| Spencer & Co. (Pakistan) Limited |
|
|
|
|
|
|
|
|
|
|
| Annual
Report 1998 |
|
|
|
|
|
| CONTENTS |
|
|
|
| Board
of Directors |
|
| Notice of meeting |
|
| Chairman's
review |
|
| Report
of the Directors |
|
| Auditors'
report |
|
| Balance
Sheet |
|
| Profit and Loss Account |
|
| Statement
of changes in financial position |
|
| Notes
to the accounts |
|
| Statement
under sub-section (1) (E) of |
|
| section
237 of the Company Ordinance, 1984 |
|
| Pattern
of shareholdings |
|
|
| Spencer
Pharma (Pvt) Ltd. |
|
| Audited
account for the year ended June 30, 1998 |
|
|
|
| Board
of Directors |
|
|
| DIRECTORS |
|
| Byram
D. Avari, Chairman & C.E.O. |
|
| Dinshaw
B. Avari |
|
| Xerxes
B. Avari |
|
| Nauzer
B. Commissariat |
|
| Keky
R. Dastur |
|
| Mrs.
Dinaz D. Avari |
|
| Mrs.
Dilnaz X. Avari |
|
|
| COMPANY
SECRETARY |
|
| Abdul
Rahim Suriya |
|
|
| AUDITORS |
|
| Ford,
Rhodes, Robson, Morrow |
|
|
| BANKERS |
|
| Allied
Bank of Pakistan Ltd. |
|
| American
Express Bank Ltd. |
|
| ANZ
Grindlays Bank p.l.c. |
|
| Habib
Bank A.G. Zurich. |
|
| Metropolitan
Bank Ltd. |
|
| Union
Bank Ltd. |
|
|
| REGISTERED
OFFICE |
|
| 2nd
Floor, Beach Luxury Hotel, |
|
| M.T.
Khan Road, |
|
| Karachi. |
|
|
|
| NOTICE
OF ANNUAL GENERAL MEETING |
|
|
| NOTICE
IS HEREBY GIVEN that the 50th Annual General Meeting of Spencer & Co.
(Pakistan) Ltd., will |
|
| be
held on Wednesday, December 30, 1998, at 2.00 p.m. at the Beach Luxury Hotel,
M.T. Khan Road, |
|
| Karachi,
to transact the following business :- |
|
|
| 1.
To read the notice of the meeting. |
|
|
| 2.
To confirm the Minutes of the 49th Annual General Meeting held on December
30, 1997. |
|
|
| 3.
To receive, consider and adopt Audited Accounts, together with the Directors'
and Auditors' Reports |
|
| thereon,
for the year ended June 30, 1998. |
|
|
| 4.
To approve the dividend @ 45% per Ordinary Share of Rs. 10/= each (i.e. Rs.
4.50 per share) for |
|
| the
year ended June 30, 1998 as recommended by the Board of Directors. |
|
|
| 5.
To appoint Auditors and to fix their remuneration. |
|
|
| 6.
To transact any other business with the permission of the Chair. |
|
|
| By
Order of the Board |
|
|
| Karachi:
December 08, 1998 |
|
Abdul Rahim Suriya |
|
|
Company Secretary |
|
|
| NOTE |
|
|
| (a)
The Share Transfer Books of the Company will be closed from December 23, 1998
to December |
|
| 30,
1998 (both days inclusive). |
|
|
| (b)
A member entitled to attend and vote at the Annual General Meeting, is
entitled to appoint another |
|
| member
as a proxy to attend and vote instead of him/her at the Meeting. |
|
|
| (c)
The instrument appointing a proxy must be received at Registered Office of
the Company not later |
|
| than
48 hours before the time appointed for the Meeting. |
|
|
|
| CHAIRMAN'S
REVIEW |
|
|
| It
gives me great pleasure in presenting to you the Chairman's Review alongwith
the Annual Report and the |
|
| Audited
Accounts of Spencer & Company (Pakistan) Limited, for the year ended June
30, 1998. |
|
|
| Economic
conditions have over all had an effect on the business 'of the company due to
general recession |
|
| which
has also affected the Pharmaceutical. With the ever depreciating Rupee, our
costs are constantly |
|
| increasing
since most of our raw materials are imported. The Industry through Pakistan
Pharmaceutical |
|
| Manufacturers
Association has been aggressively taking up the matter of price increase with
Ministry of |
|
| Health.
