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Ismail Industries Limited
Annual Report 1999
CONTENTS
COMPANY PROFILE
NOTICE OF ANNUAL GENERAL MEETING
DIRECTORS' REPORT AND CHIEF EXECUTIVE'S REVIEW
FINANCIAL HIGHLIGHTS
PORTRAYED BY GRAPHIC ILLUSTRATIONS
AUDITORS' REPORT TO THE MEMBERS
BALANCE SHEET
PROFIT AND LOSS ACCOUNT
STATEMENT OF CHANGES IN FINANCIAL POSITION
NOTES TO THE FINANCIAL STATEMENTS
PATTERN OF SHAREHOLDING
COMPANY PROFILE
Principal/
Registered Office
17, Banglore Town
Main Shahra-e-Faisal
Karachi.
Factory
C230-241
Hub Chowki
Distt. Lasbella
Baluchistan
Company Secretary
Mohammad Aslam
Auditor
M/s Khalid Majid Husain Rahman
Chartered Accountants
Legal Advisor
Mr. Farooq Rasheed
Tax Advisor
Munaf Yusuf & Co.
Chartered Accountants
Bankers
Habib Bank Limited
Faysal Islamic Bank Limited
Muslim Commercial Bank Limited
Bank A1-Habib Limited
Habib Bank A. G. Zurich
Metropolitan Bank Limited
National Bank of Pakistan
Our business
Ismail Industries Limited is a public limited company incorporated on June 21, 1988. The
company manufactures and sells high quality sugar confectionery products under the brand
name of CANDYLAND. The company's manufacturing facilities are located at Hub
Industrial Trading Estate.
Stock exchange listing
Ismail Industries Limited is listed on the Karachi and Lahore Stock Exchanges in Pakistan. Daily
quotations on the Company's stocks are printed in the leading newspapers. The company is listed
under "Food and allied sector".
Public Information
Financial analysts, stock brokers, interested investors and financial media desiring information
about Ismail Industries Limited should contact Mr. Mohammad Aslam at company's principal/
registered office at Karachi.
Tel: 4554961, 4554935, 4554819
Fax: (92-021) 4547843
E-mail: smile@khi.compol.com
Shareholder information
Enquiries concerning lost share certificates, changes of address, verification of transfer deeds
and share transfer should be directed to our Registrar Messers Khalid Majid Husain Rahman,
16K, Block-6, P.E.C.H.S., Shahra-e-Faisal, Karachi.
Annual General Meeting
Eleventh Annual General Meeting of the Company will be held on December 24, 1999, R.C.M. Hall,
Sidco Avenue Centre at 12:00 noon.
BOARD OF DIRECTORS
MR. MUHAMMAD M. ISMAIL
CHAIRMAN & CHIEF EXECUTIVE
MR. MAQSOOD ISMAIL
MR. MIFTAH ISMAIL
MR. MUNSARIM SAIF
MRS. KHADIJA ISMAIL
MRS. ANISA NAVIWALA
MRS. NAFISA Y. PALLA
MRS. RASHIDA IQBAL
MRS. UZMA ARIF
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Eleventh Annual General Meeting of Ismail Industries Limited will be held
on Friday, December 24, 1999 at 12:00 noon at the Raffia Chaudhary Memorial (R.C.M.) Hall, Ground Floor,
Sidco Avenue Centre, 264 R.A. Lines, Karachi, to transact the following business:
ORDINARY BUSINESS
1. To confirm the minutes of the Tenth Annual General Meeting of the Company held on December 28, 1998.
2. To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30,
1999 together with the Directors' and Auditors' Report thereon.
3. To approve Cash Dividend @ 17.50% for the year ended June 30, 1999 as recommended by the Board
of Directors (sponsors and associates have waived their right to dividend).
4. To appoint Auditors of the Company for the ensuing year (1999-2000) and to fix their remuneration.
The retiring Auditors M/s. Khalid Majid Husain Rahman, Chartered Accountants, being eligible have
offered themselves for re-appointment.
5. To transact any other business, which may be placed before the meeting, with the permission of the
chair.
