| BATA PAKISTAN LIMITED |
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| ANNUAL
REPORT 1997 |
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| CONTENTS |
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| Board
of Directors |
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| Notice
of Meeting |
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| Company's
Financial Highlights |
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| Distribution
of Revenue - 1997 |
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| Operational
Statistics |
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| Chairman's
Review |
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| Directors'
Report to the Members |
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| Auditors'
Report to the Members |
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| Balance
Sheet |
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| Profit
and Loss Account |
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| Cash
Flow Statement |
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| Net
Changes in Operating Assets and Liabilities |
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| Notes
to the Accounts |
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| Statement
Under Section 237 |
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| Pattern
of Shareholding |
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| Consolidated
Financial Information |
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| Consolidated
Balance Sheet |
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| Consolidated
Profit & Loss Account |
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| ANNUAL
REPORT I. T. I. (PVT) LTD. |
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| Board
of Directors |
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| Directors'
Report to the Members |
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| Auditors'
Report to the Members |
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| Balance
Sheet |
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| Profit
and Loss Account |
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| Cash
Flow statement |
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| Net
Changes in Operating Assets and Liabilities |
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| Notes
to the Accounts |
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| BOARD
OF DIRECTORS |
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| 1.
MR. M. OLDROYD |
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Chairman |
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| 2.
MR. D. BARTON |
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Managing Director |
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| 3.
MR. A. KELLY |
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Director |
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| 4.
MR. J.P. LEE |
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Director |
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| 5.
MR. KHALID M. HAS SAN |
Director |
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| 6.
SYED MOHAMMAD MOHSIN |
Director |
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| 7.
MALIK MANZOOR HAYAT NOON |
Director |
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| 8.
MR. RAZI-UR-RAHMAN KHAN |
Director |
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| 9.
MR. S. SIBTEY ALI |
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Director |
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| Company
Secretary |
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Auditors |
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| Salahuddin
Niazi |
|
Gardezi & Company |
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Chartered Accountants |
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65,
Shahrah-e-Quaid-e-Azam, Lahore. |
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| Registered
Office & Factory |
Bankers |
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| Batapur,
G. T. Road |
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Habib Bank Limited |
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| P.O.
Batapur, Lahore |
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Citibank N. A. |
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Bank of America |
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National Bank of Pakistan |
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ANZ Grindlays Bank |
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American Express Bank
Limited |
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Emirates Bank
International |
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| NOTICE
OF MEETING |
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| NOTICE
IS HEREBY GIVEN that the 46th Annual General Meeting of Bata Pakistan Limited |
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| will
be held at the Registered Office of the Company at Batapur, District Lahore
on 05th |
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| May,
1998 at 10.00 a.m. to transact the following business. |
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| 1.
To confirm the minutes of 45th Annual General Meeting held on 9th April,
1997. |
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| 2.
To receive, consider, and adopt the Directors' Report, Audited Accounts of
the Company |
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| and
Auditors' Reports thereon, for the year ended 31st December, 1997. |
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| 3.
To declare dividend as recommended by the Directors. |
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| 4.
To appoint Auditors and fix their remuneration. |
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| NOTES: |
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| 1.
A member entitled to attend and vote at the meeting may appoint any person as
his |
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| proxy
to attend the meeting and vote instead of him. The proxy shall have the right
to |
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| attend,
speak and vote in place of the member appointing him at the meeting. A |
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| proxy
need not be a member of the Company. Proxy form must be deposited at the |
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| Company's
Registered Office not less than 48 hours before the time for holding the |
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| meeting. |
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| 2.
The shareholders are requested to promptly notify the Company of any change
in |
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| their
addresses. |
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| 3.
