For business information, annual reports, laws, ordinances, regulations and articles.

	Web Paksearch.com

Bata Pakistan Limited
Annual Report 1999
CONTENTS
Board of Directors
Notice of Meeting
Company's Financial Highlights
Distribution of Revenue-1999
Operational Statistics
Chairman's Review
Directors' Report to the Members
Auditors' Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Schedule of Net Changes in Operating Assets and Liabilities
Notes to the Accounts
Statement Under Section 237
Pattern of Shareholding
Consolidated Financial Information
Consolidated Balance Sheet
Consolidated Profit & Loss Account
ANNUAL REPORT I.T.I. (PVT) LTD.
Board of Directors
Directors' Report to the Members
Auditors' Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Schedule of Net Changes in Operating Assets and Liabilities
Notes to the Accounts
BOARD OF DIRECTORS
1. MR. K. WESTON			Chairman
2. MR. G. STRICKER			Managing Director
3. MR. J.P. LEE			Director
4. MR. KHALID M. HASSAN			Director
5. MR. MUHAMMAD ALI MALIK			Director
6. SYED MOHAMMAD MOHSIN			Director
7. DR. AMJAD WAHEED			Director
8. MR. ISTAQBAL MEHDI			Director
Company Secretary			Auditors
Salahuddin Niazi			Gardezi & Company
			Chartered Accountants
			65, Shahrah-e-Quaid-e-Azam, Lahore.
Registered Office & Factory			Bankers
Batapur, G. T. Road,			Habib Bank Limited
P.O. Batapur, Lahore.			Citibank N. A.
			ANZ Grindlays Bank
			Emirates Bank International
			The Bank of Punjab
			National Bank of Pakistan
			Bank Alfalah Limited
NOTICE OF MEETING
NOTICE IS HEREBY GIVEN that the 48th Annual General Meeting of Bata Pakistan
Limited will be held at the Registered Office of the Company at Batapur, District
Lahore on 17th May 2000 at 10.00 a.m. to transact the following business.
1. To confirm the minutes of the Extraordinary General Meeting of the shareholders
of the Company held on 19th August, 1999.
2. To receive, consider, and adopt the Directors' Report, Audited Accounts of the
Company and Auditors' Reports thereon, for the year ended 31st December, 1999.
3. To declare dividend as recommended by the Directors.
4. To appoint Auditors and fix their remuneration for the year ending 31st December,
2000.
					By Order of the Board
Batapur					Salahuddin Niazi
LAHORE: March 1, 2000					Company Secretary
NOTES:
1. A member entitled to attend and vote at the meeting may appoint any person as
his proxy to attend the meeting and vote instead of him. The proxy shall have the
right to attend, speak and vote in place of the member appointing him at the
meeting. A proxy need not be a member of the Company. Proxy form must be
deposited at the Company's Registered Office not less than 48 hours before the time
for holding the meeting.
2. The members whose shares are maintained on Central Depository System with the
Central Depository Company of Pakistan Limited should follow the guidelines for
attending the General Meetings and appointment of proxies as laid down by the
Securities and Exchange Commission of Pakistan.
3. The shareholders are requested to promptly notify the Company of any change in
their addresses.
4. The Share Transfer Books of the Company will remain closed from 11th to 17th
May, 2000 (both days inclusive).
COMPANY'S FINANCIAL HIGHLIGHTS
YEAR ENDED			(RUPEES IN THOUSAND)		% INCREASE/
DECEMBER 31,			1999	1998	(DECREASE)
NET SALES			2,007,224	1,658,759	21
RESULT
PROFIT / (LOSS) BEFORE TAX			47,262	(116,280)	--
PROFIT / (LOSS) AFTER TAX			33,954	(124,336)	--
NET RETURN ON TURNOVER %			1.69	(7.50)	--
CURRENT ASSETS			1,038,542	800,915	30
CURRENT LIABILITIES			843,973	552,204	53
CURRENT RATIO			1.2:1	1.5:1	--
ASSETS: LIABILITIES
DISTRIBUTABLE RESERVES			223,354	204,520	9
SHAREHOLDERS EQUITY			299,437	280,603	7
NUMBER OF SHARES			7,560	7,560	--
EARNING PER SHARE
OF RS. 10 EACH			4.49	(16.45)	--
DISTRIBUTION OF REVENUE 1999
				Rs. '000s	%
REVENUE PAID TO GOVERNMENT				412,981	16.9
COST OF SALES EXCLUDING WAGES
AND GOVERNMENT TAXES				1,155,033	47.2
SALARIES, WAGES, BENEFITS AND
WELFARE EXPENSES				415,059	17.0
OVERHEADS				427,422	17.5
TRANSFER TO APPROPRIATION ACCOUNT				18,834	0.8
DIVIDEND				15,120	0.6
GROSS SALES				2,444,449	100.0
CHAIRMAN'S REVIEW
On behalf of the Board of Directors, it gives me great
pleasure to welcome you to the Company's 48th
Annual General Meeting and present the Company's
Annual Report and financial statements for the year
ended 31st December, 1999.
