| Ismail Industries Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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| COMPANY
PROFILE |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| DIRECTORS'
REPORT AND CHIEF EXECUTIVE'S REVIEW |
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| FINANCIAL
HIGHLIGHTS |
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| PORTRAYED
BY GRAPHIC ILLUSTRATIONS |
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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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| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
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| NOTES
TO THE FINANCIAL STATEMENTS |
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| PATTERN
OF SHAREHOLDING |
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| COMPANY
PROFILE |
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| Principal/ |
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| Registered
Office |
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| 17,
Banglore Town |
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| Main
Shahra-e-Faisal |
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| Karachi. |
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| Factory |
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| C230-241 |
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| Hub Chowki |
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| Distt. Lasbella |
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| Baluchistan |
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| Company
Secretary |
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| Mohammad
Aslam |
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| Auditor |
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| M/s
Khalid Majid Husain Rahman |
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| Chartered
Accountants |
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| Legal Advisor |
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| Mr.
Farooq Rasheed |
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| Tax Advisor |
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| Munaf
Yusuf & Co. |
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| Chartered
Accountants |
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| Bankers |
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| Habib
Bank Limited |
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| Faysal
Islamic Bank Limited |
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| Muslim
Commercial Bank Limited |
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| Bank
A1-Habib Limited |
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| Habib
Bank A. G. Zurich |
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| Metropolitan
Bank Limited |
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| National
Bank of Pakistan |
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| Our business |
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| Ismail
Industries Limited is a public limited company incorporated on June 21, 1988.
The |
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| company
manufactures and sells high quality sugar confectionery products under the
brand |
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| name
of CANDYLAND. The company's manufacturing facilities are located at Hub |
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| Industrial
Trading Estate. |
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| Stock
exchange listing |
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| Ismail
Industries Limited is listed on the Karachi and Lahore Stock Exchanges in
Pakistan. Daily |
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| quotations
on the Company's stocks are printed in the leading newspapers. The company is
listed |
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| under
"Food and allied sector". |
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| Public
Information |
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| Financial
analysts, stock brokers, interested investors and financial media desiring
information |
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| about
Ismail Industries Limited should contact Mr. Mohammad Aslam at company's
principal/ |
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| registered
office at Karachi. |
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| Tel:
4554961, 4554935, 4554819 |
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| Fax:
(92-021) 4547843 |
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| E-mail:
smile@khi.compol.com |
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|
| Shareholder
information |
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| Enquiries
concerning lost share certificates, changes of address, verification of
transfer deeds |
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| and
share transfer should be directed to our Registrar Messers Khalid Majid
Husain Rahman, |
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| 16K,
Block-6, P.E.C.H.S., Shahra-e-Faisal, Karachi. |
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| Annual
General Meeting |
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| Eleventh
Annual General Meeting of the Company will be held on December 24, 1999,
R.C.M. Hall, |
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| Sidco
Avenue Centre at 12:00 noon. |
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| BOARD
OF DIRECTORS |
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| MR.
MUHAMMAD M. ISMAIL |
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| CHAIRMAN
& CHIEF EXECUTIVE |
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| MR.
MAQSOOD ISMAIL |
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| MR.
MIFTAH ISMAIL |
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| MR.
MUNSARIM SAIF |
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| MRS.
KHADIJA ISMAIL |
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| MRS.
ANISA NAVIWALA |
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| MRS.
NAFISA Y. PALLA |
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| MRS.
RASHIDA IQBAL |
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| MRS.
UZMA ARIF |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the Eleventh Annual General Meeting of Ismail Industries
Limited will be held |
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| on
Friday, December 24, 1999 at 12:00 noon at the Raffia Chaudhary Memorial
(R.C.M.) Hall, Ground Floor, |
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| Sidco
Avenue Centre, 264 R.A. Lines, Karachi, to transact the following business: |
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| ORDINARY
BUSINESS |
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| 1.
To confirm the minutes of the Tenth Annual General Meeting of the Company
held on December 28, 1998. |
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| 2.
