| CLOVER PAKISTAN LIMITED |
|
|
|
|
|
|
| ANNUAL
REPORT 2004 |
|
|
| Directors' Report |
|
|
| The
Directors take pleasure in presenting the Annual Report together with the
Company's audited accounts |
|
| for
the year ended June 30, 2004. |
|
|
| FINANCIAL HIGHLIGHTS |
|
(Rupees in million) |
|
| The
profit and appropriations for the year are as follows: |
|
|
|
| Net
profit before tax for the year |
|
96.233 |
|
| Provision
for taxation |
|
31.214 |
|
| Profit after tax |
|
65.019 |
|
| Unappropriated
profit brought forward |
|
324 |
|
| Profit
available for appropriation |
|
65.343 |
|
| Proposed
cash dividend @ 45% |
|
24.57 |
|
| Transfer
to general reserves |
|
40 |
|
| Unappropriated
profit carried forward |
|
0.773 |
|
|
| OPERATING
RESULTS |
|
| The
Company has managed to post stable sales this year despite the entry of a
number of new powder |
|
| beverages
in the market and competition from existing brands. Gross sales grew by 7% to
Rs.654.200 million |
|
| from
Rs.609.899 million last year. |
|
|
| This
growth in revenue was achieved by giving increased discounts to the trade
which was necessary to match |
|
| those
offered by competition. Selling and distribution costs increased 24% mainly
due to higher expenditure |
|
| on
advertising, sales promotion and also on improving and streamlining the sales
network. |
|
|
| Spending
on advertising and sales promotion has been the key factor that has continued
to help us build sales. |
|
| This
has increased to Rs 64.209 million from Rs.44.513 million, an increase of
44%. Along with this we have |
|
| also
been re-organising and expanding our wharehousing capabilities throughout the
country and increasing |
|
| the
number of personnel in our sales force and field staff. |
|
|
| During
the year the Company introduced two new variants of Tang in the market. These
included the launch |
|
| of
Tang Plus, with added vitamins A, C and Iron. Initial demand suggests that
both these mixed fruit flavours |
|
| have
been well received by the consumer. |
|
|
| Despite
increased sales, profit before tax declined to Rs.96.233 million from Rs.
102.734 million for the previous |
|
| year,
registering a drop of 6%. This was due to reasons explained above. Profit
aftertax was Rs.65.019 million |
|
| which
also declined by 6%. |
|
|
| Notes: |
|
|
| 1. The share transfer books of the
Company will remain closed from October 16, 2004 to October 26, |
|
| 2004 (both days inclusive).Transfers received in
order at the Company's registered office situated |
|
| at
Lakson Square, Building No.2, Sarwar Shaheed Road, Karachi upto October 15,
2004 will be |
|
| considered
in time to be eligible for payment of the dividend to the transferees. |
|
|
| 2. A member who has deposited his/her
shares into Central Depository Company of Pakistan Limited, |
|
| must
bring his/her participant's ID number and account/sub-account number
alongwith original |
|
| Computerised
National Identity Card (CNIC) or original Passport at the time of attending
the meeting. |
|
|
| 3. A member entitled to attend and
vote at the Annual General Meeting may appoint another member |
|
| as
his/her proxy to attend, speak and vote instead of him/her. |
|
|
| 4. Forms of proxy to be valid must be
received by the Company at its registered office not later than |
|
| 48
hours before the time of the meeting. |
|
|
| 5. Members are requested to notify
the Company promptly of any change in their addresses. |
|
|
| 6. Members who have not yet submitted
photocopy of their Computerized National Identity Cards to the |
|
| Company
are requested to send the same at the earliest. |
|
|
| 7. A form of proxy is enclosed
herewith. |
|
|
| STATEMENT
UNDER SECTION 160 OF THE COMPANIES ORDINANCE.
