| Kohinoor Industries Limited |
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| Annual
Report 1997 |
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| CONTENTS |
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| Company Information |
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| Notice of Annual General
Meeting |
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| Directors' Report to the
Shareholders |
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| Auditors'
Report to the Members |
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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
INFORMATION |
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|
| BOARD
OF DIRECTORS |
|
| Mr.
M Naseem Saigol |
(Chairman) |
|
| Mrs.
Sehyr Saigol |
|
| Mrs.
Razia Bagum |
|
| Mr.
Shahid Sethi |
|
| Mr.
Irfan Zubair |
|
| Mr.
Imran Iqbal |
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| Mr.
Muhammad Ashraf (NIT Nominee) |
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|
| CHIEF
EXECUTIVE |
|
| Mr.
M. Azam Saigol |
|
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| COMPANY
SECRETARY |
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| Mr.
Haroon Ahmad Khan |
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| AUDITORS |
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| M/s
Manzoor Hussain Mir & Co. |
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| Chartered
Accountants |
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| BANKERS |
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| Allied
Bank of Pakistan Limited. |
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| Askari
Commercial Bank Limited. |
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| Emirates
Bank International. |
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| Faysal
Bank Limited. |
|
| Habib
Bank Limited. |
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| Muslim
Commercial Bank Limited. |
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| National
Bank Of Pakistan. |
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| Standard
Chartered Bank. |
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| Union
Bank Limited. |
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| United
Bank Limited. |
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| REGISTERED
OFFICE |
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| 6
- Egerton Road, Lahore - Pakistan. |
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| Tel:
92-42-6306131 ( 5 Lines ) |
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|
| MILLS |
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| Kohinoor
Nagar, |
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| Faisalabad. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the forty eighth Annual General Meeting of the
Shareholders of Kohinoor Industries |
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| Limited
will be held on Tuesday 31 March, 1998 at 11:00 a.m. at Mezzanine floor.
Associated House, 7- Egerton |
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| Road,
Lahore to transact the following business: |
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|
| 1.
To confirm the minutes of the forty-seventh Annual General Meeting of the
Company held on 31 March, |
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| 1997. |
|
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| 2.
To receive and adopt the Annual Audited Accounts for the year ended 30
September, 1997 along with |
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| Directors'
and auditors' reports thereon. |
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| 3.
To appoint Auditors to hold office till the conclusion of the next Annual
General Meeting and to fixed their |
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| remuneration. |
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| 4.
Any other business with the permission of the Chair. |
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| The
Share Transfer Books of the Company will remain closed from 31 March,1998 to
06 April 1998 |
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| (both
days inclusive) |
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| Notes: |
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|
| 1.
A member entitled to attend and vote at this Meeting may appoint another
member as proxy. Proxies in |
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| order
to be effective. Must be received at the Registered Office of the Company not
later than forty-eight |
|
| hours
before the time of the meeting and must be duly stamped, singed and
witnessed. |
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| 2.
Members are requested to notify the company change in their addresses, if
any. |
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| DIRECTORS'
REPORT TO THE SHAREHOLDERS |
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| The
directors of the company are pleased to place before the 48th Annual Report
together with the Financial |
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| Statements
and Auditors' Report thereon for the year ended 30th September 1997. |
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| The
year 1997 was worst in the history of the company due to various factors
particularly high cotton prices, |
|
| imposition
of sales tax continued inflation is power rates and other input costs. Due to
crises, sales revenue was |
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| reduced
by 5% as compared to last year while the administrative and financial costs
went up substantially. |
|
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| This
year financial expenses amounted to Rs. 424.6 million against Rs. 360.0
million showing an increase of Rs. 64.6 |
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| million
over the preceding year. |
|
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| Another
factor of increasing the loss this year is the heavy amount of taxation
aggregating Rs. 66.5 million, as a result |
|
| of
judgement of the Honourable Supreme Court which held the provisions of
Section 80-D and 80-CC as intravires. |
|
|
| Net
loss for the year accordingly amounted to Rs, 380.4 million after charging
depreciation of Rs. 179.8 million. |
|
| Financial
Results for the year are tabulated as follows: |
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|
|
1997 |
1996 |
|
|
(Rupees in thousand) |
|
|
| Gross
profit |
|
271,807 |
451,338 |
|
|
| Operating
Expenses |
|
192,602 |
204,750 |
|
|
---------- |
---------- |
|
|
79,205 |
246,588 |
|
| Other
Income |
|
31,629 |
18,025 |
|
| Financial
Charges |
|
424,700 |
360,056 |
|
|
| Loss
before taxation |
|
313,866 |
95,443 |
|
| Provision
for taxation |
|
66,556 |
-- |
|
|
---------- |
---------- |
|
| Net
loss after tax |
|
380,422 |
95,443 |
|
|
========== |
========== |
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| The
management of your company has taken a lot of remedial steps to make the
project's operations viable. |
|
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| Due
to currency crises, there are very bad conditions in Far-Eastern Market. To
improve our economics, and get out |
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| of
the recessive Far-Eastern Market, we are tapping the non-conventional textile
markets like Europe and USA. For |
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| this
purpose production plane has been shifted more towards synthetic yarn from
pure cotton in order to decrease |
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| working
capital requirements and improve the operational results. |
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| The
management has added 14 combing machines and one mini blow room which will
start operating in April, 1998, |
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| thereby
increasing combed yarn and coarser count production and increase our
revenues. |
|
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| The
management of your company is endeavouring to get rescheduling and
restructuring of long term as well as |
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| short
term loans and with the co-operation of related banks will succeed to get
freeze in the mark-up payable |
|
| currently.
