| Pakistan Engineering Company Limited |
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| Annual
Report 2000 |
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| CONTENTS |
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| Company
Information |
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| Notice
of Meeting |
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| Chairman's
Review |
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| Directors'
Report |
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| Auditors'
Report to the Shareholders |
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| Balance Sheet |
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| Profit
& Loss Account |
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| Cash
Flow Statement |
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| Statement
of Changes in Equity |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| Ten
Years Summary |
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| COMPANY
INFORMATION |
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| BOARD
OF DIRECTORS |
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| Hussain
Ahmad Siddiqui (Chairman) |
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| M.
Imtiaz-ur-Raheem (Chief Executive) |
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| Prince
Abbas Khan |
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| Jawaid
Iqbal Mufti |
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| Afaq
Jamal Hussain |
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| S.
Hashim Ishaque |
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| Syed
Aijaz Ali Abbasi |
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| Liaqat
Mohammad |
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| Mohammad
Shabir Malik |
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| Sheikh
Asif Salam |
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| COMPANY
SECRETARY |
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| M.
Imtiaz-ur-Raheem |
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| BANKERS |
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| National
Bank of Pakistan |
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| United
Bank Limited |
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| Habib
Bank Limited |
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| American
Express Bank Limited |
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| Emirates
Bank International Limited |
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| AUDITORS |
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| S.M.
Masood & Company |
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| Chartered
Accountants |
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| REGISTERED
AND HEAD OFFICE |
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| 6-Ganga
Ram Trust Building, |
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| Shahrah-e-Quaid-e-Azam,
Lahore. |
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| BRANCHES |
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| Karachi |
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| Islamabad |
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| Peshawar |
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| Quetta |
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| PLANT |
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| Kot
Lakhpat, Lahore. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 51st Annual General Meeting of Pakistan Engineering |
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| Company
Limited will be held at Hotel Ambassador, 7 - Davis Road, Lahore, on Saturday |
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| December
23, 2000 at 10.30 A.M. to transact the following business: - |
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| 1.
To confirm Minutes of 22nd Extra Ordinary General Meeting held on June 17th
2000. |
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| 2.
To receive, consider and adopt the Audited Accounts of the company for the
year |
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| ended
June 30, 2000 together with the Auditors' and Directors' reports thereon. |
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| 3.
To appoint Auditors for the year ending June 30, 2001 and to fix their
remuneration. |
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| The
present Auditors M/s. S.M. Masood & Company, Chartered Accountants |
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| being
eligible for reappointment have offered themselves for reappointment. |
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| 4.
To transact any other business with the permission of the chain |
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BY ORDER OF THE BOARD |
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(M. Imtiaz-ur-Raheem) |
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| Lahore:
November 18, 2000 |
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Company Secretary |
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| NOTES: |
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| 1.
The Share Transfer Books of the company shall remain closed from December |
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| 14,
2000 to December 23, 2000 (Both days inclusive). |
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| 2.
A member entitled to attend and vote at this meeting is entitled to appoint
any |
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| person
as a proxy and vote on his / her behalf. Proxies in order to be effective |
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| must
be received at the Registered Office of the Company not less than 48 hours |
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| before
the time of the meeting. |
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| 3.
Any individual Beneficial Owner of CDC, entitled to attend and vote at this |
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| Meeting,
must bring his/her original NIC or passport to prove his/her identity and in |
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| case
of Proxy must enclose an attested copy of his/her NIC or Passport. |
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| Representatives
of corporate members should bring the usual documents required |
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| for
such purpose. |
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| 4.
The shareholders are requested to notify the change of address, if any, |
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| immediately. |
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| CHAIRMAN'S
REVIEW |
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| It
gives me great pleasure to welcome you, on behalf of the Board of Directors,
to the 51st |
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| Annual
General Meeting of the Company, and to apprise you of the affairs of the
Company for the |
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| year
ended June 30, 2000. |
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| OVERVIEW: |
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| Engineering
industry faced many challenges during the year 1999-2000. The overall |
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| economic
and market conditions continued to remain uncertain, like last year.
Inflation resulted in. |
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| on
one hand, decline in demand and on the other, increased cost of sales. The
growth performance |
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| of
manufacturing sector, in general, and large scale manufacturing in
particular, showed declining |
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| trend.
