| PARKE, DAVIS & COMPANY LIMITED |
|
|
|
|
|
|
|
|
| ANNUAL
REPORT 1997 |
|
|
|
|
|
| CONTENTS |
|
| COMPANY
INFORMATION |
|
| NOTICE
OF MEETING |
|
| REPORT
OF THE DIRECTORS |
|
| PATTERN
OF HOLDING OF SHARES |
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| BALANCE
SHEET |
|
| PROFIT
AND LOSS ACCOUNT |
|
| CASH
FLOW STATEMENT |
|
| NOTES
TO THE ACCOUNTS |
|
| LOCATION
MAP |
|
|
|
|
|
|
| BOARD
OF DIRECTORS |
|
|
| M.
Raziuddin Ansari, Chairman and Chief Executive |
|
| Ramesh
T. Thadani |
|
| Fabio
A. Bernal |
|
| Irtiza
Husain |
|
| Badaruddin
F. Vellani |
|
| S.
Khalid Hussain |
|
|
| M. Saleem |
|
|
| SECRETARY |
|
| M. Saleem |
|
|
| AUDITORS |
|
| A.
F. Ferguson & Co. |
|
|
| REGISTERED
OFFICE |
|
| B-2,
S.I.T.E., |
|
| Karachi-75700 |
|
|
|
| Notice
of Meeting |
|
|
| Notice
is hereby given that the Thirty-seventh Annual General Meeting of the Company
will be held at |
|
| B-2,
S.I.T.E., Karachi, on Tuesday, May 26, 1998 at 10:00 a.m. to transact the
following business: |
|
|
| 1.
To receive and consider the audited Balance Sheet and Profit and Loss Account
for the year ended |
|
| November
30, 1997 with the Reports of the Directors and Auditors thereon. |
|
|
|
|
| 2.
To approve the payments of dividend for the year ended November 30, 1997 as
recommended by the |
|
| Directors. |
|
|
|
| 3.
To appoint Auditors and to fix their remuneration. |
|
|
| NOTES: |
|
| 1.
The Share Transfer Books of the Company will be closed from May 19, 1998 to
May 26, 1998 |
|
| (both
days inclusive). |
|
|
|
|
| 2.
A member entitled to attend, speak and vote at the Annual General Meeting may
appoint a proxy to |
|
| attend
and vote on his behalf. Proxies in order to be effective must be received by
the Company not |
|
| less
than 48 hours before the Meeting. The proxy must be a member of the Company,
except that a |
|
| corporation
being a member of the Company may appoint as its proxy one of its officers or
some other |
|
| person
though not a member of the Company. |
|
|
|
|
| 3.
Members appearing on the Register of Members as on May 19, 1998 i.e. the date
of closure of Share |
|
| Transfer
Books will be considered eligible for payment of dividend declared in the
Annual General |
|
| Meeting
to be held on May 26, 1998. |
|
|
| 4.
Members are requested to notify us immediately of any change in their
Registered Address currently |
|
| available
with us. |
|
|
|
|
|
| Report
of the Directors |
|
|
| Your
directors are pleased to present their Annual Report together with the
audited accounts for the year ended |
|
| November
30, 1997 |
|
|
| BUSINESS
REVIEW |
|
| Despite
difficult economic and trading environment that persisted during the year,
your company was able to maintain a |
|
| strong
growth in its turnover. The sales at Rs. 913 Million grew at higher than the
industry growth rate and registered a |
|
| 15%
growth over the previous year. All major brands recorded strong volume
growth. |
|
|
| Though
sales growth has been satisfactory, the operating margins remained under
constant pressure mainly due to currency |
|
| devaluation,
soaring inflation and non availability of price increases from the Government
during the period under review. |
|
| Timely
and innovative measures undertaken by the management of your Company helped
control costs effectively. This, |
|
| together
with the initiatives taken to enhance, productivity and improve internal
efficiencies, helped us minimize the |
|
| adverse
impact on profits resulting from the above factors. |
|
|
| Adverse
economic conditions that prevailed during the year created a liquidity crunch
at the trade level, which is mainly |
|
| responsible
for increase in the trade debts. Nonetheless, the impact on the working
capital was well contained by a |
|
| considerable
reduction in inventory levels achieved through re-engineering of inventory,
planning and warehousing |
