| Spencer & Co. (Pakistan) Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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|
| Board
of Directors |
|
| Notice
of meeting |
|
| Chairman's
review |
|
| Report
of the Directors |
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| Auditors' report |
|
|
| Balance Sheet |
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|
| Profit
and Loss Account |
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| Statement
of changes in financial position (Cash Flow Statement) |
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| Notes
to the accounts |
|
| Statement
under sub-section (1) (E) of |
|
| section
237 of the Company Ordinance, 1984 |
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| Pattern
of shareholdings |
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|
| Consolidated
Financial Statements |
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| Auditors'
Report to the Members |
|
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| Consolidated
Balance Sheet |
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| Consolidated
Profit & Loss Account |
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| Consolidated
Statement of changes in financial position |
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| Notes
to the Consolidated Financial Statements |
|
| Spencer
Pharma (Pvt) Ltd - Subsidiary Company |
|
| Audited
accounts for the year ended June 30, 1999 |
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| Board
of Directors |
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| DIRECTORS |
|
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|
| Byram
D. Avari, Chairman & C.E.O. |
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| Dinshaw
B. Avari |
|
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| Xerxes B. Avari |
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|
| Nauzer
B. Commissariat |
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|
| Keky R. Dastur |
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|
| Mr.
Zia-ur-Rehman Shami |
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| Col.
(Rtd) Aziz Khan |
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| COMPANY
SECRETARY |
|
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|
| Abdul
Rahim Suriya |
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| AUDITORS |
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| Ford,
Rhodes, Robson, Morrow |
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|
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| BANKERS |
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| Allied
Bank of Pakistan Ltd. |
|
| American
Express Bank Ltd. |
|
| ANZ
Grindlays Bank p.l.c. |
|
| Habib
Bank A.G. Zurich. |
|
|
| Metropolitan
Bank Ltd. |
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| Union Bank Ltd. |
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|
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| Doha Bank Ltd. |
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| REGISTERED
OFFICE |
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| 2nd
Floor, Beach Luxury Hotel, |
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| M.T.
Khan Road, |
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| Karachi. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| NOTICE
IS HEREBY GIVEN that the 51st Annual General Meeting of Spencer & Co.
(Pakistan) Ltd., will |
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| be
held on Thursday, March 30, 2000, at 7:00 p.m. at the Beach Luxury Hotel,
M.T. Khan Road, Karachi, |
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| to
transact the following business:- |
|
|
| 1.
To read the notice of the meeting. |
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|
|
|
|
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| 2.
To confirm the Minutes of the 50th Annual General Meeting held on December
30, 1998 and the |
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| Minutes
of the Extra-Ordinary General Meeting held on April 30, 1999. |
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|
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| 3.
To receive, consider and adopt Audited Accounts, together with the Directors'
and Auditors' Reports |
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| thereon,
for the year ended June 30, 1999. |
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|
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| 4.
To appoint Auditors and to fix their remuneration. |
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| 5.
