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FEROZSONS
LABORATORIES LIMITED |
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(40th Annual Report 1996) |
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| Contents |
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| Board
of Directors |
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2 |
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| Notice
of Annual General Meeting |
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3 |
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| Summary
of Financial Results |
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5 |
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| Directors'
Report |
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6 |
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| Auditors'
Report |
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9 |
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| Balance
Sheet |
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10 |
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| Profit and Loss Account |
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12 |
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| Statement
of Source and |
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| Application
of Funds |
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13 |
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| Notes
to the Accounts |
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14 |
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| Pattern
of Shareholding |
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26 |
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| Form
of Proxy |
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27 |
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| BOARD
OF DIRECTORS |
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| Chairperson and |
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| Chief
Executive |
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Mrs. Akhter Khalid Waheed |
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| Directors |
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Zafar, Mr. A. U.,
President |
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Waheed, Begum S. |
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Sayeed, Mr. A.K.M.
(N.I.T.) |
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Cassim, Mr. Firozuddin A. |
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Ispahani, Mr. M.M. |
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Khanzada, Mr. Taj
Mohammad |
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Sherpao, Khan Dost
Mohammad Khan |
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Azhar, Ms. Munize |
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Waheed, Mr. Ostnan Khalid |
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Mazhar, Mr. Farooq |
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Iqbal Mr. Walid |
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| Secretary |
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Maqbool Ahmed |
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| General
Manager Nowshera |
Sh. Zawar Ahmed |
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| Auditors |
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Messrs Taseer Hadi Khalid
& Co. |
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|
6th Floor, State Life
Building No. 5, |
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Blue Area, lslamabad. |
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| Bankers |
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Allied Bank of Pakistan
Ltd. |
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|
Crescent Investment Bank
Ltd. |
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| Registered
Office |
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197-A, The Mall,
Rawalpindi. |
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| Factories |
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P.O. Ferozsons, Nowshera
(N.W.F.P.) |
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|
NOTICE OF ANNUAL GENERAL
MEETING |
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| Notice is hereby given that the 40th
Annual General Meeting of FEROZSONS LABORATORIES |
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| LIMITED
will be held on Saturday, the 16th of November, 1996 at 12.30 p.m. at its
Registered Office, 197-A, |
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| The
Mall, Rawalpindi to transact the following business: |
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| 1.
To confirm the Minutes of the Extra Ordinary General Meeting held on 4th
July, 1996. |
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| 2.
To receive, consider, and adopt the Annual Audited Accounts for the year
ended 30th June, 1996 |
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| and
Directors' and Auditors' Reports thereon. |
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| 3.
To approve payment of Dividend at the rate of 32.5% (Rs. 3.25/-per share of
Rs. 10/-each) for |
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| the
year ended 30th June, 1996 as recommended by the Directors. |
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| 4.
To appoint Auditors and to fix their remuneration. |
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| 5.
To transact any other business with the permission of the Chair. |
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| Notes: |
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| 1.
The Share Transfer Books of the Company will remain closed from 14-11-1996 to
20-11-1996 |
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| (both
days inclusive). |
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| 2.
A member entitled to attend and vote at this meeting may appoint another
member as |
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| his/her
proxy to attend and vote. The Form of Proxy duly completed, should reach the |
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| Registered
Office of the Company 48 hours before the time of the Meeting. |
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| 3.