In reciprocity of restructuring being carried out by financial institutions,
sponsors of your company will inject |
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| sizeable
amount of fresh equity. |
|
|
| Since
the last Annual General Meeting Ch. Abdul Ghafoor resigned from the Board of
Directors and in his place Mr. |
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| Imran
Iqbal has been appointed. We wish to welcome the incoming director and place
on record our appreciation to |
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| the
outgoing director. |
|
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| The
following comments are offered on the Auditors' observations as contained in
their report: |
|
|
| 1.
During the current year raw cotton has been procured for entire years
requirements at a price better than |
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| that
of last year. |
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| 2.
As reported in our last report and in the notes to the accounts, claims of
the company against Government |
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| taken
over concerns are pending with Lahore High Court, Lahore and are subjudice. |
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| 3.
In our opinion amount of Rs. 9.281 million recoverable form Kohinoor Textile
Mills Limited and Rs. 3.030 |
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| million
recoverable from local debtors is considered good and the company has filed a
suit for recovery of |
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| the
amount. The amount of Rs. 5.833 million is, however, doubtful of recovery. |
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| 4.
Loss on investments determined on the basis of stock exchange quotations, we
feel, is not proper because |
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| these
investments are not intended to be sold in stock market. Strategic value of
these investments is |
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| considered
by the management to be higher than the cost. |
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| 5.
Your company is an old one and lot of time is required in updating the fixed
assets register. However, the |
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| fixed
assets are being looked after and maintained carefully. |
|
|
| The
auditors M/s Manzoor Hussain Mir & Co., Chartered Accountants retire, and
being eligible, offer themselves for |
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| re-appointment. |
|
|
| A
statement showing the pattern of holding of shares held by the shareholders
of Kohinoor Industries Limited as on |
|
| 30th
September 1997, is attached. |
|
|
| The
worker and the management relation remained very cordial during the year. We
record our sincere thanks to our |
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| employees
and the bankers for their continued support and co-operation during the year
under review and hope the |
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| same
to be continued in future. |
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|
| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed balance sheet of KOHINOOR INDUSTRIES LIMITED as at
30 September, 1997 and |
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| the
related profit and loss account and cash flow statement, together with the
notes forming part thereof, for the year |
|
| then
ended and 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, and subject to |
|
| the
observations expressed in the annexure to this report and the extent to which
the notes referred to may effect, |
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| we
report that: |
|
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| (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 the notes thereon
have been drawn |
|
| up
in conformity with the Companies Ordinance, 1984, and are in agreement with
the books of |
|
| account
and are further in accordance with accounting policies consistently applied; |
|
|
| (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 in |
|
| 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,
profit and loss account and cash flow statement, 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 |
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| true
and fair view of the state of the company's affairs as at 30 September, 1997
and of the loss and cash |
|
| flow
for the year then ended; and |
|
|
| (d)
in our opinion, no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
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| ANNEXURE TO AUDITORS' REPORT |
|
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| 1.
