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Ghandhara Nissan Diesel Limited
Annual Report 2000
CONTENTS
Company Information
Notice of Annual General Meeting
Chairman's Review and Directors' Report
Auditors' Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Statement of Changes in Equity
Notes to the Accounts
Pattern of Shareholding
COMPANY INFORMATION
BOARD OF DIRECTORS
Mr. Raza Kuli Khan Khattak Chairman and Chief Executive
Lt. Gen. (Retd.) All Kuli Khan Khattak
Begum Tehmina Habibullah Khan
Mr. Mushtaq Ahmed Khan
Mr. Taiji Hatanaka
(Alternate of Mr. Norio Abe)
Mr. Mitsuo Doi
Mr. Shamim Ahmed
Mr. Anis Wahab Zuberi
Ms. Aaliya K. Dossa
SECRETARY
Mr. Aqiel Amjad Ghani
REGISTERED OFFICE
Ghandhara House,
109/2, Clifton,
Karachi.
FACTORY
Port Bin Qasim,
Karachi.
BANKERS OF THE COMPANY
Bank Al Falah
Allied Bank of Pakistan Ltd.
American Express Bank Ltd.
Standard Chartered Grindlays Bank
The Bank of Tokyo - Mitsubishi, Ltd.
Credit Agricole Indosuez
Mashreq Bank psc.
Emirates Bank International PJSC.
Habib Bank Limited
The Hong Kong & Shanghai Banking Corporation
Muslim Commercial Bank Ltd.
Societe Generale Bank
United Bank Ltd.
National Bank of Pakistan Ltd.
Union Bank Limited.
Indus Bank Limited.
Askari Commercial Bank Ltd.
Bolan Bank Ltd.
Al-Barka Islamic Bank
Habib Bank AG Zurich
AUDITORS
Taseer Hadi Khalid & Co.
Chartered Accountants,
First Floor,
Shaikh Sultan Trust Building No. 2
Beaumont Road, Karachi.
LEGAL ADVISORS
Shaukat Law Associates,
217, Central Hotel Annexe,
Abdullah Haroon Road,
Karachi.
SHARE REGISTRARS
T.H.K. Associates (Pvt) Ltd.
Ground Floor,
Shaikh Sultan Trust Building No. 2
Beaumont Road, Karachi.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 14th Annual General Meeting of Shareholders of Ghandhara Nissan
Diesel Limited will be held on Saturday, the 30th December, 2000 at 11.00 A.M., at Hotel Avari
Towers, Fatima Jinnah Road, Karachi, to transact the following business:
1. To receive and consider the Audited Accounts of the Company for the year ended 30th June,
2000.
2. To appoint Auditors for the year ending 30th June, 2001 and to fix their remuneration. The
retiring Auditors, Messrs Taseer Hadi Khalid & Co., Chartered Accountants, being eligible,
offer themselves for reappointment.
Special Business
3. To consider ratify and approve remuneration of two full time working Directors.
4. To transact any other business with the permission of the Chairman.
By Order of the Board
AQIEL AMJAD GHANI
Karachi: 5th December, 2000. Company Secretary
Statement under section 160 (1) (b) of the Companies Ordinance, 1984 pertaining to the
special business is annexed to this notice.
NOTES:
1. The Share Transfer Books of the Company will remain closed from 29th December, 2000 to
4th January, 2001, (both days inclusive).
2. Shareholders are requested to intimate any change in their address to our Share Registrars,
Messrs THK Associates (Pvt) Ltd., Shares Department, Ground Floor, Sheikh Sultan Trust
Building No. 2, Beaumont Road, Karachi.
3. A Member entitled to attend and vote at the Annual General Meeting may appoint another
member as his/her Proxy to attend and vote instead of him/her. Form of Proxy is enclosed with
the Annual Report. Votes may be given personally or by Proxy or by Attorney or, in case of a
Corporation, by a representative. The instrument of Proxy, duly stamped, signed and
witnessed, should be lodged at the Registered Office of the Company at Ghandhara Hour,
109/2, Clifton, Karachi-6, not later than 48 hours before the time of the meeting.
CDC Account Holders will further have to follow the under mentioned guidelines as laid down in
Circular-1 dated January 26, 2000 issued by the Securities and Exchange Commission of Pakistan.
(a) For Attending the Meeting
(i) In case of individuals, the account holder or sub-account holder and/or the person whose
securities are in group account and their registration details are uploaded as per the
regulations, shall authenticate his/her identity by showing his original National Identity
Card (NIC) at the time of attending the meeting.
(ii) In case of corporate entity, the Board of Directors' resolution/power of attorney with
specimen signature of the nominee shall be produced (unless it has been provided earlier)
at the time of the meeting.
(b) For Appointing Proxies
(i) In case of individuals, the account holder or sub-account holder and/or the person whose
securities are in group account and their registration details are uploaded as per the
Regulations, shall submit the proxy form as per the above requirement.
(ii) Attested copies of NIC of the beneficial owners and the proxy shall be furnished with the
proxy form.
(iii) The proxy shall produce his original NIC at the time of the meeting.
STATEMENT UNDER SECTION 160 (1) (b) OF THE COMPANIES ORDINANCE, 1984.
The approval of the shareholders is sought for the remuneration of two full time working Directors,
as recommended by the Board of Directors.
For this purpose, it is proposed that the following resolution be passed as an ordinary resolution.
"Resolved that an aggregate sum not exceeding Rs. 0.930 million be and is hereby approved for
payment as remuneration to Mr. Norio Abe and Mr. Mitsuo Doi, full time working Directors".
