| ANNUAL REPORT 2004 |
|
|
|
|
|
|
| ANNUAL
REPORT 2004 |
|
|
| DIRECTOR'S
REPORT |
|
| Your
Directors take this opportunity to present to you the annual report together
with audited financial |
|
| statements
of the company for the year ended 30th June 2004. |
|
|
| Financial
and Appropriations: |
|
| Your
company is maintaining the pace of regular improvement in all areas and by
the grace of Almighty |
|
| Allah,
your company continued to perform well and posted a profit after tax of 2.479
million (2003: |
|
| Rs.3.297
million). The decrease in net profit is due to deferred taxation amounting to
Rs. 2.482 million. |
|
| Your
directors have pleasure in recommending a final cash dividend of 12% i.e.
1.20 per share (2003: @ |
|
| 10%
i.e. Rs. 1.00 per share) for the approval of shareholders at the forthcoming
Annual General Meeting. |
|
| Financial
results for the year is summarized as under: - |
|
|
|
|
2004 |
2003 |
|
|
|
Rupees |
Rupees |
|
| Profit
for the year before taxation |
|
6,744,908 |
5,116,669 |
|
| Provision
for taxation |
|
4,265,759 |
1,819,992 |
|
| Profit
after taxation |
|
2,479,149 |
3,296,677 |
|
| Unappropriated
profit brought forward |
|
3,344,120 |
1,158,384 |
|
| Profit
available for appropriation |
|
5,823,269 |
4,455,061 |
|
| Appropriation: |
|
|
|
| Proposed dividend |
|
1,333,129 |
1,110,941 |
|
| Un-appropriated
Profit carried forward |
|
4,490,140 |
3,344,120 |
|
| Earning per share |
|
2.23 |
2.97 |
|
|
| The
gross turnover of the company has increased by Rs. 20.255 million with a
tremendous growth of |
|
| 10.71
% over the last year. The major contribution in the growth of turnover is
from processing section. |
|
| The
increase in the administrative expense shows a normal growth. The effect of
decrease in mark up |
|
| rate
is visible in the financial charges i.e. 1.860 million as compared to Rs.
3.880 million in the last year. |
|
|
| Year
Under Review |
|
| The
year under review was a good year in terms of profit. Mashallah your company
has posted its name in |
|
| market
by its better quality output. The processing unit had contributed a major
portion towards the total |
|
| profit
before taxation. |
|
|
| Future
Prospects |
|
| The
management is trying their best for improving the processing unit to compete
the market and has |
|
| imported
one further Stenter machine, which has been shown as capital work in progress
as at June 30, |
|
| 2004.
The management hopes that with the refine quality of processing and increase
in production after |
|
| installation
of stenter machine the performance will improve, consequently company
anticipate better |
|
| final
results of next year. |
|
|
| Appreciation |
|
| We
would like to thank all of our staff members for the way they have responded
to challenges of the year. |
|
| The
increase in competitive pressures meant that everyone had to work harder.