|
| operations. |
|
|
| As
you are aware the Company places great emphasis on strict compliance with the
international standards of Safety, Health |
|
| and
Environment and with the principles of Current Good Manufacturing Practices
(CGMP). This, not only ensures achieving |
|
| and
sustaining the quality of our products, but also results in maintaining a
safe and healthy environment for our colleagues |
|
| and
the community at large. All these measures entailed extra costs, which were
also absorbed. |
|
|
| FINANCIAL
RESULTS |
|
| Results
for 1997 together with Directors' recommendations for appropriations are
given below: |
|
|
|
|
|
Rs.000 |
|
| Profit
after taxes |
|
139,230 |
|
| Add:
Unappropriated profit brought forward |
|
893 |
|
|
|
|
---------- |
|
|
|
|
140,123 |
|
| Less:
Transfer to general reserve |
|
93,000 |
|
|
|
|
---------- |
|
| Balance
available for appropriation |
|
47,123 |
|
| Interim
dividend @ 100% paid during the year |
|
19,584 |
|
| Recommended
final dividend @ 140% |
|
27,418 |
|
|
|
|
---------- |
|
| Unappropriated
profit carried forward |
|
121 |
|
|
========== |
|
|
|
| DIVIDEND |
|
| The
directors recommend a final dividend 6f 140% making a total dividend payment
for 1997 of 240%. An interim |
|
| dividend
of 100% has already been paid in October 1997. |
|
|
| FUTURE
PROSPECTS |
|
| Our
diversified and competitively priced product portfolio presents good
prospects for future progress. Your Company is |
|
| determined
to provide quality healthcare products to its customers and has ambitious
plans to launch new pharmaceutical |
|
| preparations
which are awaiting registration. The Company is also making investments for
expansion and modernization |
|
| of
current manufacturing facilities which will help enhance growth in the
future. |
|
|
| Growth
in the Company's business and profitability is largely dependent upon
economic policies of the Government |
|
| towards
the industry and improvement in the macro economic conditions. The new
government did provide some relief to |
|
| the
pharmaceutical industry by withdrawing sales tax on pharmaceutical raw and
packaging materials, which should have |
|
| a
positive effect on the profitability. However, the issue of price increase
which is already overdue for sometime, still |
|
| remains
unresolved. We hope that the government's emphasis on encouraging industrial
growth will continue and the |
|
| pricing
issue will be settled soon. |
|
|
| SUBSEQUENT
EVENTS |
|
| The
company is in the process of revamping its distribution system which is
likely to provide efficiencies which will |
|
| increase
our spread making us better geared to take advantage of future opportunities. |
|
|
| DIRECTORS |
|
| Effective
July 1,1997 Mr. S.M. Sarwar All resigned from the board and the resulting
vacancy was filled in by the |
|
| appointment
of Mr. Fabio A. Bernal. |
|
|
| COLLEAGUES |
|
| We
take pride in the quality of human resources that we have. They are high
caliber colleagues who are skilled and |
|
| strongly
committed to their work. Our success has been built around their collective
efforts. Directors wish to record their |
|
| appreciation
of the efforts of our colleagues in making the current operations successful. |
|
|
| A
two year agreement was successfully negotiated between the Workers Union
(CBA) and the Company. This Agreement |
|
| will
expire on December 31,1998. |
|
|
| PARENT
COMPANY |
|
| The
Company's holding company is Parke, Davis & Company, which is a
subsidiary of Warner-Lambert Company; both |
|
| companies
are incorporated in the USA. |
|
|
| EARNINGS
PER SHARE |
|
| The
after-tax earnings per ordinary share of Rs. 10 is Rs. 71.10 (1996:Rs.78.31). |
|
|
| PATTERN
OF SHAREHOLDING |
|
| The
pattern of shareholding is detailed on page 6 |
|
|
| AUDITORS |
|
| Our
Auditors Messrs A.F. Ferguson & Co., Chartered Accountants, retire and