SPECIAL BUSINESS
6. To consider and approve the remuneration payable to the Chief Executive/Director and three other
Directors for ensuing year (1999-2000)
By order of the Board
MUHAMMAD ASLAM
Karachi: December 01, 1999. Company Secretary
Notes:
1. A member eligible to attend and vote at this meeting may appoint another as his/her proxy to attend
and vote instead of him/her. Proxies, in order to be effective must reach the Company s Registrar s
Office not less than 48 hours before the time of the meeting during working hours.
2. The Share Transfer books of the Company shall remain closed with effect from December 17 to De-
cember 24, 1999 (both days inclusive). Shares may be lodged for transfer with our Registrar M/s.
Khalid Majid Husain Rahman, Chartered Accountants, 16-K, Block No. 6, P.E.C.H.S., Shahra-e-Faisal,
Karachi. The shareholders are advised to notify the Registrar of any change in their addresses.
STATEMENT UNDER SECTION 160 OF
THE COMPANIES ORDINANCE, 1984
The following statement under section 160 of the Companies Ordinance, 1984 is made regarding the Spe-
cial Business to be conducted at the Eleventh Annual General Meeting of the company to be held on De-
cember 24, 1999.
CHIEF EXECUTIVE/DIRECTORS REMUNERATION
Approval is being sought for the payment of remuneration to the full time Chief Executive/Director and
three other Directors.
For this purpose the following Special Resolution will be moved at the meeting.
RESOLUTION
Resolved that the company be and hereby approves and authorises the payment as remuneration to
Mr. Muhammad M. Ismail (Chief Executive and Director) of a sum of Rs. 360,000 per annum and to
Mr. Maqsood Ismail (Director), Mr. Miftah Ismail (Director) and Mr. Munsarim Sail (Director) of a sum of
Rs. 300,000 per annum to each one of them, for the year ending June 30, 2000. It is further resolved that in
addition to the above remuneration, all the utilities, telephone bills and membership fee of the directors
will be paid by the Company.
DIRECTORS REPORT AND THE
CHIEF EXECUTIVE'S REVIEW
We are pleased to present the company's eleventh annual report for the year ended June 30, 1999. After
a decade of its existence, we are thankful to al-mighty Allah that your company has emerged as a
major manufacturer of premium quality confectionery products. Once again, we are glad to report
that your company has attained almost all the performance and operating targets that were fixed for
the year. A review of the enclosed financial statements of the company will highlight that almost
all the indicators are showing robust growth. Revenue, gross profit, profit before tax and profit
after tax have all grown significantly compared to last year.
During the year, your management vigorously pursued the strategy of product innovation and
improvement, expanding further its sales force and penetrating into the new markets through
widening of its distribution network and by launching creative advertisement campaigns. The
result was a strong growth in our sales, both local and exports, which was sustained as predicted in
the last year's annual report despite slow-down of the economy. Total sales increased to Rs. 468 million
compared to Rs. 348 million reflecting a rise of 34% over the previous year. The export sales went
up by 23% to Rs. 125 million compared to Rs. 101 million in the previous year despite the overall
slump in the international markets that resulted in considerable reduction in the country's exports
during the year. Through close and effective monitoring the cost of production was contained and
your company was able to post handsome increase in gross profit that amounted to Rs. 77 million up
28% compared to the corresponding year. The net profit after tax jumped up to 13 million, reflecting
an increase Of 116% compared to the corresponding year. The increase in your company's sales and
profit after tax compared to 1997 comes to 100% and 713%. As a result, the break-up value of your
company that had plunged to Rs. 6.7 per share at June 1997 after heavy losses in the years 94-95 and
95-96 has been resurrected to Rs. 9.2, nearly its face value. The earnings per share for the year comes to
Rs. 1.80 compared to Rs. 0.87 in the previous year.
Seen in the background of continuing slow-down of the economy in the last few years, the perform-
ance of your company, which is candidly portrayed by the above improvements in the company's
volume, gross profit and bottom line, is indeed impressive and satisfying for all of us. We express
our gratitude to Allah for his blessings and hope that your company will continue this pace of
advancement in the ensuing years.
