| Bata Pakistan Ltd - 2007 |
|
BALANCE SHEET AS AT DECEMBER 31, 2007
=================================================================================
2007 2006
Note Rs. '000s Rs. '000s
=================================================================================
CAPITAL AND RESERVES
Authorized capital
10,000,000 ordinary shares of Rs. 10 each 100,000 100,000
Issued, subscribed and paid up capital 4 75,600 75,600
Reserves and surplus
Capital reserve 5 483 483
General reserve 6 880,000 582,000
Unappropriated profit 16,957 39,480
897,440 621,963
973,040 697,563
NON-CURRENT LIABILITIES
Long term deposits 7 23,848 22,136
Deferred Liabilities 8 67,403 66,610
91,251 88,746
CURRENT LIABILITIES
Trade and other payables 9 711,212 616,519
Mark - up accrued 10 663 1,991
Provision for taxation 11 96,845 9,912
808,720 628,422
CONTINGENCIES AND COMMITMENTS 12
TOTAL EQUITY AND LIABILITIES 1,873,011 1,414,731
NON-CURRENT ASSETS
Property, plant and equipment 13 409,363 332,726
Intangible assets 14 - -
Long term investments 15 23,848 22,136
Long term deposits and prepayments 16 37,477 28,607
Deferred taxation 17 4,320 17,280
475,008 400,749
CURRENT ASSETS
Stores and spares 18 - 14,418
Stock in trade 19 769,996 716,738
Trade debts 20 243,079 129,434
Loans and advances 21 3,482 1,709
Deposits, short term prepayments and
other receivables 22 45,154 36,028
Tax refunds due from Government 23 88,579 32,772
Cash and bank balances 24 247,713 82,883
1,398,003 1,013,982
TOTAL ASSETS 1,873,011 1,414,731
=================================================================================PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2007=================================================================================
2007 2006
Note Rs. '000s Rs. '000s
=================================================================================
NET SALES 25 3,964,187 2,989,474
COST OF SALES 26 2,327,134 1,876,653
GROSS PROFIT 1,637,053 1,112,821
OPERATING EXPENSES
Selling and distribution 27 793,524 626,844
Administrative 28 271,617 223,3911
1,065,141 850,235
OPERATING PROFIT 571,912 262,586
FINANCE COST 29 23,394 33,151
548,518 229,435
OTHER INCOME 30 5,195 7,215
PROFIT FOR THE YEAR 553,713 236,650
OTHER OPERATING EXPENSES 31 49,714 69,830
PROFIT BEFORE TAXATION 503,999 166,820
PROVISION FOR TAXATION
Current 137,302 64,712
Prior years (4,900) (158)
Deferred 12,960 (7,355)
145,362 57,199
PROFIT AFTER TAXATION 358,637 109,621
EARNINGS PER SHARE - BASIC AND DILUTED 32 Rs. 47.44 Rs. 14.50
=================================================================================CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31,2007=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation 503,999 166,820
Adjustment for non - cash charges and other items:
Depreciation 49,966 39,007
Amortization - 1,295
Provision for gratuity 5,794 5,609
Profit on property, plant and (1,317) (1,779)
equipment sold and scrapped
Finance cost 23,394 33,151
77,837 77,283
Operating profit before working capital changes 581,836 244,103
Net changes in operating assets (121,576) 243,171
and liabilities (Schedule attached)
Finance cost paid (24,722) (39,767)
Income taxes paid (55,549) (57,853)
Gratuity paid (5,001) (6,835)
Net cash inflow from operating activities 374,988 382,819
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (127,970) (91,515)
Proceeds of property, plant and equipment sold 2,684 4,206
Increase in long term investments (1,712) (1,669)
Net cash outflow from investing activities (126,998) (88,978)
CASH FLOW FROM FINANCING ACTIVITIES
Change in short term borrowings - (215,766)
Dividends paid (83,160) (30,240)
Net cash outflow from financing activities (83,160) (246,006)
NET INCREASE IN CASH 164,830 47,835
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS 82,883 35,048
AT BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS (Note - 24) 247,713 82,883
AT END OF THE YEAR
=================================================================================SCHEDULE OF NET CHANGES IN OPERATING ASSETS AND LIABILITIES FOR THE YEAR ENDED DECEMBER 31, 2007=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Stores and spares 14,418 15,580
Stock in trade (53,258) (109,973)
Trade debts (113,645) 188,288
Loans and advances (1,773) (1,018)
Deposits, short term prepayments (9,126) (7,075)
and other receivables
Tax refunds due from Government (55,807) (32,772)
Trade and other payables 104,773 185,407
Long term deposits - employees securities 1,712 1,669
Long term deposits and prepayments (8,870) 3,065
(121,576) 243,171
=================================================================================STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31,2007=========================================================================================================
(Rupees in '000s)
=========================================================================================================
Share Capital General Unappropriated
Capital Reserve Reserve Profit Total
=========================================================================================================
Balance at December 31, 2005 75,600 483 510,000 32,099 618,182
Net profit for the year - - - 109,621 109,621
Final dividend 2005 @ Rs. 4.00 per share - - - (30,240) (30,240)
Transfer to general reserve - - 72,000 (72,000) -
Balance at December 31, 2006 75,600 483 582,000 39,480 697,563
Net profit for the year - - 358,637 358,637
Final dividend 2006 @ Rs. 5.00 per share - - - (37,800) (37,800)
Interim dividend 2007 @ Rs. 6.00 per share - - - (45,360) (45,360)
Transfer to general reserve - - 298,000 (298,000) -
Balance at December 31, 2007 75,600 483 880,000 16,957 973,040