Their hard work and |
|
| commitment
is greatly appreciated and is reflected in these results. |
|
|
| We
are also thankful for the encouragement and support which we received from
our suppliers, |
|
| shareholders,
bankers and financial institutions. |
|
|
| SUMMARY
OF LAST SIX YEARS |
|
| FINANCIAL
RESULTS |
|
| Description |
|
2004 |
2003 |
2002 |
2001 |
2000 |
1999 |
| Trading Results: |
|
|
| Turnover |
|
209,339,996 |
189,085,432 |
164,887,360 |
114,703,034 |
87,993,711 |
84,813,111 |
| Gross profit |
|
25,402,143 |
23,181,318 |
18,160,090 |
12,971,671 |
14,169,287 |
13,298,882 |
| Operating
profit/(loss) |
8,329,548 |
8,789,737 |
7,020,731 |
2,640,866 |
704,462 |
1,713,149 |
| Profit/(loss)
before taxation |
6,744,908 |
5,116,669 |
2,064,015 |
291,630 |
-258,988 |
614,712 |
| Profit/floss)
after taxation |
2,479,149 |
3,296,677 |
1,165,592 |
-112,424 |
-535,259 |
287,818 |
| Balance Sheet |
|
|
| Shareholders
equity |
11,109,410 |
11,109,410 |
11,109,410 |
11,109,410 |
11,109,410 |
11,109,410 |
| Unappropriated
profit/(loss) |
4,490,140 |
3,344,120 |
1,158,384 |
-7,208 |
105,216 |
140,475, |
| Tangible
fixed assets |
105,708,942 |
99,615,839 |
96,384,128 |
92,778,701 |
92,222,781 |
37,445,170 |
| Long
term security deposits |
544,871 |
794,871 |
889,421 |
912,121 |
237,121 |
237,121 |
| Significant Raios: |
|
|
| Gross
profit ratio% |
12.13 |
12.26 |
11.01 |
11.31 |
16.1 |
15.68 |
| Current ratio |
|
0.93 |
1.12 |
1.02 |
0.95 |
0.99 |
0.9 |
| earning
per share Rs. |
2.23 |
2.97 |
1.04 |
-0.87 |
-0.48 |
0.25 |
|
| STATEMENT
ON CORPORATE AND FINANCIAL REPORTING FRAMWORK |
|
| The
directors would like to confirm in relation to the financial statements and
controls, the following: |
|
|
| • The financial statements prepared by the
management, present fairly its state of affairs, the result |
|
| of
its operations, cash flows and changes in equity. |
|
|
| • The company has maintained proper books
of accounts. |
|
|
| • Appropriate accounting policies have
been consistently applied. |
|
|
| • International Accounting Standards, as
applicable in Pakistan, have been followed in preparation of |
|
| financial
statements. |
|
|
| • The system of internal control is sound
in design. The system is being continuously monitored by |
|
| Internal
Audit and through other such monitoring procedure . The process of monitoring
internal |
|
| controls
will continue as an ongoing process with the objective to further strengthen
the controls and |
|
| bring
in improvement in the system. |
|
|
| • There are no doubts upon the Company's
ability to continue as a going concern. |
|
|
| • There has been no material departure
from the best practices of the corporate governance, as listed |
|
| in
the listing regulations. |
|
|
| • Key operation and financial data for
last six years in summarized form is annexed. |
|
|
| • Information about taxes and levies is
given in the notes to the accounts. |
|
|
| • None of directors of the company are
serving on the board of 10 or more listed companies. |
|
|
| • The company operated an un-funded and
unapproved gratuity scheme. The provision was made |
|
| annually
to cover the obligations under the scheme as at the end of the financial
year. The company |
|
| has
adopted the revised IAS 19 and a result actuarial valuation has been carried
out as at June 30, |
|
| 2004.
The projected unit credit method has been used to determine the actuarial
values as specified |
|
| bythelAS19. |
|
| Name |
|
Meeting Attended |
|
| Sh.
Faisal Tauheed |
7 |
|
| Sh.
Kashif Tauheed |
7 |
|
| Mst.
Shahida Tauheed |
4 |
|
| Mst.
Saima Tauheed |
5 |
|
| Mst.
Amna Tauheed |
5 |
|
| Mst.
Samira Faisal |
7 |
|
| Mst. Tahira Kashif |
|
7 |
|
| Mst.
