| Parke, Davis & Company Limited |
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|
| Annual
Report 1998 |
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| CONTENTS |
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|
| COMPANY
INFORMATION |
|
| NOTICE
OF MEETING |
|
| REPORT
OF THE DIRECTORS |
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| BALANCE
SHEET |
|
| PROFIT
AND LOSS ACCOUNT |
|
| CASH
FLOW STATEMENT |
|
| NOTES
TO THE ACCOUNTS |
|
| PATTERN
OF HOLDING OF SHARES |
|
| LOCATION
MAP |
|
|
| Company
Information |
|
|
| Board
of Directors |
|
M. Raziuddin Ansari |
|
|
Chairman, Chief Executive |
|
|
and Managing Director |
|
|
Ramesh T. Thadani |
|
|
(Alternate: Monawwer
Ghani) |
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|
Fabio Bernal |
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|
(Alternate: Islam-ul-Haq
Siddiqui) |
|
|
S. Khalid Hussain |
|
|
M. Saleem |
|
|
| Company
Secretary |
|
M. Saleem |
|
|
|
| Auditors |
|
A.F. Ferguson & Co. |
|
|
Chartered Accountants |
|
|
| Registered
Office |
|
B-2, S.I.T.E., |
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| & Factory |
|
Karachi-75700 |
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|
|
| Notice
of Meeting |
|
|
| Notice
is hereby given that the Thirty-eight Annual General Meeting of the Company
will be held |
|
| at
the Registered Office of the Company at B-2, S.I.T.E., Karachi, on Monday,
April 19, 1999, at |
|
| 11:00
a.m. to transact the following business: |
|
|
| 1.
To receive and consider the audited Balance Sheet and Profit and Loss Account
for the |
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| year
ended November 30, 1998 with the Reports of the Directors and Auditors
thereon. |
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|
|
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| 2.
To appoint Auditors and to fix their remuneration. |
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|
|
|
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| 3.
To elect (7) Directors to hold office for a period of three years from April
19, 1999. The names |
|
| of
the retiring Directors are as follows: |
|
|
|
|
| Mr.
M. Raziuddin Ansari |
|
| Mr.
Ramesh T. Thadani |
|
| Mr.
Fabio A. Bernal |
|
| Mr.
Irtiza Husain |
|
| Mr.
Badaruddin F. Vellani |
|
| Mr.
S. Khalid Hussain |
|
| Mr.
M. Saleem |
|
|
| Special
Business |
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| 4.
To approve the holding of office of profit by the Chief Executive and other
whole time |
|
| working
Directors of the Company and to approve their remuneration. |
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|
By Order of the Board |
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|
M. Saleem |
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| Karachi:
March 11, 1999 |
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|
Director & Company Secretary |
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| NOTES: |
|
|
| 1.
The Share Transfer Books of the Company will be closed from April 12, 1999 to
April 19, 1999 |
|
| (both
days inclusive). |
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|
|
|
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| 2.
A member entitled to attend, speak and vote at the Annual General Meeting may
appoint |
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| a
proxy to attend and vote on his behalf. Proxies in order to be effective must
be received |
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| at
the Registered Office of the Company not less than 48 hours before the
Meeting. The |
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| 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 the officers or some other person
though |
|
| not
a member of the Company. |
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|
|
|
| 3.
Election of Directors shall take place in accordance with the provision of
the Companies |
|
| Ordinance
1984, The Directors have fixed the number of elected Directors at seven
Directors, |
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|
|
|
| 4.
Any person who seeks to contest election as a Director of the Company must
file with the |
|
| Company
at its Registered Office a notice of his intention to offer himself for
election. Such |
|
| notice
must be filed with the Company not later than fourteen (14) days before the
date |
|
| of
the Annual General Meeting. |
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|
|
|
|
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| 5.
Members are requested to notify us immediately of any change in their
Registered Address |
|
| currently
available with us, |
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|
|
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| 6.
A statement under Section 160(I)(B) of the Companies Ordinance 1984 relating
to special |
|
| business
is being sent to the members alongwith a copy of the notice. |
|
|
| 7.