The Company's performance during the year under review may thus be evaluated
in the |
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| above
economic scene, as it directly relates to the stability of economic
conditions in the country. |
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| OPERATING
RESULTS: |
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| Despite
economic recession, the operating results of the Company for the year 1999- |
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| 2000
indicate reversal of the declining sales trend indicated during the past two
years. Diversification |
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| in
marketing strategies resulted into valuable orders for communication towers
for Pakistan |
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| Telecommunication
Corporation Ltd, and National Logistic Cell, which were successfully
executed. |
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| The
Company is enhancing its designing capabilities for communication towers to
make it a regular |
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| product.
The General Engineering jobs such as jib cranes, overhead road bridges, heavy
crane |
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| wheels
and special jobs from Lahore Development Authority, Pakistan Ordinance
Factories, |
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| Pakistan
Railways and WAPDA were also obtained. |
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| Amongst
the existing product lines, double circuit 500 KV towers were designed and |
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| successfully
tested, thus enhancing the comparative technical edge. In addition, your
Company |
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| obtained
an order for 132 KV line valuing Rs. 80 million, which was completed within a
record |
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| period
of three months. |
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| The
above efforts resulted in increase in sales turnover to Rs. 511 million as
against |
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| Rs.
244 million last year, with gross profit of Rs. 6 million as against gross
loss during two previous |
|
| years.
The net loss before taxation was reduced to Rs. 109 million compared to loss
of Rs. 178 |
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| million
in the preceding year. |
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| FUTURE
OUTLOOK: |
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| The
Company has orders of Rs. 283 million in hand for transmission towers, and
further |
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| order
of 500 KV towers for Brotha Rawat line valuing Rs. 370 million is in advanced
stage of |
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| approval
by WAPDA. Another order for 132 KV towers valuing Rs. 90 million is under
negotiation. |
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| It
is expected that order for 500 KV Muzzafargarh - Gatti lines on turn key
basis would be |
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| awarded
soon, and PECO is expecting towers valuing Rs. 350 million approximately from
the |
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| successful
foreign bidder. There are 220 KV lines orders also under negotiations with
foreign |
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| bidders
by WAPDA on turn key basis and your Company expects business of Rs. 800
million |
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| against
these contracts. Further, there are prospects of orders of approximately Rs.
700 million |
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| for
transmission towers for Ghazi Brotha power project, to be tendered shortly. |
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| You
would be pleased to know that your Company has entered into co-operation
agreement |
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| with
a foreign group for joint participation in transmission lines turnkey
business in Pakistan as |
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| well
as in third Countries. It will further enhance the business prospects of your
Company. The |
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| Company
has also signed an agreement of cooperation for technology transfer for
manufacturing |
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| large
capacity Pumps. Efforts are also underway to explore and develop new markets.
Despite |
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| your
Company being on privatization list, the management is making efforts to
improve technology, |
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| and
enhance its competitive abilities, where possible. Short-term measures are
also underway to |
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| cut
down losses and make the Company profitable. In this connection, a proposal
to close down |
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| loss
making shops is under active consideration of the Government. |
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| Looking
forward, we are optimistic that the Company would perform better during the |
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| year 2000-2001. |
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| ACKNOWLEDGEMENT: |
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| Relations
between the management and the employees continue to be cordial. I |
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| acknowledge
the hard work and dedication put in by the management and employees for yet |
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| another
turbulent year of operation. I am thankful to you, the shareholders. for your
continued |
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| confidence
in us. |
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|
HUSSAIN AHMAD SIDDIQUI |
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CHAIRMAN |
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| DIRECTORS'
REPORT |
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| The
Directors have pleasure in presenting the 51st Annual Report with the Audited
Accounts and |
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| the
Auditors' Report thereon for the year ended June 30, 2000. |
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| Financial
results are as follows: |
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|
(RS. IN THOUSAND) |
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|
Year ended |
Year ended |
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|
30.06.2000 |
30.06.1999 |
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| Loss
for the year before taxation |
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|
109,026 |
146,800 |
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| Taxation
(Turnover Tax) |
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|
2,557 |
1,218 |
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| Loss
after taxation |
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|
111,583 |
148,018 |
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| Loss
Brought Forward |
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|
1,096,738 |
948,720 |
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| Accumulated
Loss |
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|
1,208,321 |
1,096,738 |
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| Earning
/ (Loss) Per Share (Rs.) |
|
|
(19.61) |
(26.01) |
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|
| Chairman's
Review |
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| The
accompanying Chairman's review deals with the performance of the company
during the year |
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| and
future outlook. The Directors of the company endorse the contents of the
review. |
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|
| Board
of Directors |
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| During
the year under review Mr. M. Imtiaz-ur-Raheem replaced Mr. M. Javed Sahibzada
as |
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| Managing
Director and Mr. S. Hashim Ishaque nominee of NIT replaced Mr. S.M. Ahsan
Raza. |
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| Following
Directors representing Private Shareholders were elected unopposed for next
three years. |
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| 1.