=========================================================================================================NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 20071. LEGAL STATUS AND OPERATIONS Bata Pakistan Limited is a public limited company incorporated in Pakistan and is quoted on Lahore and Karachi Stock Exchanges. The address of its registered office is Batapur, Lahore. The Company is engaged mainly in the manufacturing and sale of footwear of all kinds. 2. STATEMENT OF COMPLIANCE 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 International Accounting Standard Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1. Accounting Convention and Basis of Preparation These financial statements have been prepared under the historical cost convention except that certain employee benefits are recognized on the basis mentioned in note 3.3. In these financial statements, except for cash flow statement, all the transactions have been accounted for on accrual basis. The preparation of financial statements in conformity with IASs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions and judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underline assumptions are reviewed on an on going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision effect only that period, or in the period of revision and future periods if revisions effect both-current and future periods. Significant areas requiring the use of the management estimates in these financial statements relate to the useful life of depreciable assets, investment held to maturity, provision for doubtful receivables, stores and spares obsolescence, slow moving inventory, provisions and contingencies, accruals, and staff retirement benefits. However, assumptions and judgments made by management in the application of accounting policies that have significant effect on the financial statements are not expected to result in material adjustment to the carrying amounts of assets and liabilities in the next year. 3.2. New Accounting Standards and IFRIC Interpretations that are not yet effective Except for the changes made in IAS 1 "Presentation of Financial Statements (revised 2007)" which are effective after January 1, 2008, new standards, interpretations and amendments to approved accounting standards effective from future years are not expected to have significant impact on the current transactions of the company. Adoption of the above amendments may only impact to the extent of disclosures presented in the financial statements. 3.3. Staff Retirement Benefits Defined Benefit Plan The Company operates an un-funded gratuity scheme covering all employees, excluding managerial staff. The entitlement to gratuity is determined as follows: (a)For employees who are member of the provident fund scheme, the provision is calculated with reference to 3 weeks' basic salary for each completed year of service. (b)For employees who are not member of the provident fund scheme, provision is based on 30 days gross highest salaries/wages drawn during the year for each completed year of service. The valuation for provision of gratuity was carried out as on December 31, 2007 using the Projected Unit Credit Method. Actuarial gains and losses are recognized in accordance with the provision of IAS 19 (revised 2000) "Employee Benefits' i.e. by recognizing 50% of the opening actuarial gains and losses in the current year. Defined Contribution Plan The company operates a recognized provident fund scheme for its employees. Equal monthly contributions by the company and employees at the rates of 8% and 10% of the basic salary are made to employees provident fund and managerial staff provident fund respectively. 3.4. Taxation Current The charge for current taxation is provided on taxable income relatable to local sales at current rate of tax after recognizing tax credit and rebates available, if any or minimum tax under section 113 of the Income Tax Ordinance, 2001 whichever is higher. In case of import and export of shoes, the current taxation is provided on the basis of presumptive tax regime in accordance with the provisions of Section 169 of the Income Tax Ordinance, 2001. Deferred Deferred taxation is provided on all temporary timing differences by using the balance sheet liability method. The deferred income tax assets are recognized for all deductible temporary differences, carry-forward unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary difference, carry-forward of unused tax assets and unused tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled based on tax rates that have been enacted or substantively enacted at the balance sheet date. 3.5. Property, plant & equipment and depreciation Tangible (a)Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any, except land and capital work in progress which are stated at actual cost. (b)Depreciation is charged to income applying reducing balance method at the rates prescribed in note 13 of these financial statements to write off the cost over the useful lives of these assets. Depreciation on additions to property, plant and equipment is charged from the month in which an asset is available for use while no depreciation is charged for the month in which the asset is disposed off. (c)Subsequent expenditure relating to an item of property, plant and equipment that has already been recognized is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the company. Every other subsequent expenditure is recognized as an expense in the period in which it is incurred. (d)Gains and losses on deleted assets are included in the profit and loss account. Intangible (a)Costs that are clearly associated with an identifiable asset, which has a probable benefit beyond one year, are recognized as intangible asset. (b)Intangible assets are amortized using the straight line method over their estimated useful lives, at the rates prescribed in note - 14 of these financial statements. In transit (a)Plant and equipment in transit is stated at cost. 3.6. Investments These are classified as Held -to- Maturity and stated at cost. Profit received / accrued on these investments is reflected in income currently. 3.7. Stores and Spares These have been valued on the following basis subject to an estimated obsolescence reserve whereby the value of these items is amortized over a period of three years or earlier on actual redundancy: ===============================================================================
BASIS
Own production At production cost
Purchased At lower of moving average cost
and net realizable value
In transit At actual cost
===============================================================================3.8. Stock in Trade===============================================================================
These have been valued on the basis of
lower of cost and net realizable value, as under:
BASIS
Raw material
Own production At production cost
Purchased At lower of moving average cost
and net realizable value
In transit At actual cost
Goods in process At production cost
Finished goods
Own production At lower of production cost
and net realizable value
Purchased products At lower of actual cost and
net realizable value
In transit At actual cost
