Annual Report - Resham Textile Industries Limited Report 2015.pdf · auditors’ report to the...

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


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.

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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

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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


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

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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)


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



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


CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2015


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


Balance as at 01 July 2013

Profit for the year ended 30 June 2014 - Restated

Other 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


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


---------------------------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

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32

Annual Report

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A

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2014

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33

R E S H A

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:

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of f

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0 Ju

ne w

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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

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stA

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mu

late

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dep

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n

Net

bo

ok

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bo

ok

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eta

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e a

ssets

dis

pose

d o

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uring the y

ear

havi

ng b

ook

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00 is

as

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ws:

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pti

on

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/

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nt

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mu

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pro

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s

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de o

f

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sal

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nt

an

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ach

inery

:

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w

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00

353,0

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00

Negotia

tion

Veh

icle

s :

LE

A-7

675

1

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40

317,5

12

1

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28

1

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28

Negotia

tion

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1

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10

239,3

32

1

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1

,850,0

00

Insu

rance

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im

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03,0

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Saphire T

ext

ile M

ills

Lim

ited

Part

icu

lars

of

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rch

aser

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M. K

hurs

hid

Jubile

e Insu

rance

----

----

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up

ees--

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-

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


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.


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.


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.

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