| Highnoon Laboratories Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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| Company
Information |
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| Notice
of Meeting |
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| Directors'
Report |
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| Chairman's
Review |
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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 Sources and Application of Funds |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| COMPANY
INFORMATION |
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| Board
of Directors |
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| Mr.
Jawaid Tariq Khan |
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| (Chairman) |
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| Mr.
Tausif Ahmad Khan |
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| (Chief
Executive) |
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| Mr.
Anees Ahmad Khan |
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| Mr.
Ghulam Hussain Khan |
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| Mr.
M. Usman Satti |
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| Mst.
Farhat Jabeen |
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| Mrs.
Zainub Abbas |
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| Mrs.
Nosheen Riaz Khan |
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| Company
Secretary |
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| Mian
Ahson Farooq |
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| Auditors |
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| Sidat
Hyder Qamar & Company |
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| Chartered
Accountants |
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| Legal Advisors |
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| Sardar
Iqbal & Company |
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| Attorneys
at Law |
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| & |
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| Raja
Mohammed Akram & Co. |
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| Advocates
& Legal Consultants |
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| Registered
Office & Shares Department |
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| Mr.
Khadim Hussain Mirza |
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| Group
Corporate Secretary |
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| 17.5
Kilometer, Multan Road, Lahore-53700 (Pakistan) |
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| Phones:
7510023-27 (5 lines) Tlx: 47681 HINON PK. |
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| Fax:
92-42-7510037 |
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| Head
Office & Plant |
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| 17.5
Kilometer, Multan Road, Lahore-53700 (Pakistan) |
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| Phones:
7510023-27 (5 lines)Tlx: 47681 HINON PK. |
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| Fax:
92-42-7510037 |
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| e-Mail:
info@hignoon.com.pk |
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| Web:
http://www.highnoon-labs.com |
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Bankers |
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| Habib Bank Ltd. |
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|
Prime Commercial Bank
Ltd. |
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| Muslim
Commercial Bank Ltd. |
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|
Emirates Bank
International |
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| National
Bank of Pakistan |
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|
Habib Bank A.G. Zurich |
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| Allied
Bank of Pakistan Ltd. |
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Bank A1 Habib Ltd. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| NOTICE
is hereby given that 17th Annual General Meeting of Highnoon Laboratories
Limited will be held on Thursday, |
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| June
29, 2000 at 9.00 a.m. at Registered Office, 17.5 Kilometer, Multan Road,
Lahore to transact the following business: |
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| 1.
To confirm minutes of last Annual General Meeting held on June 29, 1999. |
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| 2.
To receive, consider and adopt the Audited Accounts of the Company for the
year ended December 31, 1999 |
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| together
with Directors' and Auditors' Reports thereon. |
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| 3.
To approve payment of Cash Dividend @ 15% and issue of Bonus Shares @ 5% to
the shareholders as |
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| recommended
by the Board of Directors. |
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| 4.
To elect eight Directors of the Company for a term of three years commencing
from September 03, 2000 as fixed |
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| by
the Board of Directors in accordance with the provisions of the Companies
Ordinance, 1984. The following |
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| Directors
shall retire on September 02, 2000 and shall be eligible for re-election: |
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| 1.
Mr. Jawaid Tariq Khan |
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2. Mr. Tausif Ahmad Khan |
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| 3.
Mr. Anees Ahmad Khan |
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4. Mr. Ghulam Hussain
Khan |
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| 5.
Mr. M. Usman Satti |
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6. Mst. Farhat Jabeen |
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| 7.
Mrs. Zainub Abbas |
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8. Mrs. Nosheen Riaz Khan |
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| 5.
To appoint Auditors and fix their remuneration for the year ending December
31, 2000. The present Auditors, |
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| M/s
Sidat Hyder Qamar & Company, Chartered Accountants retire and being
eligible offer themselves for re- |
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| appointment. |
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| 6.
To discuss any other business with the permission of the Chair. |
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BY ORDER OF THE BOARD |
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| Lahore. |
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(MIAN AHSON FAROOQ) |
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| June 02, 2000 |
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|
Company Secretary |
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| Notes: |
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| 1.
Share transfer books of the Company will remain closed from June 21, 2000 to
June 30, 2000 (both days inclusive). |
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| 2.
