Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
do more
feel betterand
live longer
1
Our
Vision GlaxoSmithKlines vision is exciting
the opportunity to make a difference
to the lives of billions of people.
2
Corporate Board of Directors
Mr. M. Salman Burney Chairman / Chief Executive
Information Mr. Tariq Iqbal Khan
Mr. Rafique Dawood
Non-Executive Director
Non-Executive Director
Mr. S. Masood Abbas Jaffery Non-Executive Director
Mr. Shahid Mustafa Qureshi Legal and Corporate Affairs Director
Mr. Ghulam Mustafa Aziz Finance and Information Technology Director
Dr. Muzaffar Iqbal Technical Director
Audit Committee
Mr. Rafique Dawood Chairman
Mr. Tariq Iqbal Khan Member
Mr. M. Salman Burney Member
Management Committee
Mr. M. Salman Burney Chairman / Chief Executive
Dr. Muzaffar Iqbal Technical Director
Mr. Ghulam Mustafa Aziz Finance and Information Technology Director
Mr. Shahid Mustafa Qureshi Legal and Corporate Affairs Director
Dr. Iffat Yazdani Director Medical Services
Ms. Talat Naseer Director Human Resources & O.D.
Dr. Z. U. Khan Head of Quality
Haji Muhammad Hanif Head of Procurement
Ms. Naila Hasan Marketing Director
Ms. Erum S. Rahim Business Development Director
Mr. Pervaiz Iqbal Awan Sales Director
Mr. Maqbool ur Rehman Sales Director
Mr. Javed Y. Ahmedjee Financial Controller
Registered Office
35 Dockyard Road, West Wharf, Karachi 74000.
Telephones: 2315478-82, 2316071-73 & 2315101-08
Fax: 2314898 & 2311122
3
Highlights of the Year
GSKs Global Business Strategy Operational Excellence Research and
To build the best product pipeline in the industry 2006 saw a number of Development
To achieve commercial and operational excellence Operational Excellence (OE)
To improve access to medicines for those who cannot initiatives which materialized to Number of R&D Trials
afford them. give leaner processes, and conducted
To make GSK the best place for the best people to do improved work standards. This 19 - Phase II & Phase III
their best work. in turn boosted cost savings and Clinical Trials
To contribute to investment in communities around optimization of resources. Therapy Areas Covered
the world. Leading edge programs were
To ensure our business decisions take into consideration revisited to compliment OE and under Clinical Trials
ethical, social and environmental concerns. revive the spirit of GSK. Metabolic
Oncology
Cardiology
Best Place, Best People, Best Work EHS Haemotology
This year our recruitment team conducted career counselling F-268, West Wharf and Landhi Neurosciences
sessions for over 3,000 students, in 22 universities across sites achieved 1 million hours Psychiatry
20 cities of Pakistan. These sessions also enable us to without Lost Time Dr Iffat Yazdani won the
generate a good pipeline for our organization. injury/illness qualifying for International Finalist Award
We continued with our blended learning plan offering the EHS Milestone 2006 at the Excellence
courses on general management, leadership and technical Certificate Exchange competition at the
expertise . Some of these plans were: 2006 Medical Directors
Leadership Essentials Logos - Graphical representation West Wharf site received a
Special Commendation in the Meeting.
of the 8 Leadership essentials which represent the spirit
of GSK. EHS Initiative- Environment Dr. Jawad Gill won the award
2 Learning Fairs conducted - two weeks each of training category for its submission for the best trainer for clinical
and development for all employees across the board. titled "Lighten up by research.
Recycling" in the 2006 CEO's GSK Pakistan is currently running
From I to Us - an in house Team Building workshop.
EHS Excellence Award the largest Oncology portfolio
Health Expo - awareness sessions for the GSK employees Programme.
regarding specific products and their respective of R&D trial and Pakistan has
therapeutic areas. GSK Pakistan received a shield been declared as Oncology Hub.
Leadership Impact - a workshop for the development in the Employers' Federation
of the first line managers. of Pakistan Excellence
Key Learning Statistics Award in the Best Practices
No of courses conducted during the year 191 - Occupational Safety & Internal Audit and
Average number of participants per course 26 Health Category for the year Compliance HHHHH
Learning hours per employee 69 2004-5.
A full scope audit conducted
by Group Internal Audit (GIA)
of the Commercial Operations
Quality of GSK Pakistan, in which GSK
IMS (Laboratory Information Management system) successfully implemented. Pakistan achieved a 5 Star rating
Launch of QMS in GMS and Commercial. which is the highest achievable
Quality Council launched in GMS and Commercial. in a GIA audit. This is a result
Satisfactory GQA Audits of West Wharf and Landhi Sites. of the team work put in by all
Satisfactory regulatory/GMP inspections of West Wharf and F-268 Sites. in the organization where the
Vision factory projects implemented in Quality. focus has always been on
Suppliers Forum and Distributors Forum to support Procurement and Commercial. Performance with Integrity.
4
Financial Highlights
Rs 2.6 bn
Profit Before Tax
decrease by 2.3% over 2005
Rs 966.9
Corporate Tax Charges
increase by 9.8% over 2005
m
Rs 1.7 bn
Profit After Tax
decrease by 8.2% over 2005
Rs 12.2
Earnings per Share (basic and diluted)
decrease by 8.2% over 2005
5
GlaxoSmithKline Overview
History and Development Strategy and Business Drivers
GlaxoSmithKline (GSK) plc, and its subsidiary and associated GlaxoSmithKlines business goal is to become the indisputable
undertakings, constitute a major global healthcare group leader globally in the pharmaceutical industry. Achieving
engaged in the creation and discovery, development, this goal will require meeting the three key challenges that
manufacture and marketing of pharmaceutical and face both the industry and the society as a whole:
consumer health-related products. GlaxoSmithKline has
Improving productivity in research and development
its corporate head office in London and also has operational
headquarters in Philadelphia and Research Triangle Park, Ensuring patients access to new medicines
USA, and operations in some 116 countries, with products Reaching consumers beyond the traditional healthcare
sold over 130 countries. It plays leadership role in four professional
major therapeautic areas antibiotics, central nervous
system (CNS), respiratory and gastro-intestinal/metabolic. The strategies to meet these challenges focus on several
In addition, GlaxoSmithKline contributes to the important business drivers:
area of vaccines and also has a growing portfolio of
oncology products. Build the best product pipeline in the industry
GlaxoSmithKline is aiming to create the most productive
History of GlaxoSmithKline Pakistan Limited: discovery pipeline in the industry for the benefits of patients,
consumers and society. This includes developing a focused
Founded: portfolio strategy to support the pipeline and manage the
full life cycle of compounds from launch through to over-
1947 Glaxo operations organised in Pakistan at independence
the-counter products. This strategy includes selective in-
1949 SK&F came to Pakistan under the name of Pharmaco licensing and efficient execution of development,
Limited. commercialization and the supply chain process.
1952 Glaxo became public limited.
GSKs R&D organization measures productivity by the
1954 Beecham incorporated in Pakistan.
number and innovation of the products it creates and also
1955 Glaxo established manufacturing facilities in Pakistan. by the commercial value and their ability to address the
1955 Wellcome incorporated in Pakistan. unmet needs of all consumers. This includes patients,
1956 Wellcome established manufacturing facilities in Pakistan healthcare professionals, budget holders and regulators,
each with their own perspective on what constitutes a
1979 Wellcome Pakistan became public limited
valuable new product.
1996 Glaxo and Wellcome merged to become Glaxo Wellcome
2002 Glaxo Wellcome, Beecham and SK&F integrated as a Achieve commercial and operational excellence
result of global merger to form GlaxoSmithKline Pakistan. GlaxoSmithKline links research and commercial operations
closely in order to maximize the value of the portfolio.
GSK operates in an increasingly global environment where
Business Segments scale offers significant advantages. The Group leverages
GlaxoSmithKline operates principally in two industry that scale by building interdependent businesses that
segments: share successful practices across business boundaries and
geographic borders. Common approaches to management
Pharmaceuticals (prescription pharmaceuticals and processes and business functions are used by an
vaccines) internationally diverse and talented management team
Consumer Healthcare (over-the-counter medicines, oral in order to create and sustain competitive advantage in
care and nutritional healthcare) all markets.
