| KOHINOOR TEXTILE MILLS LIMITED |
|
|
|
|
|
|
| ANNUAL REPORT 2003 |
|
|
| COMPANY INFORMATION |
|
| BOARD OF DIRECTORS |
|
| MR. TARIQ
SAYEED SAIGOL |
|
Chairman |
|
| MR. TAUFIQUE
SAYEED SAIGOL |
|
Chief Executive |
|
| MR. SAYEED TARIQ
SAIGOL |
|
|
|
| MR. USMAN SAID |
|
|
|
| MR. AAMIRFAYYAZ
SHEIKH |
|
|
|
| MR. ASAD FAYYAZ
SHEIKH |
|
|
|
| MR.
FIRASAT ALI |
|
NIT Nominee |
|
| COMPANY SECRETARY |
|
|
|
| MR. MUHAMMAD ASHRAF |
|
|
|
| AUDIT COMMITTEE |
|
|
|
| MR. AAMIR
FAYYAZ SHEIKH |
|
Chairman |
|
| MR. SAYEED
TARIQ SAIGOL |
|
Member |
|
| MR. ASAD
FAYYAZ SHEIKH |
|
Member |
|
| MR.
MUHAMMAD ASHRAF |
|
Secretary |
|
| CHIEF FINANCIAL
OFFICER |
|
| MR. USMAN SAID |
|
| AUDITORS |
|
| M/S. M. HUSSAIN
CHAUDHURY & CO. |
|
| Chartered
Accountants, Rawalpindi. |
|
| MANAGER INTERNAL
AUDIT |
|
| MR. SOHAIL SADIQ |
|
| BANKERS |
|
| AL BARAKA ISLAMIC
BANK LIMITED B.S.C. (E.G.) |
|
| ALLIED BANK OF
PAKISTAN LIMITED |
|
| ASKARI COMMERCIAL
BANK LIMITED |
|
| BANK ALFALAH
LIMITED |
|
| FAYSAL BANK LIMITED |
|
| SAUDI PAK
COMMERCIAL BANK LIMITED |
|
| MUSLIM COMMERCIAL
BANK LIMITED |
|
| PICIC COMMERCIAL
BANK LIMITED |
|
| PRIME COMMERCIAL
BANK LIMITED |
|
| UNITED BANK LIMITED |
|
| UNION BANK LIMITED |
|
| REGISTERED OFFICE
& |
|
| SHARES DEPARTMENT |
|
| 42 - LAWRENCE ROAD,
LAHORE |
|
| TEL--: (92-042)6302261-62 |
|
| FAX- : (92-042) 6368721 |
|
| MILLS |
|
| • PESHAWAR ROAD, RAWALPINDI |
|
| TEL : (92-051)
5473941 - 3 FAX (92-051) 5473083 WEB SITE : www.kmlg.com |
|
| • 8th K.M., MANGA RAIWIND ROAD, DISTRICT
KASUR. |
|
| TEL : (92-4951)
391941 FAX : (92-4951) 391947 |
|
| • GULYANA ROAD, GUJAR KHAN, DISTRICT
RAWALPINDI. |
|
| TEL : (92-0571)
510144-6 FAX : (92-0571) 564336 |
|
|
| NOTES TO THE
ACCOUNTS |
|
| FOR THE YEAR ENDED
SEPTEMBER 30, 2003 |
|
| 1 . STATUS AND NATURE OF BUSINESS |
|
| Kohinoor Textile
Mills Limited is a public limited company incorporated in Pakistan under the
repealed |
|
| Companies Act, 1913
(now Companies Ordinance, 1984) and is listed on all the Stock Exchanges of |
|
| Pakistan. Principal
activity of the Company is the manufacture and trade of textile products. |
|
| 2. SIGNIFICANT ACCOUNTING POLICIES |
|
| 2.1 Statement of Compliance |
|
| These financial
statements have been prepared in accordance with approved accounting
standards |
|
| as applicable in
Pakistan and the requirements of Companies Ordinance, 1984. Approved
accounting |
|
| standards comprise
of such International Accounting Standards as modified under provisions of
the |
|
| Companies
Ordinance, 1984. Wherever, the
requirements of Companies Ordinance,
1984 or |
|
| directives issued
by the Securities and Exchange Commission of Pakistan differ with the
requirements |
|
| of these standards,
the requirements of Companies Ordinance, 1984 or the requirements of the said |
|
| directives take
precedence. |
|
| 2.2 Accounting Convention |
|
| The Financial
Statements have been prepared under
historical cost convention without any |
|
| adjustment for
inflation or reference to current values. |
|
| 2.3 Employees Retirement Benefits |
|
| The Company has
introduced a provident fund scheme for all its employees. Equal monthly |
