on |
|
| all
the three stock exchanges in Pakistan. The principal business of the company
is |
|
| manufacture
and sale of textile products. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared on the basis o! historical cost convention. |
|
|
|
|
| 2.2
Staff Retirement Benefits |
|
| The
company operates an unfunded gratuity scheme covering all its employees, |
|
| Provision
is made annually in the accounts to cover the liability under this scheme. |
|
|
| 2.3 Taxation |
|
|
| The
charge for current taxation for the year is based on taxable income at the
current |
|
| rates
of taxation after taking into account applicable tax credit and rebates, if
any. |
|
| The
company accounts for deferred taxation, using the liability method on all |
|
| significant
timing differences. |
|
|
|
|
| 2.4
Fixed Capital Expenditure and Depreciation |
|
| Operating
taxed assets are stated at cost less accumulated depreciation except |
|
| freehold
land and capital work in progress which are stated at cost. |
|
|
| Depreciation
on operating fixed assets is charged to income applying reducing |
|
| balance
method at the rates specified in the operating fixed assets schedule. Full |
|
| years'
depreciation is charged on assets acquired during the year. However, |
|
| depreciation
for proportionate period o! use is charged on major product costs |
|
| capitalised
during the year, normal repairs and maintenance of assets are charged to |
|
| income
as and when incurred. Major renewals and replacements are capitalized. |
|
| Gains
or losses on disposal of taxed assets are included in current income. |
|
|
| 2.5
Assets Subject to Finance Lease |
|
| These
are stated at lower of present value of minimum lease payments under the |
|
| lease
agreements and the fair value of assets acquired on lease Aggregate amount o~ |
|
| obligation
relating to assets subject to finance lease is accounted for at net present |
|
| value
of liabilities. Assets so acquired are amortized over the useful life of the
assets. |
|
| Amortization
of leased assets is charged to current year's income. |
|
|
|
|
| 2.6
Deterred Costs |
|
| Expenses,
the benefit of which is expected to spread over several years, are deferred |
|
| and
amortised over their useful life not exceeding five years. |
|
|
| 2.7
Stores and Spares |
|
| These
are valued at cost calculated on moving average basis except goods in transit |
|
| which
are valued at cost. |
|
|
| 2.8
Stock in Trade |
|
| These
are valued at the lower of cost and net realisable value applying the
following |
|
| basis |
|
|
| a)
Raw material |
|
Weighted average cost. |
|
| b)
Work in process |
|
Average manufacturing
cost |
|
| c)
Finished goods |
|
Average manufacturing
cost |
|
| d) Waste |
|
|
Net realizable value |
|
|
| 2.9
Investments |
|
| These
are stated at cost. |
|
|
|
|
| 2.10
Foreign Currency Translations |
|
| Assets
and liabilities in foreign currencies are translated into Pak Rupee at the |
|
| exchange
rates approximating those prevailing at the balance sheet date except |
|
| where
forward exchange contracts are entered into for repayment of liabilities. |
|
| Exchange
differences in respect of foreign currency loans obtained for acquisition of |
|
| fixed
assets are incorporated in the cost of respective assets. All other exchange |
|
| differences
are charged to current year's income. |
|
|
| 2.11
Revenue Recognition |
|
| Sales
are recorded on despatch of goods. |
|
|
| 3.
LONG TERM LOANS |
|
|
| DESCRIPTION |
|
CURRENCY |
BALANCE DUE IN |
1997 |
1996 |
|
|
|
FOREIGN CURRENCY |
RUPEES |
RUPEES |
|
| Banker's
Equity |
|
|
|
| Limited
(Note 3.1) |
|
|
|
| Long
Term Loan |
|
|
|
| (Note 3.2)) |
|
Pak Rupee |
|
18,313,612 |
24,418,150 |
|
| Medium
Term Finance |
|
|
|
|
| Certificates |
|
|
|
|
| (Note 3.3) |
|
Pak Rupee |
|
23,327,660 |
24,418,144 |
|
|
|
|
|
|
| Netherland |
|
|
|
|
| Development |
|
|
Netherland |
|
| Finance
Company |
|
|
|
| Limited |
|
|
Gilder |
|
| FMO
(Note 3.4) |
|
(DFL) |
5,200,000 |
48,793,680 |
48,793,680 |
|
|
|
|
| DEC-German |
|
|
|
| Investment |
|
German Mark |
|
| and
Development |
|
|
|
| Company |
|
(DM) |
4,000,000 |
42,582,600 |
42,582,600 |
|
| (Note 3.5) |
|
|
|
|
|
|
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|
|
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