6
GlaxoSmithKline undertakes a range of activities to sites. Converting active compounds into a finished dosage
maximize the commercial potential of its intellectual formulation is the responsibility of the secondary
property, by introducing products into as many markets manufacturing sites.
as possible, accelerating the process of bringing new
products to market, increasing brand recognition and By adopting leading edge practices and developing its
ensuring that patients have access to new medicines. people GMS expects to derive benefits from:
Both the pharmaceutical and consumer healthcare a secure source of supply of high quality products
businesses focus on ways to improve existing performance
compliance with regulatory requirements and customer
through commercial and operational excellence
expectations
initiatives.
best in class cost
Improve access to medicines
GSK continues to seek new ways of improving access to Marketing and Distribution
its medicines for people who need them, but are least GlaxoSmithKline sells its prescription medicines through
able to obtain them. It has created extensive programmes distributors, primarily to pharmacists, hospitals, government
designed to improve the healthcare of people who have entities and other institutions. These products are prescribed
limited access to medicines. It is working to provide by doctors, and dispensed to patients by pharmacies or
meaningful access to medicines for people with limited used in a hospital environment.
financial resources.
GlaxoSmithKline sales team provides value to healthcare
Be the best place for the best people to do professionals. Well organized training is provided aimed
their best work at raising the standards of representatives knowledge
The single greatest source of competitive advantage of about diseases and the role of GlaxoSmithKline
any organization is its people. GlaxoSmithKlines ambition medicines in treating them.
is to be the place where great people apply their energy
and passion to make a difference in the world. Their skills Value in health care can only be achieved with
and intellect are key components in the successful appropriate treatment being administered to maximum
implementation of GSKs strategy. The work environment number of patients.
supports an informed, empowered and resilient workforce,
in which the Group values and draws on the diverse GlaxoSmithKlines marketing initiatives aim to remain
knowledge, perspectives and experience and styles of the leader of new medicines from cost of treatments, proper
global community. diagnosis and knowledge about diseases and prospective
options with effective and ethical marketing initiative.
Global Manufacturing and Supply (GMS)
GlaxoSmithKline manufacturers large portfolio of products,
ranging from tablets and toothpaste to inhalers and
complex capsules, in different pack sizes and presentations.
Manufacture of medicines begins with the development
of a therapeutic active ingredient (bulk active) in a selected
formulation. Global Manufacturing and Supply (GMS)
develops manufacturing processes for full scale volume
production of active compounds at primary manufacturing
7
Our
GlaxoSmithKline discovers, develops,
Products manufactures and markets pharmaceuticals,
vaccines, over-the-counter medicines and health-
related consumer products.
8
Antibiotics Tagamet Uniplex Polyfax
Augmentin Dyspamet Wellcosine Cicatrin
Amoxil Marzine Lotrix
Ampiclox Maxolon Calcium Pilzcin
Ceporex Phillips Milk of Magnesia Supplement Furacin
Septran Stelabid Chewcal Silvate
Penbritin ENO
Zinacef Anticoagulants Cardio-vasculars
Fortum Central Nervous Fraxiparine Lanoxin
Floxy System
Angised
Orbenin Seroxat Anthelmintics
Wellcodox Imigran Zentel
Syraprim Requip Nemazole Anti-malarials
Timentin Lamictal Halfan
Floxapen Kemadrin Anti-virals
Migril Zeffix Anti-diarrhoeals
Analgesics Stelazine Valtrex Dependal-M
Panadol Zovirax Furoxone
Calpol Vaccines Hepsera
Dicofen Engerix-B Anaesthesia
Empirin Compound Havrix Systemic Steroids Tracrium
Iodex Infanrix Betnesol
Tritanrix-HB Betnelan Oncology
Respiratory Fluarix Hycamtin
Seretide Hiberix Eye/Ear Zofran
Ventide Typherix Cortisporin
Ventolin Varilrix Polyfax Other Products
Flixonase Priorix Betnesol Zyloric
Flixotide Mencevax ACWY Otosporin Imuran
Beconase Lidosporin
Thyroxine
Serevent Haematinics &
Relifex
Becotide Vitamins Cough/Cold
Amphyll Fefol Actifed-P
Fefol-Vit Piriton Oral Care
Diuretic Fesovit-Z Actidil Aquafresh
Dyazide Revitale-B Macleans
Revitale Multi Dermatologicals Sensodyne
Gastro- intestinal & Starvits Cutivate
Metabolic Cytacon Betnovate Nutritional
Avandia Cytexin Dermovate Healthcare
Zantac Cytamen Bactroban Horlicks
9
2006 was the landmark year for GSK Pakistan
as the Company achieved Rs. 10 billion sales
10 f
ce
na
Zi
10
Fura
zoli
don
e
Beta
me
tha
son
ev
ale
(halo
rate
,N
fantr
eom
ycin
ine H
Cl)
Fura
zoli
don
e, M
etro
nid
azo
le
Flut
icas
one
Pro
pion
Flix
ate
TM
ona
Salb
uta
mo
se
l
passionate people
Po
Populated by innovative,
lym
yxin
BS
ulp
hate
,B
acit
rac
in Z
inc
billion
11
GlaxoSmithKline at Work
A conducive, learning and friendly GSK is a company which values talent,
environment is what GSK has to diversity and ambition. Every day
offer! Two thumbs up for the brings with it new challenges &
training and development efforts put newer opportunities for growth and
by GSK! Batool learning. At the end of the day you
are left with an exhilarating sense of
achievement with a tomorrow promising
so much more. Arif Tahir
12
Business
Ethics and
Integrity High standards of honesty and integrity are vital to the success of
our business. Performance with integrity is the principle by
which we aim to live and work at GlaxoSmithKline.
Our Code of Conduct lays out the principles that we value and
that employees should apply in their daily work. It is the responsibility
of every employee to implement the Code and Company policies.
13
Notice of Annual General Meeting
Notice is hereby given that the SIXTIETH Annual General Meeting of the Shareholders of the Company will be held
at Beach Luxury Hotel, Karachi at 12:00 noon on Thursday, March 29, 2007 to transact the following business:
1. (a) To receive and adopt the Report of the Directors and the Accounts for the year ended December 31,
2006 and the Auditors' Report thereon;
Notes:
1. The Share Transfer Books of the Company will be closed from March 23, 2007 to March 29, 2007 (both days
inclusive) for the purpose of determining the entitlement for the payment of Final Dividend.
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. The shareholders are requested to notify the Company if there is any change in their address.
4. CDC Account Holders will further have to follow the under mentioned guidelines as laid down in
Circular No. 1 of 2000 dated January 26, 2000 issued by the Securities and Exchange Commission
of Pakistan.
14
A. For Attending the Meeting:
i) In case of individuals, the account holder or sub-account holder and/or the person whose
securities are in group account and their registration details are uploaded as per the
Regulations, shall authenticate his/her identity by showing his/her original National Identity
Card (NIC) or original passport at the time of attending the meeting.
ii) In case of corporate entity, the Board of Directors resolution/power of attorney with specimen
signature of the nominee shall be produced (unless it has been provided earlier) at the time
of the meeting.
i) In case of individuals, the account holder or sub-account holder and/or the person whose
securities are in group account and their registration details are uploaded as per the
Regulations, shall submit the proxy form as per the above requirement.
ii) The proxy form shall be witnessed by two persons whose names, addresses and NIC numbers
shall be mentioned on the form.
iii) Attested copies of NIC or the passport of the beneficial owners and the proxy shall be
furnished with the proxy form.
iv) The proxy shall produce his/her original NIC or original passport at the time of the meeting.
v) In case of corporate entity, the Board of Directors resolution/power of attorney with specimen
signature shall be submitted (unless it has been provided earlier) along with proxy form to
the Company.