|
| contributions are
made both by the Company and employees at the rate of 8.33 percent of basic |
|
| salary and cost of
living allowance to the fund. |
|
| 2.4 Taxation |
|
| Current |
|
| The Company falls
in the ambit of presumptive tax regime regarding export sales under section
154 of |
|
| the Income Tax
Ordinance, 2001. Provision for income tax is made in the accounts
accordingly. |
|
| However, provision
for tax on other income is based on taxable income at the current rates after |
|
| considering the
rebates and tax credits available, if any, or minimum tax u/s 113 of the
Income Tax |
|
| Ordinance, 2001
whichever is higher. |
|
| Deferred |
|
| Deferred tax is
calculated using balance sheet liability method on all temporary differences
arising at |
|
| the balance sheet
date, between the tax base of assets and liabilities and their carrying
amounts. |
|
| Deferred tax assets
are recognized for all deductible temporary differences' to the extent that
it is |
|
| probable that
future taxable profit will be available against which the temporary
difference can be |
|
| utilized. The tax
rates prevalent at the balance sheet date are used to determine deferred tax. |
|
| The carrying amount
of all the deferred tax assets is reviewed at each balance sheet date and |
|
| reduced to
appropriate extent, if it is no longer probable that sufficient taxable
profits will be available |
|
| to allow all or
part of deferred tax assets to be utilized. |
|
|
| intended purpose
for holding such
investments. Management determines the
appropriate |
|
| classification of
its investments at the time of purchase and re-evaluates such designation on
regular |
|
| basis and presents
in the balance sheet on the following basis : |
|
| Held to Maturity |
|
| These are stated at
amortized cost, less impairment loss, if any, recognized to reflect |
|
| irrecoverable
amounts. Impairment losses are charged to profit and loss account. |
|
| Held for Trading |
|
| These are stated at
fair value and changes in carrying values are included in profit and loss |
|
| account. |
|
| Available for Sale |
|
| These are stated at
fair value and changes in carrying values are recognized in equity until |
|
| investment is sold
or determined to be impaired at which time accumulated gain or loss |
|
| previously
recognized in equity is included in profit and loss account for the year. |
|
| 2.7 Deferred Costs |
|
| Expenses, benefit
of which is expected to spread over several years, are deferred and amortised
over |
|
| their useful life
but not exceeding five years. |
|
| 2.8 Stores, Spares and Loose Tools |
|
| Stores, spares and
loose tools are valued at moving average cost. Stores in transit are valued
at costs |
|
| incurred upto the
date of balance sheet. |
|
| 2.9 Stock in Trade |
|
| These are valued at
lower of cost and net realizable value. Stock of raw materials are valued at |
|
| average cost, work
in process and finished goods at annual average cost consisting of cost of |
|
| materials, labour
and appropriate production overheads. Process wastes are valued at net
realizable |
|
| market value.