being eligible offer themselves for |
|
| re-appointment. |
|
|
|
| Pattern
of holding of shares held by the shareholders of |
|
| Parke,
Davis & Company, Limited as at November 30, 1997 |
|
|
| NUMBER OF |
|
SHAREHODLING |
|
TOTAL |
|
|
| SHAREHOLDERS |
FROM |
-- |
TO |
SHARES HELD |
|
|
|
|
| 92 |
1 |
-- |
100 |
7,765 |
|
| 37 |
101 |
-- |
500 |
11,465 |
|
| 18 |
501 |
-- |
1000 |
16,400 |
|
| 10 |
1001 |
-- |
5000 |
27,700 |
|
| 4 |
5001 |
-- |
10000 |
29,500 |
|
| 2 |
10001 |
-- |
15000 |
28,000 |
|
| 1 |
70001 |
-- |
75000 |
75,000 |
|
| 1 |
280000 |
-- |
285000 |
282,270 |
|
| 1 |
1480001 |
-- |
1485000 |
1,480,300 |
|
| ---------- |
|
---------- |
|
| 166 |
|
1,958,400 |
|
| ========== |
|
========== |
|
|
|
|
|
| CATEGORIES
OF |
|
|
SHARES |
|
|
| SHAREHOLDERS |
|
NUMBER |
HELD |
PERCENTAGE |
|
|
| INDIVIDUALS |
|
155 |
89,230 |
4.56 |
|
| INVESTMENT
COMPANIES |
|
2 |
285,270 |
14.56 |
|
| INSURANCE
COMPANIES |
|
1 |
75,000 |
3.83 |
|
| JOINT
STOCK COMPANIES |
|
5 |
1,506,700 |
76.93 |
|
| FINANCIAL
INSTITUTIONS |
|
1 |
2000 |
0.10 |
|
| MODARABA
COMPANIES |
|
1 |
100 |
0.01 |
|
| CO-OPERATIVE
SOCIETIES |
|
1 |
100 |
0.01 |
|
|
|
---------- |
---------- |
---------- |
|
|
|
166 |
1,958,400 |
100.00 |
|
|
========== |
========== |
========== |
|
|
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Parke, Davis & Company Limited
as at November |
|
| 30,
1997 and the related profit and loss account and cash flow statement,
together with the notes |
|
| forming
part thereof, for the year then ended and we state that we have obtained all
the information |
|
| and
explanations which to the best of our knowledge and belief were necessary for
the purposes of |
|
| our
audit and, 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
Companies Ordinance, 1984; |
|
|
|
|
| (b)
in our opinion: |
|
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have |
|
| been
drawn up in conformity with the Companies Ordinance, 1984 and are in |
|
| agreement
with the books of account and are further in accordance with accounting |
|
| policies
consistently applied; |
|
|
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the company's |
|
| business;
and |
|
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during
the |
|
| year
were in accordance with the objects of the company; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given |
|
| to
us, the balance sheet, profit and Joss account and the cash flow statement,
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 the |
|
| Company's
affairs as at November 30, 1997 and of the profit and cash flows for the year |
|
| then
ended; and |
|
|
|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,
1980 was |
|
| deducted
by the Company and deposited in the Central Zakat Fund established under |
|
| section
7 of that Ordinance. |
|
|
|
|
A.F. FERGUSON & CO. |
|
| Karachi:
April 24, 1998 |
|
CHARTERED ACCOUNTANTS |
|
|
|
|
|
|
|
| BALANCE
SHEET AS AT NOVEMBER 30, 1997 |
|
|
|
|
|
Note |
1997 |
1996 |
|
|
|
(Rupees'000) |
(Rupees'000) |
|
|
|
|
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
|
|
|
| Share
capital
: |
|
| Authorized |
|
|
|
|
|
|
| 4,000,000
ordinary shares of Rs. 10 each |
|
40,000 |
40,000 |
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
3 |
19,584 |
19,584 |
|
| General
reserve-revenue |
|
4 |
481,000 |
388,000 |
|
| Unappropriated
profit |
|
121 |
893 |
|
|
|
---------- |
---------- |
|
|
|
|
500,705 |
408,477 |
|
| DEFERRED
LIABILITIES |
|
|
|
|
|
|
| Staff
retirement benefits |
|
|
4,337 |
3,700 |
|
| Deferred
taxation |
|
5 |
2,221 |
- |
|
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Creditors,
accrued and other liabilities |
6 |
145,509 |
124,454 |
|
| Taxation
-provision less payments |
|
7 |
204 |
23,221 |
|
| Dividend |
|
8 |
27,620 |
35,358 |
|
|
|
|
---------- |
---------- |
|
|
|
|
173,333 |
183,033 |
