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Glaxo Wellcome Pakistan Limited

Annual Report 1999

Corporate Mission

Glaxo Wellcome Pakistan Limited is a subsidiary of

Glaxo Wellcome plc (a research-based company) whose

people are committed to fighting disease by bringing

innovative medicines and services to patients in Pakistan

and to the health-care providers who serve them.

The strategic intent of Glaxo Wellcome Pakistan Limited

is to be an ethical and entrepreneurial company seeking

long term business opportunities, which will enable

profitable growth to be sustained over time.

KEY DATA

1999

1998

Rs. in million

Net Sales

3,123.5

3,295.5

Operating Profit

565.4

126.0

Profit before Taxation

565.3

124.0

Taxation

185.8

30.1

Profit after Taxation

379.5

93.9

Extraordinary Item - Gain on divestment of

Glaxose-D business (net of tax)

262.9

Net Profit after Tax

379.5

356.8

Dividend - Cash

184.5

134.2

Paid-up Capital

335.5

Shareholders' Equity

1,975.5

1,797.2

Contents

Notice of Meeting

Corporate Information

Directors' Report

Review by the Chairman & Managing Director

Auditors' Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Notes to the Accounts

Ten Years at a Glance

Pattern of Shareholdings

Factories and Distribution/Sales Offices

Notice of Meeting

Notice is hereby given that the FIFTY-THIRD Annual General Meeting of the Shareholders of

the Company will be held at F/268, S.I.T.E., Karachi at 9:30 a.m. on Wednesday the 26 April

2000 to transact the following business:--

1. (a) To receive and adopt the Report of the Directors and the Accounts for the year

ended 31 December 1999 and the Auditors' Report thereon;

(b) To approve the payment of salaries and allowances to the Chief Executive and

the Directors as Executives of the Company during the year ended 31 December

1999;

2. To appoint Auditors and fix their remuneration.

By Order of the Board

Karachi

Shahid Mustafa Qureshi

24 March 2000

Director/Secretary

NOTES:

1. The Share Transfer Books of the Company will be closed for the purpose of determining

the entitlement for the payment of Final Dividend from 12 April 2000 to 26 April

2000 (both days inclusive).

2. A Member entitled to attend and vote at the Meeting may appoint another member

as his/her Proxy to attend, speak and vote at the Meeting on his/her behalf. Instrument

appointing Proxy must be deposited at the Registered Office of the Company not less

than 48 hours before the time of the Meeting.

3. Since the Shares of the Company are now being maintained as "book entry security"

on the Central Depository System (CDS) of the Central Depository Company of

Pakistan (CDC) the beneficial owners of the shares registered in the name of CDC are

advised to follow the Guidelines for attending General Meeting and appointment of

Proxies as given in the Circular No. 1 of 2000 of the Securities and Exchange

Commission of Pakistan, Islamabad. A copy of the said circular is being sent to each

of the beneficial owners of shares in CDC together with this Annual Report.

4. The Shareholders are requested to notify the Company if there is any change in their

address.

5. For the convenience of our Shareholders who wish to avail transport facility, Company

transport will be available at the Karachi Stock Exchange Building and will leave for

F/268, S.I.T.E., at 8:30 a.m. sharp. After the Annual General Meeting, the Company

transport will take the Shareholders back to the Karachi Stock Exchange Building.

Corporate Information

BOARD OF DIRECTORS

Mr. Alan R. Eldridge

Chairman & Managing Director

Mr. A.U. Khawaja

Non-Executive Director

Mr. Rafique Dawood

Non-Executive Director

Mr. S. Riaz Ahmad

Commercial Director

Mr. A. Jalil Anjum

Finance Director

Dr. Muzaffar Iqbal

Technical Director

Mr. Shahid Mustafa Qureshi

Human Resource &

Corporate Affairs Director/

Company Secretary

Board of Directors

Mr. Alan R Eldridge

Chairman & Managing Director

Mr. A U Khawaja

Non-Executive Director

Mr. Rafique Dawood

Non-Executive Director

Mr. S Riaz Ahmad

Mr. A Jalil Anjum

Dr. Muzaffar Iqbal

Mr. Shahid Mustafa Qureshi

Company Secretary

Mr. Shahid Mustafa Qureshi

Executive Committee

Mr. Alan R Eldridge

Chairman & Managing Director

Mr. S Riaz Ahmad

Commercial Director

Mr. A Jalil Anjum

Finance Director

Dr. Muzaffar Iqbal

Technical Director

Mr. Shahid Mustafa Qureshi

Human Resource & Corporate Affairs Director/

Company Secretary

Bankers

ANZ Grindlays Bank Limited

ABN Amro Bank NV

Bank of America

Credit Agricole Indosuez

Emirates Bank International PJSC

Habib Bank Limited

Standard Chartered Bank

The Hongkong and Shanghai Banking Corporation

United Bank Limited

Auditors

Coppers & Lybrand

Legal Advisors

Surridge & Beecheno

Fatehali W Vellani & Co.