The Registered Office of the Company is located at B-2, S.I.T.E,, Karachi. |
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|
| STATEMENT
UNDER SECTION 160(1)(B) |
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| OF
THE COMPANIES ORDINANCE, 1984 |
|
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| The
approval of the Members of the Company will be sought for the remuneration
payable to the |
|
| Chief
Executive and other whole time working Directors of the Company in accordance
with their |
|
| respective
terms and conditions of service and for the holding of their respective
offices of profit |
|
| in
the Company. The salary and other benefits which are presently payable to
each of the Chief |
|
| Executive
and other whole time Working Directors of the Company are as follows: |
|
|
|
Chief |
|
RS. '000 |
|
|
Executive |
Directors |
|
|
| Remuneration |
|
M. Raziuddin |
S. Khalid |
M. Salaam |
Total |
|
|
|
Ansari |
Hussain |
|
|
|
|
|
|
| Managerial
remuneration |
|
6,078 |
1,296 |
1,242 |
8,616 |
|
| Retirement
benefits |
|
892 |
388 |
369 |
1,649 |
|
| Rent |
|
1,047 |
455 |
433 |
1,935 |
|
| Utilities |
|
233 |
101 |
96 |
430 |
|
| Leave
passage |
|
550 |
192 |
236 |
978 |
|
| Reimbursable
expenses: |
|
|
| Medical |
|
100 |
100 |
100 |
300 |
|
| Others |
|
25 |
25 |
25 |
75 |
|
| Total |
|
8,925 |
2,557 |
2,501 |
13,983 |
|
|
| The
Chief Executive and whole time working Directors are also provided with free
use of Company |
|
| maintained
cars. |
|
|
| The
lump sum stated in the resolution for which Members approval is being sought
includes the |
|
| above
remuneration presently payable and also anticipated increments to be paid in
the discretion |
|
| of
the Directors to the Chief Executive and other whole time working Directors
to provide for annual |
|
| increments,
bonus, inflation and other contingencies during the first year of their
respective terms |
|
| of
office. Additionally, approval of the Members is being sought for increasing
the said amount |
|
| by
aggregate sums per annum not exceeding the said amount as increased by 25%
per annum |
|
| for
the same purpose. |
|
|
| For
the above it is proposed that the following resolutions be passed as an
ordinary resolution, |
|
| namely:. |
|
|
| "RESOLVED
that Mr. M. Raziuddin Ansari, Chairman and Chief Executive of the Board of
Directors, |
|
| and
Mr. S. Khalid Hussain and Mr. M. Saleem, whole time working Directors, be and
are hereby |
|
| authorised
to hold their respective offices of profit as full time executives of the
Company under |
|
| their
respective contracts of service and that they be allowed the benefits arising
under their |
|
| respective
contracts of service and the applicable service rules of the Company and that
they |
|
| be
paid by way of remuneration, inclusive of salary, allowances, perquisites and
retirement and |
|
| other
benefits to which they are entitled under their respective contracts of
service and applicable |
|
| service
rules, such sums as the Directors in their discretion may determine not
exceeding in the |
|
| aggregate
the sum of Rupees twenty million during the first year of their term of
office and for the |
|
| remainder
of their term aggregate sums per annum not exceeding the said amount as
increased |
|
| by
25% per annum. |
|
|
| RESOLVED
FURTHER that in the event of any of the aforesaid offices of profit falling
vacant, the |
|
| approval
hereby given shall be equally applicable to any other person appointed to
fill such |
|
| vacancy." |
|
|
|
| Report
of the Directors |
|
|
| Your
directors are pleased to present their Annual Report together with the
audited accounts for |
|
| the
year ended November 30, 1998. |
|
|
| BUSINESS
REVIEW |
|
|
| 1998
was a turbulent year during which our business was affected by various
internal and |
|
| external
factors. |
|
|
| As
mentioned in the half yearly review a number of actions were taken to boost
the long-term |
|
| health
of our business. These included reorganization of the Company's distribution
system - |
|
| switching
over from a network of small regional distributors to a more organized
national |
|
| distributor
- effective June 1998. During the transitory period shipments were held back
to |
|
| liquidate
the pipeline inventory held by the former distributors. Further, due to
closure of two |
|
| major
glass manufacturers the Company faced severe shortage of glass bottles and
sale of liquid |
|
| products
including some of our major brands were affected. Also economic downturn as a
result |
|
| of
the international sanctions affected operations during the later part of the
year rendering the |
|
| business
environment more difficult. All these factors affected Company's volumes
substantially |
|
| and
ex-factory sales remained lower compared to the previous year. This had a
direct bearing |
|
| on
our margins and net profits, which also went down considerably. |
|
|
| Profits,
were hardest hit by heavy cost escalation resulting from massive rupee
depreciation, |
|
| general
inflation, revision of gas/electricity tariff and increases in transportation
costs. |
|
| Imposition
of additional duties and taxes on certain packaging materials compounded the |
|
| miseries
with regard to the operating margin. Ongoing cost saving and productivity
improvement |
|
| exercises
could hardly minimize the impact of these factors. No price increases were
granted to |
|
| compensate
for these soaring input costs. |
|
|
| The
Company's commitment to international standards of Safety, Health &
Environment and to |
|
| the
principles of Current Good Manufacturing Practices is a continuing factor.