CHAIRMAN'S REVIEW & DIRECTORS' REPORT
I welcome you on behalf of your Directors and myself to the Fourteenth Annual General meeting
of your Company, and present before you the Annual Report for the year ended 30th June, 2000.
The year under review has been affected by the overall depressed market and economic stagnation.
The first half of the year was affected by the sluggish market particularly of heavy duty commercial
vehicles. The duty free import of dump trucks and clandestine entry into the country of trucks (at a
conservative estimate of approximately forty units per month) further aggravated market conditions.
Besides, the events of October, 1999 lead to an initial reaction of wait and see, which continued till
the end of first half of the year. The downward trend halted during the first two months of the second
half of the year and it was expected that the market for 'heavy duty commercial vehicles would pick
up. However, the leniency on part of the Government towards condonation of smuggled vehicles
(by regularizing such vehicles at concessional rates of duty) and the continuous import of dump
trucks under the NRI (Custom Duty & Sales Tax free) did not allow sales to pick up as expected.
OPERATING RESULTS:
Year ended Year ended
30th June 2000 30th June 1999
(Rupees in Thousands)
Sales and Services 548,643 733,248
Gross Profit 33,026 46,898
Provision for Taxes (Net) 45098 3,711
Accumulated (Loss)/Unappropriated
Profit brought forward (31,671) 25,867
Accumulated (Loss) carried forward (87,994) (31,671)
A comparison of production and sales for the year under review with 1998/99 is given below :-
Year ended 30th June, 2000 Year ended 30th June, 1999
Production Sales Production Sales
327 357 528 512
Unit sales declined by 30%.
LOSS PER SHARE
The loss per share for the year under review amounted to Rs. 7.25.
BOARD OF DIRECTORS
During the year under review, Mr. Ahmed Kuli Khan Khattak, resigned from the Board of Directors.
Subsequent to the year end,  Mr. Nasim Beg and Mr. M. Salman Siddique also resigned.
The casual vacancies caused by their resignations were filled by the appointment of Lt. Gen (Retd.)
Ali Kuli Khan Khattak in place of Mr. Ahmed Kuli Khan Khattak, and Mr. Shamim Ahmed in place
of Mr. Nasim Beg, on 5th December, 2000.
Mr. Norio Abe nominated Mr. Taiji Hatanaka to be his alternate on the Board of Directors. Mr. Taiji
Hatanaka was appointed the Alternate Director of Mr. Norio Abe on 5th December, 2000.
The Directors wish to record their appreciation for the services rendered by the outgoing Directors
and welcome the incoming Directors.
INDUS BANK
During the course of import business with Indus Bank, the Company had, apart from other L/Cs,
established four L/Cs valuing J.¥ 87.790m (Pak Rs. 42.586m) for the import of CKD kits shipped
by Tomen Corporation Japan. The payment of these L/Cs was due on 25th May, 2000, and 14th
June, 2000.
Despite receipt of full payment from the Company in respect of these letters of credit, Indus Bank
did not remit the amount to the beneficiary's bankers in Japan on due dates, and this amount remains
unremitted todate, despite several reminders. Based on a legal opinion obtained from Barrister
Kazim Hasan, the Company considers that it has discharged its obligation against the said letters of
credit.
APPOINTMENT OF AUDITORS
The retiring auditors M/s. Taseer Hadi Khalid & Co. Chartered Accountants, being eligible, have
offered themselves for reappointment.
PATTERN OF SHAREHOLDING
The pattern of shareholding of the Company as at 30th June, 2000 is given on page 9
ASSISTANCE BY OUR PRINCIPALS
Your Directors and Management of the Company would like to express their appreciation for the
continued support extended by your Company's Principals and Partners M/s. Nissan Diesel Motor
Co. Ltd. and M/s. Tomen Corporation, Japan.
LABOUR - MANAGEMENT RELATIONS
Your directors are pleased to report most cordial Labour-Management relations.
MANAGEMENT/STAFF/WORKERS/DEALERS/VENDORS
Your Directors place on record their appreciation for the hard work and dedication of the
Management, staff, workers, dealers and vendors, and hope that they all will continue to perform
with the same zeal and dedication.
FUTURE PROSPECTS
The Market of heavy duty commercial vehicles which had remained depressed during the last year,
has continued to remain sluggish in the earlier months of the current year. It is expected that gradual
recovery will take place. However, your company is committed to regain its market share and the
management, with the blessings of Allah, is geared up to put the company back on the road to
profitability.
For and on behalf of the Board of Directors
RAZA KULI KHAN KHATTAK
KARACHI: 5th December, 2000 CHAIRMAN/DIRECTOR
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed Balance Sheet of GHANDHARA NISSAN DIESEL LIMITED as at
30 June, 2000 and the related Profit and Loss Account, Cash Flow Statement and Statement of
Changes in Equity, 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.
It is the responsibility of the company's management to establish and maintain a system of internal
control, and prepare and present the above said statements in conformity with the approved
accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is
to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the above said statements are free of any material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the above said statements. An audit
also includes assessing the accounting policies and significant estimates made by management, as
well as, evaluating the overall presentation of the above said statements. We believe that our audit
provides a reasonable basis for our opinion and after due verification, we report that:
(a) in our opinion, proper books of account have been kept by the Company as required by the
Companies Ordinance, 1984;
(b) 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 except for the change explained in note 2.9 with which
we concur;
ii) the expenditure incurred during the year w~ 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;
(c) 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, cash flow statement and statement of changes
in equity together with the notes forming part thereof conform with approved accounting
standards as applicable in Pakistan, and, give the information required by the Companies
Ordinance, 1984, in the manner so required and respectively give a true and fair view of the
state of the Company's affairs as at 30 June, 2000 and of the loss, its cash flows and changes
in equity for the year then ended; and
(d) in our opinion, no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980
(XVIII of 1980).