===============================================================================Production cost consists of prime cost and proportionate production overheads. While net realizable value means the selling prices in the ordinary course of business less estimated cost of completion and incidental selling expenses.3.9. Trade Debts and Other Receivables Receivables considered bad by the management are provided for or written off but no general provision is made for doubtful balances. 3.10. Trade and Other Payables Liabilities for trade and other amounts payable are carried at cost which is the fair value of the consideration to be paid in future for goods and services. 3.11. Commitments and Contingencies Capital commitments and contingencies, unless those are actual liabilities, are not incorporates in the accounts. 3.12. Foreign Currencies Foreign currency transactions during the year are translated into Pak Rupees at the exchange rates prevailing on the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees at the rate of exchange ruling on the balance sheet date. Exchange gains and losses are included in the income currently. 3.13. Borrowing Cost Borrowing cost is charged to income when incurred. 3.14. Provisions A provision is recognized in the balance sheet when the company has a legal or constructive obligation as a result of a past event; it is probable that an outflow of economic resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. 3.15. Dividend Dividend is recognized as a liability in the period in which it is approved. 3.16. Cash and Cash Equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of cash flow statement, cash and cash equivalents comprise of cash in hand, cash in transit and bank balances. 3.17. Financial Instruments Recognition and measurement The financial assets and liabilities are recognized at cost when the company becomes a party to the contractual provisions of the instrument. Financial instruments includes investments, trade debts, loans and advances, deposits, cash and bank balances, short term borrowings, trade and other payable. Any gain or loss on subsequent re-measurement to fair value of financial assets and financial liabilities is taken to profit and loss account on occurrence. Offsetting of financial assets and financial liabilities. A financial asset and liability is offset against each other and the net amount is reported in the balance sheet if the company has legally enforceable right to set off the recognized amount and intends either to settle on net basis or realize the asset and settle the liability simultaneously. 3.18. Impairment The carrying amounts of the company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment loss. If any such indication exists, the recoverable amount of such assets is estimated and impairment loss is recognized in the profit and loss account. 3.19. Related Party Transactions All transactions involving related parties arising in the normal course of business are conducted at arm's length at normal commercial rates on the same terms and conditions as third party transactions using valuation modes as admissible, except in extremely rare circumstances where, subject to approval of the Board of Directors, it is in the interest of the company to do so. 3.20. Revenue Recognition Revenue from sale is recognized on delivery of goods to customers. Export sales are recorded on the basis of goods shipped to customers. Profit on investments is accounted for on accrual basis, while profit on saving bank account is accounted for on the basis of actual receipt. 4. ISSUED, SUBSCRIBED AND PAID UP CAPITAL ==================================================================================
2007 2006
Rs. '000s Rs. '000s
==================================================================================
2007 2006
Number of Number of
shares shares
==================================================================================
Ordinary shares of Rs. 10 each
1,890,000 1,890,000 fully paid in cash 18,900 18,900
Ordinary shares of Rs. 10 each
300,000 300,000 Issued for consideration other than cas 3,000 3,000
Ordinary-shares of Rs. 10 each
5,370,000 5,370,000 Issued as fully paid bonus shares 53,700 53,700
7,560,000 7,560,000 Paid-up-Capital 75,600 75,600
==================================================================================4.1. Bafin (Netherlands) B.V., held 4,536,000 (2006: 4,536,000) ordinary shares of Rs. 10 each fully paid up, which is also the holding company of Bata Pakistan Limited.4.2. The Board's policy is to maintain a strong capital base so as to maintain investors, creditors and market confidence and to sustain future development of the business. The Board of Directors monitors the returns on capital, which the company defines as net operating income divided by total shareholders' equity. The Company's objectives when managing capital are: a)to safe guard the entity's ability to continue as going concern, so that it can continue to provide returns for shareholders and benefits for others stakeholders; and b)to provide an adequate return to shareholders by pricing products commensurately with the level of risk. 5. CAPITAL RESERVE. ==================================================================================
2007 2006
Rs. '000s Rs. '000s
==================================================================================
483 483
================================================================================== - This represents the balance of foreign shareholders' equity in Globe Commercial Enterprises Limited (an associated undertaking) gifted to the company on its winding up and is not available for distribution.6. GENERAL RESERVE =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Balance at January 1, 582,000 510,000
Transfer from profit and loss account 298,000 72,000
880,000 582,000
=================================================================================7. LONG TERM DEPOSITS.=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Employees' securities and personal accounts 23,848 22,136
=================================================================================7.1. This represents the securities deposited by the employees in accordance with the terms of employment and the amounts credited on account of commission etc. to the sales staff. Interest at the rate of 8.5 % per annum is being paid on the monthly outstanding balances.7.2. In accordance with provisions of Section 227 of the Companies Ordinance, 1984 this amount has been invested in PLS Term Deposit Receipts with Habib Metropolitan Bank Limited and is shown separately as long term investments (Note-15). 8. DEFERRED LIABILITIES Provision for gratuity - defined benefits plan 8.1. The principal actuarial assumptions used in the valuation of this scheme as on 31st December are as follows: =================================================================================
