20000131

Brief recordings

Ñ BY SCANNER

Auto & Allied Engineering Allied Motors Limited Year Ended June 30, 1999

OverviewÉÉÉ

This tractor and relative parts manufacturing assembling unit has been posting continuous losses. The accumulated deficit has risen to Rs 142.91 million. Thus eroded its reserve of Rs 86.19 million and part of its paid-up capital of Rs 90 million. So break-up value was reduced to merely Rs 3.69 per 10-rupee share. There is no long term debt but current ratio is much below ONE. The factory is closed and the franchise agreement with Ford was terminated. The external auditors made serious observations to which the directors have responded also. Sales declined, the company posted gross and operating losses although these losses are much smaller the preceding year's. The company has expertise and fixed assets of its manufacturing line. The management has documented its resolve to reactivate the operation. The net loss works out to loss per share at Rs 0.32 (1997-98: Rs 1.43).

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Allied Motors Limited was incorporated in 1982 in the province of Sindh. It was listed at the Karachi Stock Exchange in 1986. At present its shares are quoted at 1.85 per 10-rupee share in the defaulters list.

The company's business is the assembly-cum-progressive manufacturing and sale of tractors and trading of parts of implements related thereto.

The manufacturing facilities of the company are located in the province of Balochistan at Hub Industrial Trading Estate in the proximity of Karachi, the port city of the province of Sindh. The company's registered office is located at Sindh Industrial Trading Estate, Karachi.

The company started commercial operations in August 1983. Trading in tractors' parts and implements started in July 1986. The company started assembly cum-progressive manufacture and sale of Agrimotor Ñ 3 wheeler pick-up in 1994-95.

Its associated companies are Ñ Allied Engineering & Service Limited, Polymer & Precision Engineers (Pvt) Ltd. and Midland Motors Pakistan (Pvt) Ltd.

On 26th June 1999, the operating fixed assets of the company aggregated to Rs 89.25 million at cost; and book value was posted at Rs 29.61 million. At cost, the lease hold land amounted to Rs 12.22 million, factory building on leasehold land was at Rs 42.20 million, plant and machinery at Rs 31.44 million, furniture and office equipment was in the sum of Rs 2.13 million.

In addition, it posted another tangible asset at Rs 9.48 million. This represented the 'york line' complete machinery and transfer line, purchased from associated company (imported under the Pakistan Government's Non-Repatriable Investment Scheme). According to the company's board resolution, after utilising such machines that are adaptable for machinery for tractors' engines the surplus will be disposed off.

The long term investments amounted to Rs 5.0 million in both the years and comparison. This represents investments at cost in the equity of the associated company Polymer & Precision Engineers (Pvt) Ltd. This portfolio of investment represents 5.11% stake in the equity of this associated company.

The external auditors observed:

"2. The closure of the factory and the 'Ford' group of companies withdrawal and termination of franchise agreement alongwith operating loss (after financial charges) of Rs 5.061 million and a carried forward net loss of Rs 152.809 million as at June 30, 1999, raise substantial doubt that the company will be able to continue as a going concern and may unable to realise its assets and discharge its liabilities in the normal course of business. Consequently adjustment may be required to the recorded assets amounts to or to the amounts and classification of liabilities. The financial statement (and notes thereto) do not disclose this fact.

3. We have been unable to satisfy ourselves to, the realisable value of tangible fixed assets, the net realisable value of tools, stock-in-trade (see also note 14) and an amount of Rs 5 million in respect of investment, against which no provisions have been made."

The directors in their report responded to the auditors' observations and stated.

"Auditors' observation in para 2 of the Auditors' report to the Members, it is stated that:

The management is concerned about the future of your company and that it is actively engaged in its reactivation. The Company's property is free from all encumbrances. Further the management considers that at present the assets and liabilities do not require any adjustments or reclassification since efforts and being made to reactivate the operation.

Auditors' comments in paragraph #3 of their report to the members. It is stated that your Directors consider the tangible fixed assets, loose tools, stock-in-trade as good and realisable.