Stocks in transit are valued at costs incurred upto the date of balance
sheet. |
|
| 2.10 Financial
Instruments |
|
| Financial assets
and liabilities are recognized at cost which is the fair value of the
consideration given |
|
| or received at the
time when the Company becomes a party to the contractual provision of the |
|
| instrument by
following trade date accounting. Any gain or loss on subsequent measurement
and |
|
| derecognition is
charged to income. |
|
| 2.11 Revenue Recognition |
|
| Revenue from local
sales of products is recognised on despatch of goods to customers while in
case |
|
| of export sales it
is recognised on date of shipment. Dividend income is recognised when the |
|
| Company's right to
receive payment is established. Return on deposits is accounted for on
accrual |
|
| basis. |
|
|
|
|
2003 |
2002 |
|
|
|
(Rupees in thousand) |
|
| 3. SHARE CAPITAL |
|
|
|
| Authorised : |
|
|
|
| 150,735,325 (2002 :
150,735,325) Ordinary Shares of Rs. 10 each |
|
1,507,353 |
1,507,353 |
|
| Issued, subscribed
and paid up : |
|
| 1,596,672 Ordinary
Shares of Rs. 10 each allotted on |
|
| reorganisation of
Kohinoor Industries Ltd. |
|
15,967 |
15,967 |
|
| 26.156,000 Ordinary
Shares allotted under scheme |
|
| of arrangement of
merger of Part II of MLECo. Ltd. |
|
261,560 |
261,560 |
|
| 26,858,897 Ordinary
Shares allotted under scheme |
|
| of arrangement of
merger of Kohinoor Raiwind Mills |
|
| Limited &
Kohinoor Gujar Khan Mills Limited |
|
268,589 |
268,589 |
|
| 10,450,363 (2002:
10,450,363) Ordinary Shares |
|
| of Rs. 10 each
issued as bonus shares |
|
104,504 |
104,504 |
|
| 15,1 17,803 (2002:
15,1 17,803) Ordinary Shares |
|
| of Rs. 10 each
issued for cash |
|
151,178 |
151,178 |
|
|
|
801,798 |
801,798 |
|
| 4. CAPITAL RESERVES |
|
| At the beginning of
the year |
|
170,756 |
165,192 |
|
| Add : Due to Merger |
|
5,564 |
|
|
|
170,756 |
170,756 |
|
| 5. REVENUE RESERVES |
|
|
|
| General : |
|
|
|
| At the beginning of
the year |
|
679,783 |
231,213 |
|
| Add : Due to Merger |
|
- |
268,570 |
|
| Add Transfer during
the year |
|
70,000 |
180,000 |
|
|
749,783 |
679,783 |
|
| Dividend
Equalisation |
|
9,509 |
9,509 |
|
|
759,292 |
689,292 |
|
| 6. REDEEMABLE CAPITAL - Secured |
|
|
|
| Non - Participatory |
|
|
|
| Term Finance
Certificates (TFCs) |
|
285,000 |
- |
|
| Less: Current
Portion |
|
17,813 |
_ |
|
|
|
267,187 |
- |
|
|
| c. Loan III |
|
| The demand finance
of Rs. 200,000 thousand is repayable in sixteen (16) equal quarterly
instalments |
|
| commencing from
March 31, 2004. The demand finance is secured by first registered pari passu
charge on |
|
| fixed assets of the
Company and personal guarantee of directors of the Company. It carries mark
up @ 5% |
|
| per annum. |
|
| 7.2 Al Baraka Islamic Bank |
|
| This Morabaha
financing facility is repayable in thirty six (36) monthly instalments. This
facility is secured by |
|
| hypothecation of
stock, charge on present and future fixed and current assets of the Company
and personal |
|
| guarantees of the
sponsor directors. The facility carries mark up @ 1 0% per annum. |
|
| 7.3 Pakistan Industrial Credit and Investment
Corporation Limited |
|
| This loan has been
obtained from PICIC, in terms at the exchange rates ruling on the respective
letters of |
|
| credit payment
dates against import of Air Jet Looms. |
|
| It is repayable in
twenty (20) equal quarterly instalments, commencing from October 03, 2003.