Saadia Tauheed |
3 |
|
|
| PATERN
OF SHAREHOLDING |
|
| The
pattern of shareholding in prescribed form is annexed. |
|
| Share
traded by Directors, CEO, CFO, Company Secretary and their spouces and minor
children are |
|
| given as under:- |
|
|
|
|
| 1
. Mst. Samira Faisal (Director) |
Purchased |
Sold |
|
| 2. Mst. Tahira Kashif
(Director) |
No of shares |
4,200 |
— |
|
|
4,200 |
— |
|
|
|
| REVIEW
REPORT TO THE MEMBERS ON STATEMENT OF |
|
| COMPLIANCE
WITH BEST PRACTICES |
|
| CODE
OF CORPORATE GOVERNANCE |
|
| We
have reviewed the Statement of Compliance with the best practices contained
in the Code of |
|
| Corporate
Governance prepared by the Board of Directors of National Silk & Rayon
Mills Limited to |
|
| comply
with the Listing Regulation No.37 of the Karachi Stock Exchange (Guarantee)
Limited, Listing |
|
| Regulation
No.XIII of the Lahore Stock Exchange (Guarantee) Limited where the company is
listed. |
|
|
| The
responsibility for compliance with the Code of Corporate Governance is that
of the Board of |
|
| Directors
of the company. Our responsibility is to review, to the extent where such
compliance can be |
|
| objectively
verified, where the Statement of Compliance reflects the status of the
Company's compliance |
|
| with
the provisions of the Code of Corporate Governance and report if it does not.
A review is limited |
|
| primarily
to inquires of the Company personnel and review of various documents prepared
by the |
|
| Company
to comply with the Code. |
|
|
| As
part of our audit of financial statements we are required to obtain an
understanding of the accounting |
|
| and
internal control systems sufficient to plan the audit and develop an
effective audit approach. We have |
|
| not
carried out any, special review of the internal control system to enable us
to express an opinion as to |
|
| whether
the Board's statement on internal control covers all controls and the
effectiveness of such |
|
| internal controls. |
|
|
| Based
on our review, nothing has come to our attention which causes us to believe
that the Statement of |
|
| Compliance
does not appropriately reflected the Company's compliance, in all material
respects, with the |
|
| best
practices contained in the Code of Corporate Governance, as applicable to the
company for the year |
|
| ended
June 30,2004. |
|
|
| ABSTRACT
UNDER SECTION 218 OF THE COMPANIES ORDINANCE 1984 |
|
| In
terms of section 218 of the Companies Ordinance, 1984, the Board of Directors
of the Company in their |
|
| meeting
have passed the following resolutions to amend the existing terms of
appointment of the |
|
| Chairman/Chief
Executive and Directors. |
|
|
| "RESOLVED
that the Board hereby approves and authorizes the holding of office of profit
and payment as |
|
| remuneration
to Sh. Faisal Tauheed Puri Chairman/Chief Executive, not exceeding Rs.
558,0007- per |
|
| annum
inclusive of perquisites to which he is entitled under terms of his
appointment with the Company." |
|
|
| "RESOLVED
that the Board hereby approves and authorizes the holding of office of profit
and payment as |
|
| remuneration
to Sh. Kashif Tauheed Puri Director, not exceeding Rs. 558,0007- per annum
inclusive of |
|
| perquisites
to which he is entitled under terms of his appointment with the
Company." |
|
|
| "RESOLVED
that the Board hereby approves and authorizes the holding of office of profit
and payment as |
|
| remuneration
to Mst. Samira Faisal and Mst. Tahira Kashif, Directors, not exceeding Rs.