15
Financial Performance at a Glance
2006 2005
Rs. in million
* Represents final dividend declared by the Board of Directors subsequent to the year-end.
1,968
2,000
1,557
1,500
1,093
902 904
1,000
500
0
2000 2001 2002 2003 2004 2005 2006
Gross Profit Operating Profit
16
Statement of Value Added
The statement below shows the amount of revenue generated by the Company during the year and the way this
revenue has been distributed:
2006 2005
Rs. 000 % Rs. 000 %
Revenue Generated
Total revenue 10,599,212 100.0 9,782,988 100.0
Revenue Distributed
Bought-in-materials and Services 6,221,581 58.7 5,570,494 56.9
Selling, Marketing and Distribution Expenses 1,053,388 10.0 901,671 9.2
Administrative Expenses and Financial Charges 456,137 4.3 375,533 3.8
* Represents final dividend declared by the Board of Directors subsequent to the year-end.
Bought-in-materials
and Services 12.9%
Selling, Marketing and 2.8%
Distribution Expenses
Administrative Expenses
and Financial Charges 11.3%
Government
Retained in the Business
4.3%
58.7%
Shareholders 10.0%
17
Key Operating and Financial Data
2000 2001 2002 2003 2004 2005 2006
(Rs. in million)
Assets employed
Fixed assets - property, plant and equipment 1,219 1,347 1,396 1,461 1,434 1,503 1,774
Investments - available-for-sale - - - - 407 192 96
Deferred taxation 26 41 5 - - - -
Long-term loans and deposits 41 30 57 63 55 47 43
Net current assets**** 1,952 2,154 2,345 3,316 3,877 5,252 5,827
Total assets employed 3,238 3,572 3,803 4,840 5,773 6,994 7,740
Financed by
Issued, subscribed and paid-up capital 881 881 506 728 874 1,092 1,365
Reserves 2,151 2,416 3,051 3,854 4,674 5,646 6,172
Surplus on revaluation of fixed assets 25 25 3 3 - - -
Shareholders' equity 3,057 3,322 3,560 4,585 5,548 6,738 7,537
Staff retirement benefits - Staff gratuity 157 249 242 198 149 159 66
Deferred taxation 23 - - 57 76 97 137
Long-term loan 1 1 1 - - - -
Ratios
Earnings per share - Rs.** 5.4 3.5 4.0 7.5 10.8 13.3 12.2
Cash dividend per share - Rs. 5.2 5.0 6.0 7.0 7.0 8.0 8.0
Bonus shares (%) - - 20 20 20 25 25
Price earning ratio (times) 16.6 21.4 21.1 25.5 16.8 14.0 12.9
Market value per share - year end - Rs.*** 89.5 75.0 84.6 191.1 181.0 186.3 157.9
Market value per share - high - Rs. *** 103.0 115.9 93.0 244.8 236.5 240.3 215.8
Market value per share - low - Rs. *** 45.0 59.0 71.0 77.0 176.0 162.1 148.0
Break-up value per share-without surplus on revaluation-Rs. 34.4 37.4 70.3 62.9 63.5 61.7 55.2
Break-up value per share-with surplus on revaluation-Rs. 34.7 37.7 70.4 63.0 63.5 61.7 55.2
Dividend payout (%) 29.9 44.7 74.5 61.5 51.5 60.2 82.0
Dividend yield (%) 5.8 6.7 9.5 4.7 5.0 5.6 6.6
Return on capital employed (%) 22.8 13.4 14.3 21.2 25.5 25.9 21.5
Total assets turnover (times) 1.5 1.4 1.4 1.4 1.3 1.1 1.1
Fixed assets turnover (times) 4.8 4.9 5.0 5.6 6.2 6.3 5.7
Debtors turnover (days) 8.6 7.7 5.4 3.7 2.2 1.9 2.7
Inventory turnover (times) 2.5 2.9 3.0 3.3 3.3 3.1 3.0
Current ratio**** 3.0 3.0 2.8 4.2 4.6 5.1 4.4
Acid test ratio**** 1.4 1.5 1.7 2.6 3.1 3.6 3.1
Gross profit margin (%) 33.3 32.4 35.3 38.9 39.5 40.8 38.3
Notes: Figures for 2000 include financial data for former Smith Kline & French of Pakistan Limited and former Beecham Pakistan (Private) Limited for the purposes of comparison only.
* Dividend includes final dividend declared by the Board of Directors subsequent to the year-end.
** Earnings per share has been restated to reflect the impact of bonus shares issued subsequently.
*** Market value per share for 2000 and 2001 represents market value of former Glaxo Wellcome Pakistan Limited only.
**** Figures/ratios for 2000 to 2002 include final dividend declared by the Board of Directors subsequent to the year-end.
18
Shareholders Equity Assets & Liabilities
5,827
8,000
6,172 6,000
5,252
7,000 5,646
5,000
6,000
4,674
3,877
4,000
3,316
5,000 3,857
Rs. in Million
Rs. in Million
4,000 3,000
3,054
2,345
2,154
2,441
1,952
2,176
1,774
3,000
2,000
1,503
1,461
1,434
1,396
1,347
1,219
2,000
1,000
462
250
256
203
255
243
1,000 1,365
181
225
239
139
1,092
67
63
71
62
881 881 728 874 0
0 506
2000 2001 2002 2003 2004 2005 2006
2000 2001 2002 2003 2004 2005 2006
Long Term Liabilities Long Term Assets Net Current Assets Fixed Assets
Paid up capital Reserves
4
5
3 4 3.7
3 2.7
2 2.2
2 1.9
1
1
0 0
2000 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005 2006
3.0 3.0
15 14.0 3 2.8
12.9
10 2
5 1
0 0
2000 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005 2005
2006
Notes: Figures for 2000 include financial data for former Smith Kline & French of Pakistan Limited and former Beecham Pakistan (Private) Limited
for the purposes of comparison only.
Figures/ratios for 2000 to 2002 include final dividend declared by the Board of Directors subsequent to the year-end.
19
GlaxoSmithKline Leadership Essentials
20
?
Did you
know
?
GSK globally
has ......
and 80 manufacturing
sites in 37 countries.
21
Board of Directors
Mr. M. Salman Burney Mr. Tariq Iqbal Khan Mr. Rafique Dawood
Mr. Shahid Mustafa Qureshi Mr. Ghulam Mustafa Aziz Dr. Muzaffar Iqbal Mr. S. Masood Abbas Jaffery
The Board of Directors proposed a final cash dividend The directors of the Company endorse the contents of
of Rs. 8 per share amounting to Rs. 1,092.3 million. the same.
22
Basic and diluted earnings per share developing personal credibility, providing efficient
Basic and diluted earnings per share after taxation were customer service to internal employees, & upgrading
Rs. 12.19. HR technology and processes.
Rs. in Million
3.1
8
Rupees
7.5 3 2.8
6 2.2
5.4 2
4.0
4
3.5
1
2
0 0
2000 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005 2006
23
2006 and both sites achieved good audit results. This Best in Class Tax Participation Award
indicates GSK Pakistans commitment to excellence in GlaxoSmithKline Pakistan Limited has been awarded
environment, health & safety and continuous the Pakistan Revenue Boards recently instituted award
improvement in EHS performance. Both sites have for best in class tax participation.
received Achievement Level Recognition from Corporate
EHS in the Audit Performance Programme.
The prestigious award recognises the excellence of tax
GSK Pakistans F-268, West Wharf and Landhi sites payers in achieving high standards in tax payments
have all achieved one million hours without Lost Time compliance, transparency and reporting. Out of more
injury and Illness in 2006. As per EHS Reward and than 700 listed companies in Pakistan, only 17 were
Recognition Programme, approval for the Milestone selected as winners in various sectors.
Certificate for working one million hours without Lost
Time Injury or Illness has been received from Corporate GSK Pakistan has always endeavored to set the highest
Environment Health & Safety for F 268 and West Wharf standards of ethics, transparency and tax compliance
applications. in its dealings with the Government.