The loan is |
|
| secured by first
legal mortgage ranking pari passu with the existing first charge already
created in favour of |
|
| PICIC on the
Company's present and future immovable properties wherever situated including
all buildings, |
|
| fixed plants,
machinery and fixtures. It carries mark up @ 7.50% per annum. |
|
| 7.4 Bank Alfalah Limited |
|
| a. Deferred Loan |
|
| The loan has been
created by restructuring and capitalizing the accrued interest of Term Loans
of Bank |
|
| Alfalah Limited and
secured by first exclusive charge on machinery financed by Bank Alfalah
Limited and |
|
| second equitable
charge on Company's land, building and other assets other than machinery on
which first |
|
| exclusive charge
held, charge on all moveable assets including stocks and receivables by way
of floating |
|
| charge and personal
guarantee of the sponsor directors. This loan is repayable in eight (8) equal
quarterly |
|
| instalments
commencing from January 01, 2004. This loan will remain interest free upto
November 30, 2003 |
|
| and subsequently it
will attract interest @ 14% per annum. |
|
| 7.5 United Bank Limited |
|
| a. Term Finance |
|
| The Term Loan
facility of Rs. 200,000 thousand has been obtained from United Bank Limited
to finance |
|
| BMR at Kohinooor
Textile Mills Limited (Rawalpindi and Gujar Khan Divisions) and to refinance
loans of |
|
| other banks. It
carries mark up at 6 months T-bills cut-off rate plus 275 basis points with a
floor of 4.5% |
|
| payable quarterly. |
|
| The Term Loan
facility is repayable in five years with one year grace period. The loan is
repayable in sixteen |
|
| (16) equal
quarterly instalments of Rs. 12,500 thousand each, commencing from December
31, 2004. It is |
|
| secured by first
parri passu charge for Rs. 266,000 thousand on all existing and future fixed
assets of |
|
| Kohinoor Textile
Mills Limited (Raiwind Mills Division) and personal guarantees of the sponsor
directors. |
|
|
|
|
2003 |
2002 |
|
|
|
(Rupees in thousand) |
|
| 10. BANK BORROWINGS - Secured |
|
|
|
| Short term running
finances |
|
791,379 |
505,851 |
|
| Export refinances |
|
1,258,741 |
999,042 |
|
|
|
|
|
| Borrowing
facilities availed from the banks are secured by pledge of stocks and
marketable securities, |
|
| hypothecation of
work-in-process, letters of credit, firm contracts, book debts, second and
third registered |
|
| charge on fixed
assets of the Company. |
|
| The rate of mark up
of these finances is 2.8% to 9% (2002 : 5% to 18%) per annum. |
|
| 11. CREDITORS, ACCRUED AND OTHER LIABILITIES |
|
| Creditors |
|
261,196 |
377,612 |
|
| Accrued charges |
|
108,846 |
108,565 |
|
| Interest accrued on
secured borrowings |
|
38,372 |
27,736 |
|
| Customers deposit -
payable on demand |
|
14,644 |
10,480 |
|
| Workers' profit
participation fund (Note : 11.1) |
|
15,303 |
14,163 |
|
| Associated
Undertakings |
|
15,684 |
8,455 |
|
| Others |
|
4,305 |
1,812 |
|
|
|
|
|
| 11.1 WORKERS' PROFIT PARTICIPATION FUND |
|
| Balance at
beginning of the year |
|
14,163 |
6,428 |
|
| Add : Payable due
to Merger |
|
— |
17,068 |
|
| Interest for the
year |
|
— |
503 |
|
| Balance payable |
|
14,163 |
23,999 |
|
| Paid/Deposited
during the year |
|
6,006 |
9,836 |
|
| Balance payable |
|
8,157 |
14,163 |
|
| Current
provision (Note
: 30.2) |
|
7,146 |
— |
|
|
|
15,303 |
14,163 |
|
| 12. TAXATION |
|
|
| Provision for
income tax |
|
|
| For the year |
|
32,182 |
35,383 |
|
| Brought forward |
|
103,499 |
68,116 |
|
|
135,681 |
103,499 |
|
| Less : Income tax
paid in advance |
|
163,454 |
117,364 |
|
| Tax paid in
advance (Note : 24
and Note : 31) |
|
-27,773 |
-13,865 |
|
|
| The system of
internal control is sound in design and has been effectively implemented and
monitored. |
|
| There are no
significant doubts upon the company's ability to continue as a going concern
. |
|
| There has been no
material departure from the best practices of corporate governance, as
detailed in the listing regulations of |
|
| the stock
exchanges. |
|
| Outstanding taxes
and other government levies are given in related note(s) to the audited
accounts. |
|
| Key operating and
financial data of last six years is annexed. ' |
|
| Value of investment
of provident fund trust, based on their audited accounts of September 30,
2003 is as under: |
|
| (Rs. in thousand) |
|
| Providentfund
53,181 |
|
| PATTERN OF SHARE
HOLDING |
|
| 2 statement of
pattern of shareholding of the company as at September 30,2003 is annexed.