The Share Transfer Books of the Company will remain closed from 28th April to
05th |
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| May,
1998 (both days inclusive). The transfer received in order at the Registered
Office |
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| of
the Company upto 27th April, 1998 will be entitled for payment of the
dividend. |
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| COMPANY'S
FINANCIAL HIGHLIGHTS |
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| YEAR ENDED |
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|
(RUPEES IN THOUSAND) |
% INCREASE/ |
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| DECEMBER
31, |
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1997 |
1996 |
(DECREASE) |
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| NET SALES |
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1,849,328 |
2,001,702 |
(8) |
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| RESULT |
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| PROFIT
BEFORE TAX |
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12,970 |
49,721 |
(74) |
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| PROFIT
AFTER TAX |
|
686 |
29,434 |
(98) |
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| NET
RETURN ON TURNOVER % |
0.04 |
1.47 |
- |
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| CURRENT
ASSETS |
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882,367 |
810,095 |
9 |
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| CURRENT
LIABILITIES |
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678,492 |
605,668 |
12 |
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| CURRENT
RATIO |
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| ASSETS:
LIABILITIES |
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1.3:1 |
1.3:1 |
- |
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| DISTRIBUTABLE
RESERVES |
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328,856 |
352,923 |
(7) |
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| SHAREHOLDERS
EQUITY |
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404,939 |
429,006 |
(6) |
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| NUMBER
OF SHARES |
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7,560 |
7,560 |
- |
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| EARNING
PER SHARE |
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| OF
RS. 10 EACH |
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0.09 |
3.89 |
(98) |
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| DISTRIBUTION
OF REVENUE 1997 |
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|
Rs. '000s |
% |
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| REVENUE
PAID TO THE GOVERNMENT |
|
340,547 |
15.91 |
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| COST
OF SALES EXCLUDING WAGES |
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| AND
GOVERNMENT TAXES |
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|
1,081,421 |
50.52 |
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| SALARIES,
WAGES, BENEFITS AND |
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| WELFARE
EXPENSES |
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382,554 |
17.87 |
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| OVERHEADS |
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335,224 |
15.66 |
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| TRANSFER
TO APPROPRIATION ACCOUNT |
|
686.00 |
0.04 |
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| GROSS SALES |
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2,140,432 |
100.00 |
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| CHAIRMAN'S
REVIEW |
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| On
behalf of the Board of Directors, it gives me great |
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| pleasure
to welcome you to the Company's 46th Annual |
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| General
Meeting and present the Company's Annual |
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| Report
and financial statements for the year ended 31st |
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| December,
1997. |
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| During
1997, the performance of your Company was |
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| adversely
impacted by the unfavourable business |
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| environment
created by political events which greatly |
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| affected
consumer buying patterns and was directly |
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| reflected
in reduced business in our Retail and |
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| Wholesale
business. |
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| Despite
the difficult operational environment, we were |
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| able
to remain profitable by exercising strict internal |
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| controls,
economizing in all areas of our activities and |
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| concentrating
our efforts on improving our shoeline |
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| with
more innovative and attractive footwear. The |
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| Company's
total sales were Rs.1,849 Million as |
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| compared
with Rs.2,002 Million in 1996. |
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| For
the year 1997, the profit before tax amounted to |
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| Rs.12.97
Million as against the previous year's profit |
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| of
Rs.49.72 Million. After making provision for current |
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| and
deferred taxation of Rs. 12.28 Million, the net profit |
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| was
Rs.0.69 Million. By adding Rs.1.92 Million of |
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| unappropriated
profit brought forward from last year, |
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| Rs.2.61
Million were available for appropriation. The |
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| gross
amount of appropriation available as at 31st |
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| December,
1997 is required to cover not only the |
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| dividend
as now proposed by the Directors of Rs.7.56 |
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| Million
but also an amount of Rs.17.19 Million |
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| representing
the diminution of the value of the |
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| Company's
investment in its wholly owned subsidiary |
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| ITI.
These two outflows (Rs.7.56 Million + Rs.17.19 |
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| Million
= Rs.24.75 Million) are proposed to be covered |
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| by
the appropriation ofrs.2.61 Million already referred |
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| to
plus a transfer of Rs.24.0 Million from General |
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| Reserve. |
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| Due
to the transfer of the aforementioned amount from |
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| the
General Reserve, equity has declined from |
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| Rs.429.01
Million to Rs.404.94 Million and the return |
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| on
the equity has decreased from 6.86% in 1996 to |
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| 0.17%.
The Company's shares of Rs.10.- each were |
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| quoted
at Rs.48.- on the 31st December, 1997. |
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| Your
Company in 1997 contributed over Rs.340.05 |
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| Million
to the National Exchequer in the form of |
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| corporate
tax, custom duty, sales tax, excise duty and |
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| other
taxes. |
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| Your
Company continues to monitor and control its |
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| internal
costs vigorously to optimise profitability from |
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| operations.