GSK Pakistan has also received the shield in the
Employers' Federation of Pakistan Excellence Award in Audit Committee
the Best Practices - Occupational Safety & Health An Audit Committee has been in existence since May
Category for the year 2004-5. 2002. It comprises of three members, of whom two are
non-executive directors including the chairman of the
Effluent treatment plants have been set up at F268 and committee. The terms of reference of the Committee
West Wharf sites and are in commissioning stage.
have been determined by the Board of Directors in
GSK Earth Week was celebrated in June 2006 to coincide accordance with the guidelines provided in the Listing
with World Environment Day with activities to create Regulations and advised to the Committee for compliance.
environmental awareness. Exhibition of items made The Committee held four meetings during the year.
with recyclable materials was held at all sites and prizes
awarded to best three winning entries at all sites. An independent Internal Audit function reporting to
Health and safety week was celebrated at site in October the Boards Audit Committee reviews risks and controls
2006 and a Health & Safety Quiz Competition was held across the organization and utilizes the services of
at all sites. independent audit firms for continuous reviews of
internal controls and risks.
Statement of ethics and business practices
The Board of Directors of the Company has adopted
a statement of ethics and business practices. All Management Committee
employees are informed and aware of this and are The Management Committee comprises of 13 senior
required to observe these rules of conduct in relation members who meet and discuss important business
to business and regulations. plans, issues and progress made in their functions.
Significant matters to be put forth in the Board are
Meetings of the Board of Directors discussed for onward approval by the Board.
During the year, 4 meetings of the Board of Directors
were held, the details are as follows:
Auditors
Name of directors Meetings attended The present auditors, Messrs A.F. Ferguson & Co.,
Mr. M. Salman Burney 3 Chartered Accountants, retire and being eligible, offer
Mr. Tariq Iqbal Khan - themselves for re-appointment. The Board of Directors
Mr. Rafique Dawood 4 endorses recommendation of the Audit Committee for
Mr. Shahid Mustafa Qureshi 4 their re-appointment.
Mr. Ghulam Mustafa Aziz 4
Dr. Muzaffar Iqbal 4 Subsequent events
Mr. S. Masood Abbas Jaffery 1 No material changes or commitments affecting the
financial position of the Company have occurred
Leave of absence was granted to the Directors who between the end of the financial year of the Company
could not attend some of the board meetings. and the date of this report.
24
Value of investments of provident, gratuity b. Proper books of account of the Company have been
and pension funds maintained.
The value of investments of provident, gratuity and
pension funds based on their un-audited accounts as on c. Appropriate accounting policies have been
December 31, 2006 (audit in progress) was as follows: consistently applied in preparation of financial
statements and accounting estimates are based on
2006 reasonable and prudent judgement.
Rs. in 000
Provident fund 667,256 d. International Accounting Standards, as applicable
Pension fund 875,047 in Pakistan, have been followed in preparation of
financial statements.
Gratuity fund 357,336
Corporate and financial reporting framework h. There has been no departure from the best practices
a. The financial statements, prepared by the of transfer pricing.
management of the Company, present fairly its state
of affairs, the result of its operations, cash flows i. The key operating and financial data for the seven
and changes in equity. years is set out on page 18.
Karachi
February 26, 2007
25
Chairman/Chief Executives Review
I am pleased to present the Annual Report of your Review of operating results
Company for the financial year ended December 31, The year 2006 saw rising inflation and high fuel and
2006. energy costs which adversely affected our margins.
However the company managed to sustain good
Economy & Market financial performance through cost saving initiatives,
Pakistans economy sustained good economic growth productivity improvements, and sustained investment
in 2005-06 despite a surge in oil prices and the in product promotion.
earthquake of October 8, 2005. This sustained growth
momentum indicates both resilience & dynamism in Net Sales
industry, agriculture and services, and the emergence 11,000
10,088
of a new investment cycle. 10,000 9,417
9,000
8,867
8,101
The pharmaceutical business in Pakistan remained 8,000
6,993
very challenging and competitive. The Pakistans 7,000 6,560
5,910
pharmaceutical industry with market size of around Rs. in Million 6,000
5,000
Rs 70 billion(US$ 1.2 billion),continued to grow in
4,000
line with GDP, with over 400 manufacturing and
3,000
importing companies competing in a highly genericised
2,000
market.
1,000
0
Pharmaceutical Turnover 2000 2001 2002 2003 2004 2005 2006
26
growth of 11.3% as compared to last year. Iodex, Eno Profit after Tax
and Macleans were the leading contributors in the year.
2,000
1,814
The Animal Health portfolio maintained its sales at 1,800
1,665
Rs. 91.4 million (2005: Rs. 90.2 million). 1,600
1,471
1,400
Overall gross margin for the year was lower at 38.3% 1,200
Rs. in Million
1,026
compared to 40.8% in 2005. The decline in margins 1,000
Administrative expenses at Rs.436.8 million recorded The Company continues to invest in plant, machinery
an increase of 20.6% This was due to increased site and infrastructure upgradation.
lease charges and the overall impact of inflation.
Capital Expenditure
Other operating expenses at Rs 221.7 million,
500
decreased by Rs. 3.5 million. 472
450
400
Other operating income increased by Rs.146 million
350
showing good growth of 41.7% over last year. The
301
higher income was made possible through the efficient 300 282
265
Rs. in Million
250
247
management of the Companys funds and also the
improved interest rate profile during the year. 200 189
172
150
During the year under review, profit before tax was 100
27
Despite significant capital expenditure during the year, Over the last few years , payout as well as shareholder
the cash position of the Company improved by Rs value has increased significantly as a result of
676.3 million over last year. Companys sustained business success. The Companys
market capitalization has increased over the last 4
years from Rs 4.3 billion in 2002 to Rs 21.6 billion as
Payout to Shareholders
at December 31, 2006.
1400
273
1200 Future outlook
218 1092
GlaxoSmithKline Pakistan aims to create value for its
1000
shareholders by continuing to provide affordable
800 874 healthcare products to its customers many of which
Rs. in Million
Market Capitalization
The year 2007 is likely to be challenging , in particular
25,000
for the Pharmaceutical industry in Pakistan. The
21,559 industry has great potential for growth, however, its
20,350
20,000
sustained success depends on a regulatory
15,817 environment which is able to balance the interests of
15,000 13,916 this research based industry, with the need for
Rs. in Million
affordable healthcare.
10,000
28
The business improvement initiatives undertaken in Acknowledgment
the last few years have contributed towards improved GlaxoSmithKline Pakistan Limiteds sustained success
operational efficiencies and cost savings for the is only possible due to the effort and commitment of
Company. The beneficial impact of these enhanced all its employees.
business efficiencies is, however, eroding and will
continue to do so unless the government implements, On behalf of the Board I would like to place on record
in a timely manner, the existing notified policy of our appreciation for the passion and commitment
allowing price adjustments to offset inflation and demonstrated by all members of the GlaxoSmithKline
devaluation. Pakistan family individually and as a team.
This is essential if this industry is to sustain itself for During the year, industrial relations remained cordial
the future. and GlaxoSmithKline is committed to maintaining a
motivational and co-operative work environment
Intellectual Property enabling everyone to contribute their best reflecting
The protection of intellectual capital and property is a common spirit.
important to ensure returns for the very substantive
costs of researching and commercializing new I invite all shareholders, employees and stakeholders
treatments. to share our enthusiasm for our company and look
forward to its continued success in 2007.