Without qualifying our report we state that the company has sustained losses
of Rs. 380.422 |
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| million
which has adversely effected the working capital position. Current
liabilities have |
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| exceeded
the current assets by Rs. 1,089 million. The concept of going concern will be
valid if the |
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| management
is in a position to obtain new funds and can get rescheduling and
restructuring of |
|
| long
term and short-term loans. The matter was explained to be under negotiation. |
|
|
| 2.
The claims of the company against Government taken over concerns reported at
note -16 |
|
| remained
unresolved. The writ filed in Lahore High Court against Federal Government is
still |
|
| subjudice. |
|
|
| 3.
Trade debts at Note 20.2 and advance listed at Note 22.1 (a) and (c)
aggregating to Rs. 18.144 |
|
| million
in our opinion are doubtful of recovery for which no provision is made in the
account. |
|
|
| 4.
Attention is also invited to Note 13.6 & 21.2. |
|
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| 5.
Fixed asset registers were stated to be under preparation. |
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|
|
MANZOOR HUSSAIN MIR &
CO |
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| Lahore:
07 March, 1998 |
|
Chartered Accountants |
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|
|
| BALANCE
SHEET AS AT 30 SEPTEMBER, 1997 |
|
|
|
1997 |
1996 |
|
|
NOTE |
(Rupees in thousand) |
|
|
| SHARE
CAPITAL & RESERVES |
|
|
| Authorized
Capital |
|
| 30,000,000
ordinary shares |
|
| of
Rs. 10/- each |
|
300,000 |
300,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
(3) |
288,596 |
288,596 |
|
| Reserves |
|
(4) |
360,825 |
360,825 |
|
| Accumulated
Loss |
|
|
(682,544) |
(302,122) |
|
|
|
--------- |
--------- |
|
|
|
(33,123) |
347,299 |
|
| SURPLUS
ON REVALUATION OF FIXED ASSETS |
|
(5) |
685,011 |
713,732 |
|
|
|
|
|
| REDEEMABLE
CAPITAL |
|
(6) |
-- |
14,767 |
|
|
| DEBENTURES
AND LONG TERM LOANS |
|
| Custom
Debentures |
|
(7) |
-- |
-- |
|
| Long
term Loans |
|
(8) |
422,076 |
518,141 |
|
|
|
--------- |
--------- |
|
|
422,076 |
518,141 |
|
| LIABILITIES
AGAINST ASSETS SUBJECT TO |
|
| FINANCE
LEASE |
|
(9) |
85,734 |
144,998 |
|
|
| CURRENT
LIABILITIES |
|
| Shod
term loans |
|
(10) |
1,193,374 |
915,890 |
|
| Current
portion of long term liabilities |
|
(11) |
400,130 |
289,709 |
|
| Creditors,
provisions, and accrued charges |
|
(12) |
604,368 |
361,827 |
|
| Unclaimed
dividend |
|
611 |
611 |
|
|
--------- |
--------- |
|
|
2,198,483 |
1,568,037 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
(13) |
-- |
-- |
|
|
--------- |
--------- |
|
|
3,358,181 |
3,306,974 |
|
|
========= |
========= |
|
| The
annexed notes (1) to (34) form an integral part of these financial
statements. |
|
|
| LAND-Freehold
(Non Operating) |
|
(14) |
106,172 |
125,800 |
|
| OPERATING
ASSETS |
|
(15) |
2,095,161 |
2,095,108 |
|
|
|
|
|
| GOVERNMENT
TAKEN OVER CONCERNS |
|
(16) |
32,126 |
33,640 |
|
|
|
|
|
| LONG
TERM LOANS -UNSECURED |
|
(17) |
-- |
6,586 |
|
| LONG
TERM DEPOSITS |
|
|
15,124 |
21,414 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stores,
spares and loose tools |
|
(18) |
45,794 |
34,088 |
|
| Stock-in-trade |
|
(19) |
352,399 |
217,526 |
|
| Trade
debts |
|
(20) |
124,627 |
98,597 |
|
| Short
term investments |
|
(21) |
146,250 |
146,250 |
|
| Advances,
deposits, prepayments |
|
|
|
| and
other receivable |
|
(22) |
426,541 |
496,842 |
|
|
|
|
| Cash
and Bank Balances |
|
(23) |
13,987 |
31,123 |
|
|
|
--------- |
--------- |
|
|
1,109,598 |
1,024,426 |
|
|
--------- |
--------- |
|
|
3,358,181 |
3,306,974 |
|
|
========== |
========== |
|
|
|
| PROFIT
& LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
|
1997 |
1996 |
|
|
NOTE |
(Rupees in thousand) |
|
|
| SALES |
|
(24) |
3,173,682 |
3,333,785 |
|
| COST
OF SALES |
|
(25) |
2,901,876 |
2,882,1O9 |
|
|
|
---------- |
---------- |
|
| GROSS
PROFIT |
|
271,806 |
451,676 |
|
|
| OPERATING
EXPENSES |
|
| Administrative |
|
(26) |
63,171 |
60,798 |