2007 2006
=================================================================================
Contribution rates As per Rules As per Rules
Expected rate of salary increase in future years 9% 9%
Discount rate 10% 10%
Average expected remaining working 11 Years 12 Years
life time of employees
=================================================================================8.2. Movement in the net liability recognized in the balance sheet is as follows:=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Opening liability 66,610 67,836
Amount recognized during the year - 5,794 5,609
Payments made by the (5,001) (6,835)
Company during the year
Closing liability 67,403 66,610
=================================================================================8.3. The amount recognized on the balance sheet is as follows:=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Present Value of defined benefit obligation 62,349 64,326
Less: Non - vested past service cost (797) (1,255)
to be recognized in later periods
recognized in later periods 5,851 3,539
67,403 66,610
=================================================================================8.4. The amount recognized in the profit and loss account is as follows:=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Current service cost 674 709
Interest cost 6,433 5,982
Actuarial gains recognized during the year (1,770) (1,539)
Non-vested past service cost charge 457 457
5,794 5,609
=================================================================================9. TRADE AND OTHER PAYABLES=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Creditors 360,893 373,433
Due to associated undertakings (Note - 9.1) 28,554 33,590
389,447 407,023
Accrued liabilities 220,615 150,203
Advances from customers 2,793 282
Due to provident fund trust (Note - 9.2) 9,363 4,252
Deposits (Note - 9.3) 17,155 18,532
Workers' profit participation fund (Note - 9.4) 27,060 8,969
Sales tax payable 149 5,998
Taxes deducted at source payable 15,298 13,980
Unclaimed dividend 16,443 1,856
Other liabilities 12,889 5,424
711,212 616,519
=================================================================================9.1. Due to associated undertakings - unsecured=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Bata Brand, Switzerland 18,003 -
Bata Shoe Singapore Pte Ltd. 7,121 30,187
Bata Compar S.P.A. Italy 2,681 -
Bata Marketing Sdn. Bhd., Malaysia 749 285
Bata Limited, Canada - 861
Bata P.T. Sepatu, Indonesia - 1,830
Global Footwear Services, Singapore - 427
28,554 33,590
=================================================================================No interest has been paid / accrued on the amounts due to associated undertakings.9.2. The balance due to provident fund trust has been paid on January 14, 2008. 9.3. Deposits These represent the security money received from the registered wholesale dealers, agency holders and other customers in accordance with the terms of the contract with them. Deposits from agency holders carry interest at the rate of 8.5 % per annum. These are repayable on termination / completion of the contract and on returning the company's property already provided to them. 9.4. Workers' profit participation fund =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Balance at January 1, 8,969 6,887
Allocation for the year 27,060 8,969
Interest on funds utilized in company's business 71 96
36,100 15,952
Less: Amount adjusted / paid to fund's trustees 9,040 6,983
27,060 8,969
=================================================================================10. MARK-UP ACCRUED=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
On cash finance - secured 663 1,991
=================================================================================11. PROVISION FOR TAXATION=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Income tax
Balance at January 1, 9,912 3,211
Income tax paid for prior years (3,464) -
Provision written back for prior years (4,900) (158)
1,548 3,053
Provision for the year 137,302 64,712
138,850 67,765
Advance tax paid and tax (52,085) (57,853)
deducted / collected at source
86,765 9,912
Other taxes
Workers' welfare fund
Balance at January 1, - -
Payments / adjustments made for prior years
Provision for the year 10,080 3,487
Payment made during the year - (3,487)
10,080 -
96,845 9,912
=================================================================================11.1. The tax charge for the current year is reconciled to accounting profit as follows:=================================================================================
2007 2006
Rs. '000s Rs '000s
=================================================================================
Profit before tax 503,999 166,820
Tax rate 35% 35%
Tax at applicable rate on accounting profit 176,400 58,387
Tax effect of expenses that are
not deductible in computing
taxable income 54 57
Effect of difference in tax rates
under normal assessment
and presumptive tax regime (31,092) (1,076)
Tax effect of temporary differences of last year 4,900 (11)
Tax charge for the year 150,262 57,357
Classified into:
Provision for taxation - current year 137,302 64,712
Deferred 12,960 (7,355)
150,262 57,357
=================================================================================12. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS12.1. The Company is contingently liable for: =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Counter Guarantees given to banks 8,617 6,231
Indemnity Bonds given to Custom Authorities 1,938 8,589
Claims not acknowledged as debts - under appeal 10,261 10,261
Show cause notices by sales tax - 346,875
department-under appeals (Note-12.2)
20,816 371,956
=================================================================================12.2. During the year the company was succeeded to resolve its sales tax dispute through ADRC and the resulted liability of Rs. '000s 13,261, which has been duly accounted for in these financial statements and paid on January 18, 2008.12.3. Commitments in respect of: =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Contracts for capital expenditure - 5,442