Date: 5th December, 2000 TASEER HADI KHALID & CO.
KARACHI. CHARTERED ACCOUNTANTS
PATTERN OF SHAREHOLDING
AT 30 JUNE 2000.
Sr. Number of Shareholding Total
No. Share Holders From to Shares held Percentage
1 416 1 100 16173 0.2082
2 300 101 500 76391 0.9834
3 153 501 1000 121817 1.5682
4 127 1001 5000 255076 3.2837
5 13 5001 10000 86001 1.1071
6 4 10001 15000 49160 0.6329
7 4 15001 20000 68243 0.8785
8 1 25001 30000 27850 0.3585
9 1 30001 35000 31500 0.4055
10 1 35001 40000 39043 0.5026
11 1 45001 50000 48172 0.6201
12 1 50001 55000 52468 0.6755
13 1 95001 100000 99289 1.2782
14 1 435001 440000 438691 5.6475
15 1 775001 780000 777546 10.0098
16 1 1165001 1170000 1167069 15.0243
17 1 1585001 1590000 1585571 20.4119
18 1 2825001 2830000 2827830 36.4041
------------ ------------ ------------
1028 7767890 100.0000
========== ========== ==========
Categories of Number of
Share Holders Share Holders Shares Held Percentage
Individuals 1000 785862 10.1168
Investment Companies 2 31600 0.4068
Insurance Companies 2 66893 0.8612
Joint Stock Companies 11 2842008 36.5866
Financial Institutions 8 2086212 26.8569
Foreign Companies 3 1949215 25.0932
Non-Resident (Pak Rs.) 2 6100 0.0785
------------ ------------ ------------
TOTAL: 1028 7767890 100.0000
========== ========== ==========
BALANCE SHEET
AS AT 30 JUNE, 2000
NOTE 2000 1999
Rs '000 Rs '000
FIXED ASSETS 3 173,334 190,717
LONG TERM INVESTMENT 4 1,875 1,500
DEPOSIT AGAINST LEASE FACILITY 1,299 1,785
DEFERRED DEVELOPMENT EXPENDITURE 5 2,675 3,567
CURRENT ASSETS
Stores spares and loose tools 6 1,375 1,549
Stock in trade 7 90,717 167,478
Trade debtors - unsecured
considered good 8 19,265 30,553
Advances, deposits, prepayments
and other receivables 9 108,095 150,192
Cash and bank balances 10 25,235 710
------------ ------------
244,687 350,482
LESS: CURRENT LIABILITIES
Current maturity of lease facility 3,826 6.64
Finance under mark-up
arrangements - secured 11 118,803 199,620
Bills payable 5,144 4,567
Creditors, accrued expenses
and other liabilities 12 134,838 100,327
Unclaimed dividends 300 301
Taxation 13 5,553 22,134
------------ ------------
268,464 333,586
------------ ------------
NET CURRENT (LIABILITIES)/ASSETS (23,777) 16,896
------------ ------------
155,406 214,465
========== ==========
SHARE CAPITAL 14 77,679 77,679
GENERAL RESERVE 36,000 36,000
ACCUMULATED LOSS (87,994) (31,671 )
------------ ------------
25,685 82,008
SURPLUS ON REVALUATION
OF FIXED ASSETS 15 120,760 121,094
LIABILITY AGAINST ASSETS SUBJECT
TO FINANCE LEASE 16 229 4,187
DEFERRED LIABILITIES - Staff gratuity 8,732 7,176
CONTINGENCIES AND COMMITMENTS 17
------------ ------------
155,406 214,465
========== ==========
These accounts should be read in conjunction with the attached notes.
RAZA KULI KHAN KHATTAK MITSUO DOI
Chief Executive Director
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE, 2000
NOTE 2000 1999
Rs '000 Rs '000
Sales and services - Net 18 548,643 733,248
Cost of goods sold 19 515,617 686,350
----------- -----------
Gross profit 33,026 46,898
Administration and selling expenses 20 52,960 53,487
----------- -----------
Operating loss (19,934) (6,589)
Other income 21 4,933 2,329
----------- -----------
(15,001) (4,260)
Financial charges 22 37,224 49,567
----------- -----------
Loss before taxation (52,225) (53,827)
Provision for taxation
- Current year 3,564 3,711
- Prior year 534 --
----------- -----------
4,098 3,711
----------- -----------
Loss after taxation (56,323) (57,538)
Accumulated (1oss)/profit brought forward (31,671) 25,867
----------- -----------
Accumulated loss carried forward (87,994) (31,671)
========== ==========
LOSS PER SHARE - basic and diluted 29 (7.25) (7.41)
========== ==========
These accounts should be read in conjunction with the attached notes.
