our strength is our people
TRANSCRIPT
OUR STRENGTH ISOUR PEOPLE
HALF YEARLY REPORT DECEMBER 2016
Company Information 2
Directors’ Report to the Members 3
Directors’ Report to the Members (Urdu) 7
Auditors’ Report to the Members on Review of Interim Financial Information 8
Condensed Interim Unconsolidated Financial Statements
Balance Sheet 9
Profit and Loss Account 10
Statement of Cash Flows 11
Statement of Changes in Equity 12
Notes to the Financial Statements 13
Condensed Interim Consolidated Financial Statements of The Searle Company Limited
Directors’ Report to the Members 27
Directors’ Report to the Members (Urdu) 31
Consolidated Balance Sheet 32
Consolidated Profit & Loss Account 33
Consolidated Statement of Cash Flows 34
Consolidated Statement of Changes in Equity 35
Notes to the Consolidated Financial Statements 36
CONTENTS
COMPANY INFORMATION
BOARD OF DIRECTORS LEGAL ADVISORSMr. Adnan Asdar Ali Chairman Mohsin Tayebaly & Co.Mr. Rashid AbdullaMr. Husain Lawai BANKERSMr. S. Nadeem Ahmed Chief Executive Officer Albaraka Bank (Pakistan) LimitedMr. Zubair Palwala Bank Al Habib Limited Mr. Ayaz Abdulla Bank Alfalah Limited Mr. Shahid Abdulla Bank of PunjabMr. Arshad Anis Dubai Islamic Bank Pakistan LimitedMr. Mufti Zia Ul Islam Faysal Bank Limited
Habib Bank LimitedBOARD OF AUDIT COMMITTEE Habib Metropolitan Bank LimitedMr. Husain Lawai Chairman MCB Bank LimitedMr. Ayaz Abdulla Member Meezan Bank LimitedMr. Arshad Anis Member National Bank of Pakistan
Silk Bank LimitedBOARD OF HR & REMUNERATION COMMITTEE Soneri Bank LimitedMr. Shahid Abdulla Chairman Standard Chartered Bank (Pakistan) LimitedMr. Ayaz Abdulla Member Summit Bank LimitedMr. Arshad Anis Member
REGISTERED OFFICECHIEF FINANCIAL OFFICER First Floor, N.I.C. Building, Abbasi Shaheed RoadMr. Mobeen Alam Off: Shahrah-e-Faisal, Karachi.
COMPANY SECRETARY SHARE REGISTRARMr. Zubair Palwala Central Depository Company of Pakistan Limited
Head Office, CDC House, 99-B, Block ‘B’AUDITORS S.M.C.H.S., Main Shahrah-e-FaisalA.F.Ferguson & Co. Karachi - 74400
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DIRECTORS’ REPORT TO THE MEMBERS
We are pleased to present the financial information of your Company for the half year ended December 31, 2016. These financial statements have been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34 – ‘Interim Financial Reporting’ and the provisions of the directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provision of directives issued under the Companies Ordinance, 1984 have been followed.
OPERATING RESULTS
December 31,2016 2015(Rupees in thousand)
Revenue 5,336,756 4,743,092Gross profit 2,074,792 1,814,133Operating expenses 1,475,058 1,225,201Other Operating expenses 98,342 121,671Other Income 1,225,098 936,336Operating profit 1,726,490 1,403,597Profit before taxation 1,643,866 1,321,114Profit after taxation 1,485,867 1,144,375
The Searle Company Limited has a proven track record of developing, manufacturing and marketing high quality pharmaceutical formulations. The company is continuously emerging stronger and is ready to embark on a new era as a resource-rich and fully integrated pharmaceutical company.
Searle is on its track to redefine the term growth. With every passing day, we are progressing with leaps and bounds and are creating value for our shareholders through consistent double digit growth and quality healthcare solutions. In lieu with the same philosophy, this period ended December 31, 2016 was yet again a commendable period for our stakeholders.
Financial highlights are summarized below:
• Net sales of the Company amounted to Rs. 5,336.76 million, registering a growth of 13% over the corresponding period of last year.
• Gross profit margins were 39% as compared with 38% of the corresponding period of the prior year.
• Operating expenses as percentage of sales increased nominally by 2% and stood at 28% as compared to 26% in the corresponding period of the last year.
• Operating profit, Profit before taxation and Profit after taxation of the Company increased substantially by 23%, 24% and 30% respectively.
The growth was driven by expanding doctor coverage, maturing product portfolio, higher volumes, richer product mix, branding efforts and strengthened demand. Further, tighter control over costs and expenses contributed their part in the improved financial performance of the company.
3Half Yearly Report December 2016
DIRECTORS’ REPORT TO THE MEMBERS
KarachiFebruary 27, 2017
Syed Nadeem Ahmed Chief Executive Officer
EARNINGS PER SHARE
Basic earnings per share after taxation were Rs. 10.62 (2015: Rs. 8.18).