During the year |
|
| the
Company spent heavily to further improve its compliance with these standards,
to ensure |
|
| still
better quality of its products and to provide a safe and healthy environment
for its |
|
| colleagues
and the community as well. |
|
|
| FINANCIAL
RESULTS |
|
|
| Results
for 1998 together with Directors' recommendations for appropriations are
given below: |
|
|
|
|
RS. 000 |
|
|
| Profit
after taxes |
|
|
74,156 |
|
| Add:
Unappropriated profit brought forward |
|
121 |
|
|
---------- |
|
|
|
|
74,277 |
|
| Less:
Transfer to general reserve |
|
49,000 |
|
|
|
|
---------- |
|
| Balance
available for appropriation |
|
25,277 |
|
| Interim
dividend @125% paid during the year |
|
24,480 |
|
|
---------- |
|
| Unappropriated
profit carried forward |
|
797 |
|
|
|
========== |
|
|
| DIVIDEND |
|
|
|
| An
interim dividend of 125% has already been paid in August, 1998. In view of
the lower profits |
|
| for
the year the Directors do not recommend any further dividend for the
financial year 1998. |
|
|
| FUTURE
PROSPECTS |
|
|
| The
pharmaceutical industry is one of the most strictly regulated industries in
the country. |
|
| Controls
extend to registration, manufacturing, promotion and most importantly pricing
of the |
|
| products.
Future prospects, therefore, greatly depend on the government's policy
towards the |
|
| pharmaceutical
industry specially pricing. The Company has not received any price increases |
|
| for
the past two and a half years. However during that period costs of inputs
have increased |
|
| substantially
due to the reasons already mentioned. It is high time that controls on prices
of |
|
| pharmaceutical
products are relaxed, to maintain the viability of this industry. Your
Company will |
|
| also
remain in difficulties if the pricing issue is not immediately and equitably
addressed. |
|
|
| The
Company on its part has a competitive portfolio of innovative products in
important |
|
| therapeutic
categories. The firm base and strong brand loyalty enjoyed by the Company is |
|
| proved
yet again by the in-market performance of its products. The Company also has
a strong |
|
| product
pipeline at various stages. These factors are supported by a highly
modernized and |
|
| renovated
state-of-the-art manufacturing facility. The Company has a highly skilled and
dedicated |
|
| sales
force capable of demonstrating the true value of our products. |
|
|
| Based
on these strengths, with improved general economic atmosphere and business
friendly |
|
| government
policies, specially resolution of the long overdue pricing issue, the Company
believes |
|
| it
can deliver the value demanded by the health care system. |
|
|
| SUBSEQUENT
EVENTS |
|
|
|
| No
material changes or commitments affecting the financial position of the
Company have |
|
| occurred
between the end of the financial year of the Company and the date of this
report. |
|
|
| COMPLIANCE
WITH YEAR 2000 |
|
|
| The
management is very much aware of the issues that the Year 2000 will bring to
its computer |
|
| systems
and other equipment with embedded micro-controllers. The Company is actively |
|
| addressing
its technology infrastructure with the goal of achieving Year 2000 compliance
in all |
|
| areas
of its operations, including to the extent practicable, its relationship with
suppliers, |
|
| customers
and other stockholders. |
