| DEWAN KHALID TEXTILE MILLS LIMITED |
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| ANNUAL
REPORT 2004 |
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|
| Board
of Directors |
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|
Dewan Zia-ur-Rehman
Farooqui |
Chairman |
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| Audit
Committee |
|
Vice Chairman / Director |
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|
Dewan Ghulam Mustafa
Khalid |
Chief Executive /
Managing Director |
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|
Dewan Abdul Rehman
Farooqui |
Deputy Managing Director |
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|
Dewan Muhammad Ayub
Khalid |
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|
Dewan Mohammad Yousuf
Farooqui |
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|
Dewan Asim Mushfiq
Farooqui |
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|
Dewan Abdul Baqi Farooqui |
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| Auditors |
|
|
Dewan M. Yousuf Farooqui
- Chairman |
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|
Dewan M. Ayub Khalid -
Member |
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|
Dewan Asim Mushfiq
Farooqui - Member |
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| Chief
Financial Officer |
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|
Mr. Mohammad Nadeem |
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| Company
Secretary |
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|
Syed Moonis Abdullah Alvi |
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| Tax Advisors |
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Messrs Feroze Sharif
Tariq & Co. |
Chartered Accountants |
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| Bankers |
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|
Muslim Commercial Bank
Limited |
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|
Habib Bank Limited |
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|
Bank Al-Falah Ltd. |
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|
United Bank Ltd. |
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|
Askari Commercial Bank
Ltd. |
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|
Union Bank Limited |
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ABN Amro Bank |
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| Registered
Office |
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3-A, Lalazar, |
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Beach Hotel Road, |
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Karachi-74000, |
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|
Pakistan. |
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| Factory Office |
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G/ ll.S.I.T.E. |
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Kotri, |
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Sind, Pakistan. |
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| NOTES: |
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| 1. A member of the Company entitled to
attend and vote at this meeting may appoint another member |
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| as
his/her proxy to attend and vote instead of him/her. Proxies, in order to be
effective, must be |
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| received
by the Company not less than 48 hours before the meeting. CDC Account holders
will |
|
| further
have the following guidelines as laid down by the Securities and Exchange
Commission of |
|
| Pakistan. |
|
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| a) For Attending
Meeting: |
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| i)
In case of individual, 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/her original National
Identity |
|
| Card
(NIC) or original passport at the time of attending the meeting. |
|
|
| ii)
In case of corporate entity, the Board of Directors' resolution/power of
attorney with the |
|
| specimen
signature of the nominee shall be produced (unless it has been provided
earlier) at |
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| the
time of meeting. |
|
|
| b) For Appointing
Proxies: |
|
| i)
In case of individual, 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 requirements. |
|
|
| ii)
Two persons whose names, addresses and NIC numbers shall be mentioned on the
form shall |
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| witness
the proxy. |
|
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| iii)
Attested copies of NIC or passport of the beneficial owners and proxy shall
be furnished with |
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| the proxy form. |
|
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| iv) The proxy shall produce his/her original
NIC or original passport at the time of the meeting. |
|
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| v)
In case of corporate entity, the Board of Directors' resolution/power of
attorney with the |
|
| specimen
signature of the nominee shall be produced (unless it has been provided
earlier) |
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| along
with the proxy form to the Company. |
|
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| 2. Members are requested to immediately
notify the change in their addresses, if any. |
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| 3. The Share Transfer Books of the Company
will remain closed from 31st January 2005 to 7th |
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| February
2005 (both days inclusive) |
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| "Statement
under section 160 of the Companies Ordinance, 1984 is attached along with the
Annual |
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| Report
circulated to the members of the Company". |
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| This
statement is annexed to the Notice of 27th Annual General Meeting of Dewan
Khalid Textile Mills |
|
| Limited
(hereinafter referred to as DKTML) to be held on 31st January 2005 and sets
out material fact |
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| concerning
the Special Business to be transacted at the Meeting. |
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| 1. PUBLICATION OF ACCOUNTS |
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| Consent
of the shareholders is sought to place all quarterly accounts on the website: |
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| www.dewangwup.com.pk of the company instead of sending the
same by post to the members as |
|
| per
the requirements of circular # 19 of 2004 dated April 14, 2004 of Securities
& Exchange |
|
| Commission
of Pakistan and Karachi Stock Exchange (G) Limited notice dated April
27,2004. |
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| The
company would like to take the benefit from the recent announcement by the
SECP for |
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| declaration
of results via website. This will result in tremendous cost savings and the
shareholders |
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| will
be able to see the results instantaneously. The company will however continue
to print accounts |
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| on
a limited basis and will provide to those shareholders who do not have access
to computers and |
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| internet.
