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Textile Spinning

Ellcot Spinning Mills Limited

Year Ended September 30, 1999

Overview

The balance sheet of the company is quite robust as its size has enhanced Rs 0.64 billion from Rs 0.62 billion in the previous year. The resource mobilisation was comfortable. The company's long term debts both loans and lease finance aggregated at Rs 38.61 million which produced debt to equity ratio at 25:75. The amount was significantly lower as compared to the preceding year's long term debt of Rs 65.19 million. The current portion of long term liabilities increased to Rs 30.3 million from previous year's Rs 27.70 million. Short term working capital finance increased by Rs 72 million as the stock in trade mounted at cost at Rs 87.51 million from previous year's Rs 33.7 million. The current ratio remained very near to the bench mark ratio of "one" and creditors would not look with apprehension. The optimistic future sceneri can be constructed on the lower price of cotton and lower financial cost.

Ellcot spinning Mills Ltd is one of the constituents of Nagina Group Companies. This is a 24,960 spindles spinning unit located at Manga Mandi-Raiwind Road in District Kasur in the province of Punjab. The share in the company is trading at Rs 17 at 70 percent premium over the par value of Rs 10.

The share was listed at the Karachi Stock Exchange in 1990. During the fiscal year 1998-99, the share price remained within the wide price band of Rs 5 and Rs 10. The six years highest price of the share was quoted in 1994 at Rs 31.

Since 1996, the company has always declared dividend. During the last 4 years the highest cash dividend payout was made in 1997 at Rs 25 and the lowest in 12.50 in 1996. Prior to 1996, no dividend was announced. During the year under review and last year the company announced dividend in the shape of cash at 25 percent.

Sales in terms of value posted 26.2 percent growth to Rs 809.39 million over preceding year a 1997-98 sale at Rs 641.02 million. The company's sale constituted both yarn sale and fabric export sale, also both domestic yarn sale as well yarn export sales. While total sales increased the export sales at Rs 363.35 million declined by 20.6 percent as compared to the preceding year 1997-98 at Rs 457.84 which is significantly drastic drop in the exports.

Fabric sale at Rs 147.06 million made a quantum jump by more than 14 times of the preceding year's Rs 10.46 million.

The plant's production capacity utilisation skidded to 92.9 percent from 94.6 percent in the preceding year's. The plant has been rated at the annual spinning capacity of yarn converted into 30/s counts, at 5.988 million kgs against which the production was registered at 5.564 million kgs. Last year the output was recorded at 5.668 million kgs.

During the year under review the cost of sales increased at a higher rate of 30 percent which is much higher the growth rate in sales. Resultantly the margins came under pressure.

Gross margin works out to 9.9 percent as compared to 12.6 percent in the preceding year's.

The company's net profit was posted at Rs 11.18 million which shows 44 percent decline over Rs 17.89 million in the preceding year.

Obviously, EPS also lowered at Rs 1.28 while last year net earning per share figure was Rs 2.04 and the company was encouraged also to match the EPS with Dividend Payout at Rs 2 per share. This year, although the dividend was identical to the last year's the provision for full dividend payable could be possible from funds brought forward from the previous year's retained earnings.

PERFORMANCE STATISTICS (MILLION RUPEES)

September 30 1999 1998

Capital & Liabilities

Paid-up Capital 87.60 87.60

Unappropriated Profit 27.79 34.14

Equity 115.39 121.74

L.T. Debts 38.61 65.19

Deferred Liability Gratuity 4.67 3.05

Current Liabilities 483.52 426.79

Assets

Fixed Capital Expenditure 177.11 186.12

L.T. Investments 11.50 11.50

L.T. Deposits 0.25 0.24

Current Assets 453.33 418.91

TOTAL ASSETS 642.19 616.77

Sales, Profit & Payout

Sales Net 809.39 641.02

Gross Profit 80.23 80.90

Operating Profit 35.94 35.73

Other Income 3.25 7.76

Depreciation 18.71 19.81

Financial Charges 22.72 20.42

Profit Before Taxation 15.51 21.80

Profit After Taxation 11.18 17.89

Dividend Cash 20% (1998: 20%)

Financial Ratios

Share Price (Rs) 29/2/2000 17.00 -

Book Value Per Share (Rs) 13.17 13.90

Price Book Value Ratio 1.29 -

Debt/Equity Ratio 25:75 35.65

Current Ratio 0.94 0.98

Asset Turn Over Ratio 1.26 1.04

Days Receivable 17.70 5.05

Days Inventory 44 22

Gross Profit Margin % 9.91 12.61

Operating Margin (%) 4.44 5.57

Net Profit Margin (%) 1.38 2.79

EPS (Rs) 1.28 2.04

Price/Earning Ratio 13.28 -

R.O.E. (%) 9.69 14.70

R.O.A. (%) 1.74 2.90

R.O.C.E. (%) 7.05 9.42

(A) PLANT CAPACITY & ACTUAL PRODUCTION (MILLION KGS)

Yarn 30/s (Kgs)

Capacity (100%) 5.988 5.988

Actual Production 30/s Count 5.564 5.668

Capacity Utilisation (%) 92.92 94.65

(B) Number of Spindles 24,960 24,960

COMPANY INFORMATION:

Chairman: Shaikh Enam Ellahi

Managing Director/Chief Executive: Shafqat Ellahi Shaikh

Other Directors: S.M. Yusuf, Faridullah Khan (Sapico), Shaukat Ellahi Shaikh, H.A. Naqvi (NTI), Shahzada Ellahi Shaikh, Tahir Hussain Raza.

Corporate Secretary: Sheikh Muhammad Shafi.

Registered Office Nagina House 91-B-1, M.M. Alam Road Gulberg-III, Lahore 54660.

Phone: 5756270-78, Fax 5711856 & 5753820

E-mail: ellcot@paknet 4.ptc.pk

Factory: Mouza Rossa Manga Mandi Raiwind Road Tehsil & District, Kasur (Punjab).