| Knoll Pharmaceuticals Limited Pakistan |
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| Annual
Report 1997 |
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| (Reports
and Accounts for the nine months ended December 31, 1997) |
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| Contents |
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| Notice
of meeting |
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| Company
information |
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| Results
at a glance |
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| Five
years at a glance |
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| Report
of the Directors |
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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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| Notes
to the accounts |
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| Pattern
of shareholdings |
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| Ten
years at a glance |
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| Comparison
of results |
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| Notice
of Meeting |
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| Notice
is hereby given that the Fiftieth Annual |
Notes: |
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| General
Meeting of Knoll Pharmaceuticals Limited will |
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| be
held at Hotel Sheraton, Karachi, on Monday, |
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(a) The Share Transfer
Books of the Company will |
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| June
29, 1998 at 11.00 a.m., to transact the |
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remain closed from June
18 to June 29, 1998 (both |
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| following
business: |
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days inclusive). |
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| Ordinary
Business |
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(b) A member entitled to
attend and vote at the |
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|
meeting may appoint a
proxy to attend and vote |
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| 1.
To receive, consider and adopt the Balance Sheet |
instead of him/her.
Proxies must be deposited at |
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| and
Profit & Loss Account together with the Report |
the Company's Registered
Office not less than 48 |
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| of
the Directors and the Auditors' Report for the |
hours before the time for
holding the meeting. A |
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| nine
months ended December 31,1997. |
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member shall not be
entitled to appoint more than |
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one proxy. |
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| 2.
To approve dividend for the nine months ended |
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| December
31,1997, as recommended by the |
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c) A statement under
Section 160 of the Companies |
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| Directors. |
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|
Ordinance, 1984,
pertaining to Special Business, |
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|
is annexed to the Notice
of the meeting. |
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| 3.
To appoint Audi{ors and to fix their remuneration. |
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| Special
Business |
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| 4
a) To approve the remuneration of the Chief |
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| Executive. |
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| b)
To approve the remuneration of the whole-time |
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| working
Directors. |
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| Statement
Pertaining to Special Business and |
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Remuneration of
whole-time Director |
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| Related
Draft Resolutions |
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Mr. Basharat A Malik |
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| ITEM
NO. 4 (a) |
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* Salary per month not
exceeding Rs. 100,000 |
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| Remuneration
of the Chief Executive, Mr. W. J. Hargan: |
He shall be entitled to
the following payments/ |
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|
perquisites and benefits
according to the terms and |
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| Effective
January 1, 1998, the remuneration of the Chief |
conditions of his
employment: |
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| Executive
(Managing Director) shall be fixed within the |
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| following
limits: |
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* Annual bonus. |
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* Medical expenses. |
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| *
Salary per month not exceeding Rs. 240,000 |
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* Housing, utilities and
telephone. |
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* Leave passage. |
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| He
shall be entitled to the following perquisites and |
* Company maintained car. |
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| benefits
according to the terms and conditions of his |
* Retirement benefits. |
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| employment: |
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* Other
payments/perquisites and benefits |
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|
according to the rules of
the Company. |
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| *
Annual bonus. |
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| *
Medical expenses for self and his family. |
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Mr. Basharat A Malik is
interested in this business to |
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| *
Furnished housing. |
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|
the extent of his
remuneration. |
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| *
Company maintained transport. |
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| *
Other perquisites and benefits according to the |
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| terms
of employment. |
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| Mr.
W. J. Hargan is interested in this business to the |
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| extent
of his remuneration. |
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| ITEM
NO. 4 (b) |
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| (i)
Remuneration of whole-time Director |
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| Mr.
Abdul Baqy Khan |
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| *
Salary per month not exceeding Rs. 100,000 |
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| He
shall be entitled to the following payments/ |
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| perquisites
and benefits according to the terms and |
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| conditions
of his employment: |
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| *
Annual bonus. |
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| *
Medical expenses. |
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| *
Housing, utilities and telephone. |
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| *
Leave passage. |
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| *
Company maintained car. |
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| *
Retirement benefits. |
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| *
Other payments/perquisites and benefits |
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| according to the rules of the Company. |
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| Mr.
Abdul Baqy Khan is interested in this business to |
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| the
extent of his remuneration. |
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| Company
information |
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| Board
of Directors |
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| A.
H. Hashemy |
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Chairman |
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| W.
J. Hargan |
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Managing Director |
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| T. Schatzle |
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| Pir
Ali Gohar |
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(Alternate A. Gohar) |
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| Razi
ur Rahman Khan |
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| Basharat
A. Malik |
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| Abdul
Baqy Khan |
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| Secretary |
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| Abdul
Baqy Khan |
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| Auditors |
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| A.