The investment of Rs 5 million in Polymer & Precision Engineers (Pvt) Ltd., which have now started yielding returns and should in the opinion of your Directors start yielding tangible returns."

Allied Motors Limited posted gross loss of Rs 1.04 million (FY 1997-98: Rs 2.62 million), operating loss before financial charges at Rs 3.71 million (FY 1997-98: Rs 6.11 million) and net loss for the year of Rs 2.93 million (FY 1997-98: Rs 12.93 million). It can be observed that the loss has declined substantially as compared to the preceding year's and net loss is lower than the operating loss because of mainly other income and prior periods positive adjustment.

The company's sales remained small, although increased to Rs 14.33 million from Rs 4.86 million of the preceding year's.

The company's prime sales item was the marketing of 'Ford' brand of tractors but the franchise agreement terminated with Ford so operation stopped.

The plant capacity was designated at 6,000 tractors but the actual production during the year was recorded at 116 tractors (1997-98: 34 tractors). On the other hand, the production of Agrimotors was nil in both the years under comparison.

The directors reported that during 1998-99, the financial year under review, the company sold 96 units of small horse power tractors from the left over inventory under their own brand "Allied-35".

The management also reported that they could not make significant progress towards their various options and contacts with world-wide tractor manufactures. However, the management is hopeful for the company's turnaround due to some positive response from a couple of tractors manufacturers of European origin.

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Performance Statistics (Million Rupees)

June 30 1999 1998

Capital & LiabilitiesÉÉÉ

Paid-up Capital: 90.00 90.00

Reserves: 86.19 86.19

Accumulated (Loss): (142.91) (139.98)

Shareholders' Equity: 33.28 36.21

Current Liabilities: 28.13 33.38

AssetsÉÉÉ

Fixed Assets Ñ Tangible: 39.10 41.42

L.T. Investments: 5.00 5.00

Current Assets: 17.31 23.17

Total Assets: 61.41 69.59

Sales, Profit & PayoutÉÉÉ

Sales: 14.33 4.86

Gross (Loss): (1.04) (2.62)

Operating (Loss) Before Financial Charges: (3.71) (6.11)

Other Income: 1.86 0.42

Depreciation: 1.95 2.22

Financial Charges: 1.35 3.15

(Loss) Before Taxation: (3.20) (8.84)

(Loss) After Taxation: (2.93) (12.92)

Financial RatiosÉÉÉ

D-Share Price (Rs) 20/1/2000: 1.85 Ñ

Book Value Per Share (Rs): 3.69 4.02

Price/Book Value Ratio: 0.52 Ñ

Debt/Equity Ratio: 0:100 0:100

Current Ratio: 0.52 7.73

Asset Turnover Ratio: 0.23 0.06

Days Receivables: 16 Ñ

Days Inventory: 299 1,077

Gross Loss to Sales (%): 7.26 53.91

Operating Loss to Sales (%): 25.89 126.72

Net Loss to Sales (%): (20.45) (265.84)

(Loss) Per Share (Rs): (0.32) (1.43)

Price/Earning Ratio: (Ñ) (Ñ)

R.O.E. (%): (Ñ) (Ñ)

R.O.A. (%): (Ñ) (Ñ)

R.O.C.E. (%): (Ñ) (Ñ)

Plant Capacity & Actual Production (Units)ÉÉÉ

A. TractorsÉÉÉ

Sanctioned Capacity: 6,000 6,000

Actual Production: 116 34

B. Actual Production: Agrimotors: Ñ Ñ

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Company information: Chairman & Chief Executive: K. Asif Rahman. Director: P.K. Shahani. Company Secretary: Asif Mahmoud. Registered Office: D-168, Sindh Industrial Trading Estate, Haroonabad, Karachi-75700 (Sindh). Factory: Plot Nos A1-A50, Hub Industrial Trading Estate, Hub, District Lasbella, Balochistan.