Letters of credit other than capital expenditure 129,054 55,364
129,054 60,806
=================================================================================13. PROPERTY, PLANT AND EQUIPMENT - TANGIBLE===============================================================================================================================================================================================
Land Buildings on free hold land
Leasehold Plant and Furniture, Capital
DESCRIPTION Free hold with super Factory Others machinery Boiler Gas Office fixtures and Vehicles work in Total
Structures installations equipments Computers fittings progress
===============================================================================================================================================================================================
COST
As at January 1, 2006 2,508 35 58,941 59,218 391,459 2,967 1,044 3,862 22,202 213,277 9,833 765,346
Additions during the year - - 3,611 1,854 7,486 - 9 178 4,276 70,847 1,962 1,292 91,515
Disposal - - (2) (4,711) - - - (62) (1,325) (744) - (6,844)
Transferdjustment - - - - - - - - - - - - -
Balance as at December 31, 2006 2,508 35 62,550 61,072 394,234 2,967 1,053 4,040 26,416 282,799 11,051 1,292 850,017
As at January 1, 2007 2,508 35 62,550 61,072 394,234 2,967 1,053 4,040 26,416 282,799 11,051 1,292 850,017
Additions during the year - - 101 - 17,044 - 10 178 6,905 102,256 2,768 - 129,262
Disposal - - - - (2,594) - - - (49) (4,065) (3,345) (10,053)
Transferdjustment - - - - - - - - - - - (1,292) (1,292)
Balance as at December 31, 2007 2,508 35 62,651 61,072 408,684 2,967 - 1,063 4,218 33,272 380,990 10,474 - 967,934
DEPRECIATION
As at January 1, 2006 - - 46,235 32,562 289,306 2534 863 2,445 15,268 84,756 8,732 - 482,701
Charge for the year - - 1,314 1,393 10,435 43 19 154 2,245 22,990 414 - 39,007
Depreciation on disposal - - (2) - (2,948) - - - (33) (714) (720) - (4,417)
Transferdjustment - - - - - - - - - -
Balance as at December 31, 2006 - - 47,547 33,955 296,793 2,577 882 2,599 17,480 - 107,032 8,426 - 517,291
As At January 1,2007 - - 47,547 33,955 296,793 2,577 882 2,599 17,480 107,032 8,426 - 517,291
Charge for the year - - 1,501 1,356 10,644 39 17 156 3,176 32,102 975 - 49,966
Depreciation on disposal - - - - - (2,223) - - - (30) (3,227) (3,206) - (8,686)
Transferdjustment - - - - - - - - - - - -
Balance as at December 31, 2007 - 49,048 35,311 305,214 2,616 899 2,755 20,626 135,907 6,195 - 558,571
Written down value as at Dec 31, 2006 2,508 35 15,003 27,117 97,441 390 171 1,441 8,936 175,767 2,625 1,292 332,726
Written down value as at Dec 31, 2007 2,508 35 13,603 25,761 103,470 351 164 1,463 12,646 245,083 4,279 - 409,363
Rate of depreciation - - 10% 5% 10% 10% 10% - 10% 25% 15% 20% - -
===============================================================================================================================================================================================13.1. The depreciation charge for the year has been allocated to:=================================================================================
2007 2006
Rs. '000s Rs. 000s
=================================================================================
Cost of goods manufactured 12,193 8,590
Selling and distribution expenses 34,748 28,335
Administrative expenses 3,025 2,082
49,966 39,007
=================================================================================13.2. The disposal of property, plant and equipment during the year was as under:========================================================================================================================
Rs.'000s
Description Cost Book value Sale proceedProfit / (lo Mode of
disposal
========================================================================================================================
Plant and machinery
M/s Destagir Enterprises, Shah Rukne Alam, Multan 1,093 123 219 96 Negotiation
M/s Talon Sports (Pvt) Limited Desks Road. Sialkot. 203 75 147 72 Negotiation
M/s Ghani Enterprises, CGE Colony, Wahdas Road, Lahore. 252 58 82 24 Negotiation
Furniture, fixtures and fittings
Mr. Muhammad Nawaz 642 50 250 200 Negotiation
Mr. M. Ali Malik 1,639 64 800 736 Negotiation
Insurance claims 333 198 291 93 - Claim
Scrapped 4,254 630 - (630) Scrapped
Aggregate of items of property, plant and equipment with Negotiation /
individual book value below Rs. 50,000 1,635 169 895 726 Auction
Rs. '000s 2007 10,053 1,367 2,684 1,317
Rs, '000s 2006 6,844 2,427 4,206 1,779
========================================================================================================================14. INTANGIBLE ASSETS=================================================================================
2007 2006
Rs. '000s Rs '000s
=================================================================================
COST
As at January 1, 5,179 5,179
Additions during the year - -
Disposal - -
Transferdjustment - -
Balance as at December 31, 5,179 5,179
AMORTIZATION
As at January 1, 5,179 3,884
Charge for the year - 1,295
Amortization on disposal - -
Transferdjustment - -
Balance as at December 31, 5,179 5,179
Written down value as at Dec 31, - -
=================================================================================15. LONG TERM INVESTMENTS=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
PLS Term Deposit Receipts - Held to Maturity 23,848 22,120
In PLS saving bank account - 16
23,848 22,136
=================================================================================15.1. These Deposits are with Habib Metropolitan Bank Limited and are earmarked against the balances due to employees securities and personal accounts (Note -7).16. LONG TERM DEPOSITS AND PREPAYMENTS =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Security deposit - rent 7,118 3,766
Security deposit - utilities - 388
Advance rent 57,578 45,643
Less: Adjustable within one year (Note - 22) 27,219 21,190
30,359 24,453
37,477 28,607
=================================================================================17. DEFERRED TAXATION=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
This is comprised of:
Deferred tax assets
Provision for gratuity, doubtful
debts, inventory obsolescence
and other timing differences 46,094 -
Deferred tax liabilities -
Accelerated-tax depreciation and amortization (34,779) (28,814)
Net deferred tax assets 4,320 17,280
