1
R E S H A
Annual Report
C O N T E N T S
17STATEMENT OF COMPREHENSIVE INCOME
18CASH FLOW STATEMENT
19STATEMENT OF CHANGES IN EQUITY
20NOTES TO THE FINANCIAL STATEMENTS
49PATTERN OF SHAREHOLDING
FORM OF PROXY
13AUDITORS’ REPORT TO THE MEMBERS
14-15BALANCE SHEET
16PROFIT AND LOSS ACCOUNT
4MISSION
3COMPANY INFORMATION
9STATEMENT OF ETHICS AND BUSINESS PRACTICES
10-11
STATEMENT OF COMPLIANCE WITH THE CODE
OF CORPORATE GOVERNANCE
6-7DIRECTORS’ REPORT
8FINANCIAL SUMMARY
5NOTICE OF ANNUAL GENERAL MEETING
12
REVIEW REPORT TO THE MEMBERS ON THE STATEMENT
OF COMPLIANCE WITH THE BEST PRACTICES OF THE
CODE OF CORPORATE GOVERNANCE
Annual Report
2
CHIEF FINANCIAL OFFICER : Mr. Muhammad Ali Chaudhry
COMPANY SECRETARY : Ms. Komal Daniel
AUDITORS : M/s Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants
Lahore.
SHARE REGISTRAR : Corplink (Pvt.) Ltd.
LEGAL ADVISORS : Mr. Shaukat Haroon (Advocate)
Barrister Salman Rahim (Advocate High Court)
Yousaf Islam Associates
REGISTERED OFFICE : 36-A Lawrence Road, Lahore.
MILLS : 1.5 Kilometer Habibabad,
Chunian Road, Tehsil Chunian,
District Kasur.
COMPANY INFORMATION
HR - COMMITTEE : Mr. Kamran Ilyas
Mr. Muhammad Ali Chaudhry
Ms. Kiran A. Chaudhry
Chairman
Secretary
Member
CHIEF EXECUTIVE OFFICER : Mr. Muhammad Arshad Saeed
DIRECTORS : Ch. Rahman Bakhsh
Mrs. Salma Aziz
Mr. Muhammad Musharaf Khan
Ms. Kiran A. Chaudhry
Mr. Kamran Ilyas
Mr. Muhammad Ali Chaudhry
BANKERS : National Bank of Pakistan
Bank Alfalah Limited
Askari Bank Limited
Al Baraka Bank (Pakistan) Ltd.
Faysal Bank Limited
Chairman
Member
Member
AUDIT COMMITTEE : Mr. Kamran Ilyas
Mrs. Salma Aziz
Mr. Muhammad Musharaf Khan
3
R E S H A
MISSION
The management is committed to excellence in operations with the aim of achieving highest
standards in product quality, customer satisfaction, Company growth, employees welfare and
social responsibilities and is constantly striving to meet these objectives.
4
Annual Report
NOTICE OF ANNUAL GENERAL MEETING
thNotice is hereby given that the 26 Annual General Meeting of the Shareholders of Resham Textile th Industries Limited will be held on Thursday 19 November,2015 at 10:00 a.m. at the Registered Office of
the Company i.e. 36-A Lawrence Road, Lahore to transact the following business:
1. To confirm the minutes of the last meeting
2. To receive and adopt the audited accounts of the Company for the year ended 30 June 2015 and reports of the Directors' and Auditors' thereon
3. To appoint auditors and to fix their remuneration at a fee of Rs. 693,000 including half yearly review for the year ending June 30, 2016. The auditors M/s Ernst & Young Ford Rhodes Sidat Hyder, Chartered Accountants, Lahore retire and being eligible, offer themselves for reappointment
4. To approve Final Cash Dividend @ 7%, in addition to the 5% Interim dividend already paid, as recommended by the Board of Directors.
5. Special Business:
To reconsider clause 75 of Article of Association of the Company and pass the following RESOLUTION with or without amendment;
“RESOLVED that the Remuneration of the Directors for performing duties and attending meetings from time to time shall be determined by Directors” instead of existing clause
6. To transact such other business as may be placed before the meeting with the permission of the Chair
By Order of the Board
(KOMAL DANIEL)
Lahore: 28 October 2015. Company Secretary
NOTES:th th1. The Share Transfer Books of the Company will remain closed from 13 November 2015 to 19
November 2015 (both days inclusive).
2. A member entitled to attend and vote at the meeting may appoint another member of the Company as a proxy to attend and vote instead of him. A proxy form duly signed and stamped must be deposited at the Registered Office of the Company not less than 48 hours before the time fixed for holding the meeting.
3. The account holders of CDC are requested to bring their original CNIC/ Passport for the purpose of identification at the meeting.
4. As directed by the SECP through its Circular No. EMD/D-II/Misc/./2009-1342 of April 4, 2013, dividend warrants cannot be issued without valid CNICs. In the absence of a shareholder's valid CNIC, the company will be constrained to withhold dispatch of dividend to such shareholders. Those shareholders who have not yet submitted their valid CNICs are once again advised to provide attested copies of their valid CNICs with their folio numbers to the Company's share Registrar if they hold physical shares, to ensure timely disbursement of dividend
5. a) In view of the law and the rules, please indicate your status as filer or non-filer of income tax returns. The filers are to be taxed at 12.5% and non -filers @ 17.5% for withholding tax on dividends. Make sure your name appears on the FBR's active tax payer list (ATL) before the date of payment of cash dividend
b) The corporate shareholders having CDC accounts are required to have their National Tax Number (NTN) updated with their respective participant, whereas corporate physical shareholders should send a copy of their NTN certificate to the Company or its share Registrar. The shareholders while sending NTN Certificates, as the case may be, must quote Company name and their respective folio numbers.
6) Shareholders are requested to immediately notify the Company any changes in address.5
R E S H A
DIRECTORS’ REPORT
It is my pleasure to present the Directors' Report and the audited accounts for the year ended June 30, 2015.
Performance Review
By the grace of Allah s.w.t., this year your Company managed to generate Rs.103.246 (M) profit after tax
compared to Rs.90.901 (M) profit after tax during the same period last year. Your management was able to
overcome the very real difficulties in the industry through careful purchase of cotton and by reducing short
term borrowing cost significantly from Rs.75.446 (M) to Rs.36.030 (M) i.e. by 52%. Although average sale
rates of yarn recorded a fall of 15.16% over the period under review, the average cotton consumption cost,
due to cautious buying, recorded a fall of 21.59%, resulting in a gross profit of Rs.246.971 (M) as compared to thRs.275.948 (M) (s.p.l.y.). The current ratio stood at 1.63 on 30 June 2015, up from 1.19 witnessed last year.
The debt equity ratio was maintained at 0:100 and equity has increased to Rs.899.159 (M) from Rs.806.894
(M) (s.p.l.y).
Strict micro management of expenses was essential in avoiding losses in light of rising input costs,
particularly with electricity and gas expenses, which were inflated with surcharges and other taxes. It is also
worth mentioning that in September 2015 Sui Northern Gas Pipelines Limited (SNGPL) raised a gas bill of
Rs. 39,884,730 to the Company which included arrears of changed tariff. Included in these arrears is an
amount of Rs. 6,923,865 which related to the year 2013 - 2014. Accordingly, prior year financial statements
have been restated. The SECP found our request genuine and graciously gave one month extension for
finalization of accounts and holding of AGM.
The financial results in tabulated form are given below and details may be perused in other sections of this
report:-
.
Sales-net
Cost of sales
Gross profit
Distribution cost
Administrative expenses
Other operating expenses
Operating profit
Other income
Finance cost Profit before taxation
Taxation
Profit after taxation
Earnings per share - basic and diluted (Rupees)
2015 2014
(Restated)
Rupees('000)
3,148,835
3,775,254
275,948
19,255
22,176
48,709
12,288
11,937
80,252 81,409
194,539
7,626
21,082
215,621 75,446 138,316
35,070 49,274
103,246 90,901
2.87 2.53
4,051,202
47,296
140,175
3,395,806
246,971
166,719
174,345
36,029
6
Annual Report
Future Prospects
Although your company has started well in the first quarter of year 2015-2016, a large number of factors beyond human control, such as floods and untimely rains, are creating uncertainty. Moreover, turbulence in international and national financial markets, particularly with turmoil in political and financial systems in an environment of increasing recession has rendered the prospects for the year and medium term uncertain, to say the least.
Massive shortage of energy alongside the ever increasing tariffs of electricity and gas, and general input cost inflation in the country, will continue to affect the performance of your Company, for which we have no easy solution or shortcut. The Company has adopted all measures possible for economy in expenditure and relevant developments will be monitored very carefully to make appropriate decisions.
Acknowledgement
The Directors take this opportunity to thank the Company's Bankers, particularly National Bank of Pakistan, Bank Alfalah Limited, Askari Bank Limited, Faysal Bank Limited, Al Baraka Bank (Pakistan) Limited and other financial Institutions for their confidence in the Company and strong financial support. The Directors feel pleasure in expressing appreciation for the continued interest and support of all the shareholders of the Company. The Directors would also like to particularly mention the dedication and devotion displayed by the employees while performing their duties during the period and hope that the same spirit will prevail in the future as well.