480,0007- per |
|
| annum
inclusive of perquisites to which they are entitled under terms of his
appointment with the |
|
| Company. |
|
|
| Each
Director is interested in the resolution to the extent of remuneration given
above. |
|
|
| PROFIT
& LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 2004 |
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
| Sales |
|
21 |
209,339,996 |
189,085,432 |
|
| Cost
of goods sold |
|
22 |
183,937,853 |
165,904,114 |
|
| Gross profit |
|
|
25,402,143 |
23,181,318 |
|
| Administrative
and general expenses |
|
23 |
16,636,749 |
13,838,869 |
|
| Selling expenses |
|
24 |
435,810 |
550,839 |
|
|
|
17,072,559 |
14,389,708 |
|
| Operating profit |
|
|
8,329,584 |
8,791,610 |
|
| Other Income |
|
25 |
630,072 |
474,162 |
|
|
|
8,959,656 |
9,265,772 |
|
| Financial charges |
|
26 |
1,859,753 |
3,879,805 |
|
| Worker's
profit participation fund |
|
|
354,995 |
269,298 |
|
|
|
2,214,748 |
4,149,103 |
|
| Profit
before taxation |
|
|
6,744,908 |
5,116,669 |
|
| Provision
for taxation |
|
27 |
4,265,759 |
1,819,992 |
|
| Profit
after taxation |
|
|
2,479,149 |
3,296,677 |
|
| Un-appropriated
profit brought forward |
|
|
3,344,120 |
1,158,384 |
|
| Profit
available for appropriation |
|
|
5,823,269 |
4,455,061 |
|
| Appropriation |
|
|
|
| Proposed
final dividend @ Rs. 1.20 (2003: Rs.1) per share |
1,333,129 |
1,110,941 |
|
| Unappropriated
profit carried forward |
|
|
4,490,140 |
3,344,120 |
|
| Earning per share |
|
28 |
2.23 |
2.97 |
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 2004 |
|
|
|
NOTE |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
| Cash
flow from operating activities |
|
|
24,548,985 |
13,430,959 |
|
| Cash
generated from operation |
|
|
-484,076 |
— |
|
| Gratuity |
|
|
-1,414,094 |
-1,385,302 |
|
| Taxes paid |
|
|
-2,176,759 |
-3,444,711 |
|
| Financial
charges paid |
|
|
20,474,056 |
8,600,946 |
|
| Net
cash inflow from operating activities |
|
|
| Cash
flow from investing activities |
|
|
-18,471,150 |
— |
|
| Capital
work in progress |
|
|
-11,395,246 |
-9,141,163 |
|
| Fixed
assets purchased |
|
|
310,000 |
__ |
|
| Sale
proceeds of fixed assets |
|
|
74,533 |
130,343 |
|
| Profit
on bank deposits |
|
|
-29,481,863 |
-9,010,820 |
|
| Net
cash outflow from investing activities |
|
|
| Cash
flow from financing activities |
|
|
7,293,692 |
7,361,000 |
|
| Long term loans |
|
|
-1,396,378 |
-3,456,557 |
|
| Repayment
of finance of lease liabilities |
|
-30,000 |
94,550 |
|
| Long
term security deposits |
|
|
-1,066,089 |
|
|
| Dividend paid |
|
|
4,801,225 |
3,998,993 |
|
| Net
cash inflow from investing activities |
|
-4,206,582 |
3,589,119 |
|
| Net
(decrease) / increase in cash and cash equivalents |
|
-16,938,116 |
-20,527,235 |
|
| Cash
and cash equivalent at beginning of the year |
|
-21,144,698 |
-16,938,116 |
|
|
|
| NOTES
TO THE CASH FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 2004 |
|
|
2004 |
2003 |
|
|
|
Rupees |
Rupees |
|
| A. Cash generated from operations |
|
6,744,908 |
5,116,669 |
|
| Profit
before taxation |
|
|
|
| Add/(Less)adjustments
for non cash charges |
|
|
|
| and other items. |
|
6,533,189 |
5,394,202 |
|
| Depreciation |
|
226,800 |
515,250 |
|
| Amortisation
of leased assets |
|
-80,091 |
— |
|
| Profit
on sale of fixed assets |
|
-43,246 |
-130,343 |
|
| Profit
on bank deposits |
|
1,859,753 |
3,444,711 |
|
| Financial charges |
|
411,913 |
— |
|
| Provision
for gratuity |
|
15,653,226 |
14,340,489 |
|
| Profit
before working capital changes |
|
|
|
| Movement
in working capital |
|
|
|
| (Increase)/
Decrease in current assets |
|
-177,529 |
320,035 |
|
| Stores,
spares and loose tools |
|
-1,982,361 |
4,613,603 |
|
| Stock in trade |
|
9,140,248 |
-6,596,795 |
|
| Trade debts |
|
|
|
| Advances,
deposits, prepayments and |
|
860,272 |
3,679,001 |
|
| other receivables |
|
7,840,630 |
2,015,844 |
|
|
|
|
| lncrease/(Decrease)
in current liabilities |
|
1,140,129 |
-3,057,224 |
|
| Creditors,
accrued and other liabilites |
|
-85,000 |
131,850 |
|
| Due to directors |
|
1,055,129 |
-2,925,374 |
|
|
24,548,985 |
13,430,959 |
|
|
|
|
| B. Cash and cash equivalents |
|
3,264,884 |
3,807,623 |
|
| Cash
and bank balances |
|
-24,409,582 |
-20,745,739 |
|
| Short
term running finance |
|
-21,144,698 |
-16,938,116 |
|
|
|
|
| FOR
THE YEAR ENDED JUNE 30, 2004 |
|
|
| 1. The company and nature of business |
|
| The
Company is a Public Limited Company, incorporated under the Companies Act.