Syed Aijaz Ali Abbasi |
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| 2.
Mr. Liaqat Mohammad |
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| 3.
Mr. Mohammad Shabir Malik |
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| 4.
Sheikh Asif Salam |
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| ISO 9001 |
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| Your
company has obtained ISO 9001 certification for design and manufacturing of
all types of |
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| Pumps,
Steel Making, Rolled Products, General Structures and Transmission Line
Towers. This will |
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| greatly
enhance its image, quality and acceptability in the local & export
market. |
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| Auditors |
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| The
present Auditors M/s S.M. Masood & Company, Chartered Accountants, being
eligible, offer |
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| themselves
for re-appointment. |
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| Pattern
of Shareholding |
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| The
pattern of shareholding as on June 30, 2000 is annexed. |
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On behalf of the Board |
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|
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| Dated:
November 18, 2000 |
|
(Hussain Ahmad Siddiqui) |
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| Lahore. |
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Chairman |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed balance sheet of Pakistan Engineering Company
Limited as at June |
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| 30,
2000 and the related profit and loss account, cash flow statement and
statement of changes in |
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| equity
together with the notes forming part thereof, for the year then ended and we
state that we |
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| have
obtained all the information and explanations which, to the best of our
knowledge and belief, |
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| were
necessary for the purposes of our audit. |
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| It
is the responsibility of the company's management to establish and maintain a
system of internal |
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| control,
and prepare and present the above said statements in conformity with the
approved |
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| accounting
standards and the requirements of the Companies Ordinance, 1984. Our
responsibility |
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| is
to express an opinion on these statements based on our audit. |
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| We
conducted our audit in accordance with the auditing standards as applicable
in Pakistan. |
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| These
standards require that we plan and perform the audit to obtain reasonable
assurance about |
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| 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 |
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| statements.
An audit also includes assessing the accounting policies and significant
estimates made |
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| by
management, as well as, evaluating the overall presentation of the above said
statements. We |
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| believe
that our audit provides a reasonable basis for our opinion and, after due
verification, we |
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| report that: |
|
|
| a)
the customs and other import duties outstanding principal amount of Rs.
105.684 million |
|
| (see
Note No. 22.2) is subject to interest @ 14% per annum which has not been
accounted |
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| for
and upto June 30, 2000 the accumulated amount of interest comes to Rs. 58.643 |
|
| million.
The management is of the view that the interest on such loan is to be paid by
the |
|
| Privatization
Commission out of sale proceeds of the company and accordingly it has not |
|
| been
accounted for. But the confirmation of management's view from Privatization |
|
| Commission
was not available. |
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|
|
|
|
|
| b)
in our opinion, proper books of accounts have been kept by the company as
required by |
|
| the
Companies Ordinance, 1984; |
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|
|
|
|
|
| c)
in our opinion: |
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|
|
|
|
|
| i)
the balance sheet and profit and loss account together with the notes thereon
have |
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| 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 |
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| business; and |
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|
|
|
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| iii)
the business conducted, investments made and the expenditure incurred during
the |
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| year
were in accordance with the objects of the company; |
|
|
| d)
in our opinion, except for the matter referred to in paragraph (a) above and
to the extent to |
|
| which
it effects the results of the Company, 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 June 30,
2000 and of the |
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| profit/loss,
its cash flows and changes in equity for the year then ended: and |
|
|
|
|
| e)
in our opinion, no Zakat was deductible at source under the Zakat and Usher
Ordinance, 1980. |
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| Without
qualifying our opinion we draw attention to note 2.1 to the accounts which
states that these |
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| accounts
have been prepared on assumption that the company will continue as a going
concern. As |
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| explained
in note 2.1 to the accounts, the company during the year has suffered an
after tax loss of |
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| Rs.