During the year under review, the country's economy
experienced a severe turndown. The business
environment was adversely affected by the sanctions
imposed by lending countries following the nuclear
explosions in 1998. The foreign currency reserves
plummeted. The economic crisis deterred almost all
investment in the country. By the middle of the year,
the Government successfully negotiated the
rescheduling of existing debts with foreign donors and
lending agencies. As a result, there was a resumption
of inflow of fresh funds. The Government also took
steps to roll back several measures taken after the
economic sanctions. However, before the economy
could actually start to recover, momentum was
hampered by the worsening of the India-Pakistan
relationship due to the Kargil conflict.
In October 1999, the Army took over control of the
country and the new military Government has been
taking steps to establish credibility in global financial
markets. Initial moves by the new administration
have had positive economic results, but time will be
required for the full impact of the moves to be felt.
During the period under review, net sales increased
by 21% from Rs.1,658.8 million to Rs.2,007.2 million.
This increase in turnover was achieved by a
significant improvement in the market appeal of the
Company's product lines, incorporating improvements
in product design and quality, complemented by
improved service to our customers.
Your Company reversed the Rs.116.3 million pre-tax
loss incurred during 1998 to record a pre-tax profit of
Rs.47.3 million in 1999. After making provision for
current and prior years taxation of Rs.13.3 million,
the net profit was Rs.34.0 million. By adding Rs.1.5
million as unappropriated profit brought forward,
Rs.35.5 million were available for appropriation.
As a result of an increase in the amounts receivable
from wholesale distributors, dealers and other
customers and low net margins, the Company has
been facing a reduction in cash flow. Due to this
reduced cash flow, your Directors have decided to
recommend a final dividend of 20% for 1999. A sum
of Rs.19.0 million is being transferred to General
Reserve, since your Board considers this necessary to
meet the Company's positive plans for its sales outlets
and factories.
Your Company achieved a return on equity of 11.7%
and earnings per share of Rs.4.49 after tax. The equity
of the Company at Rs.299.4 million, including reserves
amounting to Rs.223.8 million, reflects a strong capital
base. The Company's shares of Rs.10 each were quoted
at Rs.32 on the 31st December, 1999.
The demand for credit in the country fell off in 1999,
indicating a slowing of the economy. The Government
took steps to enable the Banks to reduce their
interest rates. Your Company, on its own initiative,
also took steps to reduce its future interest cost
burden.
The all round improved performance of the Company
is also attributable to improved production efficiencies
and better financial management.
In December, the Government raised prices of
petroleum products to compensate for the rise in the
international crude oil price. This step by the
Government will increase the cost of most of the
inputs used by the Company.
The State Bank of Pakistan withdrew the requirement
to deposit 20% cash with a bank before the opening of
letters of credit for the import of machinery and spare
parts. This decision was taken with a view to
encouraging capital formation and reviving
the economy.
During the year under review, the Company's
contribution to the National Exchequer amounted to
Rs.413.0 million in the form of payments of Corporate
Income Tax, Sales Tax, Customs Duty, Central Excise
Duty and other taxes. We are also pleased to be
contributing to the Exchequer by limiting our
dependence on imported raw materials and through
greater use of locally fabricated machinery.
The Company has invested heavily in plant and
machinery by way of lease financing over the past
few years. This is intended to improve our quality
and technology and increase our share of the market.
This improved technology should also have a positive
impact on profitability.
Capital Expenditure during the year amounted to
Rs.42.7 million. It was devoted mainly to modernizing
the Company's production units with a view to
producing high quality, fashionable footwear. The
expenditure also included Rs.22.8 million for
modernization and renovation of the Company's retail
and wholesale outlets.
Your Company is already paying General Sales Tax at
the rate of 15%. The new Government has decided to
effectively introduce a General Sales Tax at all levels
from the start of the next financial year in a
fundamental tax reform. This should increase
Government revenues in a significant manner,
contain the budget deficit and help in widening the
tax base. Through this measure, the economy of the
country will be documented and also bring the
unorganized footwear industry into the taxation
network. Such reforms are essential to the take-off
of the economy.
Our marketing team, in its constant efforts to
provide excellent service to customers, has been very
active. All sectors of the domestic market, namely
retail, wholesale, and direct sales, participated in
the increased business. Compared with 1998, the
retail business in 1999 increased by 6% in pairs
and 14% in turnover and the wholesale business
increased by 43% in pairs and 41% in turnover.
The Company's strength lies in its large retail net-
work and widespread distribution channels. We have
established a network of 218 retail stores throughout
Pakistan. These are complemented by 119 franchised
outlets. There is a comprehensive network of 24
Depots, 3 Distributors, 11 Mini-Distributors and 555
Dealers all over Pakistan. It is capable of ensuring
uninterrupted and steady supplies to our valued
customers. We have a dedicated and experienced
group of distributors, agents and dealers whose loyal
co-operation merits our gratitude and praise.
We have obtained the right to sell "Hush Puppies"
branded shoes in selected "Bata" outlets, with
resulting benefits for both parties.