There is no dilution effect on the basic earnings per share of the Company, as the Company has no convertible dilutive potential ordinary shares outstanding as at December 31, 2016.
DIVIDENDThe board of directors has declared interim cash and stock dividend of 20% & 10% respectively, for the half year ended December 31, 2016.
FUTURE OUTLOOKThe sum and substance of the existence of Searle, is based on the doctrine, ‘service of mankind’. We are functioning in full swing to make availability of adequate healthcare solutions certain. Nationally and throughout the rapidly increasing cross border destinations, people rely on Searle to help them get healthy throughout their lives.
We are persistently working for patients across the country and the respective markets, where we exist. Continuing our endeavors, we are developing Nutritional products and supplements and are trying to explore the possibilities for setting up a manufacturing facility in Europe and proceeding for USFDA approval for Bio Similar range.
In the long-term, Searle is targeting sustainable growth, faster than the market, both locally and internationally. Close focus on Bio Similar business will add significant high value to the patient’s life along with more profits for the shareholders.
ACKNOWLEDGEMENT
We wish to thank the customers for their faith in our products, and their continuing patronage. We also take this opportunity to thank our suppliers, bankers and distributors for providing us with their valuable support throughout the period. Finally we wish to thank our staff who remained committed to deliver towards the growth of the Company.
For and on behalf of the board
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5Half Yearly Report December 2016
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7Half Yearly Report December 2016
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UNCONSOLIDATED CONDENSED INTERIM BALANCE SHEETAs at December 31, 2016
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
(Un-audited) (Audited)December 31, June 30,
2016 2016ASSETS Note (Rupees in ‘000)
Non-current assets
Property, plant and equipment 5 888,765 808,692 Investment properties 2,462,112 2,483,919 Intangibles 6 180,114 69,885 Long-term investments 7 3,272,406 2,636,202 Long-term loans 271 351 Long-term deposits 1,598 1,598
6,805,266 6,000,647 Current assetsStores and spares 1,013 1,004 Stock-in-trade 1,074,967 1,166,583 Trade debts 8 2,723,243 2,577,971 Loans and advances 1,070,218 770,147 Trade deposits and short-term prepayments 130,795 130,780 Other receivables 9 714,555 241,022 Taxation - payments less provision 409,456 530,456 Cash and bank balances 10 64,327 87,888
6,188,574 5,505,851 Total assets 12,993,840 11,506,498
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 11 1,399,376 1,227,523 Reserves 7,652,947 6,952,694
9,052,323 8,180,217 Surplus on revaluation of property, plant and equipment 296,961 296,961
LIABILITIES
Non-current liabilitiesLong term financing 321,429 428,571 Deferred taxation 39,217 37,604 Retirement benefit obligations 43,837 42,248
404,483 508,423 Current liabilities
Trade and other payables 12 2,186,067 1,817,658 Accrued mark-up 14,017 11,706 Short term borrowings 13 818,686 475,577 Current portion of long term financing 214,286 214,286 Sales tax payable 7,017 1,670
3,240,073 2,520,897 Total liabilities 3,644,556 3,029,320
Contingencies and commitments 14
Total equity and liabilities 12,993,840 11,506,498
The annexed notes from 1 to 24 form an integral part of this condensed interim financial information.
9Half Yearly Report December 2016
UNCONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT - UNAUDITEDFor the half year ended December 31, 2016
10
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
Quarter ended Half year endedDecember 31, December 31, December 31, December 31,
2016 2015 2016 2015Note --------------------- (Rupees in ‘000) -----------------------
Revenue 15 2,577,763 2,486,366 5,336,756 4,743,092
Cost of sales 16 (1,520,801) (1,527,155) (3,261,964) (2,928,959)
Gross profit 1,056,962 959,211 2,074,792 1,814,133
Distribution cost (682,449) (560,872) (1,297,431) (1,073,677)
Administrative expenses (96,866) (79,594) (177,627) (151,524)
Other operating expenses (41,008) (69,793) (98,342) (121,671)
Other income 17 635,622 524,472 1,225,098 936,336
Operating profit 872,261 773,424 1,726,490 1,403,597
Finance cost (57,030) (42,190) (82,624) (82,483)
Profit before taxation 815,231 731,234 1,643,866 1,321,114
Income tax expense (69,424) (96,891) (157,999) (176,739)
Profit after taxation 745,807 634,343 1,485,867 1,144,375
Other comprehensive income - - - -
Total comprehensive income 745,807 634,343 1,485,867 1,144,375
Earnings per share - basic and diluted (Rupees) 18 5.33 4.53 10.62 8.18
The annexed notes from 1 to 24 form an integral part of this condensed interim financial information.
UNCONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