DIVIDEND
We have great pleasure in announcing that the directors have recommended a dividend of 17.5%
(1998: 15%) to be paid to the minority share-holders while the directors and the majority share-
holders continue to forego their right to dividend until the previous years accumulated losses are
completely wiped out. Your directors also hope to maintain a healthy and consistent dividend pay
out policy in the ensuing years.
EXPANSION PROJECT
As reported last year, we had initiated an expansion project in view of the vast unsatisfied demand
of CandyLand products. The expansion envisaged partly addition in the capacity of our existing
products and partly introduction of new Chocolate products. The total capital cost incurred on this
project is estimated at Rs. 121 million which has been financed as follows:
Rs. in million
Long-term loan from a commercial bank 55
Interest free loan from directors 35
Funds generated from operations 31
------------------
121
------------------
With the grace of Allah, the entire plant and machinery has been imported/acquired and installed
successfully as planned. In November, we also launched our first Chocolate based product
"NOW" consisting of thick chocolate coated caramel. As expected, the market response to this
product has been overwhelming. Soon we expect to launch a few other such products. Based on the
initial response, I am confident that our chocolate products will become market leaders like our
other CandyLand products due to their superior quality and exceptional taste.
We are also happy to report that despite increased financing needs of expansion, your company's
liquidity position remains stable and its liquidity ratios are in line with the prudential regulations.
FUTURE PROSPECTS
In the first four months subsequent to the year end, the company's overall sales have grown by
nearly 10%. Again, this is remarkably fine performance, and viewed in the background of an
overall recession in the economy and continued stagnancy in the country's exports in the first four
months of the year, it deserves to be appreciated. With the proposed expansion having implemented,
that also includes introduction of some new high premium products including chocolates,
we envisage significant increase in revenues and profitability of your company during the year
1999-2000 and beyond.
OUR STRATEGY AND VISION
Our vision statement is to become the top confectionery producers in Pakistan and South Asian
markets while retaining our competitive advantage through excellent quality of our products that
are continuously redesigned and innovated to satisfy our customers. Our strategy for accomplishing
this vision, at the dawn of a new millennium is our renewed commitment to relentless innovation and
enrichment of our products through the policy of investment in two major factors, the human re-
sources and the latest technology. We hope to continue our investment in these two vital elements of
productivity and profitability to maintain the company's supremacy in the confectionery industry.
We are also in the process of reshaping our Information Resource Management (IRM) and stream-
lining our business processes by placing enhanced emphasis on the customer.
Our strategy, in terms of financial goals, encompasses the following performance objectives:
* To attain an annual growth in volume of above 20%;
* To maintain the gross profit margin above 16%;
* To maintain yearly earnings at the rate of Rs. 1.6 per share; and
* A consistent dividend policy.
RISKS FACTORS
Major risks that may hamper the attainment of the corporate objectives, which are continuously
monitored by your management to minimize their adverse effects are:
* Volatile movements in the prices of our major raw materials of sugar and glucose, which
largely depend on the growth of agriculture sector and the government policies relating to
regulation of prices of relevant agricultural commodities.
* The possibility of continuing recession in the domestic market.
* Increased competition, especially from the small producers of low quality confectionery
products in the informal sector who do not pay their taxes, indulge in piracy and have
minimum overhead costs.
Your management has designed appropriate strategies to address and mitigate the above risk
factors so as to minimize their adverse effects on the company's future profitability. Already, due to
vigorous pursuit of such policies, your company has shown remarkable resilience by growing de-
spite adverse economic conditions.
MANAGEMENT EMPLOYEES RELATIONS
The relations between the management and the employees remained cordial and the directors
would like to record their appreciation of the valuable contribution made by the employees at all
levels in attaining the company's goals during the year.
PATTERN OF SHARE HOLDING
The pattern of shareholding is attached to the financial statements included in this report.
AUDITORS
The auditors of the company Messrs Khalid Majid Husain Rahman, Chartered Account-
ants, retire and being eligible offer themselves for re-appointment.
For and on behalf of the board.
(MUHAMMAD M. ISMAIL)
December 01, 1999 Chairman & Chief Executive
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Ismail Industries Limited as at June 30, 1999 and
the related profit and loss account and statement of changes in financial position, 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 account-
ing 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 and the statement of changes in
financial position, together with the notes forming part thereof, give the information re-
quired 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, 1999 and of
the profit and the changes in financial position for the year then ended; and
(d) Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 has been de-
ducted by the company and deposited in the Central Zakat Fund established under Sec-
tion 7 of that Ordinance.