Placement of quarterly accounts on website would be deemed to be the
compliance of the |
|
| provisions
of section 245 of the Companies Ordinance, 1984. In this respect, the
following |
|
| resolution
is proposed to be passed: |
|
|
| "RESOLVED
THAT subject to the approval of the Securities and Exchange commission of |
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| Pakistan
and the Karachi Stock Exchange (G) Limited, the Company is allowed to place
all the |
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| quarterly
accounts on the website of the company i.e. www.dewangroup.com.pk as per the |
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| requirements
of Circular # 19 of 2004 dated April 14, 2004 of Securities and commission of |
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| Pakistan
AND Karachi Stock Exchange (G) Limited notice dated April 2 7, 2004. The hard
copy |
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| of
the said accounts will be provided to the shareholders on their demand, free
of cost. The |
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| Company
after obtaining requisite permission from the SECP will inform the
shareholders |
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| through
advertisement in the newspapers" |
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|
| 2. Investments in Associated Companies: |
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| The
Board of Directors considers to advance temporary short term financing to the
associated |
|
| company
out of surplus funds available with the Company and to guarantee the
obligations of the |
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| companies.
Details of such financing are given below: |
|
|
| In
this regard following resolution is proposed to be passed, with or without
modification, as a |
|
| 'SPECIAL
RESOLUTION1 |
|
|
| "Resolved
that the Board of Directors of the Company be and is hereby authorized to
make |
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| temporary
short term loans/advances to the Dewan Salman Fibre Limited, the associated |
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| company,
up to maximum limit ofRs. 200 (Two Hundred) million at the mark up rate ofl% |
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| above
the rate on which the Company has obtained the borrowing. |
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| These
temporary loans/advances shall be adjusted as and when required by the
Company and |
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| shall
not exceed 12 months period." |
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| It
is my pleasure to welcome you to the Twenty Seventh Annual General Meeting of
the Company and |
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| place
before you the audited accounts and auditors report thereon for the financial
year ended on |
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| September
30,2004. |
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| By
the grace of Almighty Allah, the performance of your company was satisfied
for the year under |
|
| review
and your company has earned profit before tax of Rs. 28.483 million as
compared to last year's |
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| profit
before tax of Rs. 16.128 million. |
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|
(Rupees in Million) |
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| Profit after Tax |
|
9.1 |
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| Unappropriated
profit brought forward |
|
86.49 |
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| Profit
Available for appropriation |
|
95.59 |
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| Appropriation |
|
| Proposed
issue of bonus shares @ 10% |
4.27 |
|
| Unappropriated
profit carried forward |
|
91.32 |
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|
2004 |
2003 |
|
|
|
(Rupees in million) |
|
| Gross Sales |
|
881.8 |
631.08 |
|
| Sales Tax |
|
112.48 |
82.04 |
|
| Gross profit |
|
70.29 |
73.17 |
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| Operating profit |
|
47.7 |
57.54 |
|
| Financial Charges |
|
17.1 |
40.35 |
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| Net
Profit before Tax |
28.48 |
16.13 |
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| Net
Profit after Tax |
9.1 |
3.5 |
|
|
| IF
YE GIVE THANKS, I WILL GIVE YOU MORE (HOLY QURAN) |
|
|
| The
Board of Directors took the decision for appropriation of the profit keeping
in view the expectations |
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| of
the share holders of Dewan Mushtaq Group, future profitability and present
scenario of textile |
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| industry. |
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| The
Board also decided to appraise its valued shareholders with the current
status and future prevalent |
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| situation
of textile industry in detail through this report. |
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|
| Overview |
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| Year
2003-2004 remained the most challenging year for textile industry. The
Problem initiated with low |
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| cotton
production all over the world including Pakistan. Prices of raw cotton went
up to record Rs. 3,750/- |
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| per
maund. Moreover, some of the factors like post Iraq war, record high oil
prices, imposition of anti |
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| dumping
duty from EU on exports of bed linen from Pakistan, increase in prices of
polyester fiber, high |
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| quota
costs did generally effect sales & profit margins. |
|
|
| Despite
these adverse factors, there were also some new opportunities to be benefited
from and Dewan |
|
| Khalid
Textile Mills Limited, spearhead and lived up to its reputation of the most
innovative and |
|
| aggressive
textile concern of Pakistan, thus bringing new opportunities for itself and
for the region. |
|
|
| Complete
results of the company for the year are fully disclosed in the statements
accompanying this |
|
| report,
however salient features of the results for the year are as follows: |
|
|
| The
company has earned profit before tax of Rs. 28.48 million in the current year
as compared to Rs. |
|
| 16.13
million in the previous year resulting in a net increase of 76.61 %. Gross
Sales during the period |
|
| under
review increased by 250.72 million from 631.08 million to 881.80 million
which is an increase of |
|
| 39.73%.