1984 |
|
| The
Securities and Exchange Commission of Pakistan (SECP) has allowed the listed
companies vide its |
|
| Circular
No.19 of 2004 CLD/D-ll/51/2003 dated April 14, 2004 to place their quarterly
accounts on their websites |
|
| which
will be treated compliance of the provisions of Section 245 of the Companies
Ordinance, 1984 subject |
|
| to
fulfillment of the certain conditions including seeking the consent of its
shareholders in general meeting as |
|
| mentioned
in the above referred circular. |
|
|
| In
order to avoid cumbersome exercise and save the cost of printing and
despatching of periodical accounts, |
|
| the
Board of Directors has recommended to the members of the Company for
placement of quarterly accounts |
|
| on
its website www.clover.com.pk instead of circulating the same by post to the
shareholders, subject to |
|
| approval
from the SECP. |
|
|
| In
the event the quarterly accounts are transmitted through the Company's
website, the Company shall supply |
|
| printed
copies of the quarterly accounts to the shareholders on demand, within one
week of such demand. |
|
|
| The
Directors are not interested in this business except as shareholders of the
Company. |
|
|
| The
system of internal control is sound in design. The system is being
continuously monitored by |
|
| Internal
Audit and through other such monitoring procedures. The process of monitoring
internal |
|
| controls
will continue as an ongoing process with the objective to further strengthen
the controls and |
|
| bring
improvements in the system. |
|
|
| There
are no doubts upon the Company's ability to continue as a going concern. |
|
|
| There
has been no material departure from the best practices of corporate
governance, as detailed |
|
| in
the Listing Regulations. |
|
|
| The
summary of key operating and financial data of the Company of last six years
is annexed in this |
|
| report. |
|
|
| Information
about taxes and levies is given in the notes to the accounts. |
|
|
| The
value of investments made by the staff retirement benefit funds based on
their respective audited |
|
| accounts
as at June 30, 2004 is as follows: |
|
|
|
|
|
No. of Meetings |
|
| Name
of Directors |
|
|
Attended |
|
| Mr.
Iqbal All Lakhani |
|
3 |
|
| Mr.
Zulfiqar Ali Lakhani |
|
5 |
|
| Mr.
Amin Mohammed Lakhani |
|
2 |
|
| Mr.
Tasleemuddin Ahmed Batlay |
|
4 |
|
| Mr. Aziz Ebrahim |
|
5 |
|
| Mr.
Ramzan Ali Halani |
|
5 |
|
| Mr. M. A. Qadir |
|
5 |
|
|
| PATTERN
OF SHAREHOLDING |
|
| A
statement of the pattern of shareholding of the Company and additional
information as at June 30 2004 is |
|
| included
in this report on page 42. |
|
|
| The
Directors, CEO, CFO, Company Secretary and their spouses and minor children
did not carry out any |
|
| transaction
in the shares of the Company during the year. |
|
|
| AUDIT
COMMITTEE |
|
| The
Audit Committee consisting of four members, three of whom are non-executive
directors including the |
|
| Chairman
has been in existence since implementation of the Code of Corporate
Governance. The Board of |
|
| Directors
has set out Terms of Reference for the Audit Committee. |
|
|
| FINANCIALS |
|
| The
stable rupee and stable interest rates have contributed in maintaining our
net profit for the year. The |
|
| Company
is now financially sound. However with the recent fall in the value of the
Rupee against the U.S. $ |
|
| pressure
on our profit margins cannot be ruled out. |
|
|
| CONTRIBUTION
TO THE NATIONAL ECONOMY |
|
| The
Company's contribution to the national economy continues to increase year
after year, during the current |
|
| year
this contribution amounted to Rs. 106.650 million. The contribution for the
last year was Rs. 89.908 million. |
|
| There
was an increase of 19%. |
|
|
| In
addition we have been providing employment opportunities throughout the
country. |
|
|
| AUDITORS |
|
| In
compliance of the Code of Corporate Governance, the existing auditors M/s
Ebrahim & Co. who have been |
|
| auditors
of the Company for more than five years, will require to be changed at the
Annual General Meeting. |
|
| They
have given their consent to continue as auditors until the next Annual
General Meeting, if legally eligible. |
|
|
| A
notice under section 253 of the Companies Ordinance 1984, has been received
for the appointment of M/s. |
|
| Ford
Rhodes Sidat Hyder & Co. as auditors for the year ending June 30, 2005.