=================================================================================18. STORES AND SPARES=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Stores 2,567 2,628
Spares 39,026 39,703
41,593 42,331
Less: obsolescence reserve (Note - 26.3) 41,593 28,222
- 14,109
Spares in transit - 309
- 14,418
=================================================================================18.1. The company does not hold any stores and spares for specific capitalization.19. STOCK IN TRADE =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Raw material 185,887 173,063
Goods in process 45,196 33,545
Finished goods
Own production 263,032 255,203
Purchased 275,881 254,927
538,913 510,130
769,996 716,738
=================================================================================19.1. Stock of raw material and finished goods - purchased includes inventories in transit amounting to Rs. '000s 58,494 (2006: Rs. '000s 63,491) and Rs. '000s 5,944 (2006: Rs. '000s 33,007) respectively.20. TRADE DEBTS - UNSECURED =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Considered good
Due from customers 235,682 126,085
Due from associated undertakings (Note - 20.1) 7,397 3,349
243,079 129,434
Considered doubtful
Due from customers 434 -
243,513 129,434
Less: Provision for doubtful debts 434 -
243,079 129,434
=================================================================================20.1. Due from associated undertakings - unsecured=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Bata Shoe Company, Sri Lanka 5,068 1,664
Bata Shoe Company (Uganda) Ltd. 2,244 -
Futura Footwear Ltd. South Africa 85 -
Bata Shoe of Thailand Public Co. Ltd. - 1,685
7,397 3,349
=================================================================================20.2. The highest aggregated amount due from associated undertakings at the end of any month in 2007 was Rs. '000s 8,003 (2006: Rs. '000s 26,865). No interest has been charged on the amounts due from associated undertakings.21. LOANS AND ADVANCES - UNSECURED =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Considered good - -
Advances to employees for expenses 816 1,090
Advances to suppliers 2,666 619
3,482 1,709
=================================================================================22. DEPOSITS, SHORT TERM PREPAYMENTS AND OTHER RECEIVABLES=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Deposits
Considered good
Custom duty and taxes 3,288 2,771
Letters of credit - Margin - 254
Letters of guarantee - Margin 2,363 3,323
Others 1,132 1,248
6,783 7,596
Short term prepayments
Advance rent (Note - 16) 27,219 21,190
Prepaid sales tax 415 572
Prepaid expenses 1,642 1,718
29,276 23,480
Other receivables
Considered good
Export rebates 1,993 4,791
Insurance claims 6,974 -
Others 128 161
9,095 4,952
Considered doubtful
Advance rent 1,584 1,748
Others 700 1,119
2,284 2,867
11,379 7,819
Less: Provision for doubtful balances 2,284 2,867
9,095 4,952
45,154 36,028
=================================================================================23. TAX REFUNDS DUE FROM GOVERNMENT=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Sales tax refundable (Note - 23.1) 87,048 32,772
Excise duty refundable 1,531 -
88,579 32,772
=================================================================================23.1. This represents sales tax paid on raw materials used in zero rated taxable shoes for which refund claims have been lodged/ being lodged with the Sales Tax Department.24. CASH AND BANK BALANCES =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Cash in hand 807 584
Bank balances - in current accounts 201,246 36,888
Cash in transit 45,660 45,411
247,713 82,883
=================================================================================25. NET SALES=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Shoes and accessories
Local 4,078,031 3,111,145
Export 186,180 191,109
4,264,211 3,302,254
Sundry articles and scrap material 7,677 7,394
4,271,888 3,309,648
Less: Sales tax paid 71,195 166,666
Discounts to dealers and distributors 189,856 117,654
Commission to agents / business associates 46,650 35,854
307,701 320,174
3,964,187 2,989,474
=================================================================================26. COST OF SALES=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Cost of goods manufactured (Note - 26.1) 1,311,640 1,193,038
Finished goods purchased 1,044,277 717,729
Add: Opening stock of finished goods 510,130 476,016
2,866,047 2,386,783
Less: Closing stock of finished goods 538,913 510,130
2,327,134 1,876,653
=================================================================================26.1. Cost of goods manufactured=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Raw material consumed
Opening stock 173,063 107,501
Add: Purchases 1,034,166 971,118
1,207,229 1,078,619
Less: Closing stock 185,887 173,063
1,021,342 905,556
Spares consumed 5,335 4,279
Fuel and power 41,022 40,438
Salaries, wages and benefits (Note - 26.2) 205,856 209,939
Repairs and maintenance (Note - 26.3) 31,763 28,432
Insurance 5,780 6,101
Depreciation 12,193 8,590
1,323,291 1,203,335
Add: Opening goods in process 33,545 23,248
1,356,836 1,226,583
Less: Closing goods in process 45,196 33,545
1,311,640 1,193,038
=================================================================================26.2. The salaries, wages and benefits include Rs. '000s 7,179 (2006: Rs. '000s 7,474) and Rs. '000s 3,790 (2006: Rs. '000s 3,197) in respect of contribution to provident fund trusts and provision for gratuity respectively.This includes provision for obsolescence of stores and spares amounting to Rs. '000s 13,371 (2006: Rs '000s 13,534). 27. SELLING AND DISTRIBUTION EXPENSES =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Salaries and benefits (Note - 27.1) 274,415 235,165
Freight 54,688 50,495
Advertising and sales promotion 65,156 52,149
Rent 195,327 156,591
Insurance 7,471 6,210
Royalty - 3,669
Trade mark license fee 29,648 -
Fuel and power 82,253 61,024
Repairs and maintenance 39,311 26,377
Entertainment 4,741 3,579
Business and property taxes 2,838 1,906
Excise duty 1,660 -
Miscellaneous 1,268 49
Amortization - 1,295
Depreciation 34,748 28,335
793,524 626,844
=================================================================================27.1. The salaries and benefits include Rs. '000s 8,914 (2006: Rs. '000s 7,746) and Rs. '000s 1,586 (2006: Rs. '000s 1,857) in respect of contribution to provident fund trusts and provision for gratuity respectively.28. ADMINISTRATIVE EXPENSES =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Salaries and benefits (Note - 28.1) 148,097 133,078