Members are requested to notify immediately the change in their address, if
any. |
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|
Summary of Financial
Results |
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1996 |
1995 |
Growth |
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|
(Rs) |
(Rs) |
(%) |
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| Net Sales |
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192,729,397 |
149,742,787 |
28.70 |
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| Operating
Profit |
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28,199,556 |
20,926,936 |
34.8 |
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| Operating
Expenses |
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37,782.67 |
28,962,021 |
30.50 |
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| Provision
for Taxation |
9,085,662 |
6,800,000 |
33.60 |
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| Profit
After Tax |
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17,680,998 |
13,020,102 |
35.80 |
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| Earnings
per Share |
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5.63 |
4.15 |
35.80 |
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| DIRECTORS'
REPORT FOR THE YEAR ENDED |
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| 30TH
JUNE, 1996 |
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| It
is a great pleasure for us to present the Audited Accounts of your company,
alongwith the Auditors' Report |
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| for
the financial year 1995-96, its 40th year of operation. |
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| During
the Four Decades of its existence, your company has made pioneering strides
in its areas of operation. |
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| It
has also weathered many a storm, including two major wars which culminated in
the dismemberment of |
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| Pakistan
in 1971. It survived over a decade of extreme price regulations during the
Seventies and Eighties, and |
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| today,
despite being faced once again with rigid price controls, rising inflation
and a downward spiral in the |
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| value
of the rupee, your company stands as a strong and economically viable
institution, poised firmly to meet |
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| its
challenges head-on and exploit new avenues of growth in the face of
adversity. |
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| Net
Sales during your company's 40th year grew by 28.7% to Rs. 192.729 Million
against Rs. 149.742 Million |
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| achieved
in 1994-95. In our last report, we mentioned that your company was in the
process of replacing |
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| out-dated
items with the latest range of life-saving preparations, and that the 7%
growth in Net Sales achieved |
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| last
year reflected the dilution in sales growth resulting from this shift in
production capacity. We are pleased |
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| to
report that the increase in Net Sales achieved this year shows that your
company is well on the way to |
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| completing
its transition and competing with its pricier Multi-National rivals in the
latest formulations. |
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| The
Operating Profit of your company during the year under review grew by 34.8%
to Rs. 28.200 Million |
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| (1995:
Rs. 20.927 Million). |
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| Operating
expenses of your company also grew by 30.5%, as a result of increased outlay
on retaining qualified |
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| personnel,
augmenting training activities and increasing your company's presence in the
international markets |
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| of
Africa and the former Soviet Union. |
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| Your
company is cognizant of the risks inherent in the volatility of the Rupee and
the necessity of contributing |
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| to
our country's export base, and will continue to market itself aggressively in
outside markets. |
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| The
Net Profit of your company, after a provision for taxation of Rs. 9.085
Million (1995: Rs. 6.800 Million), |
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| deduction
for Worker's (Profit) Participation Fund and Central Research Fund, comes to
Rs. 17.681 Million, |
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| representing
a 35.8% growth over the figure of Rs. 13.020 Million achieved last year. |
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| We
are pleased to report that the Earnings per Share (EPS) before tax of your
company for the year under |
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| review
increased to Rs. 8.52, and the after tax EPS to Rs. 5.63 per 10 rupee share:
compared to Rs. 4.15 |
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| achieved
last year. |
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| The
encouraging response received by your company's new products in the
Anti-biotic, Cardio-vascular and |
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| Anti-Diabetic
segments is reflected in the above results. |
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| DIVIDEND |
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| In
view of the year's financial performance, the Board of Directors recommend
that a 321/2% cash dividend, |
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| i.e.
Rs. 3.25 per 10 rupee share, be issued for the year ending 30th June 1996. |
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| FUTURE
PROSPECTS |
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| The
adverse economic scenario surrounding the Pharmaceutical Industry, and the