For and on behalf of the Board
Lahore: 28 October, 2015 Muhammad Arshad Saeed
(Chief Executive Officer)
7
R E S H A
Financial Summary
2015 2014 2013 2012 2011 2010
BALANCE SHEET
(Rupees in thousand)
Paid up Share Capital 360,000 360,000 360,000 360,000 360,000 360,000
Unappropriated Profit & (Loss) 539,159 446,894 376,336 203,967 154,507 110,821
Total Equity 899,159 806,894 736,336 563,967 514,507 470,821
Surplus on Revaluation of Fixed Assets 236,394 257,360 132,850 144,907 156,914 173,150
Long Term Liabilities - - - 120,184 166,327 195,436
- -
Deferred Liabilities 296,914 316,511 257,398 236,588 210,580 163,777
Long Term Advances 131 235 389 269 143 79
Current Liabilities 326,909 436,630 672,317 275,740 487,665 207,819
1,759,507 1,817,630 1,799,290 1,341,655 1,566,461 1,284,068
Represented by:
Fixed Assets 1,218,378 1,289,573 1,019,514 893,579 925,417 898,508
Capital work in progress 5,746 3,669 1,420 8,431 - 8,631
Other Assets 3,698 3,698 3,678 3,669 3,667 3,673
Current Assets 531,685 520,690 774,678 435,976 637,377 373,256
1,759,507 1,817,630 1,799,290 1,341,655 1,566,461 1,284,068
PROFIT AND LOSS
Sales 3,395,807 4,051,203 3,501,701 3,245,032 3,704,951 2,232,455
Cost of Sales 3,148,835 3,775,254 2,994,130 2,867,911 3,409,780 1,811,714
Gross Profit 246,972 275,948 507,571 377,121 295,171 420,741
Operating Profit 166,720 194,539 410,689 318,221 249,585 385,690
Profit / (Loss) Before Taxation 138,316 140,176 349,455 232,531 142,334 277,176
Profit / (Loss) After Taxation 103,246 90,901 251,079 147,927 65,792 173,768
EPS 2.87 2.53 6.97 4.11 1.83 4.83
Dividend % 12 15 20 20 15 10
PERCENTAGE TO SALES
Gross Profit % age 7.27 6.81 14.49 11.62 7.97 18.85
Profit Before Taxation % age 4.07 3.46 9.98 7.17 3.84 12.42
Profit After Taxation % age 3.04 2.24 7.17 4.56 1.78 7.78
Admin & Selling Expenses % age 2.05 1.71 2.07 1.82 1.23 1.57
Liabilities against assets subject to finance lease - - 30,325 72,986
8
Annual Report
This Statement of Ethics and Business Practices is intended to document the principles of conduct and ethics to be followed by Resham Textile Industries Limited (the "Company") and its employees, officers and directors. Its purpose is to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest.
CONFLICTS OF INTEREST- Directors, officers and employees of the Company shall act at all times honestly and ethically, and shall avoid situations where their personal or outside business interests could conflict with the interests of the Company and its shareholders.
DEALING WITH BUSINESS PARTNERS - All purchases of goods and services by the Company will be made exclusively on the basis of price, quality, service and suitability to the Company's needs and in the interest of the Company alone. Directors, officers and employees are prohibited from accepting gifts from sellers or buyers in any form whatsoever.
DISCLOSURE - Each senior executive officer must provide full, fair, accurate and understandable information whenever communicating with the Company's stockholders or the general public.
COMPLIANCE WITH LAWS, RULES AND REGULATIONS - All directors, officers and employees must conduct Company business in compliance with all applicable laws, rules and regulations.
HEALTH, SAFETY AND ENVIRONMENTAL PROTECTION - It is the Company's policy to ensure the safety of its employees, be extra careful in protecting Company property from fire and other hazards, and to maintain the state of environment.
REPORTING OF VIOLATIONS - It is each employee's responsibility to notify promptly his or her supervisor regarding any actual or potential violation of this Code and any applicable laws, rules and regulations by anyone in the Company.
FAIR DEALING - It is our policy that each director, officer and employee will endeavor to deal fairly with the Company's customers, suppliers, competitors and employees.
CONFIDENTIALITY - All Directors, officers and employees are prohibited from revealing confidential information of the Company acquired by virtue of their association with the Company or in any other manner, disclosure of which may hurt the interests of the Company. This does not apply to disclosures required by laws, rules and regulations.
PROPER USE OF COMPANY ASSETS - All Directors, officers and employees should protect the Company's assets and ensure their efficient use. Employees must not participate in, or arrange, any activity that is not commensurate with Company interests.
STATEMENT OF ETHICS AND BUSINESS PRACTICE
9
R E S H A
This statement is being presented to comply with the Code of Corporate Governance ('the Code') contained in listing regulations of Karachi and Lahore Stock Exchange for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance.
The Company has applied the principles contained in the CCG in the following manner:
1. The Company encourages representation of independent non-executive directors and directors
representing minority interests on its Board of Directors. At present the board includes:
Category Names
Executive Directors Mr. Muhammad Arshad Saeed
Mr. Muhammad Ali Chaudhry
Non-Executive Directors Ch. Rehman BakhshMr. Muhammad Musharaf KhanMrs. Salma AzizMr. Kamran Ilyas Ms. Kiran A Chaudhry
2. The directors have confirmed that none of them is serving as a director on more than seven listed companies, including this company.
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 a stock exchange, has been declared as a defaulter by that stock exchange.
4. The Company has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken to disseminate it throughout the Company along with its supporting policies and procedures.
5. 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.
6. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO, other executive and non-executive directors, have been taken by the board/shareholders.
7. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least 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.
8. Two of the directors are exempt under the code, one of the directors is given exemption by the SECP, thother two directors have been enrolled for the training and the remaining two will get training by 30
June 2016
9. The Board of the Company has approved appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment.
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCEFOR THE YEAR ENDED 30 JUNE 2015
10
Annual Report
10. The Directors' report for this year has been prepared in compliance with the requirements of the CCG and fully describes the salient matters required to be disclosed.
11. The financial statements of the Company were duly endorsed by Chief Executive Officer and Chief Financial Officer before approval of the board.
12. The Directors, Chief Executive Officer and Executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.
13. The Company has complied with all the corporate and financial reporting requirements of the Code.
14. The Board has formed an Audit Committee. It comprises of three members, all of whom are non-executive directors.
15. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the CCG. The terms of reference of the committee have been formed and advised to the committee for compliance.
16. The Board has formed an HR and Remuneration Committee. It comprises of three members, two of whom are non-executive directors including the chairman.
17. The Board has set up an effective internal audit function. The staff is considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company.
18. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP, 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 the ICAP.
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. The 'closed period', prior to the announcement of interim/final results, and business decisions, which may materially affect the market price of Company's securities, was determined and intimated to directors, employees and stock exchange(s).
21. Material/price sensitive information has been disseminated among all market participants at once through stock exchange(s).
For and on behalf of the Board
Muhammad Arshad Saeed
(Chief Executive Officer)Lahore: 28 October, 2015
11
R E S H A
We have reviewed the Statement of Compliance with the best practices (the statement) contained in the Code of Corporate Governance (the Code) prepared by the Board of Directors of Resham Textile Industries Limited (the Company) for the year ended 30 June 2015 to comply with Regulation No. 5.19 of Rule Book of Karachi Stock Exchange Limited and Regulation No. 35 of Chapter XI contained in listing Regulations of the Lahore Stock Exchange 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, 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 are not required to consider whether the Board's statement on internal controls covers all the risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks.
The Code requires the Company to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval of its related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price and recording proper justification for using such alternate pricing mechanism. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not.
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 as applicable to the Company for the year ended 30 June 2015.
Name of Audit Engagement Partner: Naseem Akbar
REVIEW REPORT TO THE MEMBERS ON THE STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE OF CORPORATE GOVERNANCE
CHARTERED ACCOUNTANTS
(ERNST & YOUNG FORD RHODES SIDAT HYDER)
Lahore: 28 October, 2015
12
Annual Report
Audit Engagement Partner: Naseem Akbar
We have audited the annexed balance sheet of Resham Textile Industries Limited (“the Company”) as on 30 June 2015 and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit.
It is the responsibility of the Company's management to establish and maintain a system of internal control and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about 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 statements. An audit also includes assessing the accounting policies and significant estimates made by the management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:
a) in our opinion, proper books of accounts have been kept by the Company as required by the Companies Ordinance, 1984;
b) in our opinion;
i) the balance sheet and profit and loss account together with the notes thereon have 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 except for the changes as stated in Note 2.2 of these financial statements, with which we concur;
(ii) the expenditure incurred during the year was for the purpose of the Company's business; (iii) the business conducted, investments made and the expenditure incurred during the year
were in accordance with the objects of the Company;
c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, statement of comprehensive income, 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 30 June 2015 and of the profit, comprehensive income, its cash flows and changes in equity for the year then ended; and
d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance.
AUDITORS’ REPORT TO THE MEMBERS
(ERNST & YOUNG FORD RHODES SIDAT HYDER)
Lahore: 28 October, 2015
13
R E S H A
(Chief Executive Officer)
BALANCE SHEET AS AT
2015 2014
Note Rupees Rupees
(Restated)
EQUITY AND LIABILITIES
Share capital and reserves
Authorized share capital
36,000,000 (2014: 36,000,000) ordinary
shares of Rs. 10/- each
Issued, subscribed and paid up share capital
Unappropriated profit
Total equity
Surplus on revaluation of fixed assets
Non-current liabilities
Long term deposits
Deferred liabilities
Current liabilities
Trade and other payables
Balances with statutory authorities
Mark-up accrued on financing
Short term borrowings
Provision for taxation
Total liabilities
TOTAL EQUITY AND LIABILITIES
CONTINGENCIES AND COMMITMENTS
The annexed notes from 1 to 40 form an integral part of these financial statements.
360,000,000
5 360,000,000
539,159,162
899,159,162
6 236,393,980
7 130,748
8 296,914,442
297,045,190
9 178,718,547
10 1,641,270
11 5,153,641
12 55,745,482
85,649,670
326,908,610
623,953,800
1,759,506,942
13 -
360,000,000
360,000,000
446,893,760
806,893,760
257,359,415
235,441
316,511,317
316,746,758
195,087,420
-
13,593,121
144,755,608
83,193,791
436,629,940
753,376,698
1,817,629,873
-
14
Annual Report
(Director)
30 JUNE 2015
14 1,224,124,423
3,697,560
1,227,821,983
15 37,360,227
16 270,966,529
17 115,572,506
18 2,532,386
19 2,377,508
63,455,130
10 -
20 39,420,673
531,684,959
1,759,506,942
1,293,242,416
3,697,560
1,296,939,976
37,642,726
268,454,450
101,807,905
6,252,172
3,370,004
59,101,334
1,655,620
42,405,686
520,689,897
1,817,629,873
ASSETS
Non-current assets
Property, plant and equipment
Long term deposits
Current assets
Stores and spare parts
Stock in trade
Trade debts
Advances
Trade deposits and short
term prepayments
Advance income tax
Balances with statutory authorities
Cash and bank balances
TOTAL ASSETS
2015
Note Rupees
2014
Rupees
(Restated)
15
R E S H A
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2015
(Chief Executive Officer) (Director)
Sales-net
Cost of sales
Gross profit
Operating expenses:
Distribution cost
Administrative expenses
Other operating expenses
Operating profit
Other income
Finance cost
Profit before taxation
Taxation
Profit after taxation
Earnings per share - basic and diluted (Rupees)
The annexed notes from 1 to 40 form an integral part of these financial statements.