A member entitled to attend and vote at this meeting may appoint another
member as proxy to attend and vote instead of him. |
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| 3.
The instrument of proxy must be received at the Registered Office of the
Company not less than 48 hours before the time of |
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| holding
the meeting. |
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| 4.
The shareholders are requested to immediately notify the change in address,
if any. |
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| 5.
Nomination from shareholders for the office of Directors must be received
atleast 14 clear days before the date of meeting at |
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| the
Registered Office of the Company. |
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| 6.
CDC shareholders are requested to bring with them their National Identity
Cards alongwith participants' ID numbers and |
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| their
account numbers at the time of attending the Annual General Meeting in order
to facilitate identification. |
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| DIRECTORS'
REPORT |
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| Your
Directors have pleasure in presenting the Seventeenth Annual Report of your
Company together with Audited |
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| Accounts
for the year ended December 31, 1999. |
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| 1.
FINANCIAL HIGHLIGHTS |
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|
Rs. in Million |
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| The
profit and appropriations for the year are as follows: |
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| Net
profit before tax for the year |
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|
24.463 |
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| Taxation |
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|
6.129 |
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------------------ |
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| Profit after tax |
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|
18.334 |
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| Unappropriated
profit brought forward |
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0.076 |
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------------------ |
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| Profit
available for appropriation |
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18.410 |
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| Appropriations: |
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| Transferred
to General Reserve |
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|
2.500 |
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| Proposed
dividend @ 15% |
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|
13.174 |
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| Transferred
to Reserve for issuance of Bonus Shares |
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2.218 |
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------------------ |
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|
17.892 |
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------------------ |
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| Unappropriated
profit carried forward |
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0.518 |
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========== |
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| 2.
CHAIRMAN' S REVIEW |
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| Chairman's
Review below deals with the activities during the year. The Directors endorse
the contents of |
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| the Review. |
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| 3.
DIVIDEND AND BONUS SHARES |
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| The
Directors recommended that cash dividend @ 15% be paid and Bonus Shares @ 5%
i.e. in the ratio of one |
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| Bonus
Share for every 20 ordinary shares held by the shareholders be issued for the
year ended December 31, |
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| 1999.
The said Bonus Shares will not be eligible for the dividend declared for the
year ended December 31, 1999. |
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| 4.
EARNING PER SHARE |
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| The
after tax earnings per ordinary share of Rs. 10 was Rs. 2.09 (December 31
1998: Rs. 1.03). |
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| 5.
PATTERN OF SHAREHOLDING |
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| The
pattern of shareholding is detailed also given below. |
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| 6. AUDITORS |
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| The
present Auditors, Messrs Sidat Hyder Qamar and Company, Chartered
Accountants, retire and, being |
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| eligible,
offer themselves for re-appointment. |
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ON BEHALF OF THE BOARD |
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| Lahore |
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|
TAUSIF AHMAD KHAN |
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| May 29, 2000 |
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|
Chief Executive |
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| CHAIRMAN'S
REVIEW |
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| Business
Review |
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| The
net local sales of your Company for the year are Rs. |
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| 550.8
million reflecting a growth of 16.8% over the last year. |
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| Export
sales during 1999 amounted to Rs. 15.5 million. |
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| Although
there has not been any visible improvement in the |
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| economy
of the country, yet your company earned net profit |
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| of
Rs. 24.5 million as compared to Rs. 20.9 million over the |
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| corresponding
period of 1998. We were able to maintain our |
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| growth
and profitability with our efforts to rationalize all areas of operations
particularly |
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| improved
inventory management, production efficiency and expense control. |
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| Economic
conditions prevailing for last few years, continued to prevail during the |
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| current
year as well. The sanctions and other restrictions imposed on the economy |
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| after
going nuclear were although reversed but did not contribute towards the
significant |
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| change
in the economy as a whole. The Government during the current year continued |
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| to
ignore economic realities particularly with regard to the pharmaceutical
industry; |
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| no
price increase whatsoever was allowed even during the year under review. This |
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| being
the fourth consecutive year that the Government has not allowed any increase
in |
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| the
Maximum Retail Prices (MRP) of the medicines inspire of the fact that the
cost of |
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| production
has increased by about 57% during these years due to devaluation of Pak |
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| Rupee,
imposition of 10% custom duty on import of pharmaceutical raw and packing |
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| material
and to add fuel to the fire imposition of GST on import of pharmaceutical |
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| packing
material at the rate of 15% (these levies had been imposed first time in the |
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| history
of Pakistan with effect from 1st July, 1996 and 1st July, 1999 respectively). |
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| Increase