Country as a whole, |
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| continues
unabated. The industry has been hit foremost by continued devaluation of the
Pakistan Rupee, |
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| which
is perilously close to being caught in a downward spiral. In addition,
further inflationary impacts have |
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| resulted
from the imposition of new taxation in the shape of 5% sales tax and 10%
custom duty on imported |
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| raw
and packing material. |
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| At
the same time, the industry continues to operate under conditions of strict
price regulation, with justified |
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| price
increases being given only after severely debilitating delays. Unfortunately,
the issue of pharmaceutical |
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| pricing
has become severely politicised in our country. It is important for all to
recognize that the |
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| pharmaceutical
industry, like any other industry in the country, is not exempt from the Laws
of Economics, |
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| and
ironically it is the cheaper local pharmaceutical industry, especially
quality-conscious firms like your |
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| company,
which suffer the most every time there is a delay in the Govermnent's
decision to allow justified |
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| price
increases in response to new taxation and exchange rates. |
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| However,
your company plans to continue its expansion into further specialized
segments in the |
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| pharmaceutical
market. A major Anti-depressant is under launch at the time of writing this
report, with two |
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| further
launches in the anti-bacterial segment planned during the second half of
1996-97. |
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| In
addition, the feasibility study for setting up an independent plant at
Nowshera for the manufacture of |
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| sterile
injectables (mentioned in the last report) is near completion, and we expect
to commission the plant in |
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| the
very near future. |
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| Your
company stands at the threshold of a new era in its history, one in which,
Inshallah with the support of |
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| our
shareholders, we will compete strongly with the largest and best
multi-nationals in every segment of the |
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| Pharmaceutical
industry. As we celebrate four decades of our history, the presence of our
late Chairman Mr. |
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| Khalid
Waheed, whose efforts during his pioneering tenure are bearing fruit today,
will be deeply missed by |
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| all. |
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| DIVERSIFICATIONS |
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| Your
company's contract manufacturing arrangement with Procter & Gamble
Pakistan (Pvt.) Limited, |
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| continues
to run smoothly. |
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| We
regret to report that there is no change in the status of our toiletries
plant at Gadoon, where in the absence |
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| of
vital incentives, the logistical problems involved in commencing any
operations make it unfeasible to begin |
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| production. |
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| AUDITORS |
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| The
Auditors of the Company, Messrs Taseer Hadi Khalid & Co., stand retired
and have offered themselves |
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| for
reappointment. |
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| PATTERN
OF SHAREHOLDING |
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| The
statement indicating the number of shareholders and their categories forming
the pattern of shareholding |
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| is
annexed. |
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| AFFIRMATION |
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| It
is again a genuine privilege to record our sincere appreciation for our
company colleagues at all levels, at the |
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| plant
and in the field, for their hard work and dedication without which the above
results would not have been |
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| possible. |
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|
For and on Behalf of the
Board of Directors |
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|
| Rawalpindi |
|
(Mrs. Akhter Khalid
Waheed) |
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| 13th
October, 1996 |
Chairperson & Chief
Executive |
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| REPORT
OF THE AUDITORS TO THE MEMBERS OF |
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| FEROZSONS
LABORATORIES LIMITED |
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| We have audited the annexed balance sheet
of Ferozsons Laboratories Limited as at 30th June, 1996 and |
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| the
related profit and loss account and statement of source and application of
funds, together with the notes |
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| forming
part thereof, for the year then ended and we state that we have obtained all
the information and |
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| explanations
which to the best of our knowledge and belief were necessary for the purposes
of our audit and, |
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| after
due verification thereof, we report that: |