Nevertheless, the Company is not immune |
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| to
the inflationary pressures prevailing in the country |
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| and
the costs of the goods and services we receive have |
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| increased. |
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| The
devaluation of the Pak Rupee during the year, by |
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| 10%
against the U.S. Dollar, increased the cost of our |
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| imports
especially rubber, PVC, dyes and chemicals. |
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| Higher
productivity and better management will be |
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| needed
to counteract these increases, particularly since |
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| margins
continue to be under intense pressure due to |
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| the
declining purchasing power of the majority of the |
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| people. |
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| The
depressed trading conditions persisted throughout |
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| most
of the year. As compared with 1996, the retail |
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| business
in 1997 was lower by 10% in pairs and 8% in |
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| turnover.
There was a decline in the Wholesale |
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| commission's
sales which fell by 12% in pairs and 16% in |
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| turnover
as compared with the achievements of the |
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| previous
year. |
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| The
decline in the domestic sales can be attributed to |
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| the
economic and political uncertainty which prevailed |
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| in
the country coupled with a disturbed law and order |
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| situation,
forced closure of sales outlets for 510 shop |
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| days
on account of various reasons during the year |
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| under
review. |
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| Another
reason for the shortfall in our Wholesale |
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| business
was the reduction of stock levels by the |
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| wholesale
trade generally, due to political conditions |
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| during
the year, and the Company's campaign to reduce |
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| receivables
from customers. As a result, the Company |
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| was
successful in its efforts and the overdue amount |
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| receivable
from customers, which was Rs. 103.59 Million |
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| in
the month of July, 1997, was brought down to |
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| Rs.61.47
Million at the close of the year. |
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| On
the other hand, throughout 1997, good progress was |
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| made
in the Company's export business. Although |
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| export
sales normally generate low margins, they are |
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| required
to ensure greater capacity utilization. Efforts |
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| were
made to develop a shoeline in harmony with the |
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| latest
trends in different markets. As a result of the |
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| successful
implementation of this strategy, the |
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| Company
received substantial orders and increased its |
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| exports-by
147% over the previous year. The export |
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| turnover
of Rs.125.19 Million in 1997 is another |
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| landmark
in the history of the Company. |
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| After
the success of Bata Bazar stores at Township and |
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| Batapur,
Lahore the Company opened another mega |
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| store
at Bahawalpur. A sum of Rs.1.3 Million was |
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| spent
on its renovation. I am pleased to report that |
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| this
concept of sophisticated presentation of mass |
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| merchandise
in the mega stores, with an exciting and |
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| comfortable
shopping environment and a self-service |
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| selling
system, has proved successful. A very positive |
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| customer
response to these stores has been sustained |
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| and
indeed is increasing. |
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| To
increase the Company's participation in the |
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| domestic
market, your Company continues to seek new |
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| avenues
for expansion. During the year, 4 new retail |
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| stores
were opened while 1 non-progressive store was |
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| closed.
Similarly, 6 agencies were opened and 12 non- |
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| progressive
agencies closed. At the end of the year, the |
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| Company
had 217 retail stores, 128 agencies and 21 |
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| wholesale
depots. |
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| Your
Company continued to make concerted efforts to |
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| consolidate
its market position in regard to marketing |
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| of
the existing international brands licensed to the |
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| Company
such as POWER for sports shoes - BUBBLE |
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| GUMMERS
for children - NORTH STAR for casual |
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| teenagers
and SANDAK for PVC summer casuals. |
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| The leading marketers
have recognized that |
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| sponsorship
is a major weapon to be deployed in |
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| creating
and sustaining brand awareness and positive |
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| brand
associations. Sports remain the leading vehicle |
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| for
sponsorship around the world - largely as a result |
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| of
the media coverage surrounding sports of all types. |
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| The
promotional programme of the Company was |
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| strongly
pursued to project the international brands |
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| and
our corporate image in the minds of the general |
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| public.