1913 (Now |
|
| Companies
Ordinance, 1984). The Company is quoted on Lahore and Karachi stock
exchanges. |
|
| The
principle activity of the company is the dyeing, bleaching, finishing and
embroidery of textile |
|
| materials. |
|
|
| 2. Statement of compliance and significant accounting policies |
|
|
| 2.1 Statement of compliance |
|
| These
financial statement have been prepared in accordance with approved accounting |
|
| standards
as applicable in Pakistan and the requirements of the Companies Ordinance,
1984. |
|
| Approved
accounting standards comprise of such International Accounting Standards as |
|
| modified
under the provisions of the Companies Ordinance, 1984. Wherever, the
requirements |
|
| of
Companies Ordinance, 1984 or directives issued by Securities and Exchange
Commission of |
|
| Pakistan
(SECP) differ with the requirements of these standards, the requirements of
these |
|
| standards,
the requirements of the Companies Ordinance, 1984 or the requirements of the
said |
|
| directives
take precedence. |
|
|
| 2.2 Significant accounting policies |
|
|
| 2.2.1 Accounting Convention |
|
| These
accounts have been prepared under the historical cost convention, modified to
include the |
|
| revaluation
of free hold land as referred to note 5 and retirement benefits which has
been stated |
|
| at present value. |
|
|
| 2.2.2 Staff retirement benefits |
|
| The
Company operated an unfunded gratuity scheme covering all employees with
qualifying |
|
| service
period of six months. Previous year company operated provident fund scheme to
which |
|
| contribution
was made towards its share @ 10% of basic salary. At inclination of employees |
|
| gratuity
funds revived during the year and above contribution transferred to gratuity
fund. |
|
| Consequential
to the adoption of IAS 19 (Revised 2000). Employees Benefits, company made |
|
| provision
annually to cover the obligation on the basis of actuarial valuation which is
charged to |
|
| income
currently. The most recent actuarial valuation was carried out as at June 30,
2004 using |
|
| the
Projected Unit credit Method (note-8). Actuarial gains and losses are
recognized in |
|
| accordance
with the recommendations of the actuary. |
|
|
| The
principal actuarial assumptions used in the valuation of this staff
retirement benefits as at |
|
| June
2004 are as follows: |
|
|
| Discountrate
7%perannum |
|
|
| Interestrate
8%perannum |
|
|
| Average
expected remaining working life time of employees 11 years |
|
|
| 2.2.3 Taxation |
|
| Current |
|
| The
provision for current taxation is based on taxable income at the current
rates of taxation after |
|
| taking
into account tax credits and tax rebates realiseable, if any, company's
export sales fall in |
|
| the
ambit of presumptive tax regime under section 154 of the Income Tax Ordinance
2001. |
|
|
| Deferred |
|
| The
company accounts for deferred taxation using the liability method on all
major timing |
|
| differences
which are considered reversible in the foreseeable future. |
|
|
| 2.2.4 Tangible Fixed Assets and Depreciation |
|
|
| Owned |
|
| These
are stated at cost less accumulated depreciation except freehold land which
was revalued |
|
| and
is shown at such revalued amount. Depreciation is charged on reducing balance
method at |
|
| the
rates specified in note 12. Full year depreciation is provided in the year of
addition while no |
|
| depreciation
is charged in the year of disposal. |
|
|
| Repairs
and maintenance cost is charged to the profit and loss account in the year in
which it |
|
| is
incurred, major renewals and improvements are capitalized. Profit on disposal
of fixed assets |
|
| is
credited and loss is debited to the profit and loss account. |
|
|
| Leased |
|
| Assets
held under finance lease are stated at cost less accumulated amortization.