In the recent past Pakistan has made some progress
in this regard, by updating its IPR laws to the levels
required by global conventions. At a practical level
however, much more needs to be done to discourage
both piracy and counterfeiting. Effective
implementation will protect consumers, as well as M. Salman Burney
industry and also lead to a quality and research- Chairman / Chief Executive
oriented culture which is vital for the future progress Karachi
of this industry. February 26th, 2007
29
Statement of Compliance with the Code of
Corporate Governance
for the year ended December 31, 2006
The statement is being presented to comply with the 6. No casual vacancy occurred in the Board of Directors
Code of Corporate Governance contained in the listing during the year ended December 31, 2006.
regulations of Karachi and Lahore Stock Exchanges for
the purpose of establishing a framework of good 7. The powers of the Board have been duly exercised
governance, whereby a listed company is managed in and decisions on material transactions, including
compliance with the best practices of corporate appointment and determination of remuneration and
governance. The Company has applied the principles terms and conditions of employment of CEO and
contained in the Code as follows: other executive directors have been taken by the
Board, and significant matters are documented by a
1. The Company encourages representation of resolution passed by the Board.
independent non-executive directors and
representation of minority interests on its Board of 8. The meetings of the Board were presided over by the
Directors. At present, the board includes three Chairman and the Board met at least once in every
non-executive directors one of whom represents quarter. Written notices of the Board meetings, along
minority shareholders interests. with the agenda were circulated at least seven days
before the meetings. The minutes of the meetings
2. The directors have confirmed that none of them is were appropriately recorded and circulated.
serving as a director in more than ten listed companies
9. There was no new appointment of CFO and Company
including this company, except for Mr. Tariq Iqbal
Secretary during the year.
Khan representing NIT, who has been specifically
exempted by the Securities and Exchange Commission
10. All the directors on the Board are fully conversant
of Pakistan for holding directorship in more than ten
with their duties and responsibilities as directors of
listed companies.
corporate bodies. The Board had previously arranged
an orientation course of the Code of Corporate
3. All the resident directors of the Company are registered
Governance for its directors to apprise them of their
as taxpayers and none of them has defaulted in
role and responsibilities.
payment of any loan to a banking company, a DFI or
a NBFI or, being a member of Stock Exchange, has 11. The directors report for this year has been prepared
been declared as a defaulter by that Stock Exchange. in compliance with the requirements of the Code and
fully describes the salient matters required to be
4. The Company has a vision/ mission statement and disclosed.
overall corporate strategy. All policies of the Company
are governed by the Corporate Governance Charter 12. The financial statements of the Company were duly
which has been approved by the Board. endorsed by the CEO and CFO before the approval
of the Board.
5. The Company has prepared and circulated during the
year a Statement of Ethics and Business Practices, 13. The directors, CEO and executives do not hold any
to all employees and directors of the Company which interest in the shares of the Company other than that
has been signed by them. disclosed in the pattern of shareholding.
30
14. The Company has complied with all the corporate and that the firm and all its partners are in compliance
and financial reporting requirements of the Code. with International Federation of Accountants (IFAC)
guidelines on code of ethics as adopted by the Institute
15. The Audit Committee has been in existence since of Chartered Accountants of Pakistan.
May 2002. It comprises of three members, of whom
two are non-executive directors including the chairman 19. The statutory auditors or the persons associated with
of the committee. them have not been appointed to provide other
services except in accordance with the listing
16. There exists an effective internal audit function within regulations and the auditors have confirmed that they
the Company. have observed IFAC guidelines in this regard.
17. The meetings of the audit committee were held at 20. We confirm that all other material principles contained
least once in every quarter prior to approval of interim in the code have been complied with.
and final results of the Company as required by the
Code. The terms of reference of the committee have
been formed and advised to the committee for
compliance.
31
Review report to the members on Statement
of Compliance with best practices of Code of
Corporate Governance
We have reviewed the Statement of Compliance with the Best Practices contained in the Code of Corporate
Governance prepared by the Board of Directors of GlaxoSmithKline Pakistan Limited to comply with the
Listing Regulation No. 37 of the Karachi Stock Exchange and chapter XIII of Lahore Stock Exchange where
the Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors
of the Company. Our responsibility is to review, to the extent where such compliance can be objectively
verified whether the Statement of Compliance reflects the status of the Companys compliance with the
provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to
inquiries of the Company personnel and review of various documents prepared by the Company to comply
with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting
and internal control systems sufficient to plan the audit and develop an effective audit approach. We have
not carried out any special review of the internal control system to enable us to express an opinion as to
whether the Boards statement on internal controls covers all controls and the effectiveness of such internal
controls.
Based on our review, nothing has come to our attention which causes us to believe that the Statement of
Compliance does not appropriately reflect the Companys compliance, in all material respects, with the best
practices contained in the Code of Corporate Governance as applicable to the Company for the year ended
December 31, 2006.
Karachi
February 26, 2007
32
Auditors Report to the Members
We have audited the annexed balance sheet of GlaxoSmithKline Pakistan Limited as at December 31, 2006 and
the related profit and loss account, cash flow statement and statement of changes in equity 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.
It is the responsibility of the companys management to establish and maintain a system of internal control, and
prepare and present the above said statements in conformity with the approved accounting standards and the
requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements
based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant
estimates made by management, as well as, evaluating the overall presentation of the above said statements. We
believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:
(a) in our opinion, proper books of account have been kept by the company as required by the Companies
Ordinance, 1984;
(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up
in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account
and are further in accordance with accounting policies consistently applied;
(ii) the expenditure incurred during the year was for the purpose of the company's business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were in
accordance with the objects of the company;
(c) in our opinion and to the best of our information and according to the explanations given to us, the balance
sheet, profit and loss account, cash flow statement and statement of changes in equity together with the
notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, 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 December 31, 2006 and of the profit, its
cash flows and changes in equity for the year then ended; and
(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was
deducted by the company and deposited in the Central Zakat Fund established under section 7 of that
Ordinance.
Karachi
February 26, 2007
33
Balance Sheet
as at December 31, 2006
Authorised capital
150,000,000
ordinary shares of Rs. 10 each 1,500,000 1,500,000
7,536,918 6,737,962
NON-CURRENT LIABILITIES
203,098 255,854
CURRENT LIABILITIES
1,703,806 1,272,546
9,443,822 8,266,362
34
Note 2006 2005
Rupees ‘000
NON-CURRENT ASSETS
CURRENT ASSETS
7,530,354 6,525,010
9,443,822 8,266,362
35
Profit and Loss Account
for the year ended December 31, 2006
Earnings per share - basic and diluted 27 Rs. 12.19 Rs. 13.28
36
Cash Flow Statement
for the year ended December 31, 2006
Cash and cash equivalents at the beginning of the year 3,990,150 3,056,552
Cash and cash equivalents at the end of the year 4,666,470 3,990,150
37
Statement of Changes in Equity
for the year ended December 31, 2006
Balance at January 1, 2005 873,840 1,409 9 375,563 - 691 2,775,970 1,520,672 5,548,154
Balance at December 31, 2005 1,092,300 1,409 9 375,563 - (11,481) 3,999,970 1,280,192 6,737,962
Balance at December 31, 2006 1,365,375 1,409 9 375,563 - (3,648) 3,999,970 1,798,240 7,536,918
38
Notes to the Financial Statements
for the year ended December 31, 2006
39
2.2 Basis of measurement
These financial statements have been prepared under the historical cost convention except as
otherwise disclosed in the accounting policies below.
2.5 Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation, and
a reliable estimate of the amount can be made.
2.6 Taxation
2.6.1 Current
The charge for current taxation is based on taxable income at the current rates of taxation after taking
into account tax credits and rebates available, if any, and taxes paid under the final tax regime.
2.6.2 Deferred
Deferred tax is accounted for using the balance sheet liability method on all temporary differences
arising between tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax liability is generally recognised for taxable temporary differences and
deferred tax asset is recognised to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences, unused tax losses and tax credits can be utilised.
Deferred tax is charged or credited in the profit and loss account except for deferred tax arising on
revaluation of investments which is charged or credited directly to equity.
40
2.7 Fixed assets - Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation / amortisation and
impairment loss except freehold land and capital work-in-progress which are stated at cost.
Depreciation is charged using the straight line method whereby the cost of an asset less estimated
residual value, if not insignificant, is written off over its estimated useful life. Depreciation /
amortisation on assets is charged at the normal rates from the month of addition to the month of
disposal. Cost of leasehold land is amortised equally over the period of the lease.
The assets' residual value and useful life are reviewed and adjusted, if appropriate, at each balance
sheet date.