Our enthusiastic sponsorship of sports activities |
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| continued
unabated during the year. |
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| In
the year under review the 'Power' Division, besides |
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| organizing
the 'Power Master Open Golf' Tournament |
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| also
sponsored the 'Power Cup Natural Grass Court |
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| Tennis'
tournament in which the Punjab Chief |
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| Minister's
Advisor Mr. Akhtar Rasool, was the Guest- |
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| of-Honour
and presented prizes to the winners. |
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| During
the year under review the Company spent |
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| Rs.40.02
Million on advertising and sales promotional |
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| activities. |
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| Your
Company continues to benefit from its association |
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| with
many other footwear manufacturing and |
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| distributing
companies of the worldwide Bata Shoe |
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| Organization
and in particular from the valuable |
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| technical,
commercial and other assistance and services |
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| from
Bata Limited of Toronto, Canada. |
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| We
kept our designers abreast of new ideas and |
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| developments
by putting to good use the constant flow |
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| of
fashion-trend reports from Bata Limited, Canada, |
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| and
by monitoring developments in design, fashion and |
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| materials
from the international media and through |
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| visits
to international fairs and exhibitions. The most |
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| rewarding
of these visits was to the Bata Shoe |
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| Organization's
Shoecon in Padova, Italy held in May, |
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| 1997
to disseminate effectively the latest information |
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| on
new trends in all aspects of footwear design and |
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| development.
The Shoecon in Padova, Italy was |
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| attended
by a team of four from Bata Pakistan Limited, |
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| led
by the Managing Director. |
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|
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| BSO
2000 Manufacturing Team, reviewed various |
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| operations
of the Company. To improve the Company's |
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| competitiveness,
many areas were identified by them |
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| and
programmes initiated to bring about reduction in |
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| the
costs which are necessary to enable the Company |
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| to
succeed in an even more competitive market. |
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| An
investment of Rs.6.80 Million was made in new |
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| machinery
and equipment. It was done only in |
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|
|
| essential
areas. The new machinery enabled us to |
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| considerably
enhance the quality and appearance of |
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|
| our
products thereby generating continued customer |
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|
| confidence.
A sum of Rs.15.36 Million was spent on |
|
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| maintaining
and uplifting sales outlets. In addition, |
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| capital
expenditure of Rs.4.35 Million was incurred |
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| on
the renovation of retail outlets. 17 stores were |
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| renovated
and 7 uplifted to create a better shopping |
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| environment
and to improve our service to customers. |
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| Manufacturers
continued to fight for their share in a |
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| market
of reduced purchasing power. The resulting |
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|
|
| keen
competition made it impossible to pass on higher |
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|
| production
costs to consumers. |
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| The
total production of shoes during the year from the |
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| factories
at Batapur and Maraka was 13.64 Million |
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|
|
| pairs
in 1997 as against 12.75 Million pairs in 1996. |
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| To
complement our domestic collection, 0.151 Million |
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| pairs
of fashionable footwear were imported from Far |
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|
| Eastern
countries. Due to reduced domestic sales, |
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|
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| purchases
of contracted footwear were curtailed from |
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|
| 1.67
Million pairs in 1996 to 1.42 Million pairs in 1997. |
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| Despite
the restraints which we had to place on |
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|
|
| expenditure,
we continued the training of personnel |
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| generally
in accordance with the priority needs of |
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|
| marketing,
technology and other vital areas of the |
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|
| Company's
activities. In 1997,411 employees benefited |
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| from
in-Company courses, 24 attended overseas |
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|
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| training
courses and 14 participated in locally |
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|
|
| organized
courses such as those arranged by the |
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|
|
| Pakistan
Institute of Management and other |
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|
|
| specialized
agencies. |
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| At
the beginning of the year, we employed 3606 persons |
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| in
all departments of the Company. To reduce |
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|
|
| overheads,
a Voluntary-Retirement Scheme was |
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|
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| introduced
by the Company. Many employees opted |
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|
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| for
early retirement. They were paid a total ofRs.31.7 |
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|
| Million
as retiring benefits. At the close of the year, |
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| we
had 3387 employees. |
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| A
referendum was held on 19th December, 1997, to elect |
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| a
Collective Bargaining Agent for the following two |
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| years.