Their consent to act has also |
|
| been received. |
|
|
| The
Board recommends the appointment of M/s. Ford Rhodes Sidat Hyder & Co. as
auditors for the year |
|
| ending
June 30, 2005. |
|
|
| CORPORATE
AND FINANCIAL REPORTING FRAMEWORK |
|
| The
directors are pleased to state that all the necessary steps have been taken
to comply with requirements |
|
| of
the Code of Corporate Governance as required by Securities & Exchange
Commission of Pakistan (SECP). |
|
|
| Following
are the Statements on Corporate and Financial Reporting frame work: |
|
|
| The
financial statements prepared by the management of the Company, present
fairly its state of |
|
| affairs,
the result of its operations, cash flows and changes in equity. |
|
|
| Proper
books of accounts have been maintained by the Company. |
|
|
| Appropriate
accounting policies have been consistently applied in preparation of
financial statements |
|
| and
accounting estimates are based on reasonable and prudent judgement. |
|
|
| In
preparation of these financial statements International Accounting Standards,
as applicable in |
|
| Pakistan;
have been followed. |
|
|
|
|
2004 |
2003 |
|
|
|
Rupees |
Rupees |
|
| Wealth Generated |
|
|
|
| Total revenue |
|
608,374,569 |
576,669,357 |
|
| Bought-in-material
& services |
|
347,754,765 |
317,219,442 |
|
|
260,619,804 |
259,449,915 |
|
| Wealth
Distributed |
|
|
|
| To Employees |
|
26,992,623 |
21,163,654 |
|
| To Government |
|
|
|
| Excise
duty, income tax, sales tax, |
|
|
|
| To Government |
|
161,574,687 |
162,700,360 |
|
| To
providers of Capital |
|
|
|
| Dividend
to shareholders |
|
|
|
| To share holders |
|
24,570,000 |
27,300,000 |
|
| Mark-up/interest
Expenses on |
|
|
|
| Interest
expenses on borrowed funds |
|
1,124,730 |
1,706,311 |
|
| Retained
for reinvestment & future growth |
|
|
|
| Depreciation
& retained profit |
|
46,357,764 |
46,579,590 |
|
| Retained
for future growth |
|
260,619,804 |
259,449,915 |
|
|
|
|
| Statement
of Compliance with the Code of Corporate Governance |
|
| The
statement is being presented to comply with the Code of Corporate Governance
contained in the listing |
|
| regulations
of Karachi and Lahore Stock Exchanges for the purpose of establishing a
framework of good |
|
| governance,
whereby a listed company is managed in compliance with the best practices of
Corporate |
|
| Governance. |
|
|
| The
Company has applied the principles contained in the Code in the following
manner: |
|
|
| 1. The Board comprises seven
directors, including CEO. The Company encourages representation of |
|
| independent
non-executive directors and director representing minority interests on its
Board. At |
|
| present
the Board of Directors includes five non-executive directors, one of whom is
the chairman. |
|
|
| 2. The directors have confirmed that
none of them is serving as a director in more than ten listed |
|
| companies,
including this Company. |
|
|
| 3. All the resident directors of the
Company are registered as taxpayers and none of them has defaulted |
|
| in
payment of any loan to a banking company, a DPI or an NBFI or, being a member
of a stock |
|
| exchange,
has been declared as defaulter by that Stock Exchange. |
|
|
| 4. No casual vacancy occurred in the
Board during the current year. |
|
|
| 5. The Company has prepared a
'Statement of Ethics and Business Practices', which has been signed |
|
| by
all the directors and employees of the Company. |
|
|
| 6. The Board has developed a
vision/mission statement. Overall corporate strategy and significant policies |
|
| of
the Company. A complete record of particulars of significant policies
alongwith the dates on which |
|
| they
were approved or amended has been maintained. |
|
|
| 7. All the powers of the Board have
been duly exercised and decisions on material transactions, including |
|
| appointment
and determination of remuneration and terms and conditions of employment of
the CEO |
|
|
| have
been taken by the Board. |
|
|
| 8. The meetings of the Board were
presided over by the Chairman and in his absence by a director |
|
| elected
by the Board for this purpose. The Board met at least once in every quarter.