This statement is in accordance with |
|
| Code of Corporate
Governance and Companies Ordinance, 1 984. |
|
|
|
|
2003 |
2002 |
|
|
|
(Rupees in thousand) |
|
| 20. STORES AND SPARES |
|
|
|
| Stores |
|
172,202 |
195,411 |
|
| Spares |
|
54,648 |
23,961 |
|
| In transit |
|
785 |
— |
|
|
|
227,635 |
219,372 |
|
| 21. STOCKS - IN - TRADE |
|
|
|
| Raw material |
|
411,569 |
183,987 |
|
| Raw material - in
transit |
|
31,905 |
2,450 |
|
| Work in process |
|
85,946 |
54,644 |
|
| Finished goods |
|
401,759 |
292,122 |
|
|
|
931,179 |
533,203 |
|
| 22. INVESTMENTS |
|
|
| Quoted : |
|
|
| Associated
undertakings |
|
|
| Kohinoor Genertek
Limited |
|
38,145 |
38,145 |
|
| 3,499,700 (2002 :
3,499,700) ordinary shares of Rs. 10 each |
|
| fully paid Market
value Rs. 42,171 thousand Equity held :21.47% |
|
| Kohinoor Weaving
Mills Ltd. |
|
57,187 |
57,187 |
|
| 8,303,281 (2002 :
7,548,437) ordinary shares of Rs. 10 each |
|
| fully paid Market
value Rs. 315,525 thousand Equity held : 34.51 % |
|
| Un-Quoted : |
|
|
| Associated
undertaking |
|
|
| Security General
Insurance Co. Ltd. |
|
7,000 |
7,000 |
|
| 940,098 (2002 :
700,000) ordinary shares of Rs. 10 each |
|
| Equity held:9.40%
Chief Executive of the company: Syed Jawad |
|
| Gillani. Break up
value based on last available audited accounts |
|
| for the year ended
December 31 . 2002 is Rs. 1 1 ,790 thousand |
|
| (December 31, 2001
Rs. 9,758 thousand) |
|
|
|
102,332 |
102,332 |
|
| 23. TRADE DEBTS |
|
|
| - Secured |
|
380,206 |
459,187 |
|
| - Unsecured - considered good |
|
|
| Associated
undertakings - Kohinoor Weaving Mills Limited |
|
2,941 |
3,173 |
|
| Others |
|
200,402 |
26,578 |
|
|
|
583,549 |
488,938 |
|
| 23.1 The maximum aggregate amount due from
associated undertakings at end of any month during the year was |
|
| Rs. 1 1 ,840
thousand (2002 : Rs. 21 ,332 thousand). |
|
| 24. ADVANCES, DEPOSITS, PREPAYMENTS AND |
|
| OTHER RECEIVABLES -
Considered good |
|
2,166 |
657 |
|
| Loans and advances
- employees |
|
1,467 |
1,815 |
|
| Loans and advances
- executives
(Note : 24.1) |
|
2,037 |
377 |
|
| Imprests -other |
|
88,560 |
106,442 |
|
| Suppliers |
|
10,903 |
198,238 |
|
| Letters of credit
and margin deposits |
|
5,644 |
13,622 |
|
| Prepaid expenses |
|
60,004 |
43,265 |
|
| Security deposits |
|
201,700 |
113,908 |
|
| General Sales Tax
and Custom Duty receivable |
|
27,773 |
13,865 |
|
| Income Tax paid in
Advance/Refundable
(Note : 12) |
|
32,960 |
37,226 |
|
| Export rebate |
|
2,344 |
341 |
|
| Claims |
|
32,066 |
81 |
|
| Associated
Undertakings (Note
: 24.2) |
|
118,505 |
104,294 |
|
| Others |
|
586,129 |
634,131 |
|
|
|
|
| 12. The financial statements of the Company
were duly endorsed by CEO and CFO before approval of the |
|
| Board. |
|
| 13. The directors, CEO and executives do not
hold any interest in the shares of the Company other than that |
|
| disclosed in the
pattern of shareholding. |
|
| 14. The Company has complied with all the
corporate and financial reporting requirements of the Code. |
|
| 15. The Board has formed an audit committee.