Orr, Dignam & Co.

Registered Office

35-Dockyard Road, West Wharf,

Karachi-74000

Telephones: 2315478-82, 2316071-73 & 2315101-08

Fax: 2314898 & 2311105

DIRECTORS' REPORT

1. To be submitted to the Members of Glaxo Wellcome Pakistan Limited at the FIFTY-THIRD Annual General

Meeting of the Company to be held on 26 April 2000.

The Directors submit their Report and Audited Accounts of the Company for the year ended

31 December 1999.

Rs. 000

The Net Profit for the year before providing for Taxation,

WPPF and WWF

607,158

Workers' Profit Participation Fund

30,358

Workers' Welfare Fund

11,457

------------------

41,815

------------------

Profit before Taxation

565,343

Taxation

185,757

------------------

Profit after Taxation

379,586

Unappropriated Profit brought forward

109

------------------

Available for Appropriation

379,695

Appropriations:

Interim Dividend @ 20%

67,101

Proposed Final Dividend @ 35%

117,427

Transfer to Revenue Reserve

195,000

------------------

379,528

------------------

Unappropriated Profit carried forward

167

==========

2. Review by the Chairman & Managing Director: The Chairman & Managing Director's Review on Pages 5 to 7

deals with the activities during the year, The Directors of the Company endorse the contents of the same.

3. Pattern of Shareholdings: The Pattern of holding of the Shares is shown on pages 40 and 41.

4. Earnings per Share: The after tax earnings per ordinary share of Rs. 10 is Rs. 11.31 (1998: Rs. 2.80).

5. Holding Company: The Company is a subsidiary of Glaxo Group Limited which is incorporated in the United

Kingdom.

6. Auditors: The present Auditors, Messrs. Coopers & Lybrand will retire and being eligible, offer themselves for

appointment.

BY ORDER OF THE BOARD

Alan R Eldridge

A Jalil Anjum

Chairman & Managing Director

Director

Chief Executive

Karachi

16 February 2000

REVIEW BY THE CHAIRMAN & MANAGING DIRECTOR

It gives me great pleasure to welcome you to the 53rd Annual General Meeting of the

Company.

Board of Directors

Since the last Annual General Meeting, the following changes have taken place in the

constitution of the Company's Board:

On 30th November 1999, Mr. Masood Ahmed resigned from the Board of

Directors and was replaced by Mr. Abdul Jalil Anjum as Financial Advisor/

Director. He is exercising management responsibility for Finance, Information

Systems, Customer Services and, Internal Audit and Systems Control.

Sales

Net sales for the year under review were Rs. 3,123.5 million. This reflects a growth of

2.8% (excluding Glaxose-D) over the same period last year. As there has been no price

increase for pharmaceuticals since November 1996, the growth is due only to volume

increases.

This performance of Glaxo Wellcome Pakistan Ltd. came in the midst of very difficult

operating conditions. The Pakistan economy has been passing through a recessionary period,

which has impacted on our growth rate. All of this has required strenuous efforts from all

staff in order to deliver improved results.

Net local pharmaceutical sales at Rs. 3,073.9 million were 6.3% higher than last year, all

due to volume growth.

Exports

Exports at Rs. 49.6 million were lower, due to the earlier closure of our Basic

Manufacturing Plant at Lahore which in turn resulted in reduced supplies to other

Glaxo Wellcome companies.

Profits

Pretax profit was Rs. 565.3 million, representing an increase of Rs. 441.4 million over last year.

Staff

However, last year's profit was negatively impacted by a Rs. 360 million charge to fund

It gives me much pleasure to record the

our rationalisation programme. Continuing cost saving initiatives in procurement and vigorous

expense containment strategies throughout the Company also contributed towards the

improved result in 1999.

have experienced.

Development

New Products

The Company illustrated its commitment towards enhancing its presence in the local

market by introducing seven new products/presentations during the year, namely:

Dicofen Emulgel, Floxy Eye Drops, Lacipil Tablets 4mg, Polyfax Plus Skin Ointment,

Zantac Tablets 300mg, Zeffix Tablets 100mg and Zinacef Injection 1.59.