To transact any other business with the permission of the Chair. |
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|
By Order of the Board |
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|
Abdul Rahim Suriya |
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| Karachi:
March 02, 2000 |
|
Company Secretary |
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|
| NOTE: |
|
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| (a)
A member entitled to attend and vote at the Annual General Meeting, is
entitled to appoint another |
|
| member
as proxy to attend and vote instead of him/her at the Meeting. |
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|
|
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| (b)
The share transfer books of the Company will remain closed from March 24,
2000 to March 30, |
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| 2000
(both days inclusive). Transfers received in order at the Registered Office
of the Company |
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| upto
March 22, 2000 will be considered in time. |
|
|
|
|
|
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| (c)
The instrument appointing a proxy must be received at Registered Office of
the Company not later |
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| than
48 hours before the time appointed for the Meeting. |
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|
|
| CHAIRMAN'S
REVIEW |
|
|
| It
gives me great pleasure in presenting you the Chairman's Review along with
the Annual Report and the |
|
| Audited
Accounts of Spencer & Company (Pakistan) Limited, for the year ended June
30, 1999. |
|
|
| The
year under review witnessed the full effect of the general economic recession
prevailing in the country. |
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| The
Company, being no exception, was also severely effected. After a number of
years of continuous profits |
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| and
high dividends, coupled with high intrinsic value, I regret to inform you
that this year our Company will |
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| not
be able to declare any dividend as is apparent from the detailed accounts
attached. |
|
|
| The
myth that Pharmaceutical manufacturing cannot suffer recessions, as medicines
are a necessity, was |
|
| proved
wrong. For the first time in the country's history this sector witnessed a
Sales decline as inflation |
|
| has
eaten into people's ability to purchase. This resulted in Homeopathy, Hakims
and Home Remedies to |
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| be
considered as alternatives. |
|
|
| A
decline in sales has also been acerbated by the effect of normal inflation on
costs. Labour, cost of living |
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| and
other general expenses are the ones that have increased as a result. This has
further eroded margins |
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| as
these increases cannot be off-set as the selling price is controlled and
static. |
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|
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|
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| On
the positive side, I am pleased to inform you that we are manufacturing
injections for a multi national |
|
| company
and the full line of liquids, tablets and injections for another local
Pharmaceutical company. We |
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| are
also confident of executing two highly remunerative contracts with another
multi-national and local |
|
| Pharmaceutical
company during the current year. This should help pull the pharmaceuticals
business out |
|
| of
the red as "tolling" (contract manufacturing for other
Pharmaceutical companies) absorbs the overheads |
|
| and
is a high margin business with no marketing or administrative costs attached
to it. |
|
|
|
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| The
prudent decision of your Company to sell a comparatively small portion of the
Karachi property to |
|
| Metropolitan
Bank can be appreciated from the present property position throughout the
Country which has |
|
| witnessed