Bata Mazdoor League was elected as a C.B.A. |
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| in
place of Pakistan Bata Employees Union. Relations |
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| between
the employees and the management remained |
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| cordial,
which is important for efficient and productive |
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| working
conditions. I expect that the management and |
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| the
C.B.A. will maintain the existing satisfactory |
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| relationship
for the benefit of all concerned. |
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|
|
|
| During
December, 1997, Mr. T. J. Bata, together with |
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| Mrs.
Bata, visited Pakistan. He reviewed various |
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| operations
of the factories and shops and discussed |
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| with
the management the future plans of the Company. |
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| He
also presented 25-year Long Service Awards to 80 |
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| employees
of the Company and gave an Achievement |
|
| Award
to M/s Shahid Brothers, Multan in recognition |
|
| of
his excellent performance by achieving business of |
|
| over
Rs.37 Million which was the highest ever achieved |
|
| by
any Registered Dealer. He also paid courtesy calls |
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| on
the Prime Minister of Pakistan and the Governor |
|
| of Punjab. |
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|
|
|
|
| Mr.
S. Sibtey Ali, a nominee of the Investment |
|
| Corporation
of Pakistan was appointed a member of |
|
| the
Board of Directors. His appointment filled the |
|
| vacancy
created by the resignation of Mr. Asadullah |
|
| Khawaja. |
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|
|
|
|
| The
present Government has introduced a number of |
|
| economic
reforms to boost the economy. The rate of |
|
| tariff
was reduced on many items to encourage the |
|
| revival
of weak businesses but so far this does not |
|
| appear
to have produced the desired results. The |
|
| domestic
market continues to be in a deep recession. |
|
| It
is an uphill task to operate successfully in the |
|
| prevalent
difficult trading conditions. The challenges |
|
| ahead
are enormous, but I am confident that by |
|
| working
together we will be able to overcome these |
|
| challenges. |
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|
|
|
|
| In
conclusion, on behalf of the Board of Directors, we |
|
| would
like to express appreciation and thanks to our |
|
| employees,
customers, dealers, distributors, suppliers |
|
| and
union representatives for the contribution they |
|
| each
made and the assistance they each provided |
|
| during
the year 1997 and finally to you, our |
|
| shareholders,
for your continued interest in and |
|
| -support
for the well-being of the Company. |
|
|
|
|
| DIRECTORS'
REPORT TO THE MEMBERS |
|
|
| 1.
Your Directors have pleasure in submitting their Report and Statement of
Accounts for the year ended |
|
| December
31, 1997. |
|
|
|
|
| 2.
The Chairman's Review on page 7 to 9 deals with the year's activities and the
Directors of the Company |
|
| endorse
the contents of the Statement. |
|
|
| 3.
The financial results of the company are as under: |
|
|
|
|
Rs.'000s |
|
|
|
|
| Profit
before taxation |
|
|
12,970 |
|
| Less:-Provision
for taxation |
|
|
---------- |
|
| Current |
|
|
|
14,686 |
|
| Prior years |
|
|
|
(1,461) |
|
| Deferred |
|
|
|
(941) |
|
|
|
|
|
---------- |
|
|
|
|
|
12,284 |
|
|
|
|
|
---------- |
|
| Profit
after tax |
|
|
|
686 |
|
| to
this must be added Unappropriated profit brought forward from last year |
1,923 |
|
|
|
|
|
---------- |
|
| Making
available for appropriation |
|
|
2,609 |
|
|
|
|
| Out
of which the Directors recommend the |
|
|
|
| following
appropriation:- |
|
|
|
|
|
|
| Transfer
from General Reserve |
|
|
(24,000) |
|
| Provision
for diminution in the value of investment |
|
17,193 |
|
| Proposed
final dividend @ 10% (1996 @ 10%) |
|
|
7,560 |
|
|
|
|
|
---------- |
|
|
|
|
|
753 |
|
|
|
|
|
---------- |
|
| Leaving
an unappropriated profit to be carried forward to next year |
|
1,856 |
|
|
|
|
|
========== |
|
|
|
|
|
|
| 4.
The pattern of shareholding is provided on page 33 |
|
| 5.
Earning per share of Rs.10 each is Rs 0.09. |
|
| 6.
The consolidated financial information as required by SSAP-2 is provided on
page 34 to 37 |
|
| 7.
Messrs Gardezi and Company retire and being eligible, offer themselves for
reappointment as |
|
| Auditors
of the Company. |
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