in cost of imports, being a major component of the cost of pharmaceutical |
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| manufacturing
in addition to ever rising inflationary trends had a significant impact on |
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| the
over all cost of production. |
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| During
the course of the year a major setback prevented your Company from performing |
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| even
better than it was able to. In April 1999 the Ministry of Health reduced the
prices |
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| of
some major products in the market by 15%. This decision also applied to our
largest |
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| selling
product, Herbesser (Diltiazem), seriously affecting its profitability. |
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| In
the prevalent conditions, the only refuge was the rationalization of all the
spheres of |
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| operations,
increase in overall efficiency and control over expenses, which could be |
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| resorted
to maintain the profitability. Major steps have been taken by your company to |
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| increase
the efficiency of operations, the result of which could be seen in |
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| the
annual results. These measures included from restructuring of |
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|
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| operations
to rationalizing the processes to improve the efficiency. |
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| Marketing
and Sales |
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| During
the period under review, your Company successfully maintained its position
amongst the |
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| top
20 pharmaceutical companies in Pakistan. Overall market share of the Company
stood at |
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| 1.77%,
making Highnoon the 17th largest company in the country. This performance |
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| assumes
even greater significance considering that early in 1999, we were compelled
to reduce |
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| the
price of our largest selling product, Herbesser, by an average of 15% under
the |
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| directives
of Ministry of Health. |
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| All
major products of your Company maintained or improved their position in |
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| their
respective therapeutic segments. Of the top 10 products marketed by Highnoon, |
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| as
many as 7 ranked at the top of their segment with market shares ranging from |
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| 22%
to 99%. Herbesser improved its ranking to become the 2nd largest Calcium |
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| Antagonist
in the country and Blokium maintained its position as the 3rd largest |
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| selling
Beta Blocker of Pakistan. Maintaining the focus of our sales and marketing |
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| operation
towards undertaking innovative scientific marketing activities such as |
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| Medical
Group Meetings, Symposia Programs, and participation in all major |
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| medical
conferences and seminars contributed towards these achievements. |
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| The
re-structuring of our marketing operations, which commenced in 1998, was
completed during the course |
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| of
current year. The Marketing Division is now operating with four totally
independent Strategic Business Units, |
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| each
responsible for sales and marketing of its own product portfolio. This
structure has placed your |
|
| Company
in a better position to not only apply greater focus to its existing range of
products but, more |
|
| importantly,
to become more responsive to new business opportunities. |
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|
| Despite
the setback referred to earlier, the management of your Company stands |
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| firmly
committed to retain Highnoon's position as one of the fastest growing |
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| pharmaceutical
companies in Pakistan. While your Company |
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| continues
to invest in the promotion of its existing products and |
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| professional
development of the people responsible for maintaining |
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| a
competitive edge for these products in the marketplace; it is also |
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| aggressively
pursuing new products and new business |
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| opportunities
on a war footing. During the course of the |
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| forthcoming
year, your Company plans to launch in the market |
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| three
new products and two line extensions. The new products |
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| intended
to be launched during 2000 include Unitinase, a |
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| thrombolytic
agent for the patients of myocardial infarction; |
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| Heprovac
B, a unique vaccine for the prevention of hepatitis B; |
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| and
Tergynan, a novel therapy for most common vaginal infections. |
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| The
Company also plans to launch Skilax Tablets to supplement |
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| the
franchise of Skilax Drops and Loprin 300mg Tablets to offer a more |
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| comprehensive
dosage option in its enteric-coated aspirin range. |
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|
| Highnoon
Family |
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| Your
Company puts great importance on the employees and considers them |
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| members
of Highnoon family. As a policy matter, your Company continues to |
|
| invest
in the development of its human resource development by inducting |
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| professional
and highly skilled staff and improvement of skills of the personnel employed |
|
| by
way of on-job training as well as outside courses and seminars. |
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|
| These
efforts have paid your Company in the form of dedicated and skilled family
members who |
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| made
these results possible despite adverse business conditions. I would like to
highly |
|
| appreciate
their dedication and hard work. |
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|
| Year
2000 Compliance |
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| On
the turn of the century, upgrading of computer software and hardware to make |
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| them
compliant to year 2000 was a major challenge for your Company. The |
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| management
of your Company was actively pursuing this objective during the |
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| year
1999. After significant investment of time, effort and money, all our
software |
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| and
computing hardware infrastructure has been upgraded well in time to enter the |
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| new century. |
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| Production
and Technology |
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| Your
Company continued to invest in its manufacturing facilities and related
areas. |
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| Rationalization
of processes was a major source of controlling the overall cost of |
|
| production.