The |
|
| outstanding
obligation under the lease less financial charges allocated to future periods
are |
|
| shown
as liability, the financial charges are calculated at the interest rate
implicit in the lease and |
|
| are
charged to the profit and loss account. |
|
|
| Amortization
is charged at the same rates as company owned assets or over the lease period |
|
| whichever
is appropriate. |
|
|
| 2.2.5 Stores,
Spares, Loose Tools and Stocks in Trade |
|
| These
are valued as follows: |
|
|
| Stores,
spare parts, dyes, chemicals and packing material At moving average cost |
|
|
| Chemicals
and dyes in process
at estimated cost |
|
|
| Finished
goods
at lower of average cost and |
|
|
| net
realisable value |
|
|
| Cost
in relation to work in process and finished goods represents the annual
average |
|
| manufacturing
cost which consists of prime cost and appropriate manufacturing overheads.
Net |
|
| realisable
value signifies the estimated selling price in the ordinary course of
business less |
|
| estimated
cost necessary to be incurred to make the sale. |
|
|
| 2.2.6 Revenue
Recognition |
|
| Sales
are recognized as revenue when invoiced, which coincides with delivery. |
|
| Profit
on bank deposits is recognized on time proportionate basis. |
|
|
| 2.2.7 Foreign
Currencies Translation |
|
| Transactions
in foreign currencies are translated into Pak rupees at the rates of exchange |
|
| approximating
those prevailing on the date of transactions. Monetary assets and liabilities
at |
|
| rates
of exchange ruling on the balance sheet date. Exchange differences are
included in profit |
|
| and
loss account currently. |
|
|
| 2.2.8 Borrowing Cost |
|
| Borrowing
cost related to the financing of major projects is capitalised. All other
brrowing costs |
|
| are
expensed as incurred. |
|
|
| 2.2.9 Trade Debtors |
|
| Trade
debts originated by the company are recognized and carried at original
invoice amount |
|
| less
any allowance for any uncollectible amounts. Known bad debts, if any, are
written-off and |
|
| provision
is made against debts considered doubtful. |
|
|
| 2.2.10 Cash and cash equivalent |
|
| Cash
and cash equivalent consist of cash in hand and balances with banks. Cash and
cash |
|
| equivalent
included in cash flow statement comprise of cash in hand, balances with banks
and |
|
| short
term running finance. |
|
|
| 2.2.11 Financial
instruments |
|
| Recognition
and measurements |
|
| All
financial assets and liabilities are recognized at cost when the company
becomes a party to |
|
| the
contractual provisions of the instrument. Any gain or loss on subsequent
re-measurement to |
|
| fair
value of financial assets and financial liability is taken to profit and loss
account on |
|
| occurrence. |
|
|
| Offsetting
of financial assets and financial liabilities |
|
| A
financial assets and financial liabilities is offset against each other and
the net amount is |
|
| reported
in the balance sheet if the company has a legally enforceable right to set
off the |
|
| recognized
amount and intends either to settle on net basis or realize the assets and
settle the |
|
| liability
simultaneously. |
|
|
| 2.2.12 Provisions |
|
| A
provision is recognized in the balance sheet when the company has a legal or
constructive |
|
| obligation
as a result of a past event; it is probable that an outflow of economic
resources |
|
| embodying
economic benefits will be required to settle the obligation and a reliable
estimate can |
|
| be
made of the amount of obligation. |
|
|