111.583 million resulting in an accumulated loss of Rs. 1,208.321 million as
at June 30, 2000. |
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| The
company is under heavy debt burden and its long term liability to the
Government and its |
|
| institutions
of Rs. 1,354.288 million alongwith the accumulated losses have further
deteriorated its |
|
| debt
equity ratio during the year. These factors raise doubt that the company may
be able to |
|
| continue
as a going concern. Management's plan in regard to this matter is also
discussed in note |
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| 2.1
to the accounts. These accounts do not include any adjustments that might
result from the |
|
| outcome
of this uncertainty. |
|
|
| Date:
Nov. 18, 2000 |
|
S.M. MASOOD & CO |
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| Place: LAHORE |
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|
Chartered Accountants |
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|
|
| BALANCE
SHEET AS AT JUNE 30, 2000 |
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|
Note |
2000 |
1999 |
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|
(Rupees in
Thousand) |
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|
| FIXED
CAPITAL EXPENDITURE |
|
| TANGIBLE
FIXED ASSETS |
|
3 |
1,238,631 |
1,230,301 |
|
| ASSETS
SUBJECT TO FINANCE LEASE |
4 |
2,936 |
800 |
|
| CAPITAL
WORK 1N PROGRESS |
5 |
351 |
25,523 |
|
|
|
|
------------------ |
------------------ |
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|
|
|
1,241,918 |
1,256,624 |
|
|
| STATE
ENGINEERING CORPORATION PENSION FUND |
6 |
5,944 |
14,394 |
|
| LONG
TERM SECURITY DEPOSITS |
|
2,106 |
1,808 |
|
| LONG
TERM INVESTMENTS |
|
7 |
191 |
315 |
|
| DEFERRED
COST |
|
8 |
2,822 |
8,299 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
1,252,981 |
1,281,440 |
|
|
|
| CURRENT
ASSETS |
|
|
| Loose Tools |
|
|
25,741 |
28,760 |
|
| Stores & Spares |
|
9 |
141,977 |
154,443 |
|
| Stock in Trade |
|
10 |
290,897 |
314,765 |
|
| Trade Debtors |
|
11 |
232,972 |
77,934 |
|
| Loans
& Advances to Employees |
12 |
8,127 |
6,082 |
|
| Advances
to Others |
|
13 |
17,568 |
14,221 |
|
| Trade
Deposits, Prepayments & Other Receivables |
14 |
36,581 |
20,962 |
|
| Cash
& Bank Balances |
|
15 |
3,075 |
2,042 |
|
|
|
------------------ |
------------------ |
|
|
756,938 |
619,209 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
| Short
Term Loans |
|
16 |
326,455 |
229,642 |
|
|
| Current
Maturity Against Finance Lease |
24 |
614 |
176 |
|
| Deposits
& Advance Payments |
|
17 |
24,562 |
22,993 |
|
|
| Trade Creditors |
|
|
18 |
110,873 |
5,083 |
|
|
| Accrued
Liabilities / Mark-up |
|
19 |
30,658 |
26,086 |
|
|
| Provision
for Taxation |
|
|
3,776 |
1,218 |
|
|
| Unclaimed
Dividend |
|
|
1,903 |
1,903 |
|
|
| Other Liabilities |
|
|
20 |
68,886 |
70,120 |
|
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
567,727 |
357,221 |
|
|
|
|
|
------------------ |
------------------ |
|
|
| CURRENT
ASSETS LESS CURRENT LIABILITIES |
189,211 |
261,988 |
|
|
|
|
|
|
------------------ |
------------------ |
|
|
| TOTAL
ASSETS LESS CURRENT LIABILITIES |
|
1,442,192 |
1,543,428 |
|
|
|
|
------------------ |
------------------ |
|
|
| CONTINGENCIES
& COMMITMENTS |
21 |
0 |
0 |
|
|
|
|
| LONG
TERM & DEFERRED LIABILITIES |
|
|
|
| Government
Loans |
|
22 |
566,846 |
566,846 |
|
| Federal
Government Bonds |
|
23 |
787,442 |
787442 |
|
| Liabilities
Against Assets Subject to Finance Lease |
24 |
2,984 |
869 |
|
| Deferred
Liabilities |
|
|
61,196 |
52964 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,418,468 |
1408121 |
|
|
|
|
