| Service Industries Textiles Limited |
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|
| Annual
Report 1998 |
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|
| COMPANY
INFORMATION |
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|
| CHIEF
EXECUTIVE |
Mohammad Hameed |
|
|
|
|
| DIRECTORS |
|
Asad Hameed |
|
|
|
Ahmad Mahmood |
|
|
|
Hasan Mehmood |
|
|
|
Mariam Hameed |
|
|
|
Sajida Chaudhry |
|
|
|
Siddiqa Liaquat |
|
|
|
Shahid Anwar
(Nominee-I.C.P.) |
|
|
|
|
| SECRETARY |
|
Ralph Nazirullah |
|
|
| BANKERS |
|
United Bank Limited |
|
|
|
National Bank of Pakistan |
|
|
|
Habib Bank Limited |
|
|
|
|
| AUDITORS |
|
Taseer Hadi Khalid &
Company |
|
|
|
Chartered Accountants |
|
|
|
|
| LEGAL
ADVISORS |
Hassan & Hassan |
|
|
|
Advocates |
|
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| REGISTERED
OFFICE |
38 Empress Road, Lahore. |
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|
Telephones: 6304561-3,
6367862-3 |
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|
Telegram: PRIMEPAK |
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|
Telex: 44577 PRIME PK |
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|
Telefax: (92-42) 6367861 |
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|
E-mail:
primsoft@lhr.comsats.net.pk |
|
|
| MILLS |
|
G.T. Road, Gujrat |
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|
Telephones: 25085,514065 |
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|
Telex: 45344 SERTX PK |
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|
Telefax: (92-4331) 524161 |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the 37th Annual General Meeting of the members of the |
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| Company
will be held on Wednesday, March 31, 1999, at 1230 hours at |
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| branch
office, Attari Saroba, Atta Buksh road bank stop, Ferozepur road, Lahore to
transact |
|
| the
followings business: |
|
|
| 1.
To confirm the minutes of the 36th Annual General Meeting. |
|
|
|
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| 2.
To receive and adopt the audited accounts together with the Directors and
Auditors |
|
| reports
for the year ended September 30, 1998. |
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|
|
|
|
| 3.
To elect seven Directors in accordance with the provisions of section 178 of
the |
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| Companies
Ordinance, 1984. Following are the retiring directors: |
|
|
| 1.
Mr. Mohammad Hameed |
|
5. Mrs. Mariam Hameed |
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| 2.
Mr. Asad Hameed |
|
6. Mrs. Siddiqa Liaquat |
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| 3.
Mr. Ahmad Mahmood |
|
7. Mrs. Sajida Chaudhry |
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| 4.
Mr. Hasan Mahmood |
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|
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| 4.
To appoint auditors and to fix their remuneration. |
|
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| 5.
Any other business with the permission of the chair. |
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|
BY ORDER OF THE BOARD |
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|
|
|
|
|
|
| Lahore |
|
|
|
Ralph Nazirullah |
|
| March
10, 1999 |
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|
SECRETARY |
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|
| NOTES |
|
|
| 1.
A member entitled to attend and vote at the meeting may appoint another
member |
|
| as
his/her proxy to attend and vote. Votes may be given either personally or by
proxy |
|
| or
by attorney, and in case of a corporation by a representative duly
authorised. |
|
|
|
|
| 2.
The instrument of proxy duly executed in accordance with the Articles of
Association |
|
| of
the Company should be deposited at the registered office of the Company at
least |
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| 48
hours before the time of the meeting. |
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|
|
|
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| 3.
Transfers received in order upto the close of business on 22nd March, 1999
will be |
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| considered
in time to effect the voting rights. |
|
|
|
| 4
The share transfer books of the Company will remain closed from 23rd March to |
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| 31st
March, 1999 (both days inclusive). |
|
|
| 5.
The shareholders desirous of contesting the election are advised to send
their |
|
| nomination
and consent to act as Director to reach the Company fourteen days |
|
| earlier
than the date of holding the election. |
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|
|
|
| CHIEF
EXECUTIVE'S REVIEW |
|
|
| The
37th Annual Report is submitted along with financial statements for the year
ended |
|
| September
30, 1998. |
|
|
| First
of all, I take this opportunity to thank all the shareholders who through
Company's Board |
|
| of
Directors appointed me as Company's Chief Executive in place of the late
Mumtaz Hameed. |
|
| I
hereby earnestly pledge to justify the appointment by putting best efforts to
achieve improvement |
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| in
future years of the Company. |
|
|
| Mumtaz
Hameed left all of us on the fateful morning of Monday, the 3rd August, 1998.