Company accounts for impairment, where indications exist, by reducing its carrying value to the
estimated recoverable amount.
Maintenance and normal repairs are charged to income as and when incurred. Also assets costing up
to Rs 25,000 are charged to income. Major renewals and improvements are capitalised and the assets
so replaced, if any, are retired.
Gains and losses on disposal of fixed assets are included in income currently.
Securities intended to be held for an indefinite period of time, which may be sold in response to needs
for liquidity or changes in the interest rates, are classified as available-for-sale.
Gains and losses arising from changes in fair value are recognised in equity under fair value reserve.
These are valued at cost using moving average method. Items in transit are valued at cost comprising
invoice value plus other charges incurred thereon.
2.10 Stock-in-trade
These are valued at the lower of cost and net realisable value except goods-in-transit which is stated
at cost. Cost is determined using first-in first-out method.
Cost of raw and packing materials comprises purchase price including directly related expenses less
trade discounts. Cost of work-in-process and finished goods includes cost of raw and packing
materials, direct labour and related production overheads.
Net realisable value signifies the estimated selling price in the ordinary course of business less cost of
completion and cost necessary to be incurred in order to make the sale.
Trade debts are valued at the invoice value. Provision is made against debts considered doubtful of
recovery. Bad debts are written off when considered irrecoverable.
41
2.12 Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of cash flow
statement, cash and cash equivalents comprise cash and cheques in hand and in transit, balances
with banks on current and deposit accounts and running finance under mark-up arrangements.
2.16 Dividend
Dividend is recognised as a liability in the period in which it is declared.
5,386,825 5,386,825 Shares allotted for consideration paid in cash 53,868 53,868
As at December 31, 2006 Setfirst Limited UK held 107,562,871 (2005: 86,050,297) shares of Rs 10 each.
The ultimate parent of the company is GlaxoSmithKline plc, UK.
42
2006 2005
Rupees ‘000
4. RESERVES
Capital reserves
376,981 376,981
6,171,543 5,645,662
2006 2005
Rupees ‘000
(3,648) (11,481)
43
5. STAFF RETIREMENT BENEFITS
2006 2005
Funded Funded Funded Funded
gratuity pension gratuity pension
Rupees ‘000
5.1 Movement in liability / (asset)
Balance at January 1 158,469 (30,909) 76,183 (32,281)
Transfer from unfunded to funded gratuity - - 72,886 -
Charge / (Reversal) for the year (note - 5.4) 37,138 (11,242) 31,121 1,372
Payments to the fund (129,550) - (21,721) -
44
2006 2005
Funded Funded Funded Funded
gratuity pension gratuity pension
Rupees ‘000
5.6 Principal actuarial assumptions
Expected return on plan assets (% per annum) 10 10 9 9
Expected rate of increase in salaries (% per annum) 10 10 9 9
Expected rate of increase in pension (% per annum) - 5 - 4
Discount factor used (% per annum) 10 10 9 9
Retirement age (years) 60 60 60 60
As per actuarial recommendation, the expected return on plan assets was determined by considering the expected
returns available on the assets underlying the current investment policy.
2006 2005
Funded Funded Funded Funded
gratuity pension gratuity pension
% % % %
5.8 For the year ending December 31, 2007 expected contribution to funded gratuity scheme would be Rs 33.64 million
whereas no contribution is expected for funded pension scheme.
5.9 Comparison for five years 2006 2005 2004 2003 2002
Rupees ‘000
Gratuity scheme
Present value of defined benefit obligation 482,634 428,947 373,435 392,094 357,328
Fair value of plan assets (372,849) (240,920) (218,087) (215,387) (111,325)
Experience loss / (gain) on plan liabilities 23,080 11,884 (20,026) (4,685) 22,779
Experience gain on plan assets 13,410 4,578 6,932 6,808 4,382
Pension scheme
45
2006 2005
Rupees ‘000
6. DEFERRED TAXATION
(40,799) (72,592)
137,041 97,385
1,598,432 900,021
7.1 These include Rs. 56.09 million (2005: NIL) due to associated company as at December 31, 2006.
46
2006 2005
Rupees ‘000
7.2 Workers' Profits Participation Fund
At the beginning of the year 14,708 12,765
Allocation for the year – note 23 141,366 144,708
156,074 157,473
Interest on funds utilised in Company's business – note 25 370 1,854
156,444 159,327
Less: Amount paid to the Fund’s Trustees 145,105 144,619
At the end of the year 11,339 14,708
b) Taxation
In finalising the company's assessments for the years 1999 - 2000 through 2002 - 2003 (accounting
years ended December 31, 1998 through 2001) the Deputy Commissioner of Income Tax (DCIT) made
additions to income raising tax demands of Rs 74.85 million. Such additions were made on the
contention that the company had allegedly paid excessive amounts for importing raw materials. Upon
company's appeals the Commissioner of Income Tax (Appeals) (CITA) maintained the addition to
income for assessment years 1999 - 2000 and 2000 - 2001 (accounting years ended December 31,
1998 and 1999) while the addition made in assessment years 2001 - 2002 and 2002 - 2003
(accounting years ended December 31, 2000 and 2001) were deleted. In respect of assessment years
1999 - 2000 and 2000 - 2001 the company, and in respect of assessment years 2001 - 2002 and 2002
- 2003, the department, have filed appeals with the Income Tax Appellate Tribunal (ITAT).
In finalising the assessment of former Smith Kline & French of Pakistan Limited for the assessment year
2002 - 2003 (accounting year ended December 31, 2001), the DCIT made addition to income raising
tax demands of Rs. 4.4 million. Such addition was made on the contention that the company had
allegedly paid excessive amount for importing raw materials. Upon company's appeal, the CITA
maintained the addition to income. The company has filed an appeal with the ITAT.
The management is confident that the ultimate decision will be in favour of the company; hence no
provision has been made in respect of the aforementioned additional tax demands.
8.2 Commitments
Commitments for capital expenditure outstanding as at December 31, 2006 amounted to Rs. 137.88
million (December 31, 2005: Rs. 274.87 million).
Note 2006 2005
Rupees ‘000
9. FIXED ASSETS - property, plant and equipment
Operating assets 9.1 1,354,712 1,319,565
Capital work-in-progress 9.5 419,737 183,537
1,774,449 1,503,102
47
9.1 Operating Assets
Cost Additions/ Cost Accumulated Depreciation / Accumulated Impairment Net book Rate of
as at (Disposals) as at depreciation/ Amortisation depreciation / loss as at value as at depreciation/
January 1, December amortisation for the year / amortisation December December amortisation
2006 31, 2006 as at January (on disposals) as at December 31, 2006 31, 2006 %
1, 2006 31, 2006 (Note 9.4)
Rs. 000
Buildings on
freehold land 70,492 113 70,605 28,261 1,129 29,390 - 41,215 2.5
Buildings on
leasehold land 518,588 6,221 524,809 149,705 10,225 159,930 27,156 337,723 2.5
Plant and
machinery 1,561,649 111,183 1,648,153 854,887 76,195 908,255 65,153 674,745 5 to 10
(24,679) (22,827)
Furniture and fixtures 82,407 4,013 86,030 56,838 4,462 60,958 180 24,892 10
(390) (342)
Office equipments 330,739 76,484 368,506 243,467 35,027 240,074 236 128,196 10 to 33.33
(38,717) (38,420)
December 31, 2006 2,799,124 235,572 2,955,016 1,425,941 152,766 1,507,579 92,725 1,354,712
(79,680) (71,128)
December 31, 2005 2,743,854 130,672 2,799,124 1,335,759 151,605 1,425,941 53,618 1,319,565
(75,402) (61,423)
48
9.2 Reconciliation of opening and closing Net Book Value (NBV)
Buildings on
freehold land 70,492 (28,261) - 42,231 113 - (1,129) - 41,215
Buildings on
leasehold land 518,588 (149,705) (20,502) 348,381 6,221 - (10,225) (6,654) 337,723
Plant and
machinery 1,561,649 (854,887) (32,700) 674,062 111,183 (567) (76,195) (33,738) 674,745
Furniture and fixtures 82,407 (56,838) (180) 25,389 4,013 (48) (4,462) - 24,892
Office equipments 330,739 (243,467) (236) 87,036 76,484 (297) (35,027) - 128,196
December 31, 2006 2,799,124 (1,425,941) (53,618) 1,319,565 235,572 (7,267) (152,766) (40,392) 1,354,712
49
9.3 The following items of fixed assets were disposed of during the year:
Assets scrapped *
Plant and machinery 7,424 6,630 441 353 -
Office equipments 38,602 38,394 - 208 -
Furniture and Fixtures 261 213 - 48 -
* Assets scrapped primarily include items that are obsolete or redundant and have no economic value to the Company.