the largest drop of the last century in real estate prices. This sale helped
to shore up the Balance |
|
| Sheet
of the company by substituting the Surplus on Revaluation with a similar
amount being increased in |
|
| your
Company's General Reserves. After consulting experts and due deliberations,
your Board decided to |
|
| reflect
this treatment as it is mandated by the International Accounting Standards
(IAS), for similar transactions. |
|
| This
is also as per the internationally recognised accounting practices. |
|
|
|
|
|
| I
am pleased to inform you that at year-end your Company was fully Y2K
compliant and at January 01, 2000 |
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| there
were no problems faced and no interruptions. |
|
|
|
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| On
behalf of your Directors and Management, I take this opportunity of thanking
the Executives and Staff |
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| for
the hard work, dedications and loyalty to the Company as well as express our
gratitude to our customers, |
|
| bankers,
distributors and advisers. |
|
|
|
|
|
|
Byram D. Avari |
|
|
|
Chairman & Chief Executive |
|
|
|
| REPORT
OF THE DIRECTORS |
|
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| In
submitting the Accounts of the |
|
| Company
and the Auditors' Report |
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| for
the year ended June 30, 1999 |
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| the
Directors report that: |
|
|
|
|
Rupees |
|
| Loss
for the year before providing for |
|
| the taxation is |
|
|
28,194,232) |
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| Less:
Provision for Taxation |
|
(1,215,227) |
|
|
|
|
------------------ |
|
|
|
|
29,409,459) |
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| Add:
Amount brought forward from last year |
|
340,374 |
|
|
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|
------------------ |
|
| Accumulated
loss carried forward to reserves |
|
(29,089,085) |
|
|
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|
========== |
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|
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|
On behalf of the Board |
|
|
|
|
|
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|
Byram D. Avari |
|
| Karachi:
March 02, 2000 |
|
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,
1999 and the related profit and loss account and statement of changes in
financial position, together |
|
| with
the notes forming part thereof, for the year then ended and we state that we
have obtained all the |
|
| information
and explanations which to the best of our knowledge and belief were necessary
for the purposes |
|
| of
our audit and, after due verification thereof, we report that: |
|
|
| (a)
provision against short term advances given to Spencer Powergen Company of
Pakistan Limited |
|
| amounting
to Rs. 504.697 (1998: Rs. 490.363) million has not been made by the company
in the |
|
| accounts
of the current year for the reasons disclosed by the management of the
company in note |
|
| 9.1
to the accounts of the current year. Had the company made the above referred
provision, |
|
| advances
at the end of the year would have reduced by Rs. 504.697 million, net loss
for the year |
|
| would
have increased by the same amount and reserves at the end of the year would
have converted |
|
| into
accumulated loss of Rs. 243.488 million at the end of the current year; |
|
|
|
|
| (b)
in our opinion, proper books of account have been kept by the Company as
required by the |
|
| Companies
Ordinance, 1984; |
|
|
|
|
| (c)
in our opinion: |
|
|
|
|
| (i)
the balance sheet and profit and loss account together with the notes
thereon, have been |
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| 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; |
|
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|
|
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the Company's
business; and |
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|
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during
the year |
|
| were
in accordance with the objects of the Company; |
|
|
|
| (d)
in our opinion, except for the effects on the financial statements of the