|
| Selling |
|
(27) |
129,431 |
143,952 |
|
|
|
---------- |
---------- |
|
|
|
192,602 |
204,750 |
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
79,204 |
246,926 |
|
| OTHER
INCOME |
|
(28) |
31,630 |
17,687 |
|
|
|
|
---------- |
---------- |
|
|
|
|
110,834 |
264,613 |
|
| FINANCIAL
EXPENSES |
|
(29) |
424,700 |
360,056 |
|
|
|
|
---------- |
---------- |
|
| LOSS
BEFORE TAXATION |
|
(313,866) |
(95,443) |
|
|
|
| PROVISION
FOR TAXATION: |
|
| CURRENT |
|
18,012 |
-- |
|
| PRIOR
YEARS' |
|
48,544 |
-- |
|
|
---------- |
---------- |
|
|
66,556 |
-- |
|
| LOSS
AFTER TAXATION |
|
(380,422) |
(95,443) |
|
|
| ACCUMULATED
LOSS BROUGHT FORWARD |
|
(302,122) |
(206,679) |
|
|
---------- |
---------- |
|
| ACCUMULATED
LOSS CARRIED TO |
|
|
|
| BALANCE
SHEET |
|
(682,544) |
(302,122) |
|
|
========== |
========== |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
|
1997 |
1996 |
|
|
(Rupees in thousand) |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Net
(Loss) before taxation |
|
(313,866) |
(95,443) |
|
| Adjustment
for: |
|
| Depreciation |
|
179,806 |
147,347 |
|
| Provision
of claims and obsolete stores |
|
3,461 |
|
|
| Profit
on Sale of assets |
|
(32,931) |
(7,352) |
|
| Financial
charges |
|
424,700 |
360,056 |
|
|
575,036 |
500,051 |
|
|
--------- |
--------- |
|
| Operating
profit before working capital changes |
|
261,170 |
404,608 |
|
| Changes
in working capital |
|
|
|
| (Increase)/Decrease
in store and spares |
|
(13,947) |
(4,356) |
|
| (increase)
/ Decrease in stock in trade |
|
(134,873) |
12,346 |
|
| (Increase)
/ Decrease in trade debts |
|
(26,030) |
(52,544) |
|
| (Increase)
/ Decrease in advances, deposits and prepayments |
28,321 |
(181,989) |
|
| Increase
/ (Decrease) in creditors, accrued and other liabilities |
154,760 |
(58,618) |
|
|
8,231 |
(285,161) |
|
|
--------- |
--------- |
|
| CASH
GENERATED FROM OPERATIONS |
|
269,401 |
119,447 |
|
| Payments
for: |
|
| Financial
charges |
|
(336,919) |
(263,887) |
|
| Income
tax |
|
(19,297) |
(21,247) |
|
|
--------- |
--------- |
|
|
(356,216) |
(285,134) |
|
|
--------- |
--------- |
|
| Net
cash from operating activities |
|
(86,815) |
(165,687) |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Fixed
capital expenditure |
|
(200,793) |
(232,574) |
|
| Sale
proceed of fixed assets |
|
44,774 |
9,874 |
|
| Long
term deposits and loans |
|
5,531 |
22,372 |
|
| Recovery
from state owned units |
|
2,359 |
2,263 |
|
|
--------- |
--------- |
|
| Net
cash used in investing activities |
|
(148,129) |
(198,065) |
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Long
term loans received |
|
74,511 |
372,576 |
|
| Shod
term loans |
|
277,484 |
241,466 |
|
| Repayments
of: |
|
|
|
| Redeemable
capital |
|
(11,718) |
(20,895) |
|
| Long
term loans |
|
(92,149) |
(167,982) |
|
| Finance
Lease |
|
(25,613) |
(59,440) |
|
| Custom
debentures |
|
(4,707) |
-- |
|
|
--------- |
--------- |
|
|
(134,187) |
(248,317) |
|
|
--------- |
--------- |
|
| Net
cash generated / (Used) in financing activities |
|
217,808 |
365,725 |
|
| Net
increase / (Decrease) in cash and bank balances |
|
(17,136) |
1,973 |
|
| Cash
and bank balances as at 1st Oct. 1996 |
|
31,123 |
29,150 |
|
|
--------- |
--------- |
|
| Cash
and bank balances as at 30th September, 1997 |
|
13,987 |
31,123 |
|
|
========= |
========= |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| Kohinoor
Industries Limited is public quoted company incorporated in Pakistan under
the Companies Act |
|
| 1913,
(now the Companies Ordinance, 1984). The principal activity of the company is
to manufacture and |
|
| sell yarn |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
| The
policies adopted by the company, which are consistent with those of the
previous year (except those |
|
| stated
otherwise) are as follows: |
|
|
| 2.1
ACCOUNTING CONVENTION |
|
| These
accounts have been prepared on the basis of historical cost convention. |
|
|
| 2.2
STAFF RETIREMENT BENEFITS |
|
| The
company operates contributory provident fund for all its permanent employees
and |
|
| contribution,
based on salaries and wages, are made monthly to cover the obligations.