His |
|
| sudden
and unfortunate death created such vacuum that it may take years to fulfill
this great |
|
| loss. |
|
|
| The
late Mumtaz Hameed was born on the 7th September, 1947 at Lahore. After
completing |
|
| his
education from Government College and University of the Punjab, Lahore, he
went to |
|
| Indiana
University for his MBA. He served PIA and WAPDA successfully as a first ever
Chairman |
|
| from
private sector. Like his father, Chaudhry Muhammad Saeed; he remained
President Lahore |
|
| Chamber
of Commerce and Industry during 1987-88. Beside this he was holding important |
|
| offices
in trade and industry including Member Executive Board of Pakistan Federation
of |
|
| Chamber
of Commerce and Industry (1987-90). Member Employers Pakistan Labour
Commission |
|
| (1986-89),
Member of Chunian Industrial Development Authority. |
|
|
| I
would like to thank all the shareholders, friends, staff members, companies
organisations and |
|
| institutions,
who sent condolence messages or participated in the solemn ritual ceremonies |
|
| of
the late Mumtaz Hameed. Let's pray to Almighty Allah that his soul may rest
in eternal peace |
|
| and
give strength to the bereaved family to bear this irreparable loss. Amen. |
|
|
| The
Company has incurred loss after taxation of Rs. 104 million during the year
under review. |
|
| Beside
exorbitant increase in input costs and the most severe glogal textile
recession, the main |
|
| reason
for this huge loss is outdated machinery at the plant. We are in the process
of implementing |
|
| a
downsizing plan by way of disposing of the obsolete machinery and focusing on
the latest |
|
| machinery
installed in the recent years. The Company would be reducing its installed
capacity |
|
| to
nearly 28,000 spindles from 47,420 spindles to make the project more viable. |
|
|
| The
Company has been heavily burdened with huge losses incurred during the last
4.5 years. |
|
| Most
of the financial facilities obtained for meeting working capital requirements
have gradually |
|
| been
depleted in form of cash losses. Under these circumstances, existing
operations do not |
|
| generate
funds for long-term debt service and repayments due to a tight cash flow
position. |
|
|
| We
have already taken up the matter with United Bank Limited for revival of the
project. Unless, |
|
| the
Bank restructures our existing debt it is not possible to carry on the
operations efficiently |
|
| during
these crises years. It is expected that the Bank would review our proposal on
practical |
|
| and
workable financial framework in order to save the Company from total
collapse. |
|
|
| The
Company is in the process of making changes in its internal systems (Hardware
and |
|
| Software)
as required for being compliant to year 2000 and would be on line as per Y2K |
|
| compliance
well in time. |
|
|
| The
Management places on record their appreciation for the dedication and hard
work of |
|
| employees
at all levels and wish them success in future years. |
|
|
| LAHORE |
|
|
|
MOHAMMAD HAMEED |
|
| March
10, 1999 |
|
|
|
Chief Executive |
|
|
|
| DIRECTORS'
REPORT TO THE MEMBERS |
|
|
| The
directors present herewith their 37th Annual Report ended September 30, 1998. |
|
|
| ACCOUNTS: |
|
|
(Rupees) |
|
|
| Loss
for the year |
|
101,935,522 |
|
| Add:
Taxation |
|
1,667,283 |
|
|
|
|
---------- |
|
| Loss
after taxation |
|
103,602,805 |
|
|
|
|
|
|
| Add:
Accumulated loss brought forward |
|
428,672,175 |
|
|
|
|
---------- |
|
| Loss
carried forward to the next year |
|
532,474,980 |
|
|
|
|
========== |
|
|
| AUDITORS: |
|
| Company's
auditors, Messrs Taseer Hadi Khalid & Co., retire and being eligible,
offer |
|
| themselves
for re-appointment. |
|
|
| DIRECTORS: |
|
| The
term of present directors ceases on March 31, 1999. The Board of Directors |
|
| has
fixed the number of Directors to be elected at seven, as required under
section |
|
| 178
(1) of the Companies Ordinance, 1984. The present directors retire but are
eligible |
|
| for
re-election. |
|
|
|
ON BEHALF OF THE BOARD |
|
|
|
|
| LAHORE |
|
MOHAMMAD HAMEED |
|
|
AHMAD MAHMOOD |
|
| March 10, 1999 |
Chief executive |
|
|
Director |
|
|
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of SERVICE INDUSTRIES TEXTILES |
|
| LIMITED
as at September 30, 1998 and 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,
we report that: |
|
|
| a)
the company has on September 30, 1998 accumulated losses of Rs.532 million |
|
| and
its current liabilities exceeded its current assets by Rs.250 million as on
that |
|
| date.