Note
21
22
23
24
25
26
27
28
29
2015
Rupees
3,395,806,830
3,148,835,353
246,971,477
19,255,123
48,708,987
12,287,790
80,251,900
166,719,577
7,626,181
174,345,758
36,029,698
138,316,060
35,069,872
103,246,188
2.87
2014
Rupees
(Restated)
4,051,202,525
3,775,254,313
275,948,212
22,175,886
47,296,546
11,936,805
81,409,237
194,538,975
21,082,335
215,621,310
75,445,648
140,175,662
49,274,194
90,901,468
2.53
16
Annual Report
STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2015
(Chief Executive Officer) (Director)
The annexed notes from 1 to 40 form an integral part of these financial statements.
Profit for the year
Other comprehensive income:
Items to be reclassified to profit or loss in subsequent periods
Items not to be reclassified to profit or loss in subsequent periods:
Actuarial gain / (loss) on defined benefit plans-net of deferred tax
Total other comprehensive income, net of deferred tax
Total comprehensive income for the year
Transfer from surplus on revaluation of fixed assets on account
of incremental depreciation - net of deferred tax
2015
Rupees
103,246,188
-
23,396,171
1,623,024
25,019,195
128,265,383
2014
Rupees
(Restated)
90,901,468
-
17,216,089
(1,560,108)
15,655,981
106,557,449
17
R E S H A
(Chief Executive Officer) (Director)
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
The annexed notes from 1 to 40 form an integral part of these financial statements.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
Finance cost paid
Workers' profit participation fund paid
Income tax paid
Gratuity paid
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
2015
Note Rupees
(30) 257,542,638
(44,469,178)
(7,951,817)
(59,470,141)
(10,751,928)
134,899,574
2014
Rupees
(Restated)
606,412,609
(78,128,271)
(18,670,482)
(53,383,336)
(12,848,597)
443,381,923
Capital expenditure incurred
Proceeds from disposal of property, plant and equipment
Increase in long term deposits
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long term financing - net
Decrease in long term deposits
Decrease in short term borrowings - net
Dividend paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
(16,171,620)
3,669,127
-
(12,502,493)
-
(104,693)
(89,010,126)
(36,267,275)
(125,382,094)
(2,985,013)
42,405,686
(20) 39,420,673
(152,928,426)
14,679,412
(20,000)
(138,269,014)
(17,634,500)
(153,447)
(268,007,378)
(36,109,059)
(321,904,384)
(16,791,475)
59,197,161
42,405,686
18
Annual Report
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2015
(Chief Executive Officer) (Director)
Balance as at 01 July 2013
Profit for the year ended 30 June 2014 - Restated
Other comprehensive income for the year
Total comprehensive income for the year
Interim dividend paid for the year ended 30 June 2014 @ Rs.1/- per share
Balance as at 30 June 2014 - Restated
Profit for the year ended 30 June 2015
Other comprehensive income for the year
Total comprehensive income for the year
Final dividend paid for the year ended 30 June 2014 @ Rs.0.5/- per share
Interim dividend paid for the year ended 30 June 2015 @ Rs. 0.5/- per share
Balance as at 30 June 2015
The annexed notes from 1 to 40 form an integral part of these financial statements.
---------------------------Rupees---------------------------
360,000,000
376,336,311
736,336,311
-
90,901,468
90,901,468
-
15,655,981
15,655,981
-
106,557,449
106,557,449
-
(36,000,000)
(36,000,000)
-
103,246,188
103,246,188
-
25,019,195
25,019,195
-
128,265,383
128,265,383
-
(17,999,981) (17,999,981)
- (18,000,000) (18,000,000)
360,000,000
539,159,162
899,159,162
Share capital
Un-
appropriated
profit
Total equity
360,000,000 446,893,760 806,893,760
19
R E S H A
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2015
The Company has adopted the following revised standard, amendments and interpretation of IFRSs which became effective for the current year:
IAS 19 – Employee Benefits – (Amendment) - Defined Benefit Plans: Employee Contributions
IAS 32 – Financial Instruments : Presentation – (Amendment)
-offsetting Financial Assets and Financial Liabilities
IAS 36 – Impairment of Assets – (Amendment) Recoverable Amount Disclosures for Non-Financial Assets
IAS 39 – Financial Instruments: Recognition and Measurement – (Amendment) - Novation of derivatives and continuation of hedge accounting
IFRIC 21 – Levies
Resham Textile Industries Limited (the Company) is a public limited company incorporated in Pakistan on 06 June 1990 under the Companies Ordinance, 1984 and quoted on the Lahore and Karachi stock exchanges. The registered office of the Company is situated at 36-A, Lawrence Road, Lahore. The Company is principally engaged in the business of manufacturing and selling of yarn.
These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. Whenever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirement of these standards, the requirements of Companies Ordinance, 1984 or the requirements of the said directives take precedence.
Improvements to Accounting Standards Issued by the IASB
IFRS 2 Share-based Payment - Definitions of vesting conditions
IFRS 3 Business Combinations – Accounting for contingent consideration in a business combination
IFRS 3 Business Combinations - Scope exceptions for joint ventures
IFRS 8 Operating Segments – Aggregation of operating segments
IFRS 8 Operating Segments - Reconciliation of the total of the reportable segments’ assets to the entity’s assets
IFRS 13 Fair Value Measurement - Scope of paragraph 52 (portfolio exception)
IAS16 Property, Plant and Equipment and IAS 38 Intangible Assets – Revaluation method – proportionate restatement of accumulated depreciation / amortization
IAS 24 Related Party Disclosures - Key management personnel
IAS 40 Investment Property - Interrelationship between IFRS 3 and IAS 40 (ancillary services)
The adoption of the above amendments, improvements to accounting standards and interpretations did not have any material effect on the financial statements.
1. THE COMPANY AND ITS OPERATIONS
2. STATEMENT OF COMPLIANCE
2.2
2.1
New, amended standards and interpretations become effective
20
Annual Report
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted in the preparation of these financial statements are consistent with those of the previous financial year.
3.
Basis of preparation3.1
BASIS OF MEASUREMENT
These financial statements have been prepared under the historical cost convention, except for recognition of certain employee benefits at present value and certain items of property, plant and equipment which are measured at revalued amounts.
Critical accounting estimates and judgments
The preparation of financial statements in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectation of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's financial statements or where judgments were exercised in application of accounting policies are as follows:
- Employee benefits (Note 4.4); - Taxation (Note 4.7); - Provisions (Note 4.5); - Useful lives and residual value of property, plant and equipment (Note 4.10); - Impairment (note 4.16)
3.3
3.2 Presentation currency
These financial statements are presented in Pak Rupee, which is the Company's functional currency.
4.1 Surplus on revaluation of fixed assets
This represents the surplus arising on the revaluation of operating property, plant and equipment of the Company. Revaluation surplus is credited to the "surplus on revaluation of fixed assets" presented below equity (in accordance with the requirements of the section 235 of companies ordinance, 1984) except to the extent that it reverses a revaluation decrease of the same asset previously recognized in profit and loss account. An annual transfer from the surplus on revaluation of property, plant and equipment (net of deferred tax) through other comprehensive income is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets' original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.
This surplus is not free for setting-off or reducing any deficit of the Company. However, it can only be utilized:
i) to the extent actually realized on disposal of the assets which are revalued;ii) to the extent of incremental depreciation arising out of revaluation of property, plant and equipment; oriii) setting-off or in diminution of any deficit arising from the revaluation of any other property, plant and equipment of the Company.
4.2 Interest bearing loans and borrowings
All loans and borrowings are initially recognized at the fair value of the amount received less directly attributable transaction costs. After initial recognition, long term interest-bearing loans and borrowings are measured at amortized cost using the effective interest method while short term borrowings are measured at fair value. Gains and losses are recognized in profit and loss account when the liabilities are derecognized as well as through the amortization process.
21
R E S H A
4.4 Employee benefits
The Company operates an unfunded gratuity scheme for its permanent employees. The latest valuation was carried out as at 30 June 2015 using the projected unit credit method. The future contribution rates of this plan include allowances for deficit and surplus. Following significant assumptions were used for valuation of this scheme:
Expected rate of increase in salary
Discount rate
Average expected remaining working life of employees
2015
8.75% 12.25%
9.75% 13.25%
2 years 6 years
2014
4.3 Ijarah assets
The Company recognizes ijarah payments under an ijarah agreement as an expense in the profit and loss account on a straight line basis over the ijarah term.
4.5 Provisions
Provisions are recognized in the balance sheet when the Company has legal or constructive obligation as a result of past events, it is probable that outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. However, provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate.
4.6 Dividend
Dividend distribution to the Company's shareholders and appropriation to reserve are recognized in the period in which these are approved.
4.7 Taxation
Current
Deferred
Provision for current tax is based on taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using current rate of tax after taking into account rebates and tax credits, if any. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years.
Deferred tax is accounted for by using the liability method on all timing differences between carrying amounts of assets and liabilities in the financial statements and their tax base. Deferred tax liabilities are recognized for all taxable temporary differences. The Company recognizes deferred tax assets on all deductible temporary differences to the extent it is probable that future taxable profits will be available against which these deductible temporary differences can be utilized.
Deferred tax asset is also recognized for the carry forward of unused tax losses and unused tax credits to the extent it is probable that future taxable profits will be available against which the unused tax losses and unused tax credits can be utilized. Deferred tax is charged to / credited in the profit and loss account except in case of items credited or charged to other comprehensive income.
The carrying amount of all deferred tax assets is reviewed at each balance sheet date and adjusted to the appropriate extent, if it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax assets to be utilized.
22
Annual Report
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or liability is settled, based on the tax rates that have been enacted or substantively enacted at the balance sheet date.
4.8 Trade and other payables
Liabilities for trade and other amounts payable are initially recognized at fair value which is normally the transaction cost.
4.9 Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decision. The management has determined that the Company has a single reportable segment as Board of Directors views the Company's operations as one reportable segment.