In this bleak scenario, the silver lining is that our Injection Unit has been
very well received. The |
|
| Management
expect this high profit, high margin unit to contribute substantially to the
bottom line. This will |
|
| help
us to fill a niche market which is available at present. This facility has
also attracted a lot of interest |
|
| for
multinationals for Toll Manufacturing. We have already entered into an
agreement with a multinational |
|
| company
for producing their Injectable products and are expecting more such contracts
to follow. These |
|
| efforts
will have a positive effect, as the increase in product capability through
this capital investment not |
|
| only
yields returns but also adds confidence in our company by the medical
profession. When our Company |
|
| does
Toll Manufacturing for multinationals it means that medical consultants and
specialists would automatically |
|
| have
confidence in the quality of Spencer Pharma's products and would therefore
recommend the other |
|
| products
manufactured by us. The high standards of GMP (Good Manufacturing Practices)
which is the |
|
| criteria
on the basis of which a Pharmaceutical company's judged have always been
maintained at a very |
|
| high
standard by our Company. |
|
|
| I
would like to take this opportunity to also apprise the Shareholders About
the status of the 270 MW Diesel |
|
| technology
power plant which is being sponsored by your Company. Spencer Powergen
Company (Pakistan) |
|
| Ltd.,
has taken this matter up with Government and at the same time has instituted
legal proceedings to |
|
| ensue
the implementation and completion of this Project. We are fully confident
that they will prevail and |
|
| that
our shareholders will get the benefits of investment in this Company. |
|
|
| Year
2000 is fast approaching and all business organisations face continuity
problems to adjust their |
|
| computers
with the four digit requirement connected with the 21 st century. This new
Millennium bug problem |
|
| is
being dealt by the management and we are in the process of achieving the
compliance by Mid 1999 for |
|
| our
company as well as our subsidiary, Spencer Pharma (Pvt) Ltd. We have gone a
step further by looking |
|
| into
our Suppliers to see that they do not face this problem, which might :.effect
our Company. |
|
|
| The
assurance given in the past to give sustained growth, increase yields with
larger dividends is once again |
|
| being
made. Inspite of the economic situation of the country, it is my pleasure to
declare again this year |
|
| 45%
dividend to all Common Shareholders. |
|
|
| The
present management took over before the end of the financial year 1990, when
the Company's sole |
|
| business
was pharmaceutical distribution. Subsequent to this, the Management undertook
the restructuring |
|
| of
the entire Company, by deleting its non-prior making core business of
distribution and entered the field |
|
| of
pharmaceutical manufacturing, by acquiring Fisons Pakistan (Private) Ltd. and
diversifying into other |
|
| fields. |
|
|
| (You
will notice how the Company was veered around to declaring handsome
dividends.) |
|
|
|
DIVIDENDS |
|
| June 1990 |
Nil |
The new management had
conveyed that we have taken over the Company |
|
| June 1991 |
Nil |
at this juncture, as it
was floundering in May 1990, and therefore had |
|
|
informed shareholders
that two years were required to put the Company |
|
|
on an even Keel. |
|
|
(For these two years, the
Company could not generate the required |
|
|
profits.) |
|
|
| June 1992 |
20% |
Mr. Byram D. Avari, the
then Chairman, fulfilled his personal commitment |
|
| June 1993 |
25% |