To receive, consider and adopt the Audited Accounts of the Company for the
year ended June 30, |
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| 1999
together with the Directors' and Auditors' Report thereon. |
|
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| 3.
To approve Cash Dividend @ 17.50% for the year ended June 30, 1999 as
recommended by the Board |
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| of
Directors (sponsors and associates have waived their right to dividend). |
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| 4.
To appoint Auditors of the Company for the ensuing year (1999-2000) and to
fix their remuneration. |
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| The
retiring Auditors M/s. Khalid Majid Husain Rahman, Chartered Accountants,
being eligible have |
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| offered
themselves for re-appointment. |
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| 5.
To transact any other business, which may be placed before the meeting, with
the permission of the |
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| chair. |
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| SPECIAL
BUSINESS |
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| 6.
To consider and approve the remuneration payable to the Chief
Executive/Director and three other |
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| Directors
for ensuing year (1999-2000) |
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By order of the Board |
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|
MUHAMMAD ASLAM |
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| Karachi:
December 01, 1999. |
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Company Secretary |
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| Notes: |
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| 1.
A member eligible to attend and vote at this meeting may appoint another as
his/her proxy to attend |
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| and
vote instead of him/her. Proxies, in order to be effective must reach the
Company s Registrar s |
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| Office
not less than 48 hours before the time of the meeting during working hours. |
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| 2.
The Share Transfer books of the Company shall remain closed with effect from
December 17 to De- |
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| 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, |
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| Karachi.
The shareholders are advised to notify the Registrar of any change in their
addresses. |
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|
| STATEMENT
UNDER SECTION 160 OF |
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| THE
COMPANIES ORDINANCE, 1984 |
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| The
following statement under section 160 of the Companies Ordinance, 1984 is
made regarding the Spe- |
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| cial
Business to be conducted at the Eleventh Annual General Meeting of the
company to be held on De- |
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| cember 24, 1999. |
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| CHIEF
EXECUTIVE/DIRECTORS REMUNERATION |
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| Approval
is being sought for the payment of remuneration to the full time Chief
Executive/Director and |
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| three
other Directors. |
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| For
this purpose the following Special Resolution will be moved at the meeting. |
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| RESOLUTION |
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| Resolved
that the company be and hereby approves and authorises the payment as
remuneration to |
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| Mr.
Muhammad M. Ismail (Chief Executive and Director) of a sum of Rs. 360,000 per
annum and to |
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| Mr.
Maqsood Ismail (Director), Mr. Miftah Ismail (Director) and Mr. Munsarim Sail
(Director) of a sum of |
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| Rs.
300,000 per annum to each one of them, for the year ending June 30, 2000. It
is further resolved that in |
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| addition
to the above remuneration, all the utilities, telephone bills and membership
fee of the directors |
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| will
be paid by the Company. |
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| DIRECTORS
REPORT AND THE |
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| CHIEF
EXECUTIVE'S REVIEW |
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| We
are pleased to present the company's eleventh annual report for the year
ended June 30, 1999. After |
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| a
decade of its existence, we are thankful to al-mighty Allah that your company
has emerged as a |
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| major
manufacturer of premium quality confectionery products. Once again, we are
glad to report |
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| that
your company has attained almost all the performance and operating targets
that were fixed for |
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| the
year. A review of the enclosed financial statements of the company will
highlight that almost |
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| all
the indicators are showing robust growth. Revenue, gross profit, profit
before tax and profit |
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| after
tax have all grown significantly compared to last year. |
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| During
the year, your management vigorously pursued the strategy of product
innovation and |
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| improvement,
expanding further its sales force and penetrating into the new markets
through |
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| widening
of its distribution network and by launching creative advertisement
campaigns. The |
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| result
was a strong growth in our sales, both local and exports, which was sustained
as predicted in |
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| the
last year's annual report despite slow-down of the economy. Total sales
increased to Rs. 468 million |
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| compared
to Rs. 348 million reflecting a rise of 34% over the previous year. The
export sales went |
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| up
by 23% to Rs. 125 million compared to Rs. 101 million in the previous year
despite the overall |
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| slump
in the international markets that resulted in considerable reduction in the
country's exports |
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| during
the year. Through close and effective monitoring the cost of production was
contained and |
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| your
company was able to post handsome increase in gross profit that amounted to
Rs. 77 million up |
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| 28%
compared to the corresponding year. The net profit after tax jumped up to 13
million, reflecting |
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| an
increase Of 116% compared to the corresponding year. The increase in your
company's sales and |
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| profit
after tax compared to 1997 comes to 100% and 713%. As a result, the break-up
value of your |
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| company
that had plunged to Rs. 6.7 per share at June 1997 after heavy losses in the
years 94-95 and |
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| 95-96
has been resurrected to Rs. 9.2, nearly its face value. The earnings per
share for the year comes to |
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| Rs.