4.10 Property, plant and equipment
4.10.1 Operating fixed assets and depreciation
a) Cost
Operating fixed assets except land, building and plant and machinery are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing a part of such assets when that cost is incurred if the recognition criteria are met. Building and plant and machinery are stated at revalued amount less accumulated depreciation and accumulated impairment losses, while land is stated at revalued amount. Capital work in progress is stated at cost less accumulated impairment losses, if any.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to profit and loss account during the year in which they are incurred.
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
b) Depreciation
Depreciation is charged to profit and loss account on reducing balance method to write off the cost of operating fixed assets less their residual values over their expected useful lives at the rates mentioned in Note 14.1.
Depreciation on assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset is disposed off.
The assets’ residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end.
c) Derecognition
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and carrying amount of the asset) is included in profit and loss account in the year the asset is derecognized.
23
R E S H A
These are valued at lower of cost and net realizable value. Basis of determining cost is as follows: -
Raw material - First in first out (FIFO)Raw material in transit - Invoice value plus other charges paid thereonPacking materialWork in process -
- Moving averageAverage manufacturing cost
Finished goods - Average manufacturing costWaste - Net realizable value
4.11 Stores and spare parts
These are valued at lower of moving average cost and net realizable value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. Provision is made for slow moving items based on management estimate.
Trade debts originated by the Company are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. Known bad debts are written off and provision is made against debts considered doubtful when collection of the full amount is no longer probable.
Cash and cash equivalents comprise cash in hand, cash at banks in current and deposit accounts and other short term highly liquid instruments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Financial instruments comprise long term deposits, trade debts, other receivables, cash and bank balances, long term financing, short term borrowings and trade and other payables.
Financial assets and liabilities are recognized at the time the Company becomes a party to contractual provisions of the instruments.
The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.
Financial assets are derecognized when the Company loses control of the contractual rights that comprise the financial asset. The Company loses such control if it realizes the rights to benefits specified in contract, the rights expire or the Company surrenders those rights. Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expired.
Financial assets and liabilities are offset when the Company has a legally enforceable right to offset and intends to settle either on a net basis or to realize the asset and settle the liability simultaneously.
4.12 Stock in trade
Average manufacturing cost in relation to work in process and finished goods signifies cost including a portion of related direct overheads.
Net realizable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make such sale.
4.13 Trade debts
4.14 Cash and cash equivalents
4.15 Financial instruments
24
Annual Report
The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of such asset is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss account. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit and loss account.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are charged to profit and loss account whenever incurred.
Transactions and contracts with related parties are carried out at arms length prices determined in accordance with comparable uncontrolled price method. Parties are said to be related if they are able to influence the operating and financial decisions of the Company and vice versa.
Transactions in foreign currency are initially recorded in the functional currency at the rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at functional currency rate of exchange prevailing at the balance sheet date. All differences are taken to the profit and loss account.
Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer which generally coincides with the delivery of goods to customers. Export goods are considered dispatched when shipped on board.
Profit on bank deposit is recognised when accrued.
4.16 Impairment
4.17 Revenue recognition
a) Sale of goods
b) Interest income
4.18 Borrowing costs
4.19 Foreign currencies
4.20 Related party transactions
The following revised standards, amendments and interpretations with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation:
4.21 Standards, interpretations and amendments to published approved accounting standards that are not yet effective
25
R E S H A
5. ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL
2015 2014
Rupees Rupees
36,000,000 (2014 : 36,000,000) Ordinary shares of
Rs. 10 each fully paid in cash
360,000,000 360,000,000
Standard or Interpretation
IFRS 10 - Consolidated Financial Statements
IFRS 11 - Joint Arrangements
IFRS 12 - Disclosure of Interests in Other Entities
IFRS 13 - Fair Value Measurement
IAS 16 and 38 - Clarification of Acceptable Method of
Depreciation and Amortization
IAS 16 and 41 - Agriculture: Bearer Plants
Standard
IFRS 9 - Financial Instruments:
Classification and Measurement
IFRS 14 - Regulatory Deferral Accounts
IFRS 15 - Revenue from Contracts with Customers
beginning on or after)
Effective date
01 January 2015
01 January 2015
01 January 2015
01 January 2015
(accounting periods
01 January 2016
01 January 2017
01 January 2018
01 January 2016
IASB effective date (Annual
periods beginning on or
after)
01 January 2016
Note
The Company expects that the adoption of the above revisions and amendments of the standards will not affect
the Company's financial statements in the period of initial application.
In addition to the above standards and interpretations, improvements to various accounting standards have also
been issued by the IASB. Such improvements are generally effective for accounting periods beginning on or
after 01 July 2015. The Company expects that such improvements to the standards will not have any impact on
the Company's financial statements in the period of initial application.
In addition to the above, the following new standards have been issued by IASB which are yet to be notified by
the SECP for the purpose of applicability in Pakistan:
26
Annual Report
6. SURPLUS ON REVALUATION OF FIXED ASSETS
Surplus on revaluation of fixed assets as at 01 July
Surplus arisen during the year
Surplus on revalued assets disposed off
Surplus relating to incremental depreciation charged on related
assets - transferred to other comprehensive income
Surplus on revaluation of fixed assets as at 30 June
Less: Related deferred tax liability on:
- Balance as at 01 July
- Additional surplus arisen during the year
- Fixed assets disposed off during the year
- Incremental depreciation charged during the year
- Increase due to change in proportionate local sales
- Decrease due to change in tax rate
The Company had revalued its freehold land, factory building, office building and plant and machinery on 31
December 2013. The revaluation exercise was carried out by M/s Harvest (Private) Limited to replace the
carrying amount of freehold land with current market value and other assets with their depreciated market
values. The surplus arisen on the revaluation aggregating to Rs. 211,186,148 was credited to this account to
comply with the requirements of section 235 of the Companies Ordinance, 1984.
7. LONG TERM DEPOSITS
2015 2014
Rupees Rupees
8. DEFERRED LIABILITIES
Deferred taxation (8.1)
Gratuity - unfunded (8.2)
264,567,299 287,627,753
32,347,143 28,883,564
296,914,442 316,511,317
Note
These represent deposits taken from employees against future transfer of Company owned vehicles to them.
369,029,180
-
(1,334,873)
(33,391,509)
334,302,798
(111,669,765)
-
435,530
10,894,681
(628,915)
3,059,651
(97,908,818)
236,393,980
187,461,033
211,186,148
(3,730,391)
(25,887,610)
369,029,180
(54,611,312)
(69,955,872)
1,249,562
8,671,521
(407,249)
3,383,585
(111,669,765)
257,359,415
2015 2014
Rupees Rupees
27
R E S H A
8.1 Deferred taxation
Taxable temporary differences
Surplus on revaluation of fixed assets
Accelerated tax depreciation
Deductible temporary differences
Unapproved gratuity
97,908,818 111,669,765
178,169,275 186,594,356
276,078,093 298,264,121
(10,636,368)
287,627,753
8.2 Movement in net liability
Liability at the beginning of the year
Charge for the year
Paid during the year
Actuarial (gain) / loss
Liability at the end of the year
14,596,408 12,888,661 3,114,757 2,311,318
17,711,165 15,199,979
(22)
(8.2.1)
14,523,155 12,463,982 (23) 1,062,670 911,999
8.2.1 The charge for the year
Current service cost
Interest cost
8.2.2 The charge for the year has been allocated as follows:
Cost of sales
Distribution cost
Administrative expenses (24) 2,125,340 1,823,998
17,711,165 15,199,979
(11,510,794)
264,567,299
28,883,564
17,711,165
46,594,729
(10,751,928)
(3,495,658)
32,347,143
24,203,663
15,199,979
39,403,642
(12,848,597)
2,328,519
28,883,564
2015 2014
Rupees Rupees
8.2.3 Sensitivity analysis
Rupees
Discount rate +100 bps 31,812,865
Discount rate -100 bps 32,906,365
Salary increase +100 bps 33,042,469
Salary increase -100 bps 31,670,197
Significant assumptions for the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting year, while holding all other assumptions constant.
28
Annual Report
9. TRADE AND OTHER PAYABLES
Creditors
Morabaha finance 9.1
Accrued liabilities
Advances from customers 9.2
9.3
9.4
Advances from brokers against customers
Workers' Profit Participation Fund
Unclaimed dividend
Others
Unclaimed WPPF
Workers' Welfare Fund
Note2014
Rupees
(Restated)
2015Rupees
9.2 These represent advances against sale of yarn and carry no mark-up.
9.1 This facility was obtained against sanctioned limit of Rs. 10,000,000 to finance working capital requirements of the Company for purchase of raw material. The rate of mark-up was 3 months KIBOR plus 2.75% (2014: 3 months KIBOR plus 2.75% ) per annum. This was secured against first pari passu charge on all current assets of the Company amounting to Rs.134,000,000 and personal guarantees of all the directors except employee directors of the Company. However, this facility has been repaid during the year.
76,113,313
10,000,000
67,008,368
14,929,873
9,793,360
4,729,567
7,951,817
3,984,988
476,134
100,000
195,087,420
14,172,583
-
137,614,521
7,532,178
1,733,860
5,824,898
7,492,386
4,039,281
208,840
100,000
178,718,547
Note
2015
Rupees
2014
Rupees
9.3 Workers' Profit Participation Fund
Balance at the beginning of the year
Charge for the year
Less: Payments made during the year
9.4 Workers' Welfare Fund
Balance at the beginning of the year
Charge for the year
Less: Payments made during the year
25
25
7,951,817 18,670,482
7,492,386 7,951,817
15,444,203 26,622,299
7,951,817 18,670,482
7,492,386 7,951,817
5,717,998
4,039,281
3,984,988
3,984,988
8,024,269 9,702,986
3,984,988 5,717,998
4,039,281 3,984,988
Note2014
Rupees2015
Rupees
29
R E S H A
2014
Rupees2015
Rupees
10. BALANCES WITH STATUTORY AUTHORITIES
This represents sales tax payable to government.