RAZA KULI KHAN KHATTAK MITSUO DOI
Chief Executive Director
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE, 2000
2000 1999
NOTE Rs '000 Rs '000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before taxation (52,225) (53,827)
Adjustments for:
Depreciation 17,451 16,533
Provision for staff gratuity 1,556 1,025
Mark-up and lease finance charges 36,664 40,658
Gain on sale of fixed assets (367) (464)
Loss on revaluation -- 108
Amortisation of development expenditure 892 891
---------- ----------
3,971 4,924
Changes in operating assets and liabilities
Decrease/(Increase) in Stores, spares & loose tools 174 2,180
(Increase)/Decrease in Stock in trade 76,761 130,583
(Increase)/Decrease in Trade debtors 11,288 72,012
(Increase)/Decrease in Advances, deposits & prepayments 1,746 20,944
Increase/(Decrease) in Bills payable 577 (64,482)
Increase/(Decrease) in Trade creditors 36,726 (100,821)
---------- ----------
127,272 60,416
---------- ----------
131,243 65,340
Interest paid (38,879) (40,356)
Income tax refund-net 19,672 (24,445)
---------- ----------
(19,207) (64,801 )
---------- ----------
Net cash flow from operating activities 112,036 539
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure (618) (21,961)
Long term investment (375) (1,500)
Payment of dividend (1) (23)
Sales proceeds of fixed assets sold 583 310
---------- ----------
Net cash flow from investing activities (411) (23,174)
CASH FLOWS FROM FINANCING ACTIVITIES
Finance lease liability (6,283) (6,972)
---------- ----------
Net cash flow from financing activities (6,283) (6,972)
---------- ----------
Net increase/(decrease) in cash and cash equivalents 105,342 (29,607)
Cash and cash equivalents at beginning of the year (198,910) (169,303)
---------- ----------
Cash and cash equivalents at end of the year 26 (93,568) (198,910)
========== ==========
These accounts should be read in conjunction with the attached notes.
RAZA KULI KHAN KHATTAK MITSUO DOI
Chief Executive Director
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2000
(Rs. in '000)
Share General Unappropriated
Capital Revenue Profit/ Total
Reserve Accumulated(Loss)
Balance as on
30 June 1998 77,679 36,000 25,867 139,546
Loss for the year -- -- (57,538) (57,538)
----------- ----------- ----------- -----------
Balance as on
30 June 1999 77,679 36,000 (31,671 ) 82,008
Loss for the year -- -- (56,323) (56,323)
----------- ----------- ----------- -----------
Balance as on
30 June 2000 77,679 36,000 (87,994) 25,685
========== ========== ========== ==========
These accounts should be read in conjunction with the attached notes.
RAZA KULI KHAN KHATTAK MITSUO DOI
Chief Executive Director
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 JUNE, 2000
I. STATUS AND NATURE OF BUSINESS
GHANDHARA NISSAN DIESEL LIMITED was incorporated in 1985 as a public
company in Pakistan under the terms of a joint venture agreement concluded among
Ghandhara Nissan Limited, Nissan Diesel Motor Company Limited of Japan and Tomen
Corporation of Japan who are also shareholders of the Company. It is quoted on the Karachi
and Lahore Stock Exchanges. The principal activity of the Company is the assembly and
progressive manufacturing of Nissan trucks and buses in Pakistan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
These financial statements have been .prepared in accordance with accounting
standards issued by the International Accounting Standards Committee (IASC) and
Interpretations issued by the Standing Interpretations Committee of the IASC, as
adopted in Pakistan and the requirements of the Companies Ordinance, 1984.
2.2 Accounting convention
These accounts have been prepared on the basis of the historical cost convention as
modified by revaluation of fixed assets.
2.3 Fixed capital expenditure
Owned
(i) Fixed assets are stated at cost or valuation less accumulated depreciation except
for freehold land which is stated at revalued amount. On disposal, the value of
the assets and the depreciation is adjusted from both the accounts and the
resultant gain or loss is dealt with through profit and loss account. The portion
relating to gain or loss relating to revaluation on assets disposed is transferred to
profit and loss account from surplus on revaluation of fixed assets account. The
revaluation of assets is carried out every five years.
(ii) Depreciation is charged to income applying the straight line method at the rates
indicated in Note 3.
(iii) A full year's depreciation is charged on the assets acquired during the year,
whereas no depreciation is charged in the year of disposal.
(iv) Normal repairs and maintenance are charged to expenses as and when incurred.
Leased
The company accounts for fixed assets obtained under finance lease by recording the
assets and related liability. These are stated at cost less accumulated depreciation,
Financial charges are allocated to accounting periods in a manner so as to provide a
constant periodic rate of charge on outstanding liability. Depreciation is charged to
income applying the straight line method at the rates indicated in Note 3.
2.4 Investment
Long term investments are valued at cost. Provision is made for decline, other than
temporary in value of investments.
2.5 Capital work-in-progress
Capital work-in-progress is stated at cost.
2.6 Deferred development cost
Deferred development cost represents cost of parts utilised for development of local
parts for new models. These are being amortised over five years.
2.7 Stores, spares and loose tools
These are valued at cost on weighted average basis.
2.8 Stock in trade
These are valued at lower of cost and net realisable value. The cost of various
classes of stock in trade are determined as follows:
CKD Kits Identifiable import cost and incidentals.
Spare Parts for sale Weighted average basis.
Local raw materials Weighted average basis.
Work in process and Cost of raw materials, import incidentals,
finished goods direct labour and appropriate portion of overhead costs.
Stock in transit Letter of credit opening charges plus other
charges incurred thereon.
Net realisable value signifies the selling price in the ordinary course of business less
cost which are necessary to be incurred in order to make the sale.
2.9 Retirement benefits
The company operates an unfunded gratuity scheme for all its regular and permanent
employees and is proposing to setup an approved Gratuity Fund.
Until last year "Attained Age Normal Method" was being used for the valuation of the
gratuity scheme. From the current year the "Projected Unit Credit Method" has been
used in view of requirements of the revised International Accounting Standard - 19,
Employee Benefits. For this purpose, an actuarial valuation was carried out at 30 June
2000 using the "Projected Unit Credit Cost Method". Based on the Actuarial
recommendation, annual contributions at the rate of 16.25% of annual basic salary is
required to be made for the year 2000-2001.
The Change in actuarial valuation method, had resulted in a net transitional obligation
of Rs. 0.394 million which is amortised over a period of five years starting from 1999-
2000.