The overall exports of the country during the last five
years have remained stagnant. Numerous incentives
and devaluations have failed to deliver results. The
situation has been exacerbated by inconsistent
economic policies and severe erosion of confidence
coupled with a fear of war.
Owing to the general recession in export markets, the
margins on exports were much lower. Efforts were
made to develop shoelines in harmony with the latest
trends in different markets. We exported 1.1 million
pairs during 1999, this was 7% lower than in the
previous year. The export turnover at Rs.74.6 million
was 32% lower than in the previous year.
Our export-oriented canvas shoe production unit is
being brought into line with the ISO 9001
certification requirements. We will be ready for an
external audit within the next few months. The ISO
certification will enhance the image of the Company
in export markets.
During the year under review, the Company devoted
Rs.44.8 million to advertising and sales promotion
activities. We enhanced our market position by
placing continuous emphasis on our licensed
international brands "Bata", "Power", "Sandak",
"Bubble Gummers", "Weinbrenner" and "King Street"
which have achieved recognition and acceptance
among consumers and are now almost as well
recognised as the Bata trade mark in their specific
market segments. School shoes under the brand
'Toughees' have become the most popular school
footwear in Pakistan.
After the success of the Bata Bazaar stores at Lahore,
Bahawalpur, and Faisalabad, the Company opened
another megastore at Landhi, Karachi which also
proved to be successful. These stores are being
developed with a view to provide all varieties of
quality "Bata" shoes under one roof. This exclusive
network of Bata Bazaar Superstores will be further
extended to more urban areas.
The shopping area of the premier "Bata" store located
at the Mall, Lahore was increased by acquiring the
adjacent store, which also widened the frontage of our
store, thereby giving excellent exposure to the
Company and its products. The store interior has
been arranged with the latest display concepts. I am
pleased to report that this concept of sophisticated
presentation of mass merchandise in megastores, with
an exciting and comfortable shopping environment,
and a self-service selling system, continues to be
successful. All the megastores of the Company are
doing good business.
The Company continues to pursue its policy of local
sourcing, wherever commercially feasible. The stock
of raw materials was tightly controlled to minimize
the commitment of financial resources, without
jeopardizing production and sales potential.
The total production of footwear during the year from
the factory at Batapur was 12.6 million pairs, as
against 10.5 million in 1998. The branch factory at
Maraka produced 2.2 million pairs in 1999. The
Company creates regular work for 41 independent
contractors under the Business Associates Programme,
providing technical and design assistance to them, as
well as supplying materials and components, where
necessary. The total production achieved through
these manufacturers increased by 36% during the year
under review.
The Company is committed to increasing its
innovation and internal efficiency programmes and to
implement a strong growth strategy in all sections of
its business.
To find new customers, your Company participated in
various international leather and footwear fairs and
exhibitions held in Pakistan and abroad.
A representative group of the Company, headed by
the Managing Director, attended 'Shoecon 1999', an
international footwear conference, held in Trento,
Italy, in which about 150 participants from 40 Bata
Shoe Organization companies participated. Your
Company ranked among the top companies in the
Bata Shoe Organization for excellent work in
innovative product development. The efforts of your
Company received due recognition when it received
a 'SHOECON AWARD' for its shoeline.
Since the Company must prepare for competition in
the new millennium, it has to change to an even
more customer oriented and efficient work culture. The
challenge to bring about change in behavior is not
easy. The Company will continue to make every effort
to achieve behavioral changes in the best interests of
the Company, its shareholders and its customers.
Your Company believes in that it is intellectual
capital, which leads to sustained growth. Our
employees are among our most valuable assets, and
we pay careful attention to their training and
development. In the year under review, 666 of them
benefited from in-Company courses, 25 attended
overseas training courses, and 10 participated in
locally organized courses, such as those arranged by
the Pakistan Institute of Management and other
specialized agencies.
In today's global economy, competitiveness is
imperative. The investment made by your Company
in equipment and technology, and in improving
human resources and skills, is aimed at facing the
new challenges of competition both on international
as well as domestic markets.
At the beginning of the year, we employed 3,156
persons in all departments of the Company. At the
close of the year, we had 3,171 employees.
On 19th August, 1999, at an Extraordinary General
Meeting, the following persons were elected as
Directors for a three-year term, under the provisions
of the Companies Ordinance, 1984:
1. Mr. A. Kelly
2. Mr. G. Stricker
3. Syed Muhammad Mohsin
4. Mr. Muhammad Ali Malik
5. Mr. J. P. Lee
6. Mr. Khalid M. Hassan
7. Mr. Amjad Waheed
8. Mr. Istaqbal Mehdi
On 29th September, 1999, after my appointment as a
Director of the Company, I was appointed as
Chairman of the Board of Directors of your Company,
succeeding Mr. A. Kelly who deserves our gratitude
for all his guidance to the Company.
Our Technical Services Agreement with Bata Limited,
Toronto, Canada, expired on 31st December,1999. We
have already applied to the Government of Pakistan
for renewal of this Agreement on the same terms and
conditions. We remain most grateful to Bata Limited,