11. MARK-UP ACCRUED ON FINANCING
Long term financing
Short term borrowings and morabaha finance
Liabilities against assets subject to finance lease
- 15,219
5,153,641
5,153,641
13,571,728
- 6,174
13,593,121
12. SHORT TERM BORROWINGS
From banking companies - secured:
Cash finance (12.1) 107,530,842
Salam
Running finance (12.1)
-
37,105,617
Unsecured:
Bank overdrawn
Loan from directors
(12.2)
(12.3)
119,149
-
144,755,608
12.1 The aggregate facility of short term finances from commercial banks available at year end is Rs.1,275,000,000
(2014: Rs. 1,375,000,000 ). The rates of mark-up range from 3 months KIBOR plus 1% to 3 months KIBOR plus
2.75% (2014: 3 months KIBOR plus 1% to 3 months KIBOR plus 2.75%) per annum. These facilities are secured
against pledge of cotton bales with 10% margin for cotton, 25% margin for yarn bags, first pari passu charge of
Rs.159,000,000 on all current assets of the Company, first pari passu charge of Rs. 337,000,000 on fixed assets
of the Company, trust receipts duly executed by the Company and personal guarantee of the directors of the
Company.
12.2 These represent the bank overdrawn due to unpresented cheques issued near the balance sheet date. However,
the bank statement shows a favourable balance of Rs.238,972 (2014: Rs.72,939 ).
2015
Rupees
2014
Rupees
Note
12.3 This represents interest free loan from a director and have maturity of less than 12 months.
7,962,967
19,430,920
3,000,000
1,327,747
24,023,848
55,745,482
30
Annual Report
13.
13.1
CONTINGENCIES AND COMMITMENTS
Contingencies:
Order under section 122(5A) of the Income Tax Ordinance, 2001 (ITO 2001) for tax year 2005 (July - September) was issued by ACIR, which raised a demand amounting to Rs.74,047,800 against the Company. On application of the Company for rectification to ACIR, he reduced the amount to Rs.54,892,444. On appeal of the Company, CIR(A) set aside the order and directed the assessing officer to decide the case on merit in the light of the submissions of the Company's lawyers, vide order dated 24 November 2011 and the decision was taken in favour of the Company. The department has now filed an appeal against the order of CIR(A) before the ATIR which is pending adjudication.
Order under section 122(5A) of the Income Tax Ordinance, 2001 (ITO 2001) for the tax year 2005 (Oct - June) was issued by ACIR, which raised a demand amounting Rs. 6,801,138 against the Company. On appeal of the company, the CIR(A) set aside the order and directed the assessing officer to recalculate the amount of demand raised according to the rules ,vide order dated 31 March 2012. The department has now filed an appeal against the order of CIR(A) before the ATIR which is pending adjudication.
Order under section 122(5A) of the Income Tax Ordinance, 2001 (ITO 2001) for tax year 2006 was issued by CIR, which raised a demand amounting to Rs. 667,372 against the Company. The CIR(A) granted partial relief vide order dated 23 October 2012 and deleted the addition under section 21(c). Against the order of the CIR(A), the Company filed an appeal before the ATIR, which was decided in favour of company, vide order dated 15 September 2014. The department filed an appeal in High court and the case was again decided in company's favour vide order dated 24 December 2014. Now the department is in appeal in supreme court and the decision is still pending.
No provision has been made in these financial statements against the above as the management of the Company is confident that outflow of economic resources is not probable.
13.1.1
13.1.2
13.1.3
13.2 Commitments:
Bank guarantees aggregating to Rs. 43,582,200 (2014: Rs. 43,331,000) issued on behalf of the Company were outstanding on balance sheet date against which margins amounting to Rs. 1,511,565 (2014: Rs.1,511,565) have been deposited with the respective banks.
31
R E S H A
2015
2014
14.
PR
OP
ER
TY
, P
LA
NT
AN
D E
QU
IPM
EN
TN
ote
Ru
pees
Ru
pees
Opera
ting fix
ed a
ssets
(14.1
)1,2
18,3
78,2
99
1,2
89,5
73,3
42
Capita
l work
in p
rogre
ss(1
4.2
)5,7
46,1
24
3,6
69,0
74
1,2
24,1
24,4
23
1,2
93,2
42,4
16
14.1
Op
era
tin
g f
ixed
assets
DE
LE
TIO
NS
/
AD
JU
ST
ME
NT
Ow
ned
assets
:
Fre
e h
old
land
128,3
95,2
41
-128,3
95,2
41
11,8
47,5
00
(1,0
89,4
45)
-139,1
53,2
96
-139,1
53,2
96
-
Build
ing o
n fre
ehold
land
-F
act
ory
186,5
61,3
68
9,1
64,5
27
177,3
96,8
41
--
17,7
39,6
84
186,5
61,3
68
26,9
04,2
11159,6
57,1
57
10
-R
esi
dentia
l29,5
47,2
10
738,6
80
28,8
08,5
30
-1,0
89,4
45
1,4
40,4
32
30,6
36,6
55
2,1
79,1
12
28,4
57,5
43
5
Pla
nt and m
ach
inery
937,4
10,8
40
34,8
97,0
93
902,5
13,7
47
-(1
,750,0
00)
57,8
52,9
00
935,6
60,8
40
92,3
96,9
63
843,2
63,8
77
10
353,0
30
Ele
ctric
inst
alla
tions
28,5
84,6
44
13,7
07,6
65
14,8
76,9
79
-1,5
81,6
60
28,5
84,6
44
15,2
89,3
25
13,2
95,3
19
10
Mill
s equip
ment
38,8
16,9
08
13,2
65,7
32
25,5
51,1
76
122,7
10
900,7
02
38,9
39,6
18
14,1
66,4
34
24,7
73,1
84
10
Offic
e e
quip
ment
2,6
75,9
17
936,2
63
1,7
39,6
54
284,8
00
-190,1
66
2,9
60,7
17
1,1
26,4
29
1,8
34,2
88
10
Furn
iture
and fix
ture
s1,1
29,3
60
670,0
73
459,2
87
--
26,9
52
1,1
29,3
60
697,0
25
432,3
35
10
Vehic
les
14,7
48,9
13
4,9
35,9
57
9,8
12,9
56
1,8
39,5
60
(3,6
97,9
42)
1,1
30,7
38
12,8
90,5
31
5,3
97,0
33
7,4
93,4
98
20
669,6
62
Arm
s and a
mm
uniti
on
43,6
20
24,6
89
18,9
31
--
1,1
29
43,6
20
25,8
18
17,8
02
10
1,3
67,9
14,0
21
78,3
40,6
79
1,2
89,5
73,3
42
14,0
94,5
70
(6,5
37,3
87)
80,8
64,3
63
1,3
76,5
60,6
49
158,1
82,3
50
1,2
18,3
78,2
99
2,1
12,1
37
RE
CO
NC
ILIA
TIO
N
( C
ost
/
Revalu
ed
am
ou
nt)
/
Accu
mu
late
d
dep
recia
tio
n
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
Ru
pees--
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
2015
BA
LA
NC
E A
S A
T 0
1 J
ULY
2014
BA
LA
NC
E A
S A
T 3
0 J
UN
E 2
015
PA
RT
ICU
LA
RS
Co
st
/
Revalu
ed
am
ou
nt
Accu
mu
late
d
dep
recia
tio
n
Net
bo
ok
valu
eA
dd
itio
ns
Dep
recia
tio
n
ch
arg
e f
or
the y
ear
Co
st
/
Revalu
ed
am
ou
nt
Accu
mu
late
d
dep
recia
tio
n
Net
bo
ok
valu
e
RA
TE
(%
)
32
Annual Report
DE
LE
TIO
NS
Ow
ne
d a
ss
ets
:
Fre
e h
old
lan
d
30
,45
5,1
00
-3
0,4
55
,10
09
5,5
97
,44
12
,34
2,7
00
--
12
8,3
95
,24
1-
12
8,3
95
,24
1-
Bu
ildin
g
-F
act
ory
15
9,6
21
,66
53
5,8
55
,46
11
23
,76
6,2
04
3,9
24
,98
4-
6
5,0
58
,49
0
15
,35
2,8
37
42
,04
3,7
71
18
6,5
61
,36
89
,16
4,5
27
17
7,3
96
,84
11
0
-R
esi
de
ntia
l3
9,3
52
,56
94
,36
6,1
62
34
,98
6,4
07
--
(4
,56
4,5
35
)
1,6
13
,34
25
,24
0,8
24
29
,54
7,2
10
73
8,6
80
28
,80
8,5
30
5
Pla
nt
an
d m
ach
ine
ry9
74
,73
4,2
03
20
1,7
75
,94
77
72
,95
8,2
56
47
,63
8,3
82
(6,7
74
,80
0)
14
8,3
49
,49
36
1,1
98
,47
12
26
,53
6,4
38
93
7,4
10
,84
03
4,8
97
,09
39
02
,51
3,7
47
10
1,5
40
,88
7
Ele
ctric
inst
alla
tion
s2
8,5
84
,64
411
,95
0,2
65
16
,63
4,3
79
--
-1
,75
7,4
00
-2
8,5
84
,64
41
3,7
07
,66
51
4,8
76
,97
91
0
Mill
s e
qu
ipm
en
t3
8,7
02
,90
81
2,2
67
,95
22
6,4
34
,95
611
4,0
00
--
99
7,7
80
-3
8,8
16
,90
81
3,2
65
,73
22
5,5
51
,17
61
0
Offic
e e
qu
ipm
en
t2
,50
7,0
62
78
6,1
70
1,7
20
,89
22
29
,04
0(6
0,1
85
)-
19
1,4
61
-2
,67
5,9
17
93
6,2
63
1,7
39
,65
41
0
41
,36
8
Fu
rnitu
re a
nd
fix
ture
s1
,12
1,3
60
64
0,1
21
48
1,2
39
8,0
00
--
29
,95
2-
1,1
29
,36
06
70
,07
34
59
,28
71
0
Ve
hic
les
17
,93
1,9
97
5,8
75
,21
81
2,0
56
,77
93
,16
7,7
10
(6,3
50
,79
4)
-1
,58
9,3
59
-1
4,7
48
,91
34
,93
5,9
57
9,8
12
,95
62
0
2,5
28
,62
0
Arm
s a
nd
am
mu
niti
on
43
,62
02
3,5
37
20
,08
3-
--
1,1
52
-4
3,6
20
24
,68
91
8,9
31
10
1,2
93
,05
5,1
28
27
3,5
40
,83
31
,01
9,5
14
,29
51
50
,67
9,5
57
(13
,18
5,7
79
)2
11,1
86
,14
88
2,7
31
,75
42
73
,82
1,0
33
1,3
67
,91
4,0
21
78
,34
0,6
79
1,2
89
,57
3,3
42
4,1
10
,87
520
14
BA
LA
NC
E A
S A
T 0
1 J
ULY
20
13
RE
CO
NC
ILIA
TIO
NB
AL
AN
CE
AS
AT
30
JU
NE
20
14
RA
TE
(%
)P
AR
TIC
UL
AR
S
Co
st
/
Re
va
lue
d
am
ou
nt
Ac
cu
mu
late
d
de
pre
cia
tio
n
Ne
t b
oo
k
va
lue
Ad
dit
ion
s
( C
os
t /
Re
va
lue
d
am
ou
nt)
/
Ac
cu
mu
late
d
de
pre
cia
tio
n
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
Ru
pe
es