The amount recognised in profit and loss account for the year as gratuity cost includes
the following:
Rs '000
- Service cost 893
- Interest cost 866
- Amortisation of transitional obligation 78
-----------
- Total cost for 1.999-2000 1,837
==========
The actual liability as at 30 June 2000 recognised in the balance sheet was arrived as
follows:
Rs '000
- Actuarial Liability 9,234
- Fair value of plan assets (unfunded scheme) -
- Unfunded actuarial liability 9,234
- Unrecognised transitional obligation (316)
- Unrecognised net loss (186)
- Book provision 8,732
2.10 Taxation
Provision for current taxation is based on taxable income at the current rates of
taxation after taking into account tax credits and tax rebates available, if any. The
company accounts for deferred taxation using the liability method on all major timing
differences (excluding timing difference due to revaluation of assets) that are likely to
reverse in the foreseeable future. However, deferred tax debits are not recognised in
the accounts.
2.11 Foreign currencies
Foreign currency transactions are translated into Pak Rupees at exchange rates
prevailing on the date of transaction. Assets and liabilities in foreign currencies are
translated at the rate of exchange prevailing at the balance sheet date. Exchange
differences are charged to the income currently.
2.12 Income recognition
Revenue is recognised when goods are sold. Goods are treated as sold when invoiced,
and ready for delivery. Warranty claims are recognised in the accounts as and when
accepted.
3. FIXED ASSETS
WRITTEN
DOWN
COST/REVALUATION DEPRECIATION VALUE
NAME OF ASSET As AT ADDITIONS/ SURPLUS ON AS AT RATE As AT FOR THE RELEASED ON AS AT AS AT
01 JULY (DISPOSAL) REVALUATION 30 JUNE % 0l JULY YEAR/ REVALUATION 30 JUNE 30 JUNE
1999 2000 1999 (ON DISPOSAL) 2000 2000
Rs '000 Rs '000 RS '000 RS '000 RS '000 Rs '000 RS '000 Rs '000 Rs '000
TANGIBLE
OWNED:
Freehold land 32,025 -- -- 32,025 -- -- -- -- -- 31,025
Plant building
freehold land 50,962 -- -- 50,962 2.50 -- 1,274 -- 1,274 49,688
Plant and machinery 78,868 -- -- 78,868 10.00 -- 7,887 -- 7,887 70,981
Furniture and fixtures 1,100 2 -- 1,102 12.50 -- 138 -- 138 964
Vehicles 21,710 *4,866 -- 24,041 20.00 18,414 3,208 -- 22,557 1,484
(2,535) -- *2,920 (1,985)
Office equipment 160 46 -- 206 12.50 -- 26 -- 26 180
Computers 2,673 531 -- 3,204 20.00 -- 641 -- 641 2,563
Telephone system 590 9 -- 599 12.50 -- 75 -- 75 524
Electrical equipment 4,244 30 -- 4.27 12.50 -- 534 -- 534 3,740
Fire fighting equipment 40 -- -- 40 10.00 -- 4 -- 4 36
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
192,372 5,484 -- 195,321 18,414 13,787 -- 33,136 162,185
(2,535) -- *2,920 (1,985)
LEASED
Vehicles 14,345 *(4,866) -- 9,479 20.00 6,102 1,896 -- 5,078 4,401
-- *(2.920)
Plant and machinery 8,300 -- -- 8,300 10.00 1,660 830 -- 2,490 5,810
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
22,645 *(4.866) -- 17,779 7,762 2,726 -- 7,568 10,211
-- *(2,920)
INTANGIBLE
Computer software 2,814 -- -- 2,814 33.34 938 938 -- 1,876 938
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
2000 217,831 618 -- 215,914 27,114 17,451 -- 42,580 173,334
(2,535) -- (1,985)
========== ========== ========== ========== ========== ========== ========== ========== ==========
1999 153,403 20,547 44,481 217,831 36,732 16,533 (25,941) 27,114 190,717
(600) (210)
========== ========== ========== ========== ========== ========== ========== ========== ==========
* Transferred from leased assets to owned assets.
3.1 Depreciation has been allocated as follows:
2000 1999
NOTE Rs '000 Rs '000
Cost of goods sold 19 11,005 7,982
Administration and selling expenses 20 6,446 8,551
----------- -----------
17,451 16,533
========== ==========
3.2 As at 30 June 1999, all of the company's fixed assets except vehicles were revalued by
Harold Mukhtar & Co., and examined by Muniff Ziauddin & Co., Chartered
Accountants. The valuation was determined on the following basis:
Freehold Land -- Present Market Value of similar properties in the area.
Plant Building -- Present cost of construction discounted for approximate
depreciation.
Plant and Machinery -- Replacement value of similar machinery at current
exchange rates discounted for depreciation depending on
the age, maintenance, usage and change of technology/
obsolescence.
Others -- Assessed market value.
The surplus arising on revaluation was credited to surplus on revaluation of fixed assets
account.
3.3 Had there been no revaluation, the net book value of fixed assets at cost less
accumulated depreciation would amount to:
Written down value
2000 1999
Rs '000 Rs '000
Owned
Freehold land 16,292 16,292
Plant building -
freehold land 24,908 25,792
Plant and machinery 12,199 14,578
Furniture and fixtures 916 1,193
Vehicles 1,175 1,732
Office equipment 68 45
Computers 3,244 3,067
Telephone system 395 612
Electrical equipment 2,175 3,358
Fire fighting equipment 29 39
----------- -----------
61,401 66,708
Leased:
Vehicles 4,426 8,282
Plant and machinery 5,810 6,640
----------- -----------
71,637 81,630
========== ==========
3.4 Disposal of Fixed Assets
Cost/ Accumulated Written Sales Mode of Particulars of buyer
revalued Depreciation down Proceeds disposal
amount Value
(Rs '000)
Suzuki Khyber 354 283 71 71 Terms of Mr. Yawar Abbas
employment 2/102-D, PECHS..