|
|
| To
this end the Company is spending substantial resources and making
considerable efforts |
|
| towards
attaining compliance of all systems to the fullest possible extent. As a
result of its |
|
| efforts
the Company has achieved a considerably high level of confidence in attaining
this |
|
| objective
of full compliance. However, despite the Company's best efforts at ensuring
that |
|
| business
is not impacted by Y2K problem and that its operations will continue
normally, it has no |
|
| way
of guaranteeing that all potential causes of disruption have been ruled out
in their entirety. |
|
| In
order to minimize this possibility the Company has extensively tested all
systems in an effort |
|
| to
ensure that the highest level of confidence is attained in eliminating the
problem to the best |
|
| extent
possible. |
|
|
| The
Company is also undertaking a full-fledged contingency and continuity
planning exercise to |
|
| ensure
that the business keeps on functioning smoothly in an event of a Y2K
discrepancy. |
|
|
| DIRECTORS |
|
|
| The
present term of office of Directors expires on April 1, 1999. Accordingly, an
election of |
|
| Directors
will be held at the next annual general meeting. As required under section
178 (1) of |
|
| the
Companies Ordinance, 1984 and the articles of association of the Company, the
Board has |
|
| fixed
the number of elected Directors that the Company shall have at seven. Messrs.
M. |
|
| Raziuddin
Ansari, Ramesh T, Thadani, Fabio A. Bernal, Irtiza Husain, Badaruddin F.
Vellani, |
|
| S.
Khalid Hussain and M. Saleem being all the Directors of the Company for the
time being shall |
|
| retire
on April 1, 1999. Also the present term of office of Mr. M. Raziuddin Ansari
as Chief Executive |
|
| of
the Company expires on April 1, 1999. |
|
|
| COLLEAGUES |
|
|
| The
Board wishes to place on record with gratitude our appreciation for the hard
work, commitment, |
|
| support
and efforts that our colleagues have put in to help minimise the impact of a
difficult year. |
|
|
| 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. 37.87 (1997: RS.
71.11). |
|
|
| PATTERN
OF SHAREHOLDING |
|
|
| The
pattern of shareholding is detailed on page 28. |
|
|
| AUDITORS |
|
|
| Our
Auditors, Messrs. A. F. Ferguson & Co., Chartered Accountants, retire and
being eligible |
|
| offer
themselves for re-appointment. |
|
|
|
|
|
On behalf of the Board |
|
|
|
|
|
|
|
|
|
M. Raziuddin Ansari |
|
| Karachi:
March 11, 1999 |
|
|
Chairman |
|
|
|
|
| Auditors'
Report to the Members |
|
|
| We
have audited the annexed balance sheet of Parke, Davis & Company Limited
as at |
|
| November
30, 1998 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 loss 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, 1998 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:
March 11, 1999 |
|
Chartered Accountants |
|
|
|
|
| Balance
Sheet as at November 30, 1998 |
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees
'000) |
|
| SHARE
CAPITAL AND RESERVES |
|
|
| Share
capital |
|
|
|
| Authorised |
|
|
|
| 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 |
530,000 |
481,000 |
|
| Unappropriated
profit |
|
|
|
797 |
121 |
|
|
|
|
---------- |
---------- |
|
|
|
|
550,381 |
500,705 |
|
| DEFERRED
LIABILITIES |
|
|
|
| Staff
retirement benefits |
|
|
5,052 |
4,337 |
|
| Deferred
taxation |
|
|
5 |
5,528 |