Capital Expenditure

The capital expenditure for the year was Rs. 220.4 million. The major expenditures were

for upgrades to secondary manufacturing plants and Information Technology.

Staff

It gives me much pleasure to record the Directors' appreciation of the fine work

contributed during the year by the Company's Staff at all levels, particularly in light of the

very challenging operating environment we have experienced.

Human Resource development efforts continued to be given high priority. Many in-house

training programmes were conducted under the auspices of the local management and a

large number of executives, including some from other Asia Pacific countries, participated

in courses run within Pakistan.

Future Outlook

This is the fourth consecutive year that pharmaceutical selling prices have remained

frozen with the Government exercising rigorous control on selling prices. Given the significant

cost increases which have occurred since the last increase in 1996, the pharmaceutical

industry is facing worsening prospects and needs immediate Government support in terms

of allowing an immediate, across-the-board price increase. Our difficult position has been

compounded by mandated price cuts for certain major products and were the current

situation to continue, the Company would not be able to sustain an acceptable level of

profitability in future years.

On our part, Glaxo Wellcome management is committed to a long term growth strategy,

which is reflected by the capital expenditure of Rs. 220.4 million this year, in support of a

plan to improve, rationalize and modernize our secondary manufacturing facilities in Karachi

plus, our Company-wide information systems.

The Company plans to introduce new, research-based products to Pakistan and will Continue

to focus on our core pharmaceutical business in the future, even under the toughest

economic conditions. The Company will continue to attempt to reduce the inexorable

pressure on profitability by achieving higher sales volumes and in containing costs through

sustained, efficiency improvement measures.

Alan R Eldridge

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed Balance Sheet of Glaxo Wellcome Pakistan Limited as at 31 December 1999

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

except as described in note 2.9, with which we concur;

(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;

Balance Sheet, Profit and Loss Account and 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 31

December 1999 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.

Karachi

Coopers & Lybrand

18 February 2000

Chartered Accountants

BALANCE SHEET AS AT 31 DECEMBER, 1999

1999

1998

Note

Rs. 000

Tangible Fixed Assets

820,905

686,799

Long-term Loans and Advances

21,779

20,147

Long-term Deposits and Prepayments

3,332

2,390

Current Assets

Stores and Spares

46,221

52,408

Stock-in-trade

1,564,338

887,606

Trade Debts

91,429

126,808

Loans and Advances

21,557

19,725

Trade Deposits and Prepayments

14,879

99,368

Short-term Investments

200,000

Taxation Recoverable

51,340

99,927

Other Receivables

53,535

388,733

Bank and Cash Balances

61,027

100,126

------------------

1,904,326

1,974,701

Less: Current Liabilities

Short-term Finances

64,819

68,650

Creditors, Accrued and Other Liabilities

487,173

546,372

Dividend Payable

66,608

Proposed Dividend

117,427

83,877

------------------

669,419

765,507

------------------

Net Current Assets

1,234,907

1,209,194

------------------

2,080,923

1,918,530

==========

Financed by:

Share Capital

335,507

Capital Reserve - Share Premium

1,409

Revenue Reserve

1,638,403

1,460,178

Unappropriated Profit

167

109

------------------

Shareholders' Equity

1,975,486

1,797,203

Surplus on Revaluation of Fixed Assets

21,270

Long-term Loans and Deferred Liabilities

84,167

100,057

Contingent Liabilities and Commitments

------------------

2,080,923

1,918,530

==========

The annexed notes form an integral part of these accounts.

Alan R Eldridge

A Jalil Anjum

Chairman and Managing Director

Director

Chief Executive

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER, 1999

1999

1998

Note

Rs. 000

Net Sales

Local

3,073,860

3,151,223

Export

49,599

144,316

------------------

3,123,459

3,295,539

Cost of Sales

Local

2,525,353

3,070,191

Export

32,718

99,346

------------------

2,558,071

3,169,537

Operating Profit

------------------

Local

548,507

81,032

Export

16,881

44,970

------------------

565,388

126,002

Other Income

63,273

47,498

------------------

628,661

173,500

------------------

Financial Charges

6,476

20,581

Other Charges

56,842

28,952

------------------

63,318

49,533

------------------

Profit before Taxation and Extraordinary Item

565,343

123,967

Taxation

185,757

30,055

------------------

Profit after Taxation and before Extraordinary Item

379,586

93,912

Extraordinary Item - Gain on divestment of

Glaxose-D business (net of tax)

262,900

------------------

Net Profit after Tax and Extraordinary Item

379,586

356,812

Unappropriated Profit brought forward

109

------------------

Available for Appropriation