Karachi.
Suzuki Khyber 358 287 71 71 -do- Mr. Mehmood-ur-Rehman
5-8/1, 16 - East Street
Phase-l, D.H.A., Karachi.
Suzuki Mehran 257 154 103 86 -do- Syed Sajid Nasim
A-637, Sector 11-A
North Karachi., Karachi.
Suzuki Mehran 257 154 103 107 -do- Syed Mumtaz All Naqvi
5-2, Street 27 Model
Colony, Karachi.
Nissan Sunny 600 540 60 106 -do- Mr. Salman Siddique
1 I-A/2, Circular Street
Phase-fl. D.H.A.. Karachi.
Suzuki Khyber 351 281 70 70 -do- Mr. Tahir Javed
MC 324/A Green Town, Karachi.
Suzuki Khyber 358 286 72 72 -do- Mr. Bashir Ahmad Abbasi
House No. 1726/1939
Ghaus Nagar,
----------- ----------- ----------- ----------- Baldia Town Karachi.
Total 2,535 1,985 550 583
========== ========== ========== ==========
4. LONG TERM INVESTMENT
% of 2000 1999
holding (Rupees in '000)
Long term investment 12.80 1,875 1,500
This represents 187,500 (1999:t50,000) shares of Automotive Testing & Training Centre
Pvt) Ltd.
Based on un-audited accounts the per share break up value of the company s share as at 30
June 2000 was Rs. 8.73.
Chief Executive Mr. Ramzan All Khwaja
5. DEFERRED DEVELOPMENT EXPENDITURE
Balance at the beginning of the year 3,567 --
Cost incurred during the year -- 4,459
Amortized during the year (892) (892)
----------- -----------
Balance at end of the year 2,675 3,567
========== ==========
6. STORES, SPARES AND LOOSE TOOLS
Stores, spares and loose tools include consumables, paints and spares for maintenance of
plant and equipments.
7. STOCK IN TRADE
2000 1999
Rs '000 Rs '000
Raw materials in transit 5,243 4,404
Raw materials 31,973 93,729
Work in process 26,855 2,832
Spare parts for sale 23,654 32,722
Finished goods 2,992 33,791
  ----------- -----------
90,717 167,478
========== ==========
8. TRADE DEBTORS -unsecured considered good
Spare parts 1,580 3,110
Vehicles 17,685 27,443
----------- -----------
19,265 30,553
========== ==========
9. ADVANCES, DEPOSITS, PREPAYMENTS
AND OTHER RECEIVABLES
Short term advances - unsecured considered good
Staff 1,359 1,261
Taxation - Income Tax 64,865 105,216
Sales Tax 3,267 3,267
Contractors and suppliers 2,658 2,090
Letter of credit opening charges -- 92
Letter of credit margin 1,809 6,284
Bank guarantee margin 276 --
----------- -----------
74,234 118,210
Deposits
Security deposits 436 436
Earnest money 100 348
----------- -----------
536 784
Prepayments 104 445
Other receivables
Due from associated undertakings 9.1 28,639 25,131
Octroi recoverable 3,546 5,052
Others 1,036 570
----------- -----------
33,221 30,753
----------- -----------
108,095 150,192
========== ==========
9.1 No interest is charged on these balances. The maximum aggregate amount due from
associated undertakings at the end of any month during the year amounted to Rs. 33.261
million (1999: Rs. 30.881 million).
10. CASH AND BANK BALANCES
Cash in hand 2 17
At banks - on current accounts 10.1 25,233 693
----------- -----------
25,235 710
========== ==========
10.1 The above balances include Rs. 3.912 million held with Indus Bank Limited, whose
operations were ceased subsequent to year end by State Bank of Pakistan due to various
irregularities discovered during their inspection. The above balance is net of Rs. 42.586
million deposit in the deposit account and margin account against four letters of credit
due in May and June 2000. Despite full payment and several reminders, the payment of
above letters of credit has not been made to the supplier of goods. The company
considers that it has discharged its obligation against the said letters of credit. No
provision has been made against the deposit with bank as the management is hopeful of
full recovery of the balance once the affairs of the bank are sorted out.
11. FINANCE UNDER MARKUP ARRANGEMENTS ' Secured
Running finance 93,472 103,509
Short term trade finance 25,331 96,111
------------ ------------
118,803 199,620
========== ==========
The company has aggregate running finance facilities of Rs. 93.67 million (1999: Rs. 110.46
million) from various banks. The rates of markup range between Rs. 0.4520 to Rs. 0.4932 per
thousand per day. These facilities are in the process of renewal. These arrangements are
secured by way of charge on company's immovable assets, present and future, hypothecation
of stock and receivables.
12. CREDITORS, ACCRUED EXPENSES AND OTHER LIABILITIES
Sales tax payable 7,923 4,812
Creditors for goods and services 27,035 31,053
Due to associated undertakings 16,532 12,730
Accrued expenses 25,626 19,814
Accrued markup 4,993 7,208
Advances from customers 47,497 19,587
Accrued markup on customers' advance 535 535
Security deposits 350 350
Tax deducted payable to authorities 669 480
Workers' welfare fund 1,933 2,736
Others 1,745 1,022
------------ ------------
134,838 100,327
========== ==========
13. TAXATION
The income tax assessments of the company have been finalised upto and including
assessment year 1999-2000. The assessment orders for the year 1989-90 to 1997-98 are
under various stages of appeal. In case of adverse decision in appeals, no additional liability
is likely to arise.