F Ferguson & Co. |
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| Chartered
Accountants |
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| Solicitors |
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| Orr,
Digham & Co. |
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| Bankers |
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| ANZ
Grindlays Bank Limited |
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| Emirates
Bank International |
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| Standard
Chartered Bank |
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| The
Hongkong and Shanghai Banking Corporation Ltd, |
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| United
Bank Limited |
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| Registered
Office & Factory |
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| Plot
No. 13, Sector No. 20, |
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| Korangi
Industrial Area, |
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| Karachi. |
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| Registrars
and Share Transfer Office |
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| Ferguson
Associates (Pvt) Ltd. |
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| l-A,
State Life Square, |
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| I.I.
Chundrigar Road, |
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| Karachi. |
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| Results
at a glance |
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|
December 31 |
March 31 |
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1997 |
1997 |
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|
(Rupees '000) |
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| Sales |
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520,938 |
708,795 |
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| Profit
before tax |
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116,405 |
169,237 |
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| Profit
after tax |
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80,178 |
118,029 |
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| Dividend |
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|
57,621 |
76,828 |
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| Shareholders'
equity |
|
497,239 |
474,682 |
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| Earnings
per share after tax |
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10.44 |
15.36 |
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| Number
of employees |
|
425 |
440 |
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| Report
of the Directors |
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| Your
Directors are pleased to present their report |
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| together
with the accounts of the Company for the |
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| nine
months ended December 31,1997. |
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| Financial
Highlights |
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|
(Rs '000) |
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| Profit
before taxation |
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|
116,405 |
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| Less:
Taxation |
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|
36,227 |
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---------- |
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| Profit
after taxation |
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|
80,178 |
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| Appropriations: |
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| Proposed
dividend at Rs 7.50 per share |
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| (March
31,1997: Rs 10 per share) |
57,621 |
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| Transfer
to Revenue Reserve |
22,557 |
80,178 |
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|
---------- |
---------- |
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| Unappropriated
profit carried forward |
- |
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========== |
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| Earnings
per share |
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| The
after-tax earnings per ordinary share of Rs 10 was |
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| Rs
10.44 (March 31,1997: Rs 15.36). |
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| Business
Review |
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| Your
Company's accounting year has been aligned with |
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| the
accounting year of the Parent Company; as a |
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| consequence,
the financial year has been changed from |
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| March
31 to December 31. Accordingly this Report and |
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| the
annexed accounts cover a period of nine months from |
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| April
1,1997 to December 31,1997. |
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| These
accounts reflect total sales of Rs 520.9 million for |
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| the
nine months, a decline of 27% against previous year |
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| reflecting
mainly reduced accounting period and closure |
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| of
foods business. |
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| Profit
before tax for the period was Rs 116.4 million, a |
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| decline
of 31%. |
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| Pharmaceutical
Business |
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| Pharmaceuticals
sales for the nine months were 14% |
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| behind
last year but 7% ahead on yearly basis. This is a |
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| commendable
performance considering the difficult and |
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| uncertain
market conditions prevailing during the period. |
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| Sales
were affected by the confusion surrounding Sales |
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| Tax
which was a problem for much of the period. |
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| Your
Company has launched a new product for relief of |
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| soft
tissue rheumatic conditions Targus LAT, a NSAID |
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| patch
of high efficacy and acceptability. |
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| As
the promised price increase on products has been |
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| denied
to the industry by the government, the profitability |
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| of
the Company remained under serious difficulty from the |
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| increase
in cost of production due mainly to currency |
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| devaluation,
absorption of sales tax on materials, |