It comprises three members. All of them are non-executive |
|
| directors,
including the chairman of the committee. |
|
| 16. The meetings of the audit committee were
held at least once every quarter prior to approval of interim and |
|
| final results of
the Company and as required by the Code. The terms of reference of the
committee have |
|
| been formed and
advised to the committee for compliance. |
|
| 17. The Board has set-up an effective
internal audit function. |
|
| 18. The statutory auditors of the Company
have confirmed that they have been given a satisfactory rating under |
|
| the Quality Control
Review programme of the Institute of Chartered Accountants of Pakistan, that
they or |
|
| any of the partners
of the firm, their spouses and minor children do not hold shares of the
Company and that |
|
| the firm and all
its partners are in compliance with International Federation of Accountants
(IFAC) guidelines |
|
| on code of ethics
as adopted by Institute of Chartered Accountants of Pakistan. |
|
| 19. The statutory auditors or the persons
associated with them have not been appointed to provide other |
|
| services except in
accordance with the listing regulations and the auditors have confirmed that
they have |
|
| observed IFAC
guidelines in this regard. |
|
| 20. We confirm that all other material
principles contained in the Code have been complied with. |
|
|
|
|
2003 |
2002 |
|
|
|
(Rupees in thousand) |
|
| 28. ADMINISTRATIVE, SELLING AND GENERAL
EXPENSES |
|
|
|
| Salaries,
allowances and other benefits |
|
38,784 |
38,947 |
|
| Directors
remuneration |
|
4,158 |
2,361 |
|
| Travelling - Staff |
|
15,059 |
15,123 |
|
| Travelling -
Directors |
|
2,205 |
2,458 |
|
| Stationery and
printing |
|
4,572 |
4,165 |
|
| Communication &
postage |
|
11,657 |
12,707 |
|
| Legal and
professional charges
(Note 28. 1 ) |
|
2,782 |
4,369 |
|
| Rent, rates and
taxes |
|
1,825 |
2,038 |
|
| Consultancy Charges |
|
- |
1,284 |
|
| Electricity and gas |
|
1,476 |
1,445 |
|
| Insurance |
|
2,023 |
1,932 |
|
| Vehicle running and
maintenance |
|
7,270 |
6,916 |
|
| Donation and
charity
(Note 28.2) |
|
845 |
155 |
|
| Publicity |
|
4,470 |
4,773 |
|
| Export expenses |
|
128,693 |
113,312 |
|
| Carriage and
freight |
|
2,495 |
2,455 |
|
| Staff welfare |
|
2,808 |
2,828 |
|
| Amortization of
Deferred Costs |
|
4,303 |
10,305 |
|
| Other
administrative and selling expenses |
|
14,557 |
17,143 |
|
| Repair and
maintenance |
|
4,699 |
4,635 |
|
| Advertisement |
|
1,306 |
1,182 |
|
| Depreciation |
|
14,951 |
13,142 |
|
|
|
270,938 |
263,675 |
|
| 28.1 Legal and Professional charges include the
following in respect of auditors' services for : |
|
| Statutory Audit |
|
260 |
225 |
|
| Other Professional
services and Stock taking |
|
212 |
95 |
|
|
|
472 |
320 |
|
| 28.2 None of the
Directors or their spouses have any interest in donees funds. |
|
|
| 29. OTHER INCOME |
|
|
| 29.1 Operating |
|
|
| Scrap |
|
11,799 |
7,129 |
|
| Miscellaneous |
|
58 |
819 |
|
|
|
11,857 |
7,948 |
|
| 29.2 Non Operating |
|
|
|
| Profit on sale of
assets |
|
12,254 |
4,075 |
|
| Profit on sale of
Investments |
|
— |
2,087 |
|
| Profit on sale of
stores |
|
41 |
— |
|
| Exchange Loss |
|
-14 |
-54 |
|
| Export Quota |
|
540 |
2,420 |
|
|
|
12,821 |
8,528 |
|
| Dividend Income: |
|
|
| Kohinoor Raiwind
Mills Limited |
|
— |
44,883 |
|
| Kohinoor Weaving
Mills Limited |
|
15,097 |
45,291 |
|