50
9.4 Impairment loss
2006 2005
Rupees ‘000
9.5 Capital work-in-progress
419,737 183,537
10.1 Reconciliation of the carrying amount of loans to executives and other employees:
2006 2005
Executives Other Other Total Executives Other Other Total
Non- Employees Employees Non- Employees Employees
interest Interest Non-interest interest Interest Non-interest
bearing bearing bearing bearing bearing bearing
Rupees '000
Balance at January 1 577 1,976 67,580 70,133 631 1,992 72,623 75,246
Disbursements 1,036 1,049 33,260 35,345 391 1,222 34,119 35,732
Repayments (909) (1,400) (41,038) (43,347) (445) (1,238) (39,162) (40,845)
Balance at December 31 704 1,625 59,802 62,131 577 1,976 67,580 70,133
Current portion included in note 15 (482) (1,099) (24,764) (26,345) (196) (593) (29,776) (30,565)
51
10.2 The loans have been given in accordance with the terms of employment for purchase of house, motor
cars, motor cycles, computers and staff welfare and are repayable in 12 to 60 equal monthly
installments depending upon the type of the loan. These loans are interest free except certain loans
which carry interest ranging from 5% to 8% (2005: 5% to 8%). All loans are secured against the
retirement fund balances.
The maximum aggregate amount of loans due from executives at the end of any month during the
year was Rs 1.57 million (2005: Rs 750 thousand).
2006 2005
Rupees ‘000
11. INVESTMENTS - available-for-sale
Pakistan Investment Bonds - note 11.1 195,525 387,719
96,425 191,674
11.1 Pakistan Investment Bonds are held by Citibank on behalf of the Company. These carry interest at 6%
to 7% per annum having maturities from April 2007 to October 2008.
2006 2005
Rupees ‘000
12. STORES AND SPARES
Stores 1,719 1,326
Spares 80,108 68,231
81,827 69,557
Less: Provision for slow moving and obsolete items 16,831 16,680
64,996 52,877
13. STOCK-IN-TRADE
Raw and packing materials including in transit 783,241 901,167
Rs. 218.85 million (2005: Rs. 240.76 million)
Work-in-process 188,306 212,401
Finished goods including in transit Rs. 122.61 million
(2005: Rs. 55.21 million) 1,255,365 878,741
2,226,912 1,992,309
Less: Provision for slow moving and obsolete items 31,505 19,356
2,195,407 1,972,953
13.1 Stock-in-trade includes Rs. 98.13 million (2005: Rs. 42.47 million) held with third parties.
13.2 The above balances include items costing Rs. 50.73 million (2005: Rs 58.29 million) valued at net
realisable value of Rs. 46.04 million (2005: Rs. 47.44 million).
52
2006 2005
Rupees ‘000
14. TRADE DEBTS
Considered good
Related party - associated companies:
GSK Trading Services Ltd. 4,770 -
Adechsa-GmbH, Switzerland - 3,083
Others 79,927 61,798
Considered doubtful 1,010 786
85,707 65,667
84,697 64,881
14.1 The maximum aggregate amount due from related party at the end of any month during the year
was Rs 8.33 million (2005: Rs 9.2 million).
2006 2005
Rupees ‘000
15. LOANS AND ADVANCES - considered good
Loans due from:
Executives
Other employees } Note 15.1 482
25,863
196
30,369
26,345 30,565
Advances to:
-
Executives
Other employees } Note 15.2
20,210
1,073
17,919
20,210 18,992
Advances to suppliers 18,034 13,224
64,589 62,781
76,420 62,592
53
2006 2005
Rupees ‘000
17. OTHER RECEIVABLES
Customs duty and sales tax refundable
considered good 39,430 36,690
considered doubtful 18,465 18,465
Due from related parties – note 17.1 25,833 7,964
Claims recoverable from suppliers 11,990 4,296
Due from staff provident fund 642 439
Others 10,951 6,718
107,311 74,572
Less: Provision for doubtful receivables 18,465 18,465
88,846 56,107
The maximum aggregate amount due from related parties at the end of any month during the year
was Rs. 25.83 million (2005: Rs. 13.73 million).
2006 2005
Rupees ‘000
18. CASH AND BANK BALANCES
With banks
on deposit accounts 4,640,971 3,960,634
on current accounts 21,471 26,091
Cash in hand 4,028 3,425
4,666,470 3,990,150
18.1 At December 31, 2006 the rates of mark-up on PLS savings accounts and on term deposit accounts range
from 0.5% to 2.5% (2005: 0.5% to 4.75%) and 9% to 11.6% (2005: 3% to 9.3%) per annum
respectively.
2006 2005
Rupees ‘000
19. NET SALES
Gross sales
Local 10,025,453 9,369,871
Export 214,612 184,207
10,240,065 9,554,078
Less: Commissions, returns, discounts and rebates 137,243 121,492
Sales tax 14,575 15,705
10,088,247 9,416,881
54
2006 2005
Rupees ‘000
20. COST OF GOODS SOLD
5,620,198 4,963,700
Opening stock of work-in-process 212,401 221,860
Closing stock of work-in-process (188,306) (212,401)
7,549,735 6,526,950
Closing stock of finished goods (1,255,365) (878,741)
Cost of samples shown under selling, marketing
and distribution expenses (72,789) (77,715)
6,221,581 5,570,494
20.1 Salaries, wages, benefits and staff welfare include staff severance cost of Rs 127.33 million (2005: Nil).
20.2 Salaries, wages, benefits and staff welfare include Rs 12.79 million and Rs 17.11 million (2005:
Rs 20.12 million and Rs 15.45 million) in respect of defined benefits plans and contributory provident
fund respectively.
55
2006 2005
Rupees ‘000
Salaries, wages, benefits and staff welfare – note 21.1 395,321 305,260
Handling, freight and transportation 86,339 59,919
Advertising 59,768 71,495
Sales promotion 298,272 269,919
Travelling and entertainment 92,624 71,110
Vehicle running 21,742 20,266
Depreciation / Amortisation 18,844 16,951
Canteen expenses 461 260
Rent, rates and taxes 6,371 6,548
Lease rentals - 2,266
Training expenses 2,276 9,119
Fuel and power 8,008 9,170
Publication and subscriptions 12,937 9,000
Insurance 7,684 11,291
Repairs and maintenance 5,506 4,567
Stationery 7,557 7,022
Postage, telex and telephone 12,733 14,220
Security expenses 2,769 3,721
Provision for doubtful debts 885 -
Other expenses 13,291 9,567
1,053,388 901,671
21.1 Salaries, wages, benefits and staff welfare include Rs. 9.42 million and Rs. 10.99 million (2005: Rs
8.57 million and Rs. 10.82 million) in respect of defined benefits plans and contributory provident
fund respectively.
56
2006 2005
Rupees ‘000
Salaries, wages, benefits and staff welfare – note 22.1 and 22.2 234,933 182,632
Travelling and entertainment 12,820 11,491
Vehicle running 8,180 7,483
Depreciation / Amortisation 42,976 44,732
Canteen expenses 3,620 4,537
Rent, rates and taxes 18,509 2,333
Lease rentals - 1,134
Training expenses 11,850 4,482
Publication and subscriptions 2,296 4,106
Insurance 3,586 3,814
Repairs and maintenance 20,285 20,985
Stationery 8,606 7,976
Legal and professional charges 16,793 16,290
Auditors’ remuneration – note 22.3 8,086 7,705
Donations – note 22.4 14,581 15,972
Postage, telex and telephone 18,531 17,993
Security expenses 3,740 3,510
Other expenses net of recovery from a related party of
Rs. 38.97 million (2005: Rs 24.17 million) 7,429 5,112
436,821 362,287
22.1 Salaries, wages, benefits and staff welfare include staff severance cost of Rs 19.42 million (2005:
Rs 5.09 million).
