Style Craft Limited in business downturn

Style Craft Limited, a listed textile company in the capital market, is drowning in debt and business recession. The investors of the company are facing losses. The company’s revenue and profit have declined in the last financial year. The flow of cash has gone down to a negative level. In this situation, it has become impossible for the company to continue its normal activities.

An analysis of StyleCraft’s financial statements for the fiscal year ended June 30, 2021 shows that the current liabilities exceeded Tk 13 crore 89 lakh 42 thousand 259 compared to the current assets. Again, the income has decreased by 39.13 percent as compared to the previous year. At the same time, cash flow is in a negative position as compared to the previous year. Besides, the company’s factory has been closed since July 19, 2021 due to failure to pay salaries and wages to the employees and if the company fails to pay salaries and wages to its employees in this way, it is very unlikely that the factory will run properly. Moreover, the company has failed to repay the increased amount of bank loans and arrears. As a result, there have been concerns about whether it will be able to conduct its business activities properly or its ability to conduct business activities.

On the other hand, there are allegations of irregularities in the preparation of the company’s financial report. The company’s auditors also objected to the irregularities. According to International Accounting Standard 36, at the end of each accounting year, the value of the property, plants and equipment is measured by regular inspection but the company has not complied with this calculation. Again, the financial report shows the cost of the company’s inventory, which is a violation of International Accounting-2. However, according to International Accounting Standard -2, whichever is less between the cost of inventory and the net perceptible value has to be mentioned. According to the auditor’s report by SK Bara-ya & Co. Chartered Accountants, the auditor could not directly inspect the property, plants and equipment as the factory was closed during the audit activities. Besides, as per the notification of Bangladesh Securities and Exchange Commission, unpaid dividends such as name of shareholders, BO account, folio number etc. were not displayed in the financial report.

Asked about this, company secretary Edmund Guda said, “Yes, this time there is a ‘qualified opinion’ in the audit report.” The reasons behind this are correct. In fact, the inspector could not directly inspect the factory as it was closed during the inspection. Where everything takes five to seven days to inspect, they report based on what they can see in one day. Since they could not inspect everything, they objected. ‘

Asked about the business, he said, “Our staff and employees are on strike due to arrears of salaries and allowances.” We have no shortage of orders but production is not taking place due to closure of factories resulting in business recession. We are trying to reschedule the bank loan. In fact, the property that was shown as a mortgage for the bank loan is one of our entrepreneurial director. Almas Begum’s ancestral property. When he died suddenly a few days ago, there were some complications with the bank loan. ‘

Meanwhile, it has announced that it will not pay any dividend for the financial year ended June 30, 2021. The company’s earnings per share for the period under review was 93 paisa loss, up from 48 paisa in the same period last year. On June 30, 2021, the company’s net asset value per share stood at 22 Tk 18 paisa, which was 24 Tk 51 paisa in the same period last year. In the current financial year, the cash flow per share has been a loss of 11 taka 71 paisa, which was seven taka 7 paisa in the previous year.

Meanwhile, in the first quarter of the current financial year, July-September 2021, the company’s loss per share has increased. The company’s EPS in the first quarter was two Tk five paisa (loss), 18 paisa (loss) in the same period last year. On 30 September 2021, the NAV per share stood at 20 Tk 14 paisa.

Asked about the significant drop in cash flow, Edmund Guda said workers had to pay their wages even if production was halted in the early days of the nationwide lockdown in Covid; In fact, there has been a shortage of cash flow ever since. However, every effort is being made to deal with this situation.

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