|
| COMMITMENTS |
|
|
|
9 |
---------- |
---------- |
|
|
|
|
|
680,596 |
595,210 |
|
|
|
|
========== |
========== |
|
|
| FIXED
ASSETS-TANGIBLE |
|
|
|
|
|
|
| Operating
assets |
|
10 |
134,824 |
75,349 |
|
|
|
|
| Capital
work-in-progress |
|
11 |
101,778 |
82,330 |
|
|
|
|
---------- |
---------- |
|
|
|
|
236,602 |
157,679 |
|
|
|
|
| DEFERRED
TAXATION |
|
|
5 |
- |
5,696 |
|
|
|
|
|
|
|
|
|
|
|
| LONG-TERM
LOANS- considered good |
|
12 |
2,582 |
3,954 |
|
|
|
|
|
| LONG-TERM
DEPOSITS |
|
|
1,576 |
553 |
|
| CURRENT
ASSETS |
|
|
|
| Spares-at
cost |
|
13 |
12,186 |
12,420 |
|
| Stock-in-trade |
|
14 |
142,387 |
180,460 |
|
| Trade debts |
|
15 |
174,115 |
106,152 |
|
| Loans
and advances |
|
16 |
5,786 |
7,709 |
|
| Deposits
and short-term prepayments |
|
17 |
5,273 |
5,433 |
|
| Other
receivables |
|
18 |
30,095 |
6,576 |
|
| Cash
and bank balances |
|
19 |
69,994 |
108,578 |
|
|
|
|
---------- |
---------- |
|
|
|
|
439,836 |
427,328 |
|
|
|
|
---------- |
---------- |
|
|
|
|
680,596 |
595,210 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR |
|
| ENDED
NOVEMBER 30, 1997 |
|
|
|
Note |
1997 |
1996 |
|
|
|
(Rupees'000) |
(Rupees'000) |
|
|
|
|
| Sales |
|
|
20 |
913,478 |
792,208 |
|
| Cost
of sales |
|
|
21 |
559,378 |
463,632 |
|
|
|
|
---------- |
---------- |
|
|
|
|
354,100 |
328,576 |
|
| Administration
and selling expenses |
|
22 |
156,396 |
119,228 |
|
|
|
|
---------- |
---------- |
|
| Operating
profit |
|
|
|
197,704 |
209,348 |
|
| Other
income |
|
|
23 |
20,858 |
15,759 |
|
|
|
|
---------- |
---------- |
|
|
|
|
218,562 |
225,107 |
|
|
|
|
---------- |
---------- |
|
| Financial
charges |
|
|
24 |
3,652 |
3,130 |
|
| Other
charges |
|
|
25 |
14,611 |
15,384 |
|
|
|
|
---------- |
---------- |
|
|
|
|
18,263 |
18,5l4 |
|
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
|
200,299 |
206,593 |
|
| Taxation |
|
|
26 |
61,069 |
53,228 |
|
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
|
139,230 |
153,365 |
|
|
|
|
| Unappropriated
profit brought forward |
|
893 |
778 |
|
|
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
|
140,123 |
154,143 |
|
|
|
|
| Appropriations |
|
|
|
|
|
|
| Transfer
to general reserve |
|
|
93,000 |
118,000 |
|
| Interim
dividend at Rs. 10.00 per share |
|
| (1996:Rs.9.00
per share) |
|
|
19,584 |
17,625 |
|
| Proposed
final dividend at Rs. 14.00 per share |
|
| (
1996:Rs.9.00 per share) |
|
|
27,418 |
17,625 |
|
|
|
|
---------- |
---------- |
|
|
|
|
140,002 |
153,250 |
|
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
121 |
893 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED |
|
| NOVEMBER 30, 1997 |
|
Note |
1997 |
1996 |
|
|
|
(Rupees'000) |
(Rupees'000) |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTMTIES |
|
|
|
|
|
| Cash
generated from operations |
|
31 |
181,205 |
103,009 |
|
| Financial
expenses paid |
|
|
(1,660) |
(570) |
|
| Taxes paid |
|
|
(76,169) |
(76,192) |
|
|
|
|
---------- |
---------- |
|
| Net
cash inflow from operating activities |
|
103,376 |
26,247 |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
|
|
| Fixed
capital expenditure |
|
(99,799) |
60,174) |
|
| Sale
proceeds of fixed assets |
|
1,931 |
907 |
|
| Return/profit
received |
|
10,299 |
13,006 |
|
| Decrease/(increase)
in long-term loans and deposits |
349 |
(3,022) |
|
|
|
---------- |
---------- |
|
| Net
cash outflow from investing activities |
|
(87,220) |
(49,283) |
|
|
|
|
| CASH
OUTFLOW FROM FINANCING ACTIVITIES |
|
|
|
|
| Dividend
paid |
|
(54,740) |
(19,449) |
|
|
|
---------- |
---------- |
|
| Net
decrease in cash and cash equivalents |
|
(38,584) |
(42,485) |
|
| Cash
and cash equivalents at the beginning of the year |
108,578 |
151,063 |
|
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at the end of the year |
69,994 |
108,578 |
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED NOVEMBER 30, 1997 |
|
|
| 1.