2000 1999
Rs '000 Rs '000
14. SHARE CAPITAL
Authorised
12,000,000 Ordinary shares of Rs. 10 each 120,000 120,000
========== ==========
Issued, subscribed and paid up
4,323,000 Ordinary shares of Rs. 10 each
fully paid in cash 43,230 43,230
3,444,888 Ordinary shares of Rs. 10 each
issued as fully paid bonus shares 34,449 34,449
--------- --------- ---------
7,767,888 77,679 77,679
========== ========== ==========
15. SURPLUS ON REVALUATION OF FIXED ASSETS
Balance at beginning of the year 121,094 51,111
Addition during the period -- 70,527
--------- ---------
121,094 121,638
Released to profit and loss account on assets disposal (334) (544)
--------- ---------
Balance at end of the year 120,760 121,094
========== ==========
16. LIABILITY AGAINST ASSETS SUBJECT
TO FINANCE LEASE
Minimum lease rentals at beginning of the year 10,824 14,448
-- 3,044
Additions during the year --------- ---------
10,824 17,492
Payments during [he year (6,769) (6,668)
--------- ---------
4,055 10,824
Transferred to current maturity (3,826) (6,637)
--------- ---------
229 4,187
========== ==========
16.1 Approximate discounting factor range from 18.50% to 22.23% per annum. The future
commitments for minimum lease payments under various lease arrangements are as
follows:
1999-2000 -- 9,019
2000-2001 4,186 3,431
200J-2002 238 197
--------- ---------
4,424 12,647
Financial charges allocated to future periods (370) (1,823)
--------- ---------
4,054 10,824
========== ==========
17. CONTINGENCIES AND COMMITMENTS
17.1 The Deputy Collector of Sales Tax has issued show cause notice to the company
alongwith other similar units alleging that between 01 July 1990 to 17 October 1993,
the company had supplied truck and bus chassis with and without cabins, without
recovering sales tax. An amount of Rs. 869.106 million has been claimed. The
company has filed an application for exemption under section 65 of the Sales Tax Act,
1990. Pending decision on the application for exemption, the company has been
granted a stay from the High Court of Sindh. The company's Legal Advisors are
hopeful that exemption under section 65 will be granted.
17.2 During the year the company received a show cause notice from Appraisement
Collectorate, Karachi claiming that the company on import of certain CKD from its
principals in Japan enjoyed special discounts and the said CKD were cleared on these
discounted values without addition of "cost of association". The recovery proceedings
are for Rs. 6.012 million representing custom duty, sales tax and income tax and
penalties, if any, thereon. The above show cause notice is being contested in an appeal
with Customs, Excise & Sales Tax Appellate Tribunal and stay upto 22 January 2001
has been granted against recovery of the above amount. No provision has been made
in the account as in the opinion of company's legal advisor the authorities contention
may not sustain to recover adjudged amount of duty and other dues.
17.3 The company's bankers have issued bank guarantees amounting to Rs.5.620 million
against supply of vehicles to various government authorities (1999: Rs. 5.440 million).
17.4 Post dated cheques held by Collector of Customs as a security against the concessional
rate of duty amounted to Rs. 131.210 million (1999: Rs. 113.544 million).
2000 1999
Rs '000 Rs '000
18. SALES AND SERVICES
Sales and services 556,798 742,167
Less :Commission and selling expenses (8,155) (8,919)
----------- -----------
548,643 733,248
========== ==========
19. COST OF GOODS SOLD
Raw materials consumed 19.1 452,035 606,852
Stores and spares consumed 4,048 9,443
Salaries, wages and other benefits 17,496 18,487
Insurance 2,066 2,045
Fuel and power 2,167 612
Printing and stationery 165 147
Test and trial expenses 914 1,016
Travelling 219 378
Postage and telephone 535 413
Depreciation 3.1 11,005 7,982
Repairs and maintenance 1,194 705
Material handling 348 776
Motor running expenses 207 209
Royalty expenses 2,196 2~915
Cost of body fabrication -- 17,916
Cost of parts sold 13,111 12.53
Other manufacturing expenses 1,392 !,263
Excess of warranty claim (257) (1,195)
Opening stock of work in process 2,832 13,636
Closing stock of work in process (26,855) (2,832)
---------- ----------
Cost of goods manufactured 484,818 693,296
Opening stock of finished goods 33,791 26,845
Closing stock of finished goods (2,992) (33,791)
---------- ----------
515,617 686,350
========== ==========
19.1 Raw materials consumed
Opening stock 98,133 236,083
Purchases 391,118 468,902
---------- ----------
489,251 704,985
Closing stock (37,216) (98,133)
---------- ----------
452,035 606,852
========== ==========
20. ADMINISTRATION AND SELLING EXPENSES
20.1 26,415 25,421
Directors' fee 10 4
Rent. rates and taxes 1,579 1,171
Insurance 1,722 2,135
Repairs and maintenance 2,389 2,475
20.2 186 147
3.1 6,446 8,551
Advertising and sales promotion 1,218 1,199
Software development expenses -- 1,250
Travelling 2,938 1,958
Legal and professional charges 1,663 1,042
Fee and subscriptions 482 527
Motor running expenses 922 888
Utilities 3,095 2,923
Printing and stationery 964 1,315
Newspapers and periodicals 27 25
Security expenses 606 594
Loss on revaluation -- 108
Others 2,298 1,754
----------- -----------
52,960 53,487
========== ==========
20.1 Salaries, wages and employees welfare cost shown under cost of goods sold (note 19)
and selling and administration expenses includes:
- Gratuity 1,837 955
========== ==========
- Provident Fund 1,053 844
========== ==========
20.2 Auditors' remuneration