1.80 compared to Rs. 0.87 in the previous year. |
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| Seen
in the background of continuing slow-down of the economy in the last few
years, the perform- |
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| ance
of your company, which is candidly portrayed by the above improvements in the
company's |
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| volume,
gross profit and bottom line, is indeed impressive and satisfying for all of
us. We express |
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| our
gratitude to Allah for his blessings and hope that your company will continue
this pace of |
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| advancement
in the ensuing years. |
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| DIVIDEND |
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| We
have great pleasure in announcing that the directors have recommended a
dividend of 17.5% |
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| (1998:
15%) to be paid to the minority share-holders while the directors and the
majority share- |
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| holders
continue to forego their right to dividend until the previous years
accumulated losses are |
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| completely
wiped out. Your directors also hope to maintain a healthy and consistent
dividend pay |
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| out
policy in the ensuing years. |
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| EXPANSION
PROJECT |
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| As
reported last year, we had initiated an expansion project in view of the vast
unsatisfied demand |
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| of
CandyLand products. The expansion envisaged partly addition in the capacity
of our existing |
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| products
and partly introduction of new Chocolate products. The total capital cost
incurred on this |
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| project
is estimated at Rs. 121 million which has been financed as follows: |
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|
Rs. in million |
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| Long-term
loan from a commercial bank |
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55 |
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| Interest
free loan from directors |
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|
35 |
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| Funds
generated from operations |
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31 |
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------------------ |
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121 |
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------------------ |
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| With
the grace of Allah, the entire plant and machinery has been imported/acquired
and installed |
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| successfully
as planned. In November, we also launched our first Chocolate based product |
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| "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 |
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| liquidity
position remains stable and its liquidity ratios are in line with the
prudential regulations. |
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| FUTURE
PROSPECTS |
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|
|
|
|
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| 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 |
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| 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. |
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|
|
|
|
| OUR
STRATEGY AND VISION |
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|
|
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|
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| 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- |
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| 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. |
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|
|
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| We
are also in the process of reshaping our Information Resource Management
(IRM) and stream- |
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| lining
our business processes by placing enhanced emphasis on the customer. |
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|
|
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| 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 |
|
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| *
A consistent dividend policy. |
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| RISKS
FACTORS |
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|
|
|
|
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| 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 |
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| 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 |
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| products
in the informal sector who do not pay their taxes, indulge in piracy and have |
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| 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- |
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| spite
adverse economic conditions. |
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|
| 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. |
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| PATTERN
OF SHARE HOLDING |
|
|
| The
pattern of shareholding is attached to the financial statements included in
this report. |
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|
| AUDITORS |
|
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| The
auditors of the company Messrs Khalid Majid Husain Rahman, Chartered Account- |
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| ants,
retire and being eligible offer themselves for re-appointment. |
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|
|
|
For and on behalf of the board. |
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|
|
|
|
|
(MUHAMMAD M. ISMAIL) |
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| 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; |
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|
|
|
|
|
| (b)
in our opinion: |
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|
|
|
|
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have |
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| 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- |
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| ing
policies consistently applied; |
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|
|
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the company's |
|
| business; and |
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|
|
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during |
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| 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 |
|