Written notices |
|
| of
the Board meetings, along with agenda and working papers, were circulated at
least seven days |
|
| before
the meetings. The minutes of the meetings were appropriately recorded and
circulated. |
|
|
| 9. The Board arranged one orientation
course for its directors during the year to apprise them of their |
|
| duties
and responsibilities, and briefed them
regarding amendments in the Companies |
|
| Ordinance/Corporate
Laws. |
|
|
| Auditors'
Review Statement of Compliance with the |
|
| Code
of Corporate Governance |
|
| We
have reviewed the Statement of Compliance with the best practices contained
in the Code of Corporate |
|
| Governance
prepared by the Board of Directors of CLOVER PAKISTAN LIMITED to comply with
Listing |
|
| Regulation
No.37 of the Karachi Stock Exchange (Guarantee) Limited and Chapter XIII of
the Lahore Stock |
|
| Exchange
(Guarantee) Limited where the Company is listed. |
|
|
| The
responsibility for compliance with the Code of Corporate Governance is that
of the Board of Directors of |
|
| the
Company. Our responsibility is to review, to the extent where such compliance
can be objectively verified, |
|
| whether
the Statement of Compliance reflects the status of the Company's compliance
with the provision of |
|
| the
Code of Corporate Governance and report if it does not. A review is-limited
primarily to inquiries of the |
|
| Company
personnel and review of various documents prepared by the Company to comply
with the Code. |
|
| As
part of our audit of the financial statements we are required to obtain an
understanding of the accounting |
|
| and
internal control systems sufficient to plan the audit and develop an
effective audit approach. We have not |
|
| carried
out any special review of the internal control system to enable us to express
an opinion as to whether |
|
| the
Board's statement on internal control covers all controls and the
effectiveness of such internal controls. |
|
| Based
on our review nothing has come to our attention which causes us to believe
that the Statement of |
|
| Compliance
does not appropriately reflect the Company's compliance, in all material
respects, with the best |
|
| practices
contained in the Code of Corporate Governance as applicable to the Company
for the year ended |
|
| June 30, 2004. |
|
|
| The
Chief Financial Officer and the Company Secretary were appointed prior to the
implementation |
|
| of
the Code of Corporate Governance. Remuneration, terms and conditions in case
of future appointments |
|
| on
these positions will be approved by the Board. However, the appointment of
Head of Internal Audit |
|
| and
his remuneration, terms and conditions have been approved by the Board. |
|
|
| The
directors' report has been prepared in compliance with the requirements of
the Code and fully |
|
| describes
the salient matters required to be disclosed. |
|
|
| The
financial statements of the Company were duly endorsed by CEO and CFO before
approval of |
|
| the Board. |
|
|
| The
directors, CEO and executives do not hold any interest in the shares of the
Company other than |
|
| that
disclosed in the pattern of shareholding. |
|
|
| The
Company has complied with all the corporate and financial reporting
requirements of the Code. |
|
|
| The
Board has formed an audit committee. It comprises of four members and a
secretary, of whom |
|
| three
are non-executive directors including the Chairman of the committee. |
|
|
| The
meetings of the audit committee were held at least once every quarter prior
to approval of interim |
|
| and
final results of the Company and as required by the Code. The terms of the
reference of the |
|
| committee
have been formed and advised to the committee for compliance. |
|
|
| The
Board has set-up an effective internal audit function manned by suitably
qualified and experienced |
|
| personnel
who are conversant with the policies and procedures of the Company. They are
involved |
|
| in
the internal audit function on a full time basis. |
|
|
| The
statutory auditors of the Company have confirmed that they have been given a
satisfactory rating |
|
| under
the quality control review programme of the Institute of Chartered
Accountants of Pakistan, that |
|
| they
or any of the partners of the firm, their spouses and minor children do not
hold shares of the |
|
| Company
and that the firm and all its partners are in compliance with International
Federation of |
|
| Accountants
(IFAC) guidelines on code of ethics as adopted by the Institute of Chartered
Accountants |
|
| of Pakistan. |
|
|
| The
statutory auditors or the persons associated with them have not been
appointed to provide other |
|
| services
except in accordance with the listing regulations and the auditors have
confirmed that they |
|
| have
observed IFAC guidelines in this regard. |
|
|
| Auditors'
Report to the Members |
|
| We
have audited the annexed balance sheet of CLOVER PAKISTAN LIMITED as at June