------------------ |
------------------ |
|
| NET
TOTAL ASSETS |
|
|
23,724 |
135,307 |
|
|
|
|
========== |
========== |
|
|
| REPRESENTED
BY |
|
|
|
|
|
| Share Capital |
|
|
25 |
56,904 |
56,902 |
|
|
| Revenue
Reserve - General |
|
|
10,000 |
10,000 |
|
| Accumulated
Loss |
|
|
(1,208,321) |
(1,096,738) |
|
|
|
------------------ |
------------------ |
|
|
|
|
|
(1,141,419) |
(1,029,836) |
|
| Revaluation
Surplus |
|
26 |
1,165,143 |
1,165,143 |
|
|
|
------------------ |
------------------ |
|
|
23,724 |
135,307 |
|
|
========== |
========== |
|
|
| The
annexed notes from 1 to 44 form an integral part of these accounts. |
|
|
|
M. IMTIAZ-UR-RAHEEM |
|
LIAQAT MOHAMMAD |
|
MOHAMMAD SHABIR MALIK |
|
|
Chief Executive |
|
Director |
|
Director |
|
|
|
| PROFIT
& LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 2000 |
|
|
|
Note |
2000 |
1999 |
|
|
|
(Rupees in
Thousand) |
|
|
| SALES |
|
|
27 |
511,501 |
243,680 |
|
| COST
OF GOODS SOLD |
|
28 |
505,407 |
315,248 |
|
|
|
------------------ |
------------------ |
|
| GROSS
PROFIT / (LOSS) |
|
6,094 |
(71,568) |
|
|
| OPERATING
EXPENSES |
|
|
|
| General
& Administrative |
|
29 |
49,040 |
47,188 |
|
| Selling
& Distribution |
|
30 |
15,778 |
13,753 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
64,818 |
60,941 |
|
|
|
|
------------------ |
------------------ |
|
| OPERATING
PROFIT/(LOSS) |
|
|
(58,724) |
(132,509) |
|
|
| FINANCIAL
CHARGES |
|
31 |
47,014 |
39,244 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(105,738) |
(171,753) |
|
|
|
|
|
| OTHER
INCOME / (CHARGES) |
|
32 |
(4,175) |
(5,881) |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
(109,913) |
(177,634) |
|
| PRIOR
YEAR ADJUSTMENTS |
|
33 |
887 |
30,834 |
|
|
|
|
|
------------------ |
------------------ |
|
| PROFIT
/ (LOSS) BEFORE TAXATION |
|
(109,026) |
(146,800) |
|
| TAXATION |
|
|
34 |
2,557 |
1,218 |
|
|
|
|
|
------------------ |
------------------ |
|
| PROFIT/(LOSS)
AFTER TAXATION |
|
(111,583) |
(148,018) |
|
|
|
|
| PROFIT
/ (LOSS) BROUGHT FORWARD |
|
(1,096,738) |
(948,720) |
|
|
|
------------------ |
------------------ |
|
| ACCUMULATED
LOSS |
|
(1,208,321) |
(1,096,738) |
|
|
========== |
========== |
|
|
|
|
|
|
Rupees |
|
|
| EARNINGS/(LOSS)
PER SHARE |
|
35 |
(19.61) |
(26.01) |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes from 1 to 44 form an integral part of these accounts. |
|
|
|
M. IMTIAZ-UR-RAHEEM |
|
LIAQAT MOHAMMAD |
|
MOHAMMAD SHABIR MALIK |
|
|
Chief Executive |
|
Director |
|
Director |
|
|
|
|
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 2000 |
|
|
|
|
2000 |
1999 |
|
|
|
|
(Rupees in
Thousand) |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Net
Profit / (loss) before taxation |
|
|
(109,026) |
(146,800) |
|
|
| Adjustments
for: |
|
| Depreciation |
|
|
17,025 |
16,680 |
|
|
| Amortization
of leased assets |
|
734 |
200 |
|
|
| Financial
charges |
|
47,014 |
39,244 |
|
|
| Provision
for bad debts |
|
819 |
955 |
|
|
| Provision
for gratuity and pension |
|
13,205 |
5,796 |
|
|
| Provision
for diminution in value of investments |
|
124 |
0 |
|
|
| Deferred
cost amortized |
|
5,753 |
7,232 |
|
|
| (Profit)
on sale of tangible fixed assets |
|
(2,456) |
(1,415) |
|
|
| Creditors
written back |
|
(75) |
0 |
|
|
| (Profit)
/ Loss on sale of assets held for sale |
|
1,054 |
970 |
|
|
|
|
------------------ |
------------------ |
|
|
| Profit
/ (Loss) before working capital changes |
|
(25,829) |
(77,138) |
|
|
|
|
| (Increase)
/ decrease in loose tools |
|
3,019 |
(3,342) |
|
| (Increase)
/ decrease in stores and spares |
|
2,041 |
7,848 |
|
| (Increase)
/ decrease in stock in trade |
|
23,868 |