These factors raise doubt that the company will be able to continue as a
going |
|
| concern.
The ability of the company to continue operations is dependent on continued |
|
| support
from the financial institutions and favourable economic conditions for the |
|
| textile
sector. Consequently adjustments have not been made to the recorded asset |
|
| amounts
and classification of liabilities. |
|
|
| b)
In the absence of detailed production and costing information, we were unable
to |
|
| verify
the accuracy of yields and the production. Due to non-availability of
information, |
|
| the
financial impact cannot be quantified. |
|
|
|
| c)
The company is not amortizing the lease hold land which had been revalued
last |
|
| year. |
|
|
|
|
| d)
In our opinion, proper books of account have been kept by the Company as
required |
|
| by
the Companies Ordinance, 1984; |
|
|
|
|
| e)
in our opinion: |
|
|
| 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 |
|
|
|
|
|
|
| iii)
the business conducted, investments made and the expenditure incurred |
|
| during
the year were in accordance with the objects of the Company; |
|
|
| f)
in our opinion and to the best of our information and according to the
explanations |
|
| given
to us, the balance sheet, profit and loss account and the 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 except for the effects |
|
| of
the matters referred to in paragraphs (a), (b) and (c) above, respectively
give a |
|
| true
and fair view of the state of the Company's affairs as at September 30, 1998 |
|
| and
of the loss and the cash flow for the year then ended; and |
|
|
| g)
Without qualifying our opinion, we draw attention to Note-29 of the financial |
|
| statements,
which states that a show cause has been received by the company |
|
| which
could lead to the company being de-listed from the stock exchange. |
|
|
| h)
In our opinion, no zakat was deductible at source under the Zakat and Ushr |
|
| Ordinance,
1980. |
|
|
|
|
| LAHORE |
|
|
|
TASEER HADI KHALID. & CO. |
|
| March
10, 1999 |
|
|
Chartered Accountant |
|
|
|
| BALANCE
SHEET AS AT SEPTEMBER 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
(Rupees) |
(Rupees) |
|
| SHARE
CAPITAL AND RESERVES |
|
|
| AUTHORISED
SHARE CAPITAL: |
|
|
| 10,000,000
ordinary shares of Rs.10/- each |
|
100,000,000 |
100,000,000 |
|
|
|
|
========== |
========== |
|
| ISSUED,
SUBSCRIBED AND PAID-UP |
|
|
| CAPITAL |
|
4 |
44,491,590 |
44,491,590 |
|
| GENERAL
RESERVE |
|
|
35,000,000 |
35,000,000 |
|
| SHARE
DEPOSIT MONEY |
|
5 |
38,250,000 |
38,250,000 |
|
| ACCUMULATED
LOSS |
|
|
(532,274,980) |
(428,672,175) |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
(414,533,390) |
(310,930,585) |
|
|
|
|
|
|
| SURPLUS
ON REVALUATION OF |
|
|
|
| FIXED
ASSETS |
|
6 |
364,834,428 |
364,834,428 |
|
|
|
|
|
| LONG
TERM LIABILITIES |
|
|
|
| Loan
from directors - Unsecured |
|
7 |
60,602,369 |
38,185,258 |
|
| Long
term loans - Secured |
|
8 |
185,383,937 |
81,818,708 |
|
|
|
|
---------- |
---------- |
|
|
|
|
245,986,306 |
120,003,966 |
|
| CURRENT
LIABILITIES |
|
|
|
| Current
portion of long term loans |
|
9 |
16,271,349 |
46,762,420 |
|
| Short
term borrowings - Secured |
|
10 |
66,748,043 |
66,312,552 |
|
| Creditors,
accrued and other liabilities |
11 |
188,066,857 |
212,278,540 |
|
| Workers'
welfare fund |
|
|
0 |
603,985 |
|
| Unclaimed
dividend |
|
|
225,383 |
639,444 |
|
| Provision
for taxation |
|
|
14,782,259 |
16,945,540 |
|
|
|
|
---------- |
---------- |
|
|
|
|
286,093,891 |
343,542,481 |
|
| CONTINGENCIES & COMMITMENTS |
|
12 |
0 |
0 |
|
|
|
|
---------- |
---------- |
|
|
|
|
482,381,235 |
517,450,290 |
|
|
|
|
========== |
========== |
|
|
|
|