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
De
pre
cia
tio
n
ch
arg
e f
or
the
ye
ar
Ac
cu
mu
late
d
de
pre
cia
tio
n
ad
jus
tme
nt
Co
st
/
Re
va
lue
d
am
ou
nt
Ac
cu
mu
late
d
de
pre
cia
tio
n
Ne
t b
oo
k
va
lue
Re
va
lua
tio
n
ad
jus
tme
nt
14.1
.1 D
epre
ciat
ion
char
ge fo
r th
e ye
ar h
as b
een
allo
cate
d as
follo
ws:
C
ost o
f sal
es
A
dmin
istr
ativ
e ex
pens
es
2015
2014
No
teR
up
ees
Ru
pee
s
(22)
79,5
15,3
7880
,919
,830
(24)
1,34
8,98
51,
811,
924
80,8
64,3
6382
,731
,754
33
R E S H A
14.1
.2
Ow
ned
Ass
ets:
Fre
ehol
d la
nd11
2,38
3,97
5-
112,
383,
975
101,
625,
920
-10
1,62
5,92
0
Bui
ldin
g on
free
hold
land
:
Fac
tory
17
1,94
0,41
513
3,69
0,09
538
,250
,320
171,
940,
415
115,
950,
411
55,9
90,0
04
Res
iden
tial
21,0
93,3
2910
,318
,641
10,7
74,6
8820
,003
,884
8,87
8,20
911
,125
,675
Pla
nt a
nd m
achi
nery
1,22
2,86
1,11
964
7,41
5,56
557
5,44
5,55
41,
222,
427,
579
589,
934,
108
632,
493,
471
1,52
8,27
8,83
879
1,42
4,30
173
6,85
4,53
71,
515,
997,
798
714,
762,
728
801,
235,
070
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
---R
up
ees
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
Had
ther
e be
en n
o re
valu
atio
n, th
e re
late
d fig
ures
of f
reeh
old
land
, bui
ldin
g an
d pl
ant a
nd m
achi
nery
at 3
0 Ju
ne w
ould
hav
e be
en a
s fo
llow
s:
Par
ticu
lars
Bal
ance
As
at 3
0 Ju
ne
2015
Bal
ance
As
at 3
0 Ju
ne
2014
Co
stA
ccu
mu
late
d
dep
reci
atio
n
Net
bo
ok
valu
eC
ost
Acc
um
ula
ted
dep
reci
atio
n
Net
bo
ok
valu
e
14.1
.3D
eta
il of th
e a
ssets
dis
pose
d o
ff d
uring the y
ear
havi
ng b
ook
valu
e e
xceedin
g R
upees
50,0
00 is
as
follo
ws:
Descri
pti
on
Co
st
/
Revalu
ed
am
ou
nt
Accu
mu
late
d
dep
recia
tio
n
Bo
ok
valu
e
Sale
pro
ceed
s
Mo
de o
f
dis
po
sal
Pla
nt
an
d m
ach
inery
:
Axi
Flo
w
1
,750,0
00
353,0
30
1
,396,9
70
375,0
00
Negotia
tion
Veh
icle
s :
LE
A-7
675
1
,595,5
40
317,5
12
1
,278,0
28
1
,278,0
28
Negotia
tion
LE
-4437
1
,817,7
10
239,3
32
1
,578,3
78
1
,850,0
00
Insu
rance
Cla
im
5,1
63,2
50
909,8
74
4,2
53,3
76
3,5
03,0
28
Saphire T
ext
ile M
ills
Lim
ited
Part
icu
lars
of
pu
rch
aser
Chaudhry
M. K
hurs
hid
Jubile
e Insu
rance
----
----
----
----
----
----
----
----
----
---R
up
ees--
----
----
----
----
----
----
----
----
----
-
34
Annual Report
2015 2014
14.2 Capital work in progress Note Rupees Rupees
Opening 3,669,074 1,420,205
Additions during the year 3,192,016 53,166,087
Less: transfer to operating fixed assets - (50,917,218)
Less: Transfer to stores (1,114,966) -
5,746,124 3,669,074
15. STORES AND SPARE PARTS
Stores in transit 37,915 9,915
Stores 5,874,942 1,079,443
Spare parts 31,447,370 36,553,368
37,360,227 37,642,726
16. STOCK IN TRADE
Raw material 211,598,536 181,312,119
Work in process 18,980,136 17,168,014
Finished goods 31,302,878 63,567,877
Packing material 5,990,047 4,863,640
Waste 3,094,932 1,542,800
270,966,529 268,454,450
17. TRADE DEBTS
These are unsecured but considered good by the management.
18. ADVANCES- unsecured
Advances to suppliers:
Considered good 2,325,692 5,391,478
Considered doubtful 743,604 743,604
3,069,296 6,135,082Less: provision for doubtful advances 743,604 743,604
2,325,692 5,391,478Advances to employees - considered good 206,694 860,694
2,532,386 6,252,172
18.1
19. TRADE DEPOSITS AND SHORT TERM PREPAYMENTS
Bank guarantee margin 1,511,565 1,511,565
Short term prepayments 865,943 1,858,439
2,377,508 3,370,004
This represents expenses incurred and advances given in relation to office building.
No advances were given to the Chief Executive Officer, Directors and Executives of the Company.
R E S H A
35
2015 2014
20. CASH AND BANK BALANCES Note Rupees Rupees
Cash in hand 407,935 710,206
Cash at bank:
Current accounts 29,154,785 41,695,480
Deposit accounts (20.1) 9,857,953 -
39,012,738 41,695,480
39,420,673 42,405,686
20.1 These carry interest at the rate ranging from 4% to 6% (2014: 5% to 10.5%) per annum.
21. SALES - net
Local 3,406,809,202 4,078,437,764
Waste 55,375,724 53,140,262
3,462,184,926 4,131,578,026
Less: Sales tax 66,378,096 80,375,501
3,395,806,830 4,051,202,525
22. COST OF SALES(Restated)
Raw materials:
Opening 181,312,119 528,539,854
Purchases 2,393,384,505 2,703,948,693
Closing stock (16) (211,598,536) (181,312,119)
Raw material consumed 2,363,098,088 3,051,176,428
Salaries, wages and other benefits (22.1) 207,669,128 192,478,819
Fuel and power (22.2) 358,004,322 343,084,961
Packing material consumed 45,089,769 43,761,905
Stores and spare parts consumed 55,991,392 54,704,165
Ijarah rentals - 2,298,224
Insurance 5,192,946 6,337,295
Repairs and maintenance 3,873,581 6,118,797
Depreciation (14.1.1) 79,515,378 80,919,830
Others 1,500,004 1,826,041
3,119,934,608 3,782,706,465Work in process:
Opening stock 17,168,014 20,014,761
Closing stock (16) (18,980,136) (17,168,014)
(1,812,122) 2,846,747Cost of goods manufactured 3,118,122,486 3,785,553,212
Finished goods and waste:
Opening stock 65,110,677 54,811,778Closing stock (16) (34,397,810) (65,110,677)
30,712,867 (10,298,899)
3,148,835,353 3,775,254,313
Annual Report
36
In September 2015, Sui Northern Gas Pipelines Limited (SNGPL) raised a gas bill of Rs. 39,884,730 to the Company which included arrears of changed tariff. Included in these arrears is an amount of Rs. 6,923,865 which related to the year 2013 - 2014. Accordingly, prior year financial statements have been restated.
2015 2014
Note Rupees Rupees
(23.1) 6,283,562 5,099,177
12,421,334 16,644,649
103,550 123,800
446,677 308,260
19,255,123 22,175,886
5,750,416 5,114,869
(24.1) 17,095,302 15,731,277
(24.2) 15,035,000 13,900,000
(14.1.1) 1,348,985 1,811,924
951,041 1,332,317
819,126 853,211
(24.3) 680,000 630,000
625,422 729,313
540,183 441,686
599,620 1,194,500
720,826 769,547
455,312 434,481
1,015,272 1,693,200
318,386 276,570
156,017 315,121
144,585 135,560
131,855 179,816
2,321,639 1,753,154
48,708,987 47,296,546
22.1
22.2
23. DISTRIBUTION COST
Salaries and other benefits
Commission on sales
Freight and forwarding
Other expenses
23.1
24. ADMINISTRATIVE EXPENSES
Directors' remuneration
Salaries and other benefits
Charity and donations
Depreciation
Fee and subscription
Postage, telephone and telex
Auditors' remuneration
Rent, rates and taxes
Electricity, gas and water
Legal and professional
Entertainment
Repairs and maintenance
Vehicle running and maintenance
Printing and stationery
Insurance
Traveling and conveyance
Advertisement
Others
This includes an amount of Rs.1,062,670 (2014: Rs.911,999) representing gratuity expense for the year.
This includes an amount of Rs.14,523,155 (2014: Rs.12,463,982) representing gratuity expense for the year.
R E S H A
37
24.1
24.2 None of the directors had any interest in any of the donees.
24.3 Auditors' remuneration
Statutory audit 550,000 500,000
Half yearly review 75,000 75,000
Other certifications 25,000 25,000
Out of pocket expenses 30,000 30,000
680,000 630,000
2015 2014
Note Rupees Rupees
25. OTHER OPERATING EXPENSES
Workers' Profit Participation Fund (9.3) 7,492,386 7,951,817
Workers' Welfare Fund (9.4) 4,039,281 3,984,988
Loss on disposal of property, plant and equipment 756,123 -
12,287,790 11,936,805
26. OTHER INCOME
Income from financial assets:
Interest on bank deposits 640,912 912,768
Subsidy on finance lease due to subsidized rate 1,034,934 1,505,537
1,675,846 2,418,305
Income from assets other than financial assets:
Gain on disposal of property, plant and equipment - 9,334,896
Scrap sales 5,928,942 7,969,269
Creditors written back 21,393 1,359,865
5,950,335 18,664,030
7,626,181 21,082,335
27. FINANCE COST
Interest / mark-up on:
Liabilities against assets subject to finance lease - 429,714
Long term financing - 698,374
Loans from directors 278,425 2,812,223
Short term borrowings 33,451,384 67,339,002
Mark up on WPPF 741,924 2,071,656
34,471,733 73,350,969
Bank charges and commission 1,557,965 2,094,679
36,029,698 75,445,648
This includes an amount of Rs. 2,125,340 (2014: Rs. 1,823,998) representing gratuity expense for the year.