30, 2004 and |
|
| the
related profit and loss account, cash flow statement and statement of changes
in equity 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. |
|
|
| It
is the responsibility of the Company's management to establish and maintain a
system of internal control, |
|
| and
prepare and present the above said statements in conformity with the approved
accounting standards and |
|
| the
requirements of the Companies Ordinance, 1984. Our responsibility is to
express an opinion on these |
|
| statements
based on our audit. |
|
|
| We
conducted our audit in accordance with the auditing standards as applicable
in Pakistan. These standards |
|
| require
that we plan and perform the audit to obtain reasonable assurance about
whether the above said |
|
| statements
are free of any material misstatement. An audit includes examining, on a test
basis, evidence |
|
| supporting
the amounts and disclosures in the above said statements. An audit also
includes assessing the |
|
| accounting
policies and significant estimates made by management, as well as, evaluating
the overall presentation |
|
| of
above said statements. We believe that our audit provides a reasonable basis
for our opinion and, after due |
|
| verification,
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 loss account, cash flow statement and statement of changes
in equity together |
|
| with
the notes forming part thereof conform with approved accounting standards as
applicable in |
|
| Pakistan,
and, 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 June |
|
| 30,
2004 and of the profit, its cash flows and changes in equity 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. |
|
|
| Profit
& Loss Account for the year ended June 30, 2004 |
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
| Gross sales |
|
|
654,200,385 |
609,898,873 |
|
| Less: Sales tax |
|
|
89,366,109 |
82,155,439 |
|
| Trade discounts |
|
|
48,701,190 |
36,941,084 |
|
|
|
138,067,299 |
119,096,523 |
|
| Add:
Export rebate |
|
|
1,495,617 |
2,459,126 |
|
| Net sales |
|
|
517,628,703 |
493,261,476 |
|
| Cost of sales |
|
19 |
286,589,795 |
282,434,515 |
|
| Gross profit |
|
|
231,038,908 |
210,826,961 |
|
| Other income |
|
20 |
1,379,756 |
1,252,442 |
|
|
|
232,418,664 |
212,079,403 |
|
| Administrative
and selling expenses |
|
21 |
127,813,363 |
100,278,610 |
|
| Other charges |
|
22 |
7,247,112 |
7,360,502 |
|
|
|
135,060,475 |
107,639,112 |
|
| Operating profit |
|
|
97,358,189 |
104,440,291 |
|
| Financial charges |
|
23 |
1,124,730 |
1,706,313 |
|
| Net
profit for the year |
|
|
96,233,459 |
102,733,978 |
|
| Taxation |
|
24 |
31,214,107 |
33,604,347 |
|
| Profit
after taxation |
|
|
65,019,352 |
69,129,631 |
|
| Unappropriated
profit brought forward |
|
|
323,959 |
3,494,328 |
|
| Profit
available for appropriation |
|
|
65,343,311 |
72,623,959 |
|
| Appropriation: |
|
|
|
| Proposed
final dividend at Rs. 4.50 per share |
|
|
| (2003:
Rs. 3.00 per share) |
|
|
24,570,000 |
11,700,000 |
|
| Transfer
to capital reserve for issue of bonus shares |
|
- |
15,600,000 |
|
| Transfer
to general reserves |
|
|
40,000,000 |
45,000,000 |
|
|
|
64,570,000 |
72,300,000 |
|
| Unappropriated
profit carried forward |
|
|
773,311 |
323,959 |
|
| Basic
and diluted earnings per share |
|
25 |
Rs. 11.91 |
Rs. 12.66 |
|
|
| Balance
Sheet as at June 30, 2004 |
|
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
| ASSETS |
|
|
|
| NON
CURRENT ASSETS |
|
|
|
| Tangible
fixed asset |
|
3 |
48,509,740 |
41,620,218 |
|
| Long term loans |
|
4 |
1,129,066 |
859,058 |
|
| Long
term security deposits |
|
|
814,376 |
980,775 |
|
|
|
50,453,182 |
43,460,051 |
|
| CURRENT
ASSETS |
|
|
|
| Stores |
|
|
176,645 |
— |
|
| Stock in trade |
|
5 |
86,916,095 |
72,295,565 |
|
| Trade debts |
|
6 |
21,042,337 |
24,781,124 |
|
| Loans
and advances |
|
7 |
4,459,685 |
2,663,896 |
|
| Deposits,
prepayments and other receivables |
8 |
5,079,158 |
5,249,682 |
|
| Cash
and bank balances |
|
9 |
122,871,080 |
87,027,153 |
|
|
|
240,545,000 |
192,017,420 |
|
| TOTAL ASSETS |
|
|
290,998,182 |
235,477,471 |
|
| EQUITY
AND LIABILITIES |
|
|
|
| CAPITAL
AND RESERVES |
|
|
|
| Authorized
share capital |
|
|
|
| 10,000,000
(2003: 5,000,000) ordinary shares |
|
|
| of Rs. 10/-each |
|
|
100,000,000 |
50,000,000 |
|
| Issued,
subscribed and paid up capital |
10 |
54,600,000 |
39,000,000 |
|
| Capital
reserve for issue of bonus shares |
|
- |
15,600,000 |
|
| General reserves |
|
|
85,000,000 |
45,000,000 |
|
| Unappropriated
profit |
|
|
773,311 |
323,959 |
|
|
|
140,373,311 |
99,923,959 |
|
| NON
CURRENT LIABILITIES |
|
|
|
| Liabilities
against assets subject to finance leases |
11 |
704,544 |
1,811,301 |
|
| Deferred liability |
|
12 |
2,500,000 |
- |
|
| Long
term deposits |
|
13 |
1,664,500 |
1,262,000 |
|
|
|
4,869,044 |
3,073,301 |
|
| CURRENT
LIABILITIES |
|
|
|
| Current
portion of long term liabilities |
|
11 |
814,882 |
926,694 |
|