22.2 Salaries, wages, benefits and staff welfare include Rs 3.69 million and Rs 5.54 million
(2005: Rs 3.8 million and Rs 4.83 million) in respect of defined benefits plans and contributory
provident fund respectively.
57
2006 2005
Rupees ‘000
8,086 7,705
22.4 Donations
Donations include a sum of Rs 200 thousand (2005: Rs. 500 thousand) paid to Concern for Children Trust, B/63,
Estate Avenue, S.I.T.E, Karachi in which Mr. Salman Burney, Chairman / Chief Executive, Mr. Ghulam Mustafa
Aziz and Syed Masood Abbas Jaffery, Directors, are the trustees.
2006 2005
Rupees ‘000
221,662 225,186
496,390 350,402
58
2006 2005
Rupees ‘000
19,316 13,246
26. TAXATION
Current
for the year 944,373 875,000
prior years (15,000) (20,000).
Deferred 37,533 25,731
966,906 880,731
966,906 880,731
Basic and diluted earnings per share Rs. 12.19 Rs. 13.28
27.1 Number of ordinary shares outstanding at December 31, 2005 has been increased to reflect the
bonus shares issued during 2006.
59
2006 2005
Rupees ‘000
191,169 141,930
(428,829) (422,916)
Increase / (Decrease) in trade and other payables 693,757 (58,844)
264,928 (481,760)
3,087,966 2,354,569
60
29. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
The aggregate amounts charged in the financial statements for remuneration, including all benefits to the
Chief Executive, Directors and Executives were as follows:
Rupees ’000
In addition to the above, fee to three non-executive Directors during the year amounted to Rs. 26 thousand
(2005: Rs 2,500).
The Chief Executive, Directors and certain executives are also provided with free use of company maintained
cars and certain items of fixtures and household furniture in accordance with the company policy.
Bonus includes amount payable in cash to Chief Executive, Directors and certain executives Rs. 5.5 million,
Rs. 5.3 million and Rs. 14.62 million (2005: Rs 5.12 million, Rs 6.01 million and Rs 12.85 million) respectively
on completion of qualifying period of service, based on share value of ultimate parent company.
61
2006 2005
Rupees ‘000
The related parties balances as at December 31, 2006 are included in trade and other payables, trade debts
and other receivables respectively.
The facilities for running finance available from various banks amounted to Rs 506.6 million (2005: Rs 580
million). The rate of mark-up ranges from one month KIBOR plus 0.5% to three month KIBOR plus 0.5%
(2005: three months KIBOR Plus 1%) . The arrangements are secured by way of pari-passu charge against
hypothecation of company's stock-in-trade and book debts.
The facilities for export refinance available from various banks amounted to Rs 10 million (2005: Rs 10
million). These facilities carry mark-up at 1% (2005: 1%) above the State Bank of Pakistan Export Refinance
rate per annum.
The facilities for opening letters of credit and guarantees as at December 31, 2006 amounted to Rs 1.77
billion (2005: Rs 1.80 billion) of which unutilised balances at the year end amounted to Rs 746.5 million
(2005: Rs 1.09 billion).
62
32. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
Rupees '000
Financial Assets
Loans and advances to employees 1,099 526 1,625 45,456 35,260 80,716 82,341
Deposits - - - 13,749 6,808 20,557 20,557
Investments 99,100 96,425 195,525 - - - 195,525
Trade debts - - - 84,697 - 84,697 84,697
Accrued return - - - 189,829 - 189,829 189,829
Other receivables - - - 49,416 - 49,416 49,416
Cash and bank balances 4,640,971 - 4,640,971 25,499 - 25,499 4,666,470
December 31, 2006 4,741,170 96,951 4,838,121 408,646 42,068 450,714 5,288,835
December 31, 2005 4,157,272 193,057 4,350,329 249,810 45,193 295,003 4,645,332
Financial liabilities
The effective mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to
the financial statements.
Interest risk arises from the possibility that changes in interest rate will affect the value of financial
instruments. The company does not expect to be materially exposed to interest rate changes.
The company finances its operations through equity, borrowings and management of working capital
with a view to maintaining an appropriate mix between various sources of finance to minimise risk.
Credit risk represents the accounting loss that would be recognised at the reporting date if
counterparts failed to perform as contracted. The company does not have significant exposure to any
individual customer. To reduce exposure to credit risk the company applies credit limits to its customers.
63
(v) Foreign exchange risk management
Foreign currency risk arises mainly where receivables and payables exist due to transactions with
foreign undertakings. Payables exposed to foreign currency risks included in bills payable as at
December 31, 2006 amounted to Rs. 458.67 million (2005: Rs 213.85 million).
The company manages liquidity risk by maintaining sufficient cash and the availability of financing
through banking arrangements.
The carrying values of all the financial instruments reported in the financial statements approximate
their fair values.
The capacity and production of the Company's plant are indeterminable as it is multi-product and involves
varying processes of manufacture.
34. DIVIDEND
The Board of Directors in its meeting held on February 26, 2007 proposed a cash dividend of Rs 8 per share
(2005: Rs 8 per share) amounting to Rs 1,092.30 million (2005: Rs. 873.84 million)
Corresponding figures have been rearranged, wherever necessary, for the purpose of comparison, the effect
of which is not material.
These financial statements were authorised for issue on February 26, 2007 by the Board of Directors of the
company.
64
Form 34
Pattern of Shareholding
Number of Shareholding Total Shares
Shareholders From To Held
4,271 136,537,475
65
Categories of Shareholders
(a)
Sr. Categories of Number of Shares Percentage
No. Shareholders Shareholders Held (%)
Others:
i Mohsin Trust 1 13,827 0.01
ii The Al-Malik Charitable Trust 1 2,175 0.00
iii Securities Exchange Commission of Pakistan 1 1 0.00
iv Punjabi Saudagar Co-operative Society 1 175 0.00
v The Anjuman Wazifa Sadat-o-Momineen Pakistan 1 8,115 0.01
5 24,293 0.02
Others:
i Trustees Mohammad Amin WAKF Estate 1 54,000 0.04
ii Trustees Saeeda Amin WAKF 1 31,000 0.02
iii Trustees Kandawala Trust 1 28,626 0.02
iv The Pakistan Memon Educational & Welfare Society 1 43,518 0.03
v Managing Committee Karachi Zorthosti Banu Mandal 1 8,331 0.01
vi Trustees Mrs. Khorshed H. Dinshaw & Mr. Hosh 1 28,350 0.02
vii Trustees D.N.E. Dinshaw Charity Trust 1 38,475 0.03
7 232,300 0.17
66
Shareholding information
Categories of Shareholders No. of No. of Shares
Shareholders Held
Holding company:
Setfirst Limited U.K. 1 107,562,871
Executives 8 2,723
Distribution of Shares
1%
8%
5%
Holding company
Individuals
7% Insurance companies
Financial Instituions
Others
79%
67
Contact Details
Factories Distribution / Sales offices
Karachi Karachi
35, Dockyard Road, F/268, S.I.T.E.,
West Wharf, Near Labour Square,
Karachi-74000 Karachi- 75700
Telephones: 2315478-82, Telephones: 2564355-65, 2570665-69,
2316071-73 and 2202701-82 2574120-23, 2572200 and 2564366
Fax: 2311120 and 2314898 Fax: 2570119
Peshawar
DSouza House,
Nasirpur, Near Abid Flour Mills,
G.T. Road, Peshawar.
Telephones: 2261451-52 and 2650115-16
Fax: 2261457
68