matter referred to in paragraph |
|
| (a)
above, 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, 1999 and of the loss and the changes in financial position for
the year then |
|
| ended; and |
|
|
|
|
|
|
| (e)
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. |
|
|
|
|
|
|
Ford, Rhodes, Robson, Morrow |
|
| Karachi
- March 02, 2000 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1999 |
|
|
|
|
|
1999 |
1998 |
|
|
|
Note |
Rupees |
Rupees |
|
|
|
|
|
| TANGIBLE
FIXED ASSETS |
|
|
|
| Operating
fixed assets at cost less |
|
|
|
| accumulated
depreciation |
|
3 |
155,626,092 |
277,619,569 |
|
| LONG
TERM INVESTMENTS |
|
4 |
11,345,971 |
11,352,901 |
|
| LONG
TERM ADVANCES |
|
5 |
52,644,341 |
40,888,452 |
|
| LONG
TERM DEPOSITS |
|
6 |
145,654 |
145,654 |
|
| DEFERRED
COST |
|
7 |
3,120,553 |
966,107 |
|
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Trade debts |
|
8 |
-- |
-- |
|
| Advances,
deposit and other receivables |
|
9 |
512,560,872 |
495,621,219 |
|
| Cash
and bank balances |
|
10 |
5,254,770 |
2,052,499 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
517,815,642 |
497,673,718 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
740,698,253 |
828,646,401 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| CAPITAL
AND RESERVES |
|
|
|
| Share Capital |
|
|
|
| Authorised |
|
11 |
25,000,000 |
25,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
11 |
15,423,010 |
15,423,010 |
|
| Reserves |
|
|
|
12 |
261,209,060 |
156,769,086 |
|
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
276,632,070 |
172,192,096 |
|
| SURPLUS
ON REVALUATION OF FIXED ASSETS |
13 |
162,955,862 |
296,805,295 |
|
| LONG
TERM LOANS |
|
|
14 |
25,480,128 |
13,000,000 |
|
| LONG
TERM FINANCES |
|
|
15 |
85,000,000 |
-- |
|
|
| RENT
RECEIVED IN ADVANCE |
|
|
16 |
-- |
27,878,472 |
|
|
|
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Current
maturity of long term loan |
|
|
|
4,160,042 |
-- |
|
|
| Current
maturity of long term finances |
|
|
15,000,000 |
-- |
|
|
| Short
term running finance |
|
|
|
-- |
50,000,000 |
|
|
| Short term loan |
|
|
17 |
20,000,000 |
22,500,000 |
|
|
| Accrued
and other liabilities |
|
|
18 |
34,681,763 |
47,359,210 |
|
|
| Current
account with an associated undertaking |
|
19 |
107,255,812 |
188,644,492 |
|
|
| Provision
for taxation - net |
|
|
|
-- |
73,423 |
|
|
| Dividends
payable |
|
|
20 |
9,532,576 |
10,193,413 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
190,630,193 |
3,187,705.38 |
|
|
| CONTINGENCY |
|
|
21 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
740,698,253 |
828,646,401 |
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts |
|
|
|
Byram D. Avari |
|
Col. (Rtd) Aziz Khan |
|
|
Chairman & C.E.O. |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
|
|
|
|
|
1999 |
1998 |
|
|
|
Note |
Rupees |
Rupees |
|
|
|
|
|
|
| INCOME |
|
|
22 |
5,731,621 |
31,527,069 |
|
|
|
|
|
|
|
|
| Administrative
expenses |
|
23 |
(3,696,539) |
(1,675,995) |
|
|
| Depreciation |
|
|
(3,566,156) |
(5,382,971) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(7,262,695) |
(7,058,966) |
|
|
|
|
------------------ |
------------------ |
|
| OPERATING
(LOSS) / PROFIT |
|
|
(1,531,074) |
24,468,103 |
|
| Financial
charges |
|
24 |
(27,217,338) |
(21,784,946) |
|
| Other
operating income |
|
25 |
554,180 |
128,184 |
|
|
|
|
------------------ |
------------------ |
|
| (LOSS)
/ PROFIT BEFORE TAXATION |
|
|
(28,194,232) |
2,811,341 |
|
|
|
|
|
|
|
| TAXATION |
|
|
|
| Current |
|
26 |
(28,650) |
(157,635) |
|
| Prior |
|
26 |
(1,186,577) |
(268,530) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(1,215,227) |
(426,165) |
|
|
|
|
------------------ |
------------------ |
|
| NET
(LOSS) / PROFIT FOR THE YEAR |
|
|
(29,409,459) |
2,385,176 |
|
| UNAPPROPRIATED
PROFIT BROUGHT FORWARD |
|
340,374 |
1,797,428 |
|
| (ACCUMULATED
LOSS) / UNAPPROPRIATED |
|
|
------------------ |
------------------ |
|
| PROFIT
AVAILABLE FOR APPROPRIATIONS |
|
|
(29,069,085) |
4,182,604 |
|
|
|
|
|
| APPROPRIATIONS |
|
|
|
| Proposed
dividend @ Rs. Nil (1998: Rs. 4.50) per |
|
|
| Ordinary
share of Rs. 10 each |
|
-- |
(6,940,355) |
|
|
|
|
| Less:
Dividend waived by major shareholder |
|
|
| M/S
Beach Luxury Hotel (Private) Limited, |