Employees' welfare 13,523 10,823
Fuel and power 8,206 5,708
Telephone and postage 12,294 12,104
Insurance 773 1,043
Travelling 45,552 35,960
Repairs and maintenance 10,962 6,767
Printing and stationery 9,369 9,230
Donations and subscription (Note - 28.2) 630 537
Legal and professional charges 10,217 4,312
Business and property taxes 379 774
License fee for accounting software 6,100 -
Miscellaneous 2,490 973
Depreciation 3,025 2,082
271,617 223,391
=================================================================================28.1. The salaries and benefits include Rs. '000s 3,169 (2006: Rs. '000s 2,477) and Rs. '000s 418 (2006: Rs. '000s 555) in respect of contribution to provident fund trusts and provision for gratuity respectively.28.2. None of the directors of the -company or any of their spouses has any interest in the funds of donees. 29. FINANCE COST =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Interest / mark-up on:
Short term borrowings 8,880 21,175
Workers' profit participation fund 71 96
Provident fund trust 213 97
Employees / agents' securities 2,689 2,162
and personal accounts
11,853 23,530
Bank charges and commission 11,541 9,621
23,394 33,151
=================================================================================29.1. The short term borrowings consisting of cash finance and export refinance from total credit facilities available to the company aggregating to Rs. 735 Million (2006: Rs. 735 Million) are provided by Habib Bank Limited, Bank Al Habib Limited, Habib Metropolitan Bank Limited and Muslim Commercial Bank Limited. In addition to this, no_n funded facilities of letters of guarantee and letters of credit amounting to Rs. 185 Million (2006: Rs. 185 Million) were also provided by these banks.These finances are secured against hypothecation of stock in trade, stores & spares and receivables of the company. Mark up on cash finance is based on 3 months KIBOR plus 0.75 to 1 % as per agreement with banks and on export refinance has been charged at the rate 7.25 % per annum respectively. 30. OTHER INCOME =================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Income from Financial Assets
Profit on long term investments 1,895 1,669
Exchange gain 1,516 3,443
Income from Non - Financial Assets
Rent received 317 324
Excess provision of doubtful 150 -
balances written back
Profit on property, plant and equipment 1,317 1,779
sold / scrapped (Note - 13.2)
5,195 7,215
=================================================================================31. OTHER OPERATING EXPENSES=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Workers' profit participation fund 27,060 8,969
Workers' welfare fund 10,080 3,487
Auditors' remuneration (Note - 31.1) 2,919 1,974
Voluntary Retirement Scheme 9,655 39,400
Sales tax paid for prior years - 16,000
49,714 69,830
=================================================================================31.1. Auditors' remuneration=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Statutory audit 750 750
Review of six monthly accounts 150 150
Audit of workers' profit participation funds,
share transfers, other reviews and certifications 1,059 269
Physical verification of stock at sale outlets 400 280
Tax advisory services 435 400
Out of pocket expenses 125 125
2,919 1,974
=================================================================================32. EARNINGS PER SHARE=================================================================================
2007 2006
Rs. '000s Rs. '000s
=================================================================================
Basic and diluted
Profit after taxation for the year 358,637 109,621
Weighted average number 7,560 7,560
of ordinary shares (in 000's)
Earnings per share - Basic Rs. 47.44 Rs. 14.50
=================================================================================There is no dilution effect on the basic earnings per share.33. REMUNERATION OF DIRECTORS AND EXECUTIVES Aggregated amounts charged in the accounts for the year for remuneration, including all benefits to Chief Executive, Executive Director and Executives of the Company are as follows: ====================================================================================================
Chief Executive Executives
Executive Director
====================================================================================================
2007 2006 2007 2006 2007 2006
====================================================================================================
Rs '000s Rs '000s Rs.'000s
====================================================================================================
Managerial remuneration 13,714 11,524 4,682 3,680 27,173 25,919
Company's contribution
to provident fund 1,867 984 311 253 1,772 1,891
Perquisites and allowances
Housing 3,720 - 270 270 4,662 2,408
Leave passage - 360 - - 114 -
Conveyance 690 - 120 - 1,450 169
Medical - - 34 127 2,183 1,243
Utilities 1,350 782 120 236 1,450 1,820
Others 3,294 2,510 - - 2,611 2,611
24,635 16,160 5,537 4,566 41,415 36,061
Number of persons 1 1 1 1 18 19
====================================================================================================In addition, 5 (2006: 5) non executive directors were paid aggregated fee of Rs. '000s 230 (2006: Rs. '000s 240).34. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES 34.1. Interest rate risk exposure The company's exposure to interest rate risk on its financial assets and liabilities as of December 31, is summarized below: ==========================================================================================================================================
2007 2006
==========================================================================================================================================
Rs. '000s Rs. '000s
Interest bear Non Total Interest bear Non Total
interest interest
Maturity bearing bearing
more than Maturity more
Maturity one year and Maturity than one year
within one less than five within one and less than
year years year five years
==========================================================================================================================================
Financial assets
Long term investments - 23,848 - 23,848 - 22,136 - 22,136
Long term deposits - - 7,118 7,118 - - 4,154 4,154
Trade debts - - 243,079 243,079 - - 129,434 129,434
Loans and advances - - 816 816 - - 1,090 1,090