Extension of storage facilities is one of the major projects currently in |
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| process.
After completion of this project, material flows to and from production |
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| area
will be significantly improved. In fact, inventory management is one of the |
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| initiatives
taken by your Company in order to increase the efficiency and reduce |
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| the
costs. Restructuring of the Operations division and extending the warehousing |
|
| facilities
were part of this initiative. |
|
|
| Standards
of Good Manufacturing Practices (GMP) are constantly changing, on |
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| which
your Company has put emphasis greater than ever after achieving ISO |
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| certification.
Every effort is made to keep abreast of these changes. In order to |
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| keep
our facilities in line with current Good Manufacturing Practices (cGMP); a |
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| project
is in process to establish separate manufacturing facilities for Antibiotics. |
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| A
part of this has already been completed and this project will commence
production, |
|
| Inshallah,
from the next year. |
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|
| Future Outlook |
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| The
future of your Company and the pharmaceutical industry as a whole |
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| will
continue to depend greatly on the policies of the Government generally |
|
| and
with respect to price controls specifically. An increase in prices of |
|
| medicines
in near future is inevitable to save the pharmaceutical industry. |
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| On
the other hand the duty imposed on the import of raw and packing |
|
| material
and the GST imposed on import and procurement of packing |
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| material need to be
abolished altogether. |
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|
| As
a company, the management is making every effort to stabilize and |
|
| improve
the business prospects and maintain the leadership in national |
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| pharmaceutical
industry. Introduction of new products and line extensions |
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| of
existing products is considered a major contributor to this effort. Your |
|
| Company
is taking further steps to minimize the pressure on profitability |
|
| by
achieving high sales volumes and holding down costs through sustained |
|
| efficiency
and other measures for overall improvement. |
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|
|
|
JAWAID TARIQ KHAN |
|
|
|
Chairman |
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|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of HIGHNOON
LABORATORIES LIMITED as at 31 December 1999 |
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| and
the related profit and loss account and the statement of sources and
application of funds (cash flow statement), |
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| 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: |
|
|
| 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 |
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|
|
|
| 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
and profit and loss account and statement of sources and application of funds
(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 the changes in sources and
application of funds (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. |
|
|
| Lahore: |
|
|
(SIDAT HYDER QAMAR & COMPANY) |
|
| May 30, 2000 |
|
|
CHARTERED ACCOUNTANTS |
|
|
|
|
|
| BALANCE
SHEET AS AT 31 DECEMBER 1999 |
|
|
|
NOTE |