2015 2014
Rupees Rupees
Annual Report
38
2015 2014
Rupees Rupees
(Restated)
28. TAXATION
Current :
For the year 61,030,747 52,980,723
Prior year (3,458,523) 6,822,219
57,572,224 59,802,942
Deferred:
For the year
(28.1)
(22,502,352) (10,528,748)
35,069,872 49,274,194
2015 2014
Rupees Rupees
28.1 Relationship between tax expenses and accounting profit (Restated)
Profit before taxation 138,316,060 140,175,662
Current Taxation:
Tax at applicable tax rate of 33% (2014: 34%) 45,644,300 47,659,725
Tax effect of change in prior year (3,458,523) 6,822,219
Tax effect of expenses that are not deductible in
determining taxable income charged to profit and loss account 17,247,355 27,169,897
Tax effect of expenses that are deductible in
determining taxable income not charged to profit and loss account (20,078,831) (21,322,581)
Effect of tax credits (4,284,429) (11,055,066)
35,069,872 49,274,194
29. EARNINGS PER SHARE - BASIC AND DILUTED 2015 2014
(Restated)
Net profit for the year Rupees 103,246,188 90,901,468
Weighted average number of shares Number 36,000,000 36,000,000
Basic earnings per share Rupees 2.87 2.53
No figure for diluted earnings per share has been presented as the Company has not issued any instrumentcarrying options which would have an impact on the basic earnings per share, when exercised.
R E S H A
39
2015 2014
Rupees Rupees
30. CASH GENERATED FROM OPERATIONS (Restated)
Profit before taxation 138,316,060 140,175,662
Adjustments for non-cash items:
Depreciation 80,864,363
756,123
82,731,754
Loss / (Gain) on disposal of property, plant and equipment (9,334,896)
Provision for gratuity 17,711,165 15,199,979
Finance cost 36,029,698 75,445,648
Provision for Workers' Welfare fund 4,039,281 3,984,988
Provision for Workers' Profit Participation Fund 7,492,386 7,951,817
146,893,016 175,979,290
Cash flows from operating activities before working capital changes 285,209,076 316,154,952
Working capital changes
(Increase) / decrease in current assets:
Stores and spare parts 282,499 (22,445,253)
Stock in trade (2,512,079) 339,684,408
Trade debts (13,764,601) (87,297,439)
Advances 3,719,786 (1,475,695)
Trade deposits and short term prepayments 992,496 (695,832)
Balances with statutory authorities 3,296,890 6,155,897
(Decrease) / Increase in current liabilities:
Trade and other payables (19,681,429) 56,331,571
(27,666,438) 290,257,657
Cash generated from operations 257,542,638 606,412,609
Annual Report
40
31.
RE
MU
NE
RA
TIO
N O
F C
HIE
F E
XE
CU
TIV
E O
FF
ICE
R, D
IRE
CT
OR
S A
ND
EX
EC
UT
IVE
S
Managerial r
em
unera
tion
1,6
71,1
13
2,1
62,5
00
6,7
53,8
89
982,6
29
2,4
27,2
83
8,5
90,3
68
Util
ities
167,1
11216,2
49
675,3
89
98,2
63
242,7
28
689,5
71
House
rent
668,4
44
864,9
99
2,7
01,5
55
393,0
52
970,9
14
2,7
58,2
85
2,5
06,6
68
3,2
43,7
48
10,1
30,8
33
1,4
73,9
44
3,6
40,9
25
12,0
38,2
24
Num
ber
of pers
ons
13
41
36
31.1
In a
dditi
on, th
e a
bove
pers
ons
have
been p
rovi
ded w
ith the C
om
pany
main
tain
ed c
ars
.
31.2
No fee is
paid
to the C
hie
f E
xecu
tive O
ffic
er
or
any
direct
or
of th
e C
om
pany
for
attendin
g the m
eetin
gs.
32.
TR
AN
SA
CT
ION
S W
ITH
RE
LA
TE
D P
AR
TIE
S
2015
2014
Rela
tio
nsh
ip w
ith
th
e C
om
pan
yR
up
ees
Ru
pees
Direct
ors
Loan r
ece
ived d
uring the y
ear
91,2
12,8
48
95,6
63,7
00
67,1
89,0
00
95,6
63,7
00
278,4
25
2,8
12,2
23
635,9
15
501,6
25
Rent paid
during the y
ear
---
----
----
----
----
----
Ru
pees--
----
----
----
----
---
Natu
re o
f tr
an
sacti
on
Loan r
epaid
during the y
ear
Inte
rest
on lo
ans
The
rela
ted
part
ies
incl
ude
direct
ors
of
the
Com
pany
and
key
managem
ent
pers
onnel.
Rem
unera
tion
of
direct
ors
and
key
managem
ent pers
onnel i
s dis
close
d in
note
31. O
ther
signifi
cant tr
ansa
ctio
ns
with
rela
ted p
art
ies
are
as
belo
w:
---
----
----
----
----
----
--R
up
ees--
----
----
----
----
----
2014
Dir
ecto
rsE
xecu
tives
Ch
ief
Execu
tive
Off
icer
Dir
ecto
rsE
xecu
tives
2015
Ch
ief
Execu
tive
Off
icer
R E S H A
41
33. FINANCIAL RISK MANAGEMENT
33.1 Financial risk factors
a) Market risk
i) Currency risk
ii) Other price risk
The Company's financial liabilities comprise short term borrowings and trade and other payables. The main purpose of these financial liabilities is to raise finances for Company's operations. The Company has trade debts, short term advances and short term bank deposits that arrive directly from its operations. The Company's activities expose it to a variety of financial risks: market risk (including currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance.
Risk management is carried out by the Board of Directors (the Board). The Board provides principles for overall risk management, as well as policies covering specific areas such as currency risk, price risk, interest rate risk, credit risk and liquidity risk.
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies. The Company has no significant transactions in foreign currency therefore, it is not exposed to currency risk.
Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to commodity price risk since it has diverse portfolio of commodity suppliers. The Company is also not exposed to equity price risk.
iii) Interest rate risk
This represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Company has no significant interest-bearing assets other than bank balances in deposit accounts. The Company's interest rate risk mainly arises from short term borrowings. Borrowings obtained at variable rates expose the Company to cash flow interest rate risk. Borrowings obtained at fixed rate expose the Company to fair value interest rate risk.
At the balance sheet date the Company was not exposed to fair value interest rate risk, however the interest rate profile of the Company’s floating interest bearing financial instruments was:
Floating rate instruments
Financial assets
Bank balances - deposit accounts
Financial liabilities
Short term borrowings
2015 2014
Rupees Rupees
9,857,953 -
55,745,482 144,755,608
Annual Report
42
The following analysis demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Company's profit before tax. This analysis is prepared assuming the amounts of floating rate instruments outstanding at balance sheet dates were outstanding for the whole year.
Cash flow sensitivity analysis for variable rate instruments
Bank balances - deposit accounts2015
2014
Changes
Interest
Rate
Effects on
Profit
Before Tax
+1.00 (98,580)
-1.00 98,580
+1.00 -
-1.00 -
Credit risk represents the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows:
Credit riskb)
2015 2014
Rupees Rupees
3,697,560 3,697,560
115,572,506 101,807,905
1,511,565 1,511,565
Long term deposits
Trade debts
Trade deposits
Bank balances 39,012,738 41,695,480
159,794,369 148,712,510
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings or to historical information about counterparty default rate.
Short term borrowings
2014
2015+1.50 (836,182)
-1.50 836,182
+1.50 (2,171,334)
-1.50 2,171,334
R E S H A
43
At 30 June 2015 Company had 13 customers (2014: 10 customers) that owed the Company more than Rs. 1,000,000 each and accounted for approximately 98% (2014: 97%) of all receivables owing.
Due to the Company's long standing business relationships with these counterparties and after giving due consideration to their strong financial standing, management does not expect non-performance by these counter parties on their obligations to the Company. Accordingly the credit risk is minimal.
Rupees Rupees
A-1+ AAA JCR - VIS 495,079 488,987
A-1 A PACRA - 529,105
A-1+ AAA PACRA 10,037,439 732,734
A-1+ AAA JCR - VIS 4,122,320 861,691
A-1+ AA PACRA 5,858,854 2,286,577
A-1+ AA PACRA 19,941 35,068,462
A-1+ AA PACRA 3,628,281 1,637,058
A-1+ AA- PACRA 29,683 34,392
A-1+ AA+ PACRA 14,780,473 11,005
Banks
Habib Bank Limited
Al-Baraka Bank
MCB Bank Limited
National Bank of Pakistan
Faysal Bank Limited
Askari Commercial Bank Ltd
Bank Alfalah Limited
Bank of Punjab
Habib Metropolitan Bank Ltd
NIB Bank Limited A-1+ AA- PACRA 40,668 45,469
39,012,738 41,695,480
Trade debts
2015 2014Rupees Rupees
The age of trade receivables at balance sheet date was:
Not past due
Past due 1- 6 months
Past due 7- 12 months
1 - 2 years
Rating2015 2014
Short
Term
Long
termAgency
Credit risk related to trade receivables is managed by established policies, procedures and controls relating to customers credit risk management. Outstanding receivables are regularly monitored and shipments to foreign customers are covered by letters of credit.
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The management believes the liquidity risk to be low.
