THE shoemaker, Service Industries Limited, is seen by the industry as the biggest competitor to the multinational giant Bata Pakistan. Service has had a chequered history of over half a century.

Set up by three college friends — Chaudhry Nazar Mohammad and Chaudhry Mohammad Husain from Gujrat and Chaudhry Mohammad Said from Gujranwala district — the venture started out on a modest scale in 1941.

After success with production and sale of handbags and some sports goods, the sponsors launched a shoe manufacturing plant in Lahore in 1954, which was later to shifted to Gujrat.

The company is now in the business of manufacturing and selling footwear, tyres and tubes, and technical rubber products. Its manufacturing facilities are located in Gujrat and Muridke. The Muridke unit is engaged in the production of footwear, while the Gujrat unit rolls out tyres and tubes, and also supplements the Muridke unit in the production of footwear.

Over the years, the company has kept pace with fast changing trends. While Servis identifies ‘Cheetah’, ‘Don Carlos’ and ‘Lark & Finch’ as major brand names in footwear, the Servis ‘Cruiser’ is said to be a breakthrough in being the country’s first directional tyre for two wheelers.

At the moment, Service Industries holds over Rs6 billion in total assets. Its annual revenue for the year ended December 31, 2012 amounted to Rs12.2 billion. The management thus boasts of being “the largest manufacturer of footwear, tyres and tubes for two-wheelers, and the largest exporter of footwear of the country for the past 10 years”.

Out of total sales of Rs12.2 billion in 2012, footwear contributed revenues of Rs6.6 billion, followed by tyres and tubes with Rs5.5 billion. The figures reveal that the company primarily caters to the local market, but it has made footprints in markets in Germany, Italy, France and the UK.

The company earned a profit-after-tax (PAT) of Rs127 million, which translated into earnings-per-share of Rs10.59 for 2012. However, its gross margins had shrunk to 12.71pc from 13.59pc, while the profit margin declined to 1.05pc from 3.75pc.

The company’s chief executive, Omar Saeed, points out exactly where the shoe making pinched. “Up until the end of 2012, the country’s economic situation was grim with high inflation, devalued rupee, energy crisis and breakdown in law and order situation.”

Luckily, all of that seems to be changing for the better. The first glimpse is seen in the lately released accounts for the three quarters ended September 30, 2013, in which the company posted sales of Rs11 billion and an after-tax profit of Rs517 million, which were up 24pc and 875pc respectively.

That compared with sales of Rs8.9 billion and profit of Rs53 million in the comparable nine months of the previous year.

The CEO says that “profitability improved as a result of better efficiencies in manufacturing and supply chain process”. He adds that the management is focusing on increasing the company’s share in the domestic and export markets, and it is also actively pursuing cost control measures to improve value for shareholders.

Out of total wealth of Rs2.41 billion generated in 2012, the company paid Rs1.68 billion, or 70pc, to over 6,000 employees. Shareholders were paid Rs120 million in cash dividends, at 75pc.

At December 31, 2012, shareholders’ equity in Service Industries stood at Rs2 billion, which produced the break-up value of the 10-rupee share at Rs168; and the stock’s market price at that time was almost at par with the break-up value.

The booming stock market has brought blessings to shareholders in almost all sectors. Investors’ confidence has rapidly increased in the fast moving consumer goods sector due to the burgeoning population and higher disposable incomes.

This has carried Service Industries’ stock price to as high as Rs480 a share. But, with a relatively small paid-up capital of Rs120 million in 12 million shares of Rs10 each, the company’s shares do not come up for brisk trading at the stock market.

Besides, the directors and sponsors command 43pc of the company’s equity, followed by banks and financial institutions with 15pc, and about an equal percentage by modarabas and mutual funds.

And while the general public does have a comparatively bigger stake of 23pc, it is likely that those who hold the shares are loathe to dispose them off, as they view the future of the company as well as the equity market with optimism, given the surge in the stock’s price by Rs312 or 186pc in fewer than 15 months.