Gross profit margin has been reduced from 13.44 % to 9.18 %. This decrease
was mainly due to |
|
| increase
in raw material cost which is the major cost component. However the
management made hectic |
|
| efforts
to restrict increase in other cost components through strict cost control
policies. Financial |
|
| expenses
of the company has been reduced by 57.62 % (2004: Rs 17.10 million, 2003: Rs
40.35 million) |
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| whereas
other costs are also shown little variance. |
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|
| Earning
Per Share: |
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| Earning
per share during the year under report worked out to Rs. 2.13 (2003: Rs 0.82) |
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| Dividend: |
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| The
board of Directors have pleasure in recommending Bonus Shares @ 10% for the
year under review. |
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|
| Future Outlook: |
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| The
availability of cotton at reasonable prices augurs well for the textile
industry. Cotton being the major |
|
| portion
of cost of production, the industry should be assured of a reasonable
profitability in the next year, |
|
| notwithstanding
the rise in utilities and other components of cost of production. |
|
|
| If
all goes well with the export market from January onwards, we look forward to
a favourable operating |
|
| environment
which will enable your company to produce better financial results in 2005. |
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|
| Change
in Financial year End: |
|
| The
Central Board of revenue has changed the financial year of Cotton Textile
Industry from September |
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| to
June. Therefore, your company has also changed its closing date of financial
year from 30th September |
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| to
30lh June. Hence, the next annual audited Accounts will be for nine months
ended June 30, 2005. |
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| Accordingly,
the Is' and 2" ""interim
accounts ended on 31.12.2004 and 31.03.2005 will be prepared in |
|
| routine.
Interim accounts subsequent to the year 30.06.2005 will be prepared as first,
second and third |
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| quarterly
accounts for the period ended 30.09.2005,31.12.2005 and 31.03.2006,
respectively. |
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|
| Code
of Corporate Governance: |
|
| The
directors of your company are aware of their responsibilities under the Code
of Corporate |
|
| Governance,
incorporated in the Listing Regulations of the Stock Exchanges in the country
under |
|
| instructions
from Security & Exchange Commission of Pakistan. We are taking all
necessary steps to |
|
| ensure
Good Corporate Governance in your company as required by the code. |
|
|
| As
a Part of the compliance of the code, we confirm the
following: |
|
| a) The financial statements, prepared by
the management of the company, present fairly its state of |
|
| affairs,
the results of its operations, cash flows and changes in equity |
|
|
| b) Proper book of account of the Company
have been maintained. |
|
|
| c) Appropriate accounting policies have
been consistently applied in preparation of financial |
|
| statements
and accounting estimates are based on reasonable and prudent judgment. |
|
|
| d) International accounting standards, as
applicable in Pakistan, have been followed in preparation of |
|
| financial
statements and any departure there from has been adequately disclosed. |
|
|
| e) The system of internal control is sound
in design and is being effectively implemented and |
|
| monitored. |
|
|
| f) The company has a very sound balance
sheet with excellent debt: equity ratio and therefore there is |
|
| no
doubt at all about company's ability to continue as a going concern. |
|
|
| g) There has been no material departure
from the best practices of corporate governance, as detailed in |
|
| the
Listing Regulations. |
|
|
| h) We have an Audit Committee from amongst
the members of the Board of Directors. |
|
|
| i) We have prepared and circulated a
Statement of Ethics and Business Strategy among directors and |
|
|
| employees, |
|
| j) The Board of Directors has adopted a
Mission Statement and a Statement of Overall Corporate |
|
|
| Strategy, |
|
| k) As required by the Code of Corporate
Governance, we have included the following information in |
|
|
| this report: |
|
|
| i.
Statement of pattern of Share holding. |
|
|
| ii.