1999 |
1998 |
|
|
|
Rupees |
Rupees |
|
|
|
|
| SHARE
CAPITAL |
|
3 |
87,826,430 |
79,842,210 |
|
| RESERVES |
|
4 |
40,600,000 |
40,273,569 |
|
| RESERVE
FOR ISSUANCE OF BONUS SHARES |
|
|
4,391,320 |
7,984,221 |
|
| UNAPPROPRIATED
PROFIT |
|
|
517,806 |
76,102 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
133,335,556 |
128,176,102 |
|
| SURPLUS
ON REVALUATION OF FIXED ASSETS |
5 |
116,264,331 |
67,532,938 |
|
| LIABILITIES
AGAINST ASSETS |
|
|
|
| SUBJECT
TO FINANCE LEASE |
|
6 |
5,061,643 |
3,173,821 |
|
| DEFERRED
LIABILITIES |
|
7 |
17,434,682 |
16,714,567 |
|
| LONG
TERM ADVANCES AND DEPOSITS |
|
8 |
5,048,679 |
5,293,436 |
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Short
term bank borrowings |
|
9 |
193,498,646 |
204,316,635 |
|
| Current
portion of long term liabilities |
|
|
4,013,285 |
9,428,667 |
|
| Creditors,
advances, accrued and other liabilities |
|
10 |
65,469,026 |
48,734,031 |
|
| Proposed
dividend |
|
|
13,173,965 |
3,992,111 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
276,154,922 |
266,471,444 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
11 |
-- |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
553,299,813 |
487,362,308 |
|
|
|
|
========== |
========== |
|
|
|
|
|
| OPERATING
FIXED ASSETS |
|
12 |
236,562,449 |
207,159,329 |
|
| CAPITAL
WORK IN PROGRESS |
|
13 |
21,826,725 |
4,122,574 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
258,389,174 |
211,281,903 |
|
| LONG
TERM INVESTMENTS |
|
14 |
15,000 |
15,000 |
|
| LONG
TERM DEPOSITS |
|
|
308,765 |
108,765 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stores,
spares and loose tools |
|
15 |
4,001,592 |
2,870,406 |
|
| Stock in trade |
|
16 |
135,344,313 |
142,943,949 |
|
| Investments |
|
|
-- |
4,605,000 |
|
| Trade debtors |
|
17 |
5,823,232 |
10,395,234 |
|
| Advances,
deposits and prepayments |
|
18 |
87,687,897 |
65,321,579 |
|
| Other
receivables |
|
19 |
57,445,004 |
23,981,483 |
|
| Cash
and bank balances |
|
20 |
4,284,836 |
25,838,989 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
294,586,874 |
275,956,640 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
553,299,813 |
487,362,308 |
|
|
|
|
|
========== |
========== |
|
| The
Auditors' Report to the members is annexed hereto. |
|
| The
annexed notes from 1 to 36 form an integral part of these accounts. |
|
|
|
ANEES AHMAD KHAN |
|
TAUSIF AHMAD KHAN |
|
|
DIRECTOR |
|
CHIEF EXECUTIVE |
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 31 DECEMBER 1999 |
|
|
|
NOTE |
1999 |
1998 |
|
|
|
Rupees |
Rupees |
|
|
|
|
|
|
| SALES |
|
21 |
566,387,332 |
844,036,004 |
|
| COST
OF SALES |
|
22 |
394,616,661 |
647,851,032 |
|
|
|
|
------------------ |
------------------ |
|
| GROSS
PROFIT |
|
|
171,770,671 |
196,184,972 |
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
| Administrative
and general |
|
23 |
48,488,887 |
47,176,752 |
|
| Selling
and promotional |
|
24 |
65,222,146 |
90,835,177 |
|
| Research
and development |
|
25 |
5,581,279 |
9,817,457 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
119,292,312 |
147,829,386 |
|
|
|
|
------------------ |
------------------ |
|
| OPERATING
PROFIT FOR THE YEAR |
|
|
52,478,359 |
48,355,586 |
|
| OTHER
INCOME |
|
26 |
3,538,136 |
5,394,057 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
56,016,495 |
53,749,643 |
|
| FINANCIAL
AND OTHER CHARGES |
|
27 |
31,553,587 |
32,891,849 |
|
|
|
|
------------------ |
------------------ |
|
| PROFIT
BEFORE TAXATION |
|
|
24,462,908 |
20,857,794 |
|
| TAXATION |
|
28 |
6,129,488 |
12,613,917 |
|
|
|
|
------------------ |
------------------ |
|
| PROFIT
AFTER TAXATION |
|
|
18,333,420 |
8,243,877 |
|
| UNAPPROPRIATED
PROFIT BROUGHT FORWARD |
|
76,102 |
424,336 |
|
|
|
|
------------------ |
------------------ |
|
| PROFIT
AVAILABLE FOR APPROPRIATIONS |
|
|
18,409,522 |
8,668,213 |
|
|
|
|
|
| APPROPRIATIONS: |
|
|
|
| Transferred
to general reserves |
|
2,500,000 |
4,600,000 |
|
| Proposed
dividend @ 15% (1998: 5%) |
|
13,173,965 |
3,992,111 |
|
| Transferred
to reserve for issuance of Bonus shares |
|
2,217,751 |
-- |
|
|