Deposits, short term prepayments
and other receivables - - 1,226 1,226 - - 1,391 1,391
Cash and bank balances - - 247,713 247,713 - - 82,883 82,883
- 23,848 499,952 523,800 - 22,136 218,952 241,088
Financial liabilities
Long term deposits - 23,848 - 23,848 - 22,136 - 22,136
Short term borrowings - - - - - - - -
Trade and other payables 10,667 - 622,841 633,508 9,986 - 539,052 549,038
Mark - up accrued - - 663 663 - - 1,991 1,991
10,667 23,848 623,504 658,019 9,986 22,136 541,043 573,165
Of f Balance Sheet items:
Counter Guarantees given to banks - - 8,617 8,617 - - 6,231 6,231
Indemnity Bonds given to Custom
Authorities - - 1,938 1,938 - - 8,589 8,589
Commitments - - 129,054 129,054 - - 60,806 60,806
- - 139,609 139,609 - - 75,626 75,626
10,667 23,848 763,113 797,628 9,986 22,136 616,669 648,791
==========================================================================================================================================34.2. Concentration of credit riskThe credit risk represents the accounting loss that would be recognized at the reporting date, if counter parties failed to perform as contracted. The maximum exposure to credit risk is represented by the carrying amount of each financial asset. Investments are allowed only in liquid securities -and only with banks. Given their high credit rating, management does not expect any counter party to fail to meet its obligation. The management has a credit policy in place and exposure to credit risk is monitored on a continuous basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Company does not require a collateral in respect of financial assets. The Company, however, mitigates any possible exposure to credit risk by taking security deposits from its dealers and distributors as well as by executing formal agreements with them. Out of the total trade receivables, 33.28% is concentrated in six parties (2006: 61.13% in 6 parties) 34.3. Effective interest / markup rates and related risk ========================================================================================
Fixed or
variable 2007 2006
========================================================================================
Long term investments Fixed 10 to 10.50% 8.50%
Short term borrowings Variable 10.32 to 11.42% 9.27 to 11.09%
Long term deposits - employees' securitie Fixed 8.50% 8.50%
Deposits - agents Fixed 8.50% 8.50%
Provident fund trust Variable 9.17 to 9.25% 8.50%
Workers' profit participation fund Variable 37.50% 33.75%
========================================================================================The markup on cash finance as included in the short term borrowings is based on three months KIBOR plus 0.75 to 1 % as per agreement with banks.34.4. Foreign exchange risk =================================================================================
2007 2006
Rs.'000s Rs.'000s
=================================================================================
The assets / liabilities subject to foreign
exchange risk are detailed below:
Financial assets
Trade debts - Export customers 40,698 38,542
Financial liabilities
Trade and other Payables - Foreign suppliers 28,597 33,633
=================================================================================34.5. Fair value of the financial instrumentsThe carrying value of all the financial instruments reflected in the financial statements approximates their fair value. 35. TRANSACTIONS WITH RELATED PARTIES 35.1. The related parties and associated undertakings comprise parent company, related group companies, provident fund trust, directors and key management personnel. Transactions with related parties during the year are as follows; ========================================================================================
Relationship with the Company Nature of transactions
Associated Companies Purchase of goods and services 303,334 176,966
Sale of goods and services 11,160 27,013
Trade mark license fee 29,648 -
Holding company Dividend paid 49,896 18,144
Royalty paid - 3,669
Staff Retirement Benefits Contribution to provident fund tru 19,262 17,697
Key Management Personnel Remuneration 62,279 48,581
========================================================================================35.2. The company continues to have a policy whereby all transactions with related parties and associated undertakings are entered into at arm's length.36. CAPACITY AND ACTUAL PRODUCTION ======================================================================================================
Installed capacity
No. of shifts based on actual Actual
worked shifts worked production
Fig. in '000s Fig. in '000s
======================================================================================================
2007 2006 2007 2006 2007 2006
======================================================================================================
Footwear in pairs
Rubber and canvas 1 1 2,700 2,700 2,007 2,296
Leather 1 to 3 1 to 3 5,400 5,000 5,259 4,329
Plastic 1 1 1,250 1,250 1,020 715
Thongs - 1 to 2 - 3,500 - 3,058
9,350 12,450 8,286 10,398
======================================================================================================36.1. The deviation in actual production from installed capacity is due to rapidly growing trend of fashion and also less / more demand of certain articles, inter - alia, the company has to change the major shoeline in accordance with the market trends. All this involves change in manufacturing operations which causes variances not only between the installed capacity and actual production but also between the actual production of any two years.36.2. Due to lesser demand of thongs, it was decided to close the thongs cutting and assembly department during the year, whereby the staff and related plant and equipment are being utilized in other department. 37. POST BALANCE SHEET EVENTS The Board of Director at its meeting held on February 20, 2008 has approved a final cash dividend @ Rs. 2.00 per share amounting to Rs. 000's 15,120 for the year ended December 31, 2007 for approval of the members at the Annual General Meeting to be held on March 31, 2008. The financial statements do not reflect this proposed dividend. 38. GENERAL 38.1. These financial statements have been authorized for issue by the Board of Directors of the Company on February 20, 2008. 38.2. Figures in these financial statements have been rounded off to the nearest thousand rupees unless otherwise stated. |