Statement of shares held by associated undertaking and related persons. |
|
|
| iii. Statement of the Board meetings held
during the year and attendance by each director. |
|
|
| iv.Key
operating and financial statistics for the six years. |
|
|
| Pattern
of Share Holding: |
|
| The
pattern of shareholdings of the company is attached to this report. |
|
| Auditors: |
|
|
| The
present auditors M/s Feroze Sharif Tariq & Co., Chartered Accountants,
Karachi, retire and being |
|
| eligible,
offer themselves for re-appointment under the terms of the Code of Corporate
Governance, they |
|
| have
been recommended by Audit Committee for the re-appointment as auditors until
the conclusion of |
|
| the
next Annual General Meeting. |
|
|
| Acknowledgements: |
|
| Your
directors record their appreciation of the efforts of the Company's officers,
technicians, staff and |
|
| workers
and the support and cooperation extended by its customers, bankers and the
Government |
|
| agencies
during the year. |
|
|
| Conclusion |
|
| In
conclusion, we bow, beg and pray to Almighty Allah, Rahman-o-Rahim, in the
name of our beloved |
|
| prophet,
Muhammad, may peace be upon him, for continued showering of His Blessings,
Guidance, |
|
| Strength,
Health and Prosperity on us, our Company, Country and Nation: and also pray
to Almighty |
|
| Allah
to bestow peace, harmony, brotherhood and unity in true Islamic spirit to the
whole of Muslim |
|
| Ummah,
Ameen, Summa-Ameen. |
|
|
| FINANCIAL
HIGHLIGHTS |
|
|
|
(Rupees in Million) |
|
|
|
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
| Sales (Net) |
|
301 |
706 |
438 |
561 |
592 |
572 |
544 |
766 |
| Gross Profit |
|
40 |
66 |
61 |
79 |
73 |
74 |
73 |
70 |
| Profit before Tax |
|
18 |
20 |
15 |
40 |
9 |
8 |
16 |
28 |
| Profit After Tax |
|
13 |
11 |
9 |
32 |
6 |
5 |
3 |
9 |
| Assets Employed |
|
589 |
588 |
766 |
906 |
963 |
938 |
1007 |
938 |
| Return on Equity |
|
5.97% |
4.73% |
3.80% |
12.52% |
2.37% |
1.96% |
1.32% |
3.33% |
| Current Assets |
|
446 |
423 |
608 |
730 |
682 |
669 |
753 |
632 |
| Shareholder's
Equity |
225 |
236 |
237 |
255 |
257 |
261 |
264 |
273 |
| Deferred
Liabilities |
13 |
13 |
15 |
17 |
16 |
16 |
25 |
31 |
| Current Liabilities |
|
337 |
309 |
494 |
624 |
627 |
615 |
683 |
547 |
| Gross Profit Ratio |
|
13.32% |
9.33% |
13.97% |
14.16% |
12.31% |
12.90% |
13.44% |
9.18% |
| Net Profit Ratio |
|
4.46% |
1.58% |
2.05% |
5.69% |
1.03% |
0.90% |
.64% |
1.19% |
| Debts/Equity
Ratio |
7.18% |
13.73% |
11.25% |
7.38% |
24.24% |
20.18% |
15.07% |
29.99% |
| Current Ratio |
|
1.34 |
1.4 |
1.25 |
1.14 |
1.12 |
1.13 |
1.12 |
1.15 |
| Earning per Share |
|
4.61 |
3.83 |
2.8 |
9.04 |
1.73 |
1.46 |
0.9 |
2.13 |
| Dividend (%) |
|
|
| cash |
|
15% |
0% |
26.50% |
40% |
10% |
5% |
0% |
0% |
| stock |
|
0% |
10% |
10% |
0% |
0% |
10% |
10% |
10% |
| Production |
|
|
| Actual Production |
|
| at
Actual Avg. Count |
3,968,299 |
4,343,955 |
4,768,887 |
5,552,402 |
5,624,672 |
5,941,513 |
5,704,658 |
5,160,125 |
| Actual Production |
|
| converted
to 20 count |
4,374,099 |
6,081,512 |
9,518,333 |
8,710,255 |
8,652,395 |
8,634,212 |
8,129,821 |
5,315,540 |
| Average Count |
|
29.91 |
24.61 |
27.81 |
26.72 |
26.44 |
25.48 |
24.89 |
23.08 |
|
| This
statement is being presented to comply with the code of Corporate Governance
contained in listing |
|
| regulations
of Karachi, Lahore and Islamabad Stock Exchange for the purpose of
establishing the |
|
| framework
of good governance, whereby a listed company is managed in compliance with
the best |
|
| practices
of corporate governance. |
|
|
| The
company has applied the principals contained in the Code in the following
manner: |
|
|
| 1. The company encourages representation
of Independent non-executive directors. At present, the |
|
| Board
includes four non-executive directors. |
|
|
| 2. The directors have confirmed that none
of them is serving as a director in more than ten listed |
|
| companies,
including Dewan Khalid Textile Mills Limited. |
|
|
| 3. All the resident directors of the
Company are registered as taxpayers and none of them has defaulted |
|
| in
payment of any loan to a banking company, a DFI or an NBFI or, being a member
of stock |
|
| exchange,
has been declared as a defaulter by that Stock Exchange. |
|
|
| 4. No vacancies occurred in the Board
during the year. |
|
|
| 5. The Company has prepared a 'Statement
of Ethics and Business Practices', which has been signed |
|
| by