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| imposition
of import duty on materials, increasing cost of |
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| utilities
and general inflation. Consequently, gross profit |
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| ratio
to sales has decline by 6% over previous year. The |
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| removal
of Sales Tax from finished goods in the June |
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| budget
was a positive move but, regrettably, this led to a |
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| significant
loss as your Company had to absorb Sales |
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| Tax,
already paid on inventory. |
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| Operating
profit is 25% behind last year reflecting the |
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| above
partly offset by savings in expenses. |
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| Prospects |
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| There
are two major factors which make the medium term |
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| outlook
for the pharmaceutical industry look very |
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| uncertain. |
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| Firstly
the market did not develop positively in 1997 due |
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| mainly
to economic difficulties. The result was a drop in |
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| the
purchasing power of consumers and this effected all |
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| industries
including pharmaceuticals. The industry will |
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| experience
problems if this continues. |
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| Secondly
there is, as yet no fair, transparent and |
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| consistent
pricing policy for pharmaceuticals in Pakistan. |
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| A
policy does exist, but is yet to be implemented. This is |
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| essential
to allow the industry to combat the alarming rise |
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| in
costs, resulting from currency devaluation, inflation, |
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| duties
and taxes. |
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| Prices
of medicines in Pakistan are amongst the lowest in |
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| the
world and this has been achieved hand in hand with |
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| international
quality standards. It is to be hoped that this |
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| can
be sustained and, to do so, the government will need |
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| to
implement the policy they conceived during their |
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| previous
tenure. |
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| Your
company continues to pursue competitive advantage |
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| in
all areas of operations. By doing so it is hoped that we |
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| will
remain profitable and able to capitalise on future |
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| opportunities. |
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| Subsequent
Events |
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| No
other material changes or commitments, which could |
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| affect
the financial position of the Company, have |
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| occurred
between the end of the financial period and the |
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| date
of this review. |
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| Dividend |
|
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| The
Directors have recommended a dividend at the rate |
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| of
Rs 7.50 per share for the nine months ended December |
|
| 31,1997,
as against Rs 10 per share declared in the |
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| previous
year. If approved, the proposed dividend will |
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| amount
to Rs 57.6 million as compared to Rs 76.8 million |
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| paid
last year. |
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| Parent
Company |
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| The
company is a subsidiary of Lupharma, GmbH, which |
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| is
a wholly owned subsidiary of Knoll AG (a BASF group |
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| company);
these companies are incorporated in Germany. |
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| Shareholding |
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| The
pattern of shareholding is detailed on page 29. |
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| Employees |
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| The
two year wage settlement with the Workers' Union |
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| expired
on March 31,1998. Negotiations on the fresh |
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| charter
of demands is currently in progress. |
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| The
Directors would like to thank all the employees for |
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| their
continuing support and hard work during the year. |
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|
| Auditors |
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| The
present Auditors, A F Ferguson & Co, Chartered |
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| Accountants,
retire and, being eligible, offer themselves |
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| for
reappointment. |
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|
| Auditors'
Report to the Members |
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| We
have audited the annexed Balance Sheet of Knoll |
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| Pharmaceuticals
Limited as at December 31, 1997 and |
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| the
related Profit and Loss Account and Cash Flow |
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| Statement,
together with the notes forming part thereof, |
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| for
the nine months then ended and we state that we |
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| have
obtained all the information and explanations which |
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| to
the best of our knowledge and belief were necessary |
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| for
the purposes of our audit and, after due verification |
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| thereof,
we report that: |
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| (a)
in our opinion, proper books of account have been |
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| kept
by the Company as required by the Companies |
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| Ordinance,