|
|
| who
is represented through the |
|
|
|
| Directors
on the Board |
|
-- |
3,098,125 |
|
|
|
|
------------------ |
------------------ |
|
|
|
-- |
(3,842,230) |
|
|
|
|
| (ACCUMULATED
LOSS) / UNAPPROPRIATED PROFIT |
|
------------------ |
------------------ |
|
| CARRIED
FORWARD TO RESERVES |
|
|
(29,069,085) |
340,374 |
|
|
|
|
========== |
========== |
|
| (LOSS)
/ EARNINGS PER SHARE (BASIC) |
|
27 |
(19.07) |
1.55 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Byram D. Avari |
|
Col. (Rtd) Aziz Khan |
|
|
Chairman & C.E.O. |
|
Director |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
1999 |
1998 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| Cash
utilised by operations |
|
30 |
(26,348,500) |
(20,593,093) |
|
| Payment
of financial charges |
|
(27,542,361) |
(22,604,100) |
|
| Payment
of taxes |
|
(1,457,509) |
(84,212) |
|
| Long
term advances |
|
(11,755,889) |
4,414,895 |
|
|
|
------------------ |
------------------ |
|
| Net
cash flow from operating activities |
|
(67,104,259) |
(38,866,510) |
|
|
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
|
| Purchase
of fixed assets |
|
(18,500) |
-- |
|
| Sale
proceeds of fixed assets |
|
119,000,000 |
-- |
|
| Deferred cost |
|
(1,260,000) |
-- |
|
| Purchase
of shares |
|
-- |
(6,930) |
|
| Decrease
in long term deposits |
|
-- |
10,000 |
|
|
|
------------------ |
------------------ |
|
| Net
cash inflow from investing activities |
|
117,721,500 |
3,070 |
|
|
|
------------------ |
------------------ |
|
|
|
|
|
50,617,241 |
(38,863,440) |
|
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
| Long term loans |
|
|
10,640,170 |
-- |
|
| Long
term finances |
|
100,000,000 |
-- |
|
| (Repayment)
/ Receipt of short term loan |
|
(2,500,000) |
22,500,000 |
|
| Payment
of dividend |
|
(660,836) |
(683,443) |
|
| Repayment
of rent |
|
(23,512,554) |
-- |
|
| (Payment
to) / Receipt from an associated undertaking |
|
(81,381,750) |
19,232,773 |
|
|
|
------------------ |
------------------ |
|
| Net
cash inflow from financing activities |
|
2,585,030 |
41,049,330 |
|
|
|
------------------ |
------------------ |
|
| NET
INCREASE IN CASH AND CASH EQUIVALENTS |
|
53,202,271 |
2,185,890 |
|
|
|
|
|
|
| CASH
AND CASH EQUIVALENTS AT THE |
|
|
|
|
| BEGINNING
OF THE YEAR |
|
|
(47,947,501) |
(50,133,391) |
|
|
|
|
|
|
| CASH
AND CASH EQUIVALENTS AT |
|
|
------------------ |
------------------ |
|
| THE
END OF THE YEAR |
|
31 |
5,254,770 |
(47,947,501) |
|
|
|
|
========== |
========== |
|
|
|
Byram D. Avari |
|
Col. (Rtd) Aziz Khan |
|
|
Chairman & C.E.O. |
|
Director |
|
|
|
| STATEMENT
OF CHANGES IN EQUITY |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
Share Capital |
|
Capital Reserve |
|
Revenue
Reserves |
|
|
|
Issued, |
Profit arising on |
Premium on |
Capital |
General |
Unappropriated |
Total |
|
|
subscribed and |
sale of land and |
issue of |
redemption |
reserve |
profit/(loss) |
|
|
|
Paid-up |
building on prior |
ordinary |
reserve |
|
|
|
|
years |
shares |
|
|
|
| Balance
as at June 30, 1997 |
15,423,010 |
249,902 |
1,542,300 |
2,375,000 |
152,261,510 |
1,797,428 |
173,649,150 |
|
| Net
profit for the year ended June 30, 1998 |
-- |
-- |
-- |
-- |
-- |
2,385,176 |
2,385,176 |
|
|
|
------------------ |
------------------ |
|
| Proposed
final dividend @45% |
-- |
-- |
-- |
-- |
-- |
(6,940,355) |
(6,940,355) |
|
| Dividend
waived |
-- |
-- |
-- |
-- |
-- |
3,098,125 |
3,098,125 |
|
|
|
------------------ |
------------------ |
|
|
|
(3,842,230) |
(3,842,230) |
|
|
------------------ |
------------------ |
|
| Balance
as at June 30, 1998 |
15,423,010 |
249,902 |
1,542,300 |
2,375,000 |
152,261,510 |
340,374 |
172,192,096 |
|
|
| Realisation
of surplus on revaluation |
|
|
| of fixed assets |
|
-- |
-- |
-- |
-- |
133,849,433 |
-- |
133,849,433 |
|
| Net
loss for the year ended |
|
|
| June
30, 1999 |
|
-- |
-- |
-- |
-- |
-- |
(29,409,459) |
(29,409,459) |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
| Balance
as at June 30, 1999 |
15,423,010 |
249,902 |
1,542,300 |
2,375,000 |
286,110,943 |
(29,069,085) |
276,632,070 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1999 |
|
|
| 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 and 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 |