Audit fee 45 45
Sundry advisory services 93 55
Special certifications 7 12
Out of pocket expenses 41 35
----------- -----------
186 147
========== ==========
21. OTHER INCOME
Sale of scrap 2,145 613
Gain on sale of fixed assets 368 464
Income on bank account 1,311 --
Miscellaneous income 1,109 1,252
----------- -----------
4,933 2,329
========== ==========
22. FINANCIAL CHARGES
Markup and excise duty on running finance 35,196 37,723
Lease finance charges 1,468 2,937
Bank charges 191 197
Mark-up on WPP Fund utilised -- 318
Exchange loss 369 8,392
----------- -----------
37,224 49,567
========== ==========
23. TRANSACTIONS WITH ASSOCIATED COMPANIES
Aggregate amounts in respect of:
Purchase made from associated undertaking 347,091 406,724
========== ==========
Cost allocated by associated undertaking 12,126 13,347
========== ==========
Commission paid to associated undertaking 1,750 2,555
========== ==========
Insurance charge by associated undertaking 4,452 4,603
========== ==========
Interest paid to associated undertaking 794 1,030
========== ==========
24. REMUNERATION OF DIRECTORS,
CHIEF EXECUTIVE AND EXECUTIVES
2000 1999
Chief Directors Executives Chief Directors Executives
Executive Executive
(Rupees in '000) (Rupees in '000)
Remuneration 1,440 2,687 7,274 1,440 1,787 8,868
Provident fund -- 87 297 -- 34 329
Gratuity 42 97 362 100 466 642
Utilities 193 175 299 133 116 398
Medical -- 83 256 -- 35 496
---------- ---------- ---------- ---------- ---------- ----------
1,675 3,129 8,488 1,673 2,438 10,733
========== ========== ========== ========== ========== ==========
Number of persons  1 3 20 I 2 26
24.1 Meeting fee paid to 10 directors Rs. 9,500 (1999: Rs. 4,000 paid to 8 directors).
24.2 Certain executives of the company are provided with free use of cars.
25. NUMBER OF EMPLOYEES
Total number of employees at 30 June 2000 were 192 (1999: 198).
26. CASH AND CASH EQUIVALENTS
2000 1999
Rs '000 Rs '000
Cash and bank balances 25,235 710
Finance under mark-up arrangements (118,803) (1,99,620)
---------- ----------
(93,568) (198,910)
========== ==========
27. PLANT CAPACITY AND PRODUCTION
The production capacity of the plant cannot be determined as this depends upon the relative
production of various types of trucks and bus chassis,
28. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
28.1 Interest rate risk exposure
The company's exposure to interest rate risk and the effective rates on its financial
assets and liabilities are summarized as follows:
(Rupees in '000)
Interest bearing Non
Within one One year to Interest Total
Year five years bearing
2000
Financial assets
Deposits against lease facility -- -- 1,299 1,299
Trade debts -- -- 19,265 19,265
Advances, deposits,
and other receivables -- -- 83,490 83,490
Cash and bank balances -- -- 25,235 25,235
----------- ----------- ----------- -----------
-- -- 129,289 129,289
========== ========== ========== ==========
Financial liabilities
Liabilities against assets
subject to finance lease 3,826 229 -- 4,055
Finance under mark-up
arrangements 118,803 -- -- 118,803
Bills payable -- -- 5,144 5,144
Staff retirement gratuity -- -- 8,732 8,732
Creditors, accrued expenses
and other liabilities -- -- 87,341 87,341
----------- ----------- ----------- -----------
122,629 229 101,217 224,075
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
On balance sheet gap (122,629) (229) 28,072 (94,786)
========== ========== ========== ==========
Average interest rates 17.04% 19.81%
Interest bearing Non
Within one One year to Interest Total
Year five years bearing
1999
Financial assets
Deposits against lease facility -- -- 1,785 1,785
Trade debts
Advances, deposits, -- -- 30,553 30,553
and other receivables -- -- 54,476 54,476
Cash and bank balances -- -- 710 710
----------- ----------- ----------- -----------
-- -- 87,524 87,524
========== ========== ========== ==========
Financial liabilities
Liabilities against assets
subject to finance lease 6,637 4,187 -- 10,824
Finance under mark-up
arrangements 199,620 -- -- 199,620
Bills payable -- -- 4,567 4,567
Staff retirement gratuity -- -- 7,176 7,176
Creditors, accrued expenses
and other liabilities -- -- 80,740 80,740
----------- ----------- ----------- -----------
206,257 4,187 92,483 302,927
----------- ----------- ----------- -----------
On balance sheet gap (206,257) (4,187) (4,959)  (215,403)
========== ========== ========== ==========
Average interest rates 20.08% 20.62%
28.2 Concentration of credit risk and credit exposures of the financial instruments.
The company does not believe that it is exposed to major concentration of credit risk.
The company applies approved limits to the amount of credit exposure to any one
counterparty. Trade debtors include an amount of Rs. 8.811 million (1999:20.553
million) is outstanding at 30 June 2000 from government agencies.
28.3 Fair value of the financial instruments
The carrying value of all the financial instruments reflected in the financial statements
approximates their fair values.
29. LOSS PER SHARE - BASIC AND DILUTED
2000 1999
Rs '000 Rs '000
Net loss for the year (56,323) (57,538)
========== ==========
Weighted average number of outstanding
ordinary shares in thousand 7,768 7,768
========== ==========
Loss per share Rupees (7.25) (7.41)
========== ==========
30. GENERAL
30.1 Previous year's amount have been rearranged, wherever necessary, to facilitate
comparison.
30.2 Figures have been rounded off to the nearest thousand of rupees.
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