1984; |
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| (b)
in our opinion: |
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| (i)
the Balance Sheet and Profit and Loss Account |
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| together
with the notes thereon have been drawn |
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| up
in conformity with the Companies Ordinance, |
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| 1984
and are in agreement with the books of |
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| account
and are further in accordance with |
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| accounting
policies consistently applied except |
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| for
the change as explained in note 3.6 with which |
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| we concur; |
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| (ii)
the expenditure incurred during the period was |
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| for
the purpose of the Company's business; and |
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| (iii)
the business conducted, investments made and |
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| the
expenditure incurred during the period were |
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| in
accordance with the objects of the Company; |
|
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| (c)
in our opinion and to the best of our information and |
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| according
to the explanations given to us, the |
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| Balance
Sheet, Profit and Loss Account and Cash Flow |
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| Statement,
together with the notes forming part thereof, |
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| give
the information required by the Companies |
|
| Ordinance,
1984 in the manner so required and |
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| respectively
give a true and fair view of the state of the |
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| Company's
affairs as at December 31, 1997 and of |
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| the
profit and cash flows for the nine months then |
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| ended; and |
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| (d)
in our opinion Zakat deductible at source under the |
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| Zakat
and Ushr Ordinance, 1980 was deducted by the |
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| Company
and deposited in the Central Zakat Fund |
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| established
under section 7 of that Ordinance. |
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|
A.F. Feguson & Co. |
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|
Chartered Accountants |
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|
Karachi: May 21, 1998 |
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|
|
| Balance
Sheet |
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| as
at December 31, 1997 |
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|
Note |
December |
March 31 |
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|
1997 |
1997 |
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| SHARE'
CAPITAL AND RESERVES |
(Rupees '000) |
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|
| Authorised
capital |
|
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|
| 10,000,000
ordinary shares |
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| of
Rs 10 each |
|
100,000 |
100,000 |
|
|
|
|
========== |
========== |
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| Issued,
subscribed and paid-up capital |
4 |
76,828 |
76,828 |
|
| Reserves |
|
5 |
420,411 |
397,854 |
|
|
|
|
---------- |
---------- |
|
|
|
|
497,239 |
474,682 |
|
|
|
|
| DEFERRED
LIABILITIES |
|
6 |
8,796 |
9,459 |
|
| CURRENT
LIABILITIES AND PROVISIONS |
|
|
| Short-term
running finances utilised |
|
---------- |
---------- |
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| under
mark-up arrangements |
|
7 |
8,596 |
28,288 |
|
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|
|
| Creditors,
accrued and other liabilities |
8 |
69,441 |
72,423 |
|
| Taxation |
|
|
58,262 |
63,095 |
|
| Proposed
dividend |
|
|
57,621 |
76,828 |
|
|
|
|
---------- |
---------- |
|
|
|
|
193,920 |
240,634 |
|
| COMMITMENTS |
|
9 |
---------- |
---------- |
|
|
|
|
699,955 |
724,775 |
|
|
|
|
========== |
========== |
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| The
annexed notes form an integral part of these accounts. |
|
|
| FIXED
ASSETS -TANGIBLE |
|
|
|
|
|
|
| Operating
assets |
|
10 |
149,687 |
158,557 |
|
| Capital
work-in-progress |
|
11 |
1,751 |
2,185 |
|
|
|
|
---------- |
---------- |
|
|
|
|
151,438 |
160,742 |
|
| LONG-TERM
INVESTMENTS |
|
12 |
75,000 |
75,000 |
|
| LONG-TERM
LOANS AND ADVANCES |
|
13 |
2,082 |
1,880 |
|
| LONG-TERM
DEPOSITS |
|
|
918 |
953 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
---------- |
---------- |
|
| Spares |
|
14 |
837 |
- |
|
| Stock-in-trade |
|
15 |
135,100 |
207,896 |
|
| Trade debts |
|
16 |
4,795 |
4,797 |
|
| Loans
and advances |
|
17 |
3,702 |
5,966 |
|
| Trade
deposits and short-term prepayments |
18 |
6,421 |
26,991 |
|
| Other
receivables |
|
19 |
48,976 |
20,976 |
|
| Investments |
|
20 |
111,319 |
170,352 |
|
| Cash
and bank balances |
|
21 |
159,367 |
49,222 |
|
|
|
|
---------- |
---------- |
|
|
|
|
470,517 |
486,200 |
|
|
|
|
---------- |
---------- |
|
|
|
|
699,955 |
724,775 |
|
|
|
|
========== |
========== |
|
|
|
|
| Profit
and loss account |
|
| For
the nine months ended December 31, 1997 |
|
|
|
Note |
Nine months |
Year ended |
|
|
|
ended |
March 31 |
|
|
|
December 31 |
1997 |
|
|
|
1997 |
|
|
|
|
|
|
(Rupees '000) |
|
|
|
|
| Net sales |
|
22 |
520,938 |
708,795 |
|
| Cost
of goods sold |
|
23 |
350,506 |
442,464 |
|
|
|
|
---------- |
---------- |
|
| Gross
profit |
|
|
|
170,432 |
266,331 |
|
|
|
|
---------- |
---------- |
|
| Administration
expenses |
|
|
24 |
23,648 |
38,786 |
|
| Selling
and distribution expenses |
|
25 |
60,620 |
110,373 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
84,268 |
149,159 |
|
|
|
|
---------- |
---------- |
|
| Operating
profit |
|
|
|
86,164 |
117,172 |
|
| Other
income |
|
|
26 |
43,985 |
74,548 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
130,149 |
191,720 |
|
|
|
|
---------- |
---------- |
|
| Financial
charges |
|
|
27 |
2,942 |
7,062 |
|
| Other
charges |
|
|
28 |
10,802 |
15,421 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
13,744 |
22,483 |
|
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
|
116,405 |
169,237 |
|
| Taxation |
|
|
29 |
36,227 |
51,208 |
|
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
|
80,178 |
118,029 |
|
| Appropriations: |
|
|
|
| Proposed
dividend Rs 7.50 per share |
|
|
---------- |
---------- |
|
| (March
31,1997: Rs 10.00 per share) |
|
|
57,621 |
76,828 |
|
| Transfer
to revenue reserve |
|
|
22,557 |
41,201 |
|
|
|
|
---------- |
---------- |
|
|
|
|
80,178 |
118,029 |
|
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
- |
- |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| Cash
Flow Statement |
|
| For
the nine months ended December 31, 1997 |
|
|
|
Note |
Nine months |
Year ended |
|
|
|
ended |
March 31 |
|
|
|
December 31 |
1997 |
|