to the small shareholders
by paying from his and his family's own resources, |
|
|
|
the stated dividends for
these two years. The beneficiaries were the |
|
|
|
Ordinary Shareholders,
holding 1% and less shares in the Company. |
|
|
|
|
| June 1994 |
30% |
|
| June 1995 |
35% |
|
| June 1996 |
40% |
|
| June 1997 |
45% |
|
| June 1998 |
45% |
|
|
| It
will therefore be of interest to shareholders to see how the present
management has turned around the |
|
| Company
to start paying increased dividends from year to year. |
|
|
| Additionally,
the break up value of the Share has been increased from Rs. 16.70 when the
present management |
|
| took
over this floundering ship in June 1990, to Rs. 111.65 as of June 1998. This
is proof in itself of |
|
| sustained
growth with larger dividends and increase in the intrinsic value to the
shareholders. |
|
|
| I
take this opportunity of thanking the Executives and staff for their ever
loyal and faithful dedication to the |
|
| Company
which has made all this possible. |
|
|
| December
8, 1998 |
|
Byram D. Avari |
|
|
Chairman & Chief
Executive |
|
|
| REPORT
OF THE DIRECTORS |
|
|
| In
submitting the Accounts of the |
|
| Company
and the Auditors' Report |
|
| for
the year ended June 30, 1998 |
|
| the
Directors report that: |
|
|
Rupees |
|
|
| Profit
for the year before providing for |
|
| the
taxation is |
|
2,811,341 |
|
| Less:
Provision for Taxation |
|
(426,165) |
|
|
--------- |
|
|
2,385,176 |
|
| Add:
Amount brought forward from last year |
|
1,797,428 |
|
|
--------- |
|
| Profit
available for appropriations |
|
4,182,604 |
|
| Appropriations: |
|
| Dividend
of Rs. 4.50 per Ordinary |
|
| Shares
of Rs. 10/- each |
|
6,940,355 |
|
|
| Less:
Dividend waived by major shareholders |
|
| M/s
Beach Luxury Hotel (Pvt.) Ltd., |
|
| who
is represented through the |
|
| Directors
on the Board. |
|
3,098,125 |
3,842,230 |
|
|
| Unappropriated
profit |
|
340,374 |
|
| Less:
Transfer to General Reserve |
|
-- |
|
|
--------- |
|
| Unappropriated
profit carried forward |
|
340,374 |
|
|
========= |
|
| On
behalf of the Board |
|
|
|
|
Byram D. Avari |
|
| Karachi:
December 08, 1998 |
|
Chairman & C.E.O. |
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Spencer & Company (Pakistan)
Limited as at June 30, 1998 |
|
| 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 accounts 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 accounts 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 statement of changes in financial
position. 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 June 30, 1998 and of the profit and the changes in financial position
for the year then |
|
| ended; |
|
|
| (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. |
|
|
| Karachi-
December 08, 1998 |
|
Ford, Rhodes, Robson,
Morrow |
|
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET |
|
| AS
AT JUNE 30,1998 |
|
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
|
| CAPITAL
AND RESERVES |
|
| Share
Capital |
|
| Authorised |
|
3 |
25,000,000 |
25,000,000 |
|
|
========== |
========== |
|
| Issued, subscribed and paid-up |
3 |
15,423,010 |
15,423,010 |
|
|
|
| Reserves |
|
4 |
156,769,086 |
158,226,140 |
|
|
---------- |
---------- |
|
|
172,192,096 |
173,649,150 |
|
|
| SURPLUS
ON REVALUATION OF FIXED ASSETS |
5 |
296,805,295 |
296,805,295 |
|
|
|
|
|
| LONG
TERM LOAN |
|
6 |
13,000,000 |
13,000,000 |
|
|
|
|
|
| RENT
RECEIVED IN ADVANCE |
|
7 |
27,878,472 |
35,172,903 |
|
|
| CURRENT
LIABILITIES |
|
|
| Shod
term running finance |
|
8 |
50,000,000 |
50,507,555 |
|
|
|
|
|
| Shod
term loan |
|
9 |
22,500,000 |
-- |
|
|
|
|
|
| Creditors,
accrued and other liabilities |
10 |
47,359,210 |