The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equate to their carrying balances as the impact of discounting is not significant:
Liquidity riskc)
115,301,945
13,391
6,027
251,143
115,572,506
98,857,405
2,267,820
455,262
227,418
101,807,905
The table below shows the bank balances held with counterparties at the balance sheet date:
Annual Report
44
Carrying
Amount
Contractual
cash flows
Less than
1 year
Between
1 and 5
years
Over 5 years
Trade and other payables 157,920,842 157,920,842 157,920,842 - -
Mark-up accrued on financing 5,153,641 5,153,641 5,153,641 - -
Post employment benefits -
gratuity 32,347,143 32,347,143 - 32,347,143 -
Short term borrowings 55,745,482 55,745,482 55,745,482 - -
251,167,108 251,167,108 218,819,965 32,347,143 -
Carrying
Amount
Contractual
cash flows
Less than
1 year
Between
1 and 5
years
Over 5 years
Trade and other payables 158,427,382 158,427,382 158,427,382 - -
- Restated
Mark-up accrued on financing 13,593,121 13,593,121 13,593,121 - -
Post employment benefits -
gratuity 28,883,564 28,883,564 - 28,883,564 -
Short term borrowings 144,755,608 144,755,608 144,755,608 - -
345,659,675 345,659,675 316,776,111 28,883,564 -
33.2 Fair values of financial assets and liabilities
33.3 Financial instruments by categories
Loans and
receivablesTotal
As at 30 June 2015
Financial assets as per balance sheet
Long term deposits - 3,697,560 3,697,560
Trade debts - 115,572,506 115,572,506
Trade deposits - 1,511,565 1,511,565
Cash and bank balances 39,420,673 - 39,420,673
39,420,673 120,781,631 160,202,304
The contractual cash flows relating to the above financial liabilities have been determined on the basis of markup rateseffective as at 30 June. The rates of mark up have been disclosed in respective notes to the financial statements.
30 June 2014
30 June 2015 ---------------------------------------------------Rupees---------------------------------------------
---------------------------------------------------Rupees---------------------------------------------
The carrying values of all financial assets and liabilities reflected in financial statements approximate their fair values. Fairvalue is determined on the basis of objective evidence at each reporting date.
Cash and cash
equivalents
--------------------------------Rupees---------------------------
R E S H A
45
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide return for shareholders and benefits for other stakeholders and to maintain healthier capital ratios in order to support its business and maximize shareholders' value. The Company manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust dividend payments to the shareholders or issue new shares.
33.4 Capital risk management
Financial liabilities as per balance sheet Rupees
Trade and other payables 157,920,842
Mark-up accrued on financing 5,153,641
Post employment benefits- Gratuity 32,347,143
Short term borrowings 55,745,482
251,167,108
Loans and
advancesTotal
As at 30 June 2014
Financial assets as per balance sheet
Long term deposits - 3,697,560 3,697,560
Trade debts - 101,807,905 101,807,905
Trade deposits - 1,511,565 1,511,565
Cash and bank balances 42,405,686 - 42,405,686
42,405,686 107,017,030 149,422,716
Financial liabilities as per balance sheet Rupees
Trade and other payables - Restated 158,427,382
Mark-up accrued on financing 13,593,121
Post employment benefits- Gratuity 28,883,564
Short term borrowings 144,755,608
345,659,675
Financial
liabilities at
amortized cost
Financial
liabilities at
amortized cost
Cash and cash
equivalents
--------------------------------Rupees------------------------------
Annual Report
46
No changes were made in the objectives, policies or processes from the previous year. The Company monitors capital using gearing ratio, which is debt divided by equity plus net debt. Debt represents short term borrowings obtained by the Company as referred to in note 12. Total capital employed includes ‘total equity’ as shown in the balance sheet plus debt. The Company’s strategy, which was unchanged from last year, was to maintain optimal capital structure in order to minimize cost of capital.
35.1 Reason for low production
36 NON ADJUSTING EVENTS AFTER THE BALANCE SHEET DATE
The gearing ratio as at year end is as follows:
35. PLANT CAPACITY AND ACTUAL PRODUCTION
Spindles installed/ worked
Production at normal capacity in 20/S count
based on 3 shifts per day
Actual production converted to 20/S count
based on 3 shifts per day
Total capital employed
Gearing ratio
Equity
Debt
2015 2014
Note Rupees Rupees
Restated
(12) 55,745,482
1,135,768,874
1,191,514,356
5%
2015 2014
No. 38,448 38,448
Kgs 14,102,609 14,102,609
Kgs 11,718,371 12,275,920
Under utilization of available capacity is due to change over in production mix and normal maintenance down time.
thThe Board of Directors of the Company in its meeting held on 28 October, 2015 has proposed a cash dividend of Rs. 0.70 per share (2014: Rs. 0.5 per share) in respect of the year ended 30 June 2015. The appropriation will be approved by the members in the forthcoming Annual General Meeting. These financial statements do not include the effect of these appropriations which will be accounted for subsequent to the year end.
37. NUMBER OF EMPLOYEES
Number of employees at the end of the year
Average number of employees during the year
2015 2014
899 959
942 994
144,755,608
1,064,253,175
1,209,008,783
12%
34 TAX ON UNDISTRIBUTED PROFITS
The Finance Act, 2015 introduced a tax on every public company at the rate of 10 percent of such undistributed reserves which exceeds the amount of its paid up capital. However, this tax shall not apply in case of a public company which distribute cash dividend equal to at least either 40 percent of its after tax profits or 50 percent of its paid up capital, within the prescribed time after the end of the relevant tax year.
Based on the fact, the Board of Directors of the Company has proposed a dividend amounting to Rs 25,200,000 in their thmeeting held on 28 October, 2015 for the financial and tax year 2015 which (along with interim dividend for the year)
exceeds the prescribed minimum dividend requirement as referred above, the Company believes that it would not be liable to pay tax on its undistributed reserves as of 30 June 2015.
R E S H A
47
38.
39.
40.
DATE OF AUTHORIZATION FOR ISSUE
CORRESPONDING FIGURES
GENERAL
These financial statements were authorized for issue on 28 October, 2015 by the Board of Directors of the Company.
Corresponding figures have been re-arranged or reclassified wherever necessary, for better and fair presentation. However, no significant reclassifications / restatements have been made.
Figures in these financial statements have been rounded off to the nearest rupee.
(Chief Executive Officer) (Director)
Annual Report
48
R E S H A
49
74.6990%
0.0003%
55.8262%
26,891,627
20,097,438
5. Categories of shareholders Shares held Percentage
119
5.1 Directors, Chief Executive Officer and their spouse and minor children
5.2 Banks Development Financial Institutions,
Non Banking Financial Institutions.
5.3 Share holders holding 10% or more
25.2449%9,088,1495.4 General Public
5.5 Others (to be specified) 1- Joint Stock Companies2- Pension Funds3- Others
519,419
681
0.0000%0.0539%0.0019%
PATTERN OF SHAREHOLDING1. Incorporation Number
2. Name of the Company RESHAM TEXTILE INDUSTRIES LIMITED
3. Pattern of holding of the shares held by the shareholders as at 30 June 2015
0021882
From To Total Shares Held ------Shareholding------4. No. of Shareholders
100
500
1,000
5,000
10,000
15,000
20,000
30,000
35,000
55,000
70,000
85,000
105,000
145,000
155,000
170,000
200,000
290,000
350,000
445,000
555,000
590,000
655,000
740,000
770,000
800,000
845,000
1,145,000
1,255,000
1,380,000
1,560,000
2,160,000
3,090,000
17,400,000
142
18,680
7,015
26,500
24,800
12,887
19,419
29,100
35,000
50,900
66,000
82,164
100,500
143,846
153,968
166,452
200,000
1,151,887
346,000
444,620
553,991
589,300
650,746
738,350
765,481
798,800
843,481
1,140,515
1,254,021
1,380,000
1,558,998
2,158,952
3,089,560
17,397,925
36,000,000
31
39
8
11
3
1
1
1
1
1
1
1
1
1
1
1
1
4
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
124
1
101
501
1,001
5,001
10,001
15,001
25,001
30,001
50,001
65,001
80,001
100,001
140,001
150,001
165,001
195,001
285,001
345,001
440,001
550,001
585,001
650,001
735,001
765,001
795,001
840,001
1,140,001
1,250,001
1,375,001
1,555,001
2,155,001
3,085,001
17,395,001
CATEGORIES OF SHAREHOLDERS REQUIRED UNDER C.C.G.
AS AT 30 JUNE 2015
Sr. No. NameNo. of
Shares HeldPercentage
Associated Companies, Undertakings and Related Parties (Name Wise Detail): -
-
Mutual Funds (Name Wise Detail) -
-
Directors and their Spouse and Minor Children (Name Wise Detail):
1 MR. MUHAMMAD ARSHAD SAEED 20,097,438
55.8262%
2 CH. REHMAN BAKHSH 82,164
0.2282%
3 MS. KIRAN ARSHAD CHAUDHRY 3,089,560
8.5821%
4 MR. MUHAMMAD ALI CHAUDHRY 843,481
2.3430%
5 MST. SALMA AZIZ 1,668,814
4.6356%
6 MR. KAMRAN ILYAS 50,900
0.1414%
7 MR. MUHAMMAD MUSHARAF KHAN 500
0.0014%
8 MRS. SHAHEEN ARSHAD 738,350
2.0510%
10 MRS. AQSA UMAR 153,968
0.4277%
9 MRS. KALSOOM KAUSAR 166,452
0.4624%
Executives: -
-
Public Sector Companies & Corporations: -
-
Banks, Development Finance Institutions, Non Banking Finance 19,538
0.0543%
Companies, Insurance Companies, Takaful, Modarabas and Pension Funds:
Shareholders holding five percent or more voting intrest in the listed company (Name Wise Detail)
1 MR. MUHAMMAD ARSHAD SAEED 20,097,438
55.8262%
2 MS. KIRAN ARSHAD CHAUDHRY 3,089,560
8.5821%
3 CHAUDHRY MUHAMMAD KHURSHID 2,924,433
8.1234%
All trades in the shares of the listed company, carried out by its Directors, Executives and their
spouses and minor children shall also be disclosed:
S. No. NAME
1 MR. MUHAMMAD ARSHAD SAEED
2 MR. MUHAMMAD ALI CHAUDHRY
3 MR. MUHAMMAD MUSHARAF KHAN
SALE
-
(500)
-
GIFT
1,558,998
-
-
Annual Report
50
PURCHASE
-
-
500
thThursday 19 November 2015
2015
th26
10.00 a.m.
R E S H A
Annual Report
36-A, Lawrence Road, Lahore.