|
|
|
| (a)
in our opinion, proper books of account have been kept by the company as
required by the |
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| Companies
Ordinance, 1984; |
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|
|
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| (b)
in our opinion: |
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have been |
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| drawn
up in confirmity with the Companies Ordinance, 1984 and are in agreement with
the |
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| books
of account and are further in accordance with accounting policies
consistently |
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| applied; |
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|
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| (ii)
the expenditure incurred during the year was for the purpose of the company's
business; |
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| and |
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|
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| (iii)
the business conducted, investments made and the expenditure incurred during
the year were |
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| in accordance with the objects of the
company; |
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|
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| (c)
in our opinion and to the best of our information and according to the
explanations given to us, the |
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| balance
sheet, profit and loss account and the statement of source and application of
funds, |
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| together
with the notes forming part thereof, give the information required by the
Companies |
|
| Ordinance,
1984 in the manner so required and respectively give a true and fair view of
the state of |
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| the
company's affairs as at 30th June, 1996 and of the profit and the source and
application of |
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| funds. |
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|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,
1980 was |
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| deducted
by the company and deposited in the Central Zakat Fund established under
section 7 of |
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| that
Ordinance. |
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|
BALANCE SHEET AS |
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1996 |
1995 |
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|
NOTES |
(RUPEES) |
(RUPEES) |
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| SHARE
CAPITAL AND RESERVES |
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| Share
capital |
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|
3 |
31,403,670 |
31,403,670 |
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| Capital
reserve |
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|
4 |
321,843 |
321,843 |
|
| Unappropriated
profit |
|
|
18,465,921 |
11,478,116 |
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|
|
--------- |
--------- |
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|
|
|
50,191,434 |
43,203,629 |
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| SURPLUS
ON REVALUATION OF |
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|
|
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| FIXED ASSETS |
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|
5 |
45,725,290 |
45,725,290 |
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| DEFEFFERED
LIABILITY FOR TAXATION |
|
3,044,000 |
2,557,000 |
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| OBLIGATIONS
UNDER FINANCE LEASE |
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6 |
- |
805,704 |
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| CURRENT
LIABILITIES |
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| Bank
and other borrowings |
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7 |
16,356,178 |
12,468,264 |
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| Current
maturity of long term liabilities |
8 |
1,045,425 |
1,253,541 |
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| Creditors,
accrued and other liabilities |
9 |
17,714,586 |
13,339,917 |
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| Revolving
advances |
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10 |
1,200,456 |
1,540,456 |
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| Provision
for taxation |
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|
9,000,000 |
11,600,581 |
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| Unpaid
dividend |
|
|
491,813 |
104,160 |
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| Proposed
dividend |
|
10,206,193 |
9.421,101 |
|
|
|
--------- |
--------- |
|
|
|
56,014,651 |
49,728,020 |
|
|
|
--------- |
--------- |
|
|
154,975,375 |
142,019,643 |
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|
|
========= |
========= |
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| The
report of the auditors is set out on page 9. |
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| The
notes set out on pages 14 to 25 form part of these accounts. |
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| These
accounts were approved by the Board of Directors on 13th October, 1996 |
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|
|
AT 30TH JUNE, 1996 |
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|
1996 |
1995 |
|
|
NOTES |
(RUPEES) |
(RUPEES) |
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| FIXED
ASSETS |
|
11 |
77,129, 178 |
76,031,090 |
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|
|
|
| LONG
TERM INVESTMENTS |
12 |
33,085 |
33,085 |
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| COMPENSATION
RECEIVABLE |
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| FROM GOVERNMENT |
|
13 |
738,076 |
738,076 |
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|
|
| CURRENT
ASSETS |
|
|
| Stores,
spares and loose tools |
14 |
1,584,873 |
1,508,578 |
|
| Stock
in trade |
|
15 |
47,086,502 |
36,192,517 |
|
| Trade
debts -- unsecured |
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| (considered