all the directors and employees of the company. |
|
|
| 6. The board has developed a vision /
mission statement, overall corporate strategy and significant |
|
| policies
of the Company. A complete record of particulars of significant policies along with the |
|
| dates
on which they were approved or amended has been maintained. |
|
|
| 7. All the powers of the Board have been
duly exercised and decision on material transactions, |
|
| including appointment
and determination of remuneration and
terms and conditions
of |
|
| employment
of the CEO and other executive directors, have been taken by the Board. |
|
|
| 8. The meetings of the board were presided
over by the Chairman, if he is available, and the Board met |
|
| once
in every quarter. Written notices of the Board meetings, along with agenda
and working |
|
| papers,
were circulated at least seven days before the meetings. The minutes of the
meetings were |
|
| appropriately
recorded and circulated. |
|
|
| 9. The Board arranged an orientation
course for its directors during the year to appraise them of their |
|
| duties
and responsibilities. |
|
|
| 10. The Board has approved appointment of CFO and Company
Secretary including their |
|
| remuneration
and terms and conditions of employment. The Head of Internal Audit was
appointed |
|
| prior
to enforcement of Code of Corporate Governance. However, his next
appointment, after its |
|
| determination
by the CEO, will be referred to the Board for approval. |
|
|
| 11. The directors, report for this year has
been prepared in compliance with the requirements of the |
|
| Code
and fully describes the salient matters required to be disclosed. |
|
|
| 12. The Financial Statement of the Company
were duly endorsed by CEO and CFO before approval of |
|
| the Board. |
|
|
| 13. The directors, CEO and executives do not
hold any interest in the shares of the Company other than |
|
| that
has already been disclosed in the pattern of shareholder. |
|
|
| 14. The company has complied with all the
corporate and financial reporting requirements of the code. |
|
|
| 15. The Board has formed an audit committee.
It comprises three members, who are non executive |
|
| Directors. |
|
|
| 16. The meetings of the audit committee were
held at least once every quarter prior to the approval of |
|
| interim
and final results of the Company and as required by the Code. The terms of
reference to the |
|
| committee
have been formed and advised to the committee for compliance. |
|
|
| 17. The Board has set-up an effective
internal audit function. |
|
|
| 18. The statutory auditors of the Company
have confirmed that they have been given a satisfactory |
|
| rating
under the Quality Control Review programme of the Institute of Chartered
Accountants of |
|
| Pakistan,
that they or any of the partners of the firm, their spouses and minor
children do not hold |
|
| shares
of the Company and that the firm and all its partners are in compliance with
International |
|
| Federation
of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of
Chartered |
|
| Accountants
of Pakistan. |
|
|
| 19. The statutory auditors or the persons
associated with them have not been appointed to provide other |
|
| services
except in accordance with the Listing regulations and the auditors have
confirmed that they |
|
| have
observed IFAC guidelines in this regard. |
|
|
| 20. We confirm that all other material
principals contained in the Code have complied with. |
|
| Total
Meetings of Board of Director during the year. 4 |
|
|
| Name
of Director |
|
No. of Meetings Attended |
|
| Dewan
Zia-ur-Rehman Farooqui |
|
1 |
|
| Dewan
Ghulam Mustafa Khalid |
|
4 |
|
| Dewan
Abdul Rehman Farooqui |
|
4 |
|
| Dewan
Mohammad Ayub Khalid |
|
4 |
|
| Dewan
Mohammad Yousuf Farooqui |
|
2 |
|
| Dewan
Asim Mushfiq Farooqui |
|
4 |
|
|
| REVIEW
REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH |
|
| BEST
PRACTICES OF 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 Dewan Khalid Textile Mills |
|
| Limited
to comply with the Listing Regulation No.37 and 40 of the Karachi and Lahore
Stock |
|
| Exchanges
respectively 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, whether 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 inquiries 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 reflect the Company's compliance, in all material
respects, with the |
|
| best
practices contained in the Code of Corporate Governance for the year ended
September 30,2004. |
|