COMPANY INFORMATION |
|
|
| The
Company is incorporated in Pakistan and is listed on the Karachi and Lahore
Stock Exchanges. It is |
|
| engaged
in the manufacture and sale of pharmaceutical, health care and consumer
products. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| (a)
Accounting convention |
|
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| (b)
Staff retirement benefits' |
|
|
| The
Company operates: |
|
|
| (i)
approved funded gratuity scheme for all its employees and pension scheme for
management |
|
| staff.
Contributions are made to the schemes on the basis of actuarial
recommendations at |
|
| the
rate of 8.33% per annum of basic salaries for gratuity and 20% per annum of
basic |
|
| salaries
for pension. Actuarial valuation of the schemes is carried out once in every
three |
|
| years.
The latest valuations were carried out as at November 30, 1995 for gratuity
and June |
|
| 30,
1996 for pension. The fair value of the schemes' assets and liabilities at
the latest |
|
| valuation
dates were Rs. 14.59 million and Rs. 29.72 million respectively for gratuity |
|
| scheme
and Rs. 15.41 million and Rs.44.01 million respectively for the pension
scheme. |
|
|
| Entry
Age Normal actuarial cost method, using following significant assumptions, is
used |
|
| for
valuation of above mentioned funded schemes: |
|
|
| - Expected
rate of increase in salaries 12% per annum. |
|
| - Expected
rate of income on investments 12% per annum. |
|
|
| (ii)
recognized provident fund scheme for all its employees. Equal contributions
are made, |
|
| both
by the Company and the employees, to the fund at the rate of 10% of basic
salary. |
|
|
| Retirement
benefits are payable on cessation of employment subject to a minimum |
|
| qualifying
period of service under the schemes. |
|
|
| (c)
Taxation |
|
|
| Provision
for current taxation is based on taxable income at the current rates of
taxation after |
|
| taking
into account tax credits and rebates available, if any. The Company accounts
for deferred |
|
| taxation
on all timing differences using the liability method. |
|
|
| (d)
Fixed assets and depreciation |
|
|
| Operating
assets are stated at cost less accumulated depreciation. Capital
work-in-progress is stated |
|
| at
cost. Leasehold land is amortized over the period of the lease. Depreciation
on other assets is |
|
| charged
to income applying the straight-line method whereby the cost of an asset is
written off over |
|
| its
estimated useful life. In respect of additions and disposals during the year,
only six months |
|
| depreciation
is charged. Maintenance and normal repairs are charged to income as and when |
|
| incurred;
also assets costing up to approximately USS 1,000 equivalent to Rs. 44,315
are charged to |
|
| income.
Major renewals and improvements are capitalized and the assets so replaced,
if any, are |
|
| retired. |
|
|
| Gain
and losses on disposal of fixed assets are recognized in income currently. |
|
|
|
| (e) Spares |
|
|
|
|
|
| These
are valued at weighted average cost. Items in transit are valued at cost
comprising invoice |
|
| value
plus other charges incurred thereon. |
|
|
| (f)
Stock-in-trade |
|
|
| All
stocks except for those in transit are stated at the lower of cost using
first-in-first-out method and |
|
| net
realizable value. Cost Of finished goods and work-in-process include an
applicable portion of |
|
| production
over-heads. |
|
|
| Items
in transit are valued at cost comprising invoice value plus other charges
incurred thereon. |
|
|
| Net
realizable value signifies the estimated selling price in the ordinary course
of business less costs |
|
| necessarily
to be incurred to make the sale. |
|
|
| (g)
Revenue recognition |
|
| Sales
of products are recorded on despatch of goods. |
|
|
|
|
| (h)
Advertising and sales promotion |
|
|
| These
costs, except for advertising and promotional materials held in inventory,
are charged to |