Note |
1998 |
1997 |
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| TANGIBLE
FIXED ASSETS - at cost less |
|
|
| accumulated
depreciation |
|
13 |
445,051,471 |
486,185,073 |
|
|
|
|
| LONG
TERM LEASE DEPOSITS |
|
|
1,288,365 |
1,288,365 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stores
and spares |
|
14 |
30,583,171 |
3,800,945 |
|
| Stock
in trade |
|
15 |
27,760,403 |
18,380,683 |
|
| Advances,
deposits, prepayments and |
|
|
| other
receivables |
|
16 |
4,480,160 |
3,467,661 |
|
| Cash
and bank balances |
|
17 |
742,519 |
4,327,563 |
|
|
|
|
---------- |
---------- |
|
|
|
|
36,041,399 |
29,976,852 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
482,381,235 |
517,450,290 |
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
| These
accounts should be read in conjunction with the annexed notes. |
|
|
|
|
|
|
|
|
|
MOHAMMAD HAMEED |
|
|
AHMAD MAHMOOD |
|
|
|
Chief Executive |
|
|
Director |
|
|
|
|
|
|
|
|
| LAHORE:
March, 10, 1999 |
|
|
|
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| SALES |
|
18 |
333,456,544 |
161,261,414 |
|
| COST
OF SALES |
|
19 |
(379,799,949) |
(223,217,044) |
|
|
|
|
---------- |
---------- |
|
| GROSS LOSS |
|
|
(46,343,405) |
(61,955,630) |
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
| Administrative |
|
20 |
(10,487,832) |
(7,267,641) |
|
| Selling
and distribution |
|
21 |
(68,400) |
(76,769) |
|
|
|
|
---------- |
---------- |
|
|
|
|
(10,556,232) |
(7,344,410) |
|
|
|
|
---------- |
---------- |
|
| OPERATING
LOSS |
|
|
(56,899,637) |
(69,300,040) |
|
|
|
|
|
| FINANCIAL
CHARGES |
|
22 |
(46,996,162) |
(45,185,02%) |
|
| OTHER
INCOME |
|
23 |
1,960,277 |
0 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
(45,035,885) |
(45,185,026) |
|
|
|
|
|
---------- |
---------- |
|
| LOSS
BEFORE TAXATION |
|
|
|
(101,935,522) |
(114,485,066) |
|
|
|
|
| PROVISION
FOR TAXATION |
|
|
|
| -Current |
|
24 |
(1,667,283) |
(806,307) |
|
| -
Prior years |
|
|
0 |
(7,823,000) |
|
|
|
|
---------- |
---------- |
|
|
|
|
(1,667,283) |
(8,629,307) |
|
|
|
|
---------- |
---------- |
|
| LOSS
AFTER TAXATION |
|
|
(103,602,805) |
(123,114,373) |
|
|
|
|
|
|
| ACCUMULATED
LOSS BROUGHT FORWARD |
|
|
(428,672,175) |
(305,557,802) |
|
|
|
|
---------- |
---------- |
|
| ACCUMULATED
LOSS CARRIED FORWARD |
|
|
(532,274,980) |
(428,672,175) |
|
|
|
|
|
========== |
========== |
|
|
| These
accounts should be read in conjunction with the annexed notes. |
|
|
| LAHORE |
|
MOHAMMAD HAMEED |
|
AHMAD MAHMOOD |
|
| March
10, 1999 |
Chief Executive |
|
Director |
|
|
|
|
|
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1998 |
|
|
|
|
|
1998 |
1997 |
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
(Rupees) |
(Rupees) |
|
|
|
|
|
| LOSS
BEFORE TAX |
|
(101,935,522) |
(114,485,066) |
|
|
|
|
|
| ADJUSTMENT
OF ITEMS NOT INVOLVING |
|
|
| MOVEMENT
OF CASH: |
|
|
|
|
|
|
| Gratuity
provision |
|
0 |
(1,102,715) |
|
| Long
outstanding creditors written back |
|
(1,960,277) |
0 |
|
| Depreciation |
|
41,388,533 |
45,781,818 |
|
| Financial
charges |
|
469,961,621 |
45,185,026 |
|
|
|
---------- |
---------- |
|
|
|
86,424,418 |
89,864,129 |
|
|
|
---------- |
---------- |
|
| CASH
GENERATED FROM OPERATIONS |
|
(15,511,104) |
(24,620,937) |
|
|
|
|
|
| (Increase)
in trade debtors, advances, deposits, prepayments |
|
| and
other receivables |
|
(1,012,499) |
(868,794) |
|
| (Increase)
in stores, spares and stock in trade |
|
(8,637,092) |
(66,166) |
|
| (Decrease)/Increase
in balances due to associated companies |
(2,524,901) |
11,779,131 |
|
| Increase
in creditors, accrued and other liabilities |
16,064,139 |
31,541,361 |
|
| Financial
charges paid |
|
(8,343,274) |
(27,348,206) |
|
| Turnover