47,175,306 |
|
|
|
|
|
| Current
account with an associated undertaking |
11 |
188,644,492 |
169,411,719 |
|
|
| Provision
for taxation - net |
|
73,423 |
-- |
|
|
|
|
| Unclaimed
dividends |
|
6,351,183 |
3,192,396 |
|
|
|
|
| Proposed
dividend |
|
3,842,230 |
3,842,230 |
|
|
---------- |
---------- |
|
|
318,770,538 |
274,129,206 |
|
|
| CONTINGENCY |
|
12 |
---------- |
---------- |
|
|
828,646,401 |
792,756,554 |
|
|
========== |
========== |
|
|
| TANGIBLE
FIXED ASSETS |
|
|
| Operating
fixed assets at cost less |
|
| accumulated
depreciation |
|
13 |
277,619,569 |
282,615,489 |
|
|
|
|
| LONG
TERM INVESTMENTS - at cost |
14 |
11,352,901 |
11,345,971 |
|
|
| LONG
TERM DEPOSITS |
|
15 |
145,654 |
542,705 |
|
|
| DEFERRED
COST |
|
16 |
966,107 |
1,674,160 |
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
| Trade debts |
|
17 |
-- |
-- |
|
| Advances
and other receivables |
18 |
536,509,671 |
496,204,065 |
|
| Cash
and bank balances |
|
19 |
2,052,499 |
374,164 |
|
|
---------- |
---------- |
|
|
538,562,170 |
496,578,229 |
|
|
|
---------- |
---------- |
|
|
828,646,401 |
792,756,554 |
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED |
|
| JUNE
30,1998 |
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| INCOME |
|
20 |
31,527,069 |
30,088,519 |
|
| ADMINISTRATIVE
EXPENSES |
|
21 |
(1,675,995) |
(1,176,580) |
|
| DEPRECIATION |
|
|
(5,382,971) |
(5,467,481) |
|
|
|
---------- |
---------- |
|
|
|
(7,058,966) |
(6,644,061) |
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
24,468,103 |
23,444,458 |
|
| GAIN
ON SALE OF INVESTMENT |
|
|
-- |
21,473,250 |
|
|
|
---------- |
---------- |
|
|
|
24,468,103 |
44,917,708 |
|
| FINANCIAL
CHARGES |
|
22 |
(21,784,946) |
(21,214,661) |
|
| OTHER INCOME |
|
23 |
128,184 |
-- |
|
|
---------- |
---------- |
|
| PROFIT BEFORE |
TAXATION |
|
2,811,341 |
23,703,047 |
|
|
| TAXATION |
|
| Current |
|
(157,635) |
(150,443) |
|
| Prior |
|
(268,530) |
(10,033,066) |
|
|
---------- |
---------- |
|
|
(426,165) |
(10,183,509) |
|
| NET
PROFIT FOR THE YEAR |
|
2,385,176 |
13,519,538 |
|
| UNAPPROPRIATED
PROFIT BROUGHT FORWARD |
|
1,797,428 |
2,120,120 |
|
|
|
---------- |
---------- |
|
| PROFIT
AVAILABLE FOR APPROPRIATION |
|
4,182,604 |
15,639,658 |
|
| APPROPRIATIONS |
|
|
| Proposed
dividend @Rs. 4.50 (1997: Rs. 4.50) per |
|
| Ordinary
share of Rs. 10 each |
|
6,940,355 |
6,940,355 |
|
|
| Less:
Dividend waived by major shareholder |
|
| M/s
Beach Luxury Hotel (Pvt.) Ltd., |
|
| who
is represented through the |
|
| Directors
on the Board |
|
3,098,125 |
3,098,125 |
|
|
---------- |
---------- |
|
|
3,842,230 |
3,842,230 |
|
| Transfer
to General Reserve |
|
-- |
10,000,000 |
|
|
---------- |
---------- |
|
|
3,842,230 |
13,842,230 |
|
|
---------- |
---------- |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD TO RESERVES |
340,374 |
1,797,428 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| Byram
D. Avari |
|
Keky R. Dastur |
|
| Chairman
& C.E.O. |
|
Director |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30,1998 |
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| Cash
generated from operations |
25 |
(16,178,198) |
(89,551,173) |
|
| Payment
of financial charges |
|
(22,604,100) |
(19,669,773) |
|
| Payment
of taxes |
|
(84,212) |
(161,844) |
|
|
---------- |
---------- |
|
| Net
cash flow from operating activities |
|
(38,866,510) |
(109,382,790) |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
|
| Sale
of investments in shares |
|
-- |
53,706,000 |
|
| Sale
proceeds of fixed assets |
|
-- |
20,000 |
|
| Deferred
cost |
|
-- |
(725,000) |
|
| Purchase
of shares |
|
(6,930) |
(1,314,000) |
|
| Receipt
of rent in advance |
|
-- |
2,110,620 |