2,221 |
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Running
finance under mark-up arrangements |
6 |
20,225 |
- |
|
| Creditors,
accrued and other liabilities |
7 |
107,961 |
145,509 |
|
| Taxation
- provision less payments |
|
|
- |
204 |
|
| Dividend |
|
8 |
17,133 |
27,620 |
|
|
|
|
---------- |
---------- |
|
|
|
|
145,319 |
173,333 |
|
| COMMITMENTS |
|
9 |
|
|
|
|
---------- |
---------- |
|
|
|
|
706,280 |
680,596 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees
'000) |
|
|
|
|
|
|
| FIXED
ASSETS-TANGIBLE |
|
|
|
| Operating
assets |
|
10 |
236,165 |
134,824 |
|
| Capital
work-in-progress |
|
11 |
18,961 |
101,778 |
|
|
|
|
---------- |
---------- |
|
|
|
|
255,126 |
236,602 |
|
|
|
|
|
|
| LONG-TERM
LOANS - considered good |
|
12 |
1,945 |
2,582 |
|
| LONG-TERM
DEPOSITS |
|
|
1,754 |
1,576 |
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Spares
- at cost |
|
13 |
13,153 |
12,186 |
|
| Stock-in-trade |
|
14 |
169,947 |
142,387 |
|
| Trade debts |
|
15 |
161,684 |
174,115 |
|
| Loans
and advances |
|
16 |
6,830 |
5,786 |
|
| Deposits
and short-term prepayments |
|
17 |
13,633 |
5,273 |
|
| Other
receivables |
|
18 |
48,866 |
30,095 |
|
| Taxation
- payments less provision |
|
19 |
26,978 |
- |
|
| Cash
and bank balances |
|
20 |
6,364 |
69,994 |
|
|
|
|
---------- |
---------- |
|
|
|
447,455 |
439,836 |
|
|
|
|
---------- |
---------- |
|
|
|
|
706,280 |
680,596 |
|
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
M. Raziuddin Ansari |
|
|
M. Saleem |
|
|
Chairman & |
|
|
Director |
|
|
Chief Executive |
|
|
|
|
|
|
| Profit
and Loss Account |
|
| for
the year ended November 30, 1998 |
|
|
|
|
1998 |
1997 |
|
|
|
|
|
(Rupees
'000) |
|
|
|
|
|
|
|
| Sales |
|
21 |
742,738 |
913,478 |
|
| Cost
of sales |
|
22 |
488,108 |
559,378 |
|
|
|
|
---------- |
---------- |
|
|
|
|
254,630 |
354,100 |
|
|
|
|
| Administration
and selling expenses |
|
23 |
138,833 |
156,396 |
|
|
|
|
---------- |
---------- |
|
| Operating
profit |
|
|
115,797 |
197,704 |
|
|
|
|
| Other
income |
|
24 |
3,504 |
20,858 |
|
|
|
|
---------- |
---------- |
|
|
|
|
119,301 |
218,562 |
|
|
|
|
| Financial
charges |
|
25 |
15,497 |
3,652 |
|
| Other
charges |
|
26 |
8,132 |
14,611 |
|
|
|
|
---------- |
---------- |
|
|
|
13,629 |
18,263 |
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
105,672 |
200,299 |
|
|
|
|
| Taxation |
|
27 |
31,516 |
61,069 |
|
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
74,156 |
139,230 |
|
|
|
|
| Unappropriated
profit brought forward |
|
121 |
893 |
|
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
74,277 |
140,123 |
|
|
|
|
| Appropriations |
|
|
|
| Transfer
to general reserve |
|
49,000 |
93,000 |
|
| Interim
dividend at RS. 12.5 per share |
|
|
|
| (1997:
RS. 10.00 per share) |
|
24,480 |
19,584 |
|
| Proposed
final dividend at RS. nil per share |
|
|
|
| (1997:
RS. 14.00 per share) |
|
- |
27,418 |
|
|
|
---------- |
---------- |
|
|
|
73,480 |
140,002 |
|
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
797 |
121 |
|
|
|
|
========== |
========== |
|
| Basic
earnings per share |
|
28 |
37.87 |
71.11 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
M. Raziuddin Ansari |
|
|
M. Saleem |
|
|
Chairman & |
|
|
Director |
|
|
Chief Executive |
|
|
|
|
| Cash
Flow Statement |
|
| for
the year ended November 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