Karachi. Khalid Majid Husain Rahman
December 01, 1999 Chartered Accountants
BALANCE SHEET
as at June 30, 1999
Note 1999 1998
Rupees Rupees
SHARE CAPITAL AND RESERVES
Authorised capital
8,000,000 ordinary shares
of Rs. 10/- each 80,000,000 80,000,000
========== ==========
Issued, subscribed and paid-up capital
7,260,000 ordinary shares of
Rs. 10/- each fully paid in cash 72,600,000 72,600,000
ACCUMULATED LOSS (6,113,371) (18,458,333)
------------------ ------------------
66,486,629 54,141,667
LONG-TERM FINANCES AND LOANS 3 139,406,338 63,365,449
OBLIGATIONS UNDER FINANCE LEASE 4 110,360 --
DEFERRED LIABILITIES 5 6,402,902 5,271,984
CURRENT LIABILITIES
Short-term finances 6 49,000,000 24,000,000
Running finances under mark-up arrangements 7 37,059,497 64,021,801
Current maturity of long-term finances 8 13,959,111 8,502,000
Current maturity of obligations under
finance lease 4 80,359 --
Creditors, accrued and other liabilities 9 78,983,435 43,973,254
Proposed dividend 954,625 914,400
------------------ ------------------
180,037,027 141,411,455
CONTINGENCIES AND COMMITMENTS 10 -- --
------------------ ------------------
392,443,256 264,190,555
========== ==========
TANGIBLE FIXED ASSETS
Operating fixed assets 11 181,423,223 112,076,700
Capital work-in-progress 12 38,599,753 7,391,687
------------------ ------------------
220,022,976 119,468,387
LONG TERM DEPOSITS AND
DEFERRED COSTS 13 631,746 1,100,672
CURRENT ASSETS
Stores and spares 784,875 707,529
Stock-in-trade 14 77,804,467 77,768,981
Trade debts - unsecured,
considered good 71,350,559 8,705,506
Advances, deposits, prepayments
and other receivables 15 17,260,754 30,099,893
Deposit under the debt retirement scheme 16 -- 23,000,000
Cash and bank balances 17 4,587,879 3,339,587
------------------ ------------------
171,788,534 143,621,496
------------------ ------------------
392,443,256 264,190,555
========== ==========
The annexed notes form an integral part of these financial statements.
MUHAMMAD M. ISMAIL MAQSOOD ISMAIL
CHIEF EXECUTIVE DIRECTOR
PROFIT AND LOSS ACCOUNT
for the year ended June 30, 1999
Note 1999 1998
Rupees Rupees
Net sales 18 468,490,273 348,116,571
Cost of goods sold 19 391,124,919 287,675,260
------------------ ------------------
Gross profit 77,365,354 60,441,311
------------------ ------------------
Administrative expenses 20 7,543,338 5,273,402
Selling expenses 21 41,678,725 33,805,224
------------------ ------------------
49,222,063 39,078,626
------------------ ------------------
Operating profit 28,143,291 21,362,685
Financial charges 22 (15,452,992) (16,089,993)
Other income 23 4,248,563 4,612,192
Workers' profit participation fund (846,943) (494,244)
Workers' welfare fund (338,777) (197,698)
------------------ ------------------
Profit before taxation 15,753,142 9,192,942
Provision for current taxation - for the year (2,674,755) (2,884,635)
------------------ ------------------
Profit after taxation 13,078,387 6,308,307
Proposed dividend @ 17.5% (1998: 15%)
(Sponsors and associates have waived
their right to dividend) (954,625) (914,400)
Dividend reversed 24 221,200 314,522
------------------ ------------------
12,344,962 5,708,429
Accumulated loss brought forward (18,458,333) (24,166,762)
------------------ ------------------
Accumulated loss carried forward (6,113,371) (18,458,333)
========== ==========
Earnings per share 25 1.80 0.87
========== ==========
The annexed notes form an integral part of these financial statements