tax paid |
|
(3,830,564) |
(1,000,000) |
|
| Gratuity
paid |
|
0 |
(157,000) |
|
|
|
---------- |
---------- |
|
|
|
(8,284,191) |
13,880,326 |
|
|
|
---------- |
---------- |
|
| NET
CASH OUTFLOW FROM OPERATING ACTIVITIES |
|
(23,795,295) |
(10,740,611) |
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| (Additions)
to fixed assets |
|
|
(254,931) |
(917,161) |
|
|
|
|
---------- |
---------- |
|
| NET
CASH (OUTFLOW)/INFLOW FROM INVESTING ACTIVITIES |
(254,931) |
(917,161) |
|
|
|
|
---------- |
---------- |
|
|
|
|
(24,050,226) |
(11,657,772) |
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES: |
|
| Loan from directors |
l |
|
22,417,111 |
5,225,980 |
|
| Repayment
of long term loans |
|
(2,387,420) |
(2,387,420) |
|
|
|
---------- |
---------- |
|
| NET
CASH INFLOW FROM FINANCING ACTIVITIES |
|
20,029,691 |
2,838,560 |
|
|
|
|
| (Decrease)
in cash and cash equivalents |
|
(4,020,535) |
(8,819,212) |
|
| Cash
and cash equivalents at the beginning of year |
(61,984,989) |
(53,165,777) |
|
|
|
|
---------- |
---------- |
|
| CASH
AND CASH EQUIVALENTS AT END OF THE YEAR |
(Note 25) |
(66,005,524) |
(61,984,989) |
|
|
|
|
========== |
========== |
|
|
| LAHORE |
|
MOHAMMAD HAMEED |
|
AHMAD MAHMOOD |
|
| March
10, 1998 |
Chief Executive |
|
Director |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1998 |
|
|
| 1.
NATURE AND STATUS OF THE COMPANY |
|
| Service
Industries Textiles Limited was incorporated in Pakistan in 1962 as a Private |
|
| Limited
Company under the Companies Act 1913, now Companies Ordinance, |
|
| 1984
and was subsequently converted into a Public Limited Company in 1970. The |
|
| company
is listed on the Karachi and Lahore Stock Exchanges. |
|
|
| Principal
activity of the Company is spinning and sale of yarn made from raw cotton |
|
| and
synthetic fibre. |
|
|
|
|
| 2.
GOING CONCERN ASSUMPTION |
|
|
|
| These
financial statements are prepared under the going concern assumption. This |
|
| is
subject to the continued support of the financial institutions and favourable |
|
| economic
conditions for the textile sector in the near future. Restructuring of loan |
|
| is
under consideration by the bank. |
|
|
|
|
| 3.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 3.1
Accounting convention |
|
|
|
| These
accounts have been prepared under the historical cost convention |
|
| as
modified by the revaluation of certain fixed assets. |
|
|
| 3.2
Staff retirement benefits |
|
| The
company operated a contributory provident fund scheme for all its |
|
| permanent
employees. In addition to this a gratuity scheme for certain |
|
| eligible
employees had been in operation till September 30, 1996, which |
|
| has
now been discontinued in view of significant losses. Also provident fund |
|
| of
factory staff has been discontinued with effect from March 1998. |
|
|
| 3.3
Taxation |
|
|
|
|
|
|
|
| Current |
|
|
|
| The
provision for current taxation is based on taxable income at the current |
|
| tax
rates. There will be no tax liability due to tax losses and therefore the |
|
| company
is providing for tax under section 80D of the Income Tax Ordinance, |
|
| 1979. |
|
|
|
|
| Deferred |
|
|
| The
company accounts for deferred taxation, using the liability method, on |
|
| all
major timing differences. However, provision is not made for deferred |
|
| tax
liability, as the timing differences are not expected to reverse in the near |
|
| future
due to available tax losses and company's capitalization plans. |
|
|
| 3.4
Foreign currencies |
|
| Transactions
in foreign currencies are translated into Pak Rupees at the |
|
| rate
prevailing on the date of transaction while assets and liabilities in foreign |
|