Gratuity is |
|
| accounted
for as and when paid. |
|
|
| 2.3
TAXATION |
|
| The
charge is based on Taxable income, if any, as adjusted for tax purposes and
after taking into |
|
| account
all tax credits, rebates and available tax losses. Tax deducted from export
sales under |
|
| Section
80-C.C is considered final discharge. No provision has been made for deferred
taxation as |
|
| the
major timing differences are not expected to reverse for a considerable
period. |
|
|
| 2.4
FOREIGN CURRENCY TRANSLATION |
|
| Foreign
liabilities (except those for which foreign exchange rates have been booked,
and or |
|
| translated
at the fixed rates) are converted into local currency at the rate prevailing
at the balance |
|
| sheet
date. |
|
|
| 2.5
CONTINGENCIES AND COMMITMENTS |
|
| These
are accounted for as and when these become due. |
|
|
| 2.6
FIXED ASSETS AND DEPRECIATION |
|
|
| All
fixed assets are shown at their purchase cost, except land, building and
machinery which are |
|
| stated
at revalued amount, together with any incidental expenses of acquisition,
including foreign |
|
| exchange
rate variance and interest accrued up to the date when the assets commence |
|
| commercial
production. |
|
| Depreciation
is calculated so as to right off the cost of fixed assets, except free hold
land, on a |
|
| reducing
balance basis using the normal rates currently applicable for tax purposes. A
full year's |
|
| depreciation
is charged in the year of acquisition except major additions to machinery
which are |
|
| depreciated
on prorata basis for the working period. No depreciation is charged in the
year of |
|
| disposal.
Maintenance and normal repairs are charged to income as and when incurred
while major |
|
| renewals
and improvements are capitalized. |
|
|
| 2.7
ASSETS SUBJECT TO FINANCE LEASE |
|
| These
are stated at lower of present value of minimum lease payments under the
lease |
|
| agreements
or the fair value of such assets. The aggregate amount of obligations
relating to these |
|
| assets
are accounted for at net present value of liabilities. Depreciation on these
assets is charged |
|
| in
line with normal deprecation policy adopted for assets owned by the company. |
|
|
| 2.8
INVESTMENTS |
|
| Investments
are stated at cost and no provision is made for diminution in its value. |
|
|
| 2.9
STORES, SPARES AND STOCKS |
|
|
| These
are valued as follows: |
|
| Stores
and spares |
|
- At average cost except
store in transit which are |
|
|
Valued at actual cost. |
|
| Raw
materials |
|
- At lower of average
cost or market value. |
|
| Work
in process |
|
- At average cost |
|
| Finished
goods: |
|
| Mills
made |
|
At moving average
production cost. |
|
| Local
purchase |
|
At average purchase
price. |
|
|
| 2.1 REVENUE RECOGNITION |
|
| Sales
are recorded on dispatch of goods to customers. |
|
|
| 3.
ISSUED, SUBSCRIBED AND PAID UP CAPITAL |
|
|
|
1997 |
1996 |
|
|
(Rupees in thousand) |
|
|
| 12,095,482
Ordinary shares of Rs. 10/- |
|
| each
fully paid in cash |
|
120,955 |
120,955 |