|
| Decrease
in long term deposits |
|
10,000 |
34,360 |
|
|
| Net
cash inflow from investing activities |
|
3,070 |
53,831,980 |
|
|
---------- |
---------- |
|
|
(38,863,440) |
(55,550,810) |
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Short
term loan |
|
22,500,000 |
-- |
|
| Repayment
of self liquidating finance |
|
-- |
(2,015,350) |
|
| Payment
of dividend |
|
(683,443) |
(452,020) |
|
| Receipt
from an associated undertaking |
|
19,232,773 |
59,652,229 |
|
|
---------- |
---------- |
|
| Net
cash inflow from financing activities |
|
41,049,330 |
57,184,859 |
|
|
---------- |
---------- |
|
| NET
INCREASE/(DECREASE) IN CASH |
|
|
|
| AND
CASH EQUIVALENTS |
|
2,185,890 |
1,634,049 |
|
|
| CASH
AND CASH EQUIVALENT AT THE |
|
| BEGINNING
OF THE YEAR |
|
(50,133,391) |
(51,767,440) |
|
|
|
|
| CASH
AND CASH EQUIVALENT AT |
|
---------- |
---------- |
|
| THE
END OF THE YEAR |
|
26 |
(47,947,501) |
(50,133,391) |
|
|
========== |
========== |
|
| Byram D. Avari |
Keky R. Dastur |
|
| Chairman
& C.E.O. |
|
Director |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED |
|
| JUNE
30, 1998 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
|
| Spencer
and Company (Pakistan) Limited is a public limited company, quoted on the
Karachi Stock |
|
| Exchange.
The business of the company is property management, pharmaceutical
manufacturing |
|
| through
its subsidiary company and is a holding company. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
|
| These
accounts have been prepared under the historical cost convention except that
land |
|
| and
building are stated at revalued amounts. |
|
|
| 2.2
Fixed assets |
|
|
| These
are stated at cost less accumulated depreciation except freehold land and a
portion |
|
| of
leasehold land which were revalued in 1974 and 1994. |
|
|
| Leasehold
land is amortised over the period of the lease. Depreciation on all other
assets |
|
| is
charged to income applying the reducing balance method whereby the cost of an
asset |
|
| is
written off over its estimated useful life. |
|
|
| Depreciation
is charged on additions during the year from the month in which the asset |
|
| is
put into use and in respect of disposals during the year upto the month in
which the |
|
| asset
is disposed off. |
|
|
| Maintenance
and normal repairs are charged to income as and when incurred. Major |
|
| renewals
and improvements are capitalized and the assets so replaced, if any, are
retired. |
|
| Profit
and loss on disposal of fixed assets are included in income currently. |
|
|
| 2.3
Investments |
|
|
| These
are stated at cost. Provision for diminution in the value of investments is
made if |
|
| considered
permanent by the directors. |
|
|
| 2.4
Trade debts |
|
|
| Debts
considered irrecoverable are written off and provision is made against those
considered |
|
| doubtful. |
|
|
| 2.5
Foreign currency translation |
|
|
| Assets
and liabilities in foreign currencies, if any, are translated into rupees at
the rates |
|
| of
exchange which approximate to those prevalent on the balance sheet date.
Transactions |
|
| in
foreign currencies are converted into Pak Rupees at the rates in effect on
the date of |
|
| the
transactions. Exchange gains and losses on translation are included in income
currently. |
|
|
| 2.6 Taxation |
|
|
|
| The
charge for current taxation in the accounts is based on taxable income or
minimum |
|
| tax
on turnover, under section 80D, @0.5% , whichever is higher. |
|
|
| The
company accounts for deferred taxation on all significant timing differences
using the |
|
| liability
method. However, deferred tax is not provided if it can be established with
reasonable |
|