good) |
|
17,716,129 |
15,486,028 |
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| Advances,
deposits, prepayments and |
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| other
receivables |
|
16 |
8,777,239 |
9,843,987 |
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| Cash
and bank balances |
17 |
1,910,293 |
2,186,282 |
|
|
--------- |
--------- |
|
|
|
77,075,036 |
65,217,392 |
|
|
|
|
|
--------- |
--------- |
|
|
|
154,975,375 |
142,019,643 |
|
|
|
========= |
========= |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 1996 |
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|
|
|
NOTES |
1996 |
1995 |
|
|
|
|
(RUPEES) |
(RUPEES) |
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|
|
|
|
| NET SALES |
|
|
18 |
192,729,397 |
149,742,787 |
|
| LESS:
COST OF SALES |
|
19 |
126,747,167 |
99,853,830 |
|
| GROSS
PROFIT |
|
|
|
--------- |
--------- |
|
| LESS:
OPERATING EXPENSES |
|
|
65,982,230 |
49,888,957 |
|
|
|
|
|
|
| Administrative expenses |
|
20 |
10,944,438 |
9,036,451 |
|
| Selling expenses |
|
|
21 |
22,685,247 |
16,087,163 |
|
| Financial expenses |
|
|
22 |
4,152,989 |
3,838,407 |
|
|
|
|
--------- |
--------- |
|
|
|
|
|
|
|
|
37,782,674 |
28,962,021 |
|
|
|
|
|
--------- |
--------- |
|
| OPERATING
PROFIT |
|
|
28,199,556 |
20,926,936 |
|
|
|
|
|
| OTHER
INCOME |
|
|
|
| Profit
on sale of fixed assets |
|
23 |
242,325 |
133,247 |
|
|
|
|
--------- |
--------- |
|
| PROFIT
FOR THE YEAR |
|
|
28,441,881 |
21,060,183 |
|
|
|
|
| LESS:
WORKERS' (PROFIT) |
|
|
| PARTICIPATION
FUND |
|
|
1,409,978 |
1,046,347 |
|
| CENTRAL
RESEARCH FUND |
|
265,243 |
193,734 |
|
|
|
|
--------- |
--------- |
|
|
|
|
1,675,221 |
1,240,08l |
|
|
|
|
--------- |
--------- |
|
| PROFIT
BEFORE TAX |
|
|
26,766,660 |
19,820,102 |
|
|
|
|
|
|
|
| PROVISION
FOR TAXAT1ON |
|
|
| - Current year |
|
|
9,000,000 |
6,800,000 |
|
| - Prior year's |
|
|
85,662 |
- |
|
|
|
|
--------- |
--------- |
|
|
|
9,085,662 |
6,800,000 |
|
|
--------- |
--------- |
|
| PROFIT
AFTER TAX |
|
|
17,680,998 |
13,020,102 |
|
| ACCUMULATED
PROFIT BROUGHT FORWARD |
|
11,478,116 |
10,436,115 |
|
| PROVISION
FOR DEFERRED TAX |
|
(487,000) |
(2,557,000) |
|
|
--------- |
--------- |
|
| PROF1T
AVAILABLE FOR APPROPRIATION |
|
28,672,114 |
20,899,217 |
|
| PROPOSED
D1V1DEND AT TIIE RATE OF 32.5% |
|
(10,206,193) |
(9,421,101) |
|
|
|
--------- |
--------- |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD |
|
18,465,921 |
11,478,116 |
|
|
|
|
========= |
========= |
|
|
|
|
|
| The
notes set out on pages 14 to 25 form part of these accounts. |
|
|
|
STATEMENT OF SOURCE AND
APPLICATION OF |
|
|
FUNDS FOR THE YEAR ENDED
30TH JUNE 1996 |
|
|
|
1996 |
1995 |
|
|
|
(RUPEES) |
(RUPEES) |
|
|
|
|
|
| Cash
flow from operating activities |
|
26,766,660 |
19,820,102 |
|
|
| Adjustment
for: |
|
| Depreciation |
|
3,594,336 |
3,288,397 |
|
| Profit
on sale of fixed assets |
|
(242,325) |
(133,247) |
|
|
--------- |
--------- |
|
|
3,352,011 |
3,155,150 |
|
| Operating
profit before |
|
|
|
| working
capital changes |
|
30,118,671 |
22,975,252 |
|
|
| (Increase)/decrease
in: |
|
|
|
| Stocks and stores |
|
(10,970,280) |
3,045,683 |
|
|
| Trade debtors |
|
(2,230,101) |
(664,971) |
|
|
| Advances,
deposits, prepayments and other receivables |
1,066,748 |
(2,810,645) |
|
|
|
|
|
|
|
|
(12,133,633) |
(429,933) |
|
|
| Increase/(decrease)
in current liabilities |
|
8,310,236 |
(13,671,771) |
|
|
|
|
--------- |
--------- |
|
|
|
|
26,295,274 |
8,873,548 |
|
|
| Payment
of tax |
|
(11,686,243) |
(724,573) |
|
|
| Payment
of dividend |
|
(9,421,101) |
- |
|
|
|
|
--------- |
--------- |
|
|
| Net
cash from operating activities |
|
5,187,930 |
8,148,975 |
|
|
|
|
|
|
| Cash
flow from investing activities |
|
|
|
|
| Purchase of operating fixed assets |
|
(4,871,379) |
(5,753,403) |
|
|
| Sale proceeds of fixed assets |
|
421,280 |
572,205 |
|
|
|
--------- |
--------- |
|
|
| Net
cash used in investing activities |
|
(4,450,099) |
(5,181,198) |
|
|
|
--------- |
--------- |
|
|
| Cash
flow from financing activities |
|
|
|
| Payments finance lease |
|
(1,013,820) |
(1,124,498) |
|
|
| Repayment of long term loan |
|
- |
(2,764,181) |
|
|
|
--------- |
--------- |
|
|
| Net
cash used in financing activities |
|
( 1,013,820) |
(3,888,679) |
|
|
|
|
|
|
| Net
(decrease) in cash and |
|
|
|
|
|
| cash equivalents |
|
(275,989) |
(920,902) |
|
|
|
|
|
|
|
| Cash
and cash equivalents at the |
|
|
|
|
| beginning of the year |
|
2,186,282 |
3,107,184 |
|
|
|
|
--------- |
--------- |
|
|
| Cash
and cash equivalents at the end of the year |
1,910,293 |
2,186,282 |
|
|
========= |
========= |
|
|
|
|
|
NOTES TO THE ACCOUNTS FOR
THE YEAR ENDED 30TH JUNE, 1996 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
| Ferozsons
Laboratories Limited ("the company.") was incorporated as a private
limited company on |
|
| 28th
January, 1954 and was converted into a public limited company on 8th
September, 1960. The |
|
| company
is listed on the Karachi, Lahore and lslamabad Stock Exchanges. The company
is primarily |
|
| engaged
in the manufacture and sale of pharmaceuticals and soap products. |
|
|
|
| 2.
PRINCIPAL ACCOUNTING POLICIES |
|
| The
following accounting policies have been applied consistently in dealing with
items which are |
|
| considered
material in relation to the company's accounts: |
|
|
|
| (a)
Accounting convention |
|
| The
accounts have been prepared under the historical cost convention, modified by
revaluation of |
|
| fixed
assets referred to in note 2 (d). |
|
|
| (b)
Staff retirement benefits |
|
|
| The
company operates a recognised provident fund scheme for employees who fulfill
conditions |
|
| laid
down in the scheme. Provision is made in these accounts for the amount
payable by the |
|
| company
to the scheme in this regard. |
|
|
| (c)
Taxation |
|
|
| Taxation
charged in the accounts is based on taxable income. Deferred taxation is
provided for all |
|
| timing
differences between the recognition of income and expenditure for accounting
and tax |
|
| purposes
which are considered likely to result in a taxation liability in the
foreseeable future, after |
|
| making
allowances for tax losses carried forward. Deferred taxation is not provided
in respect of |
|
| revaluation
surpluses, unless it is intended to dispose off the property. |
|
|
| (d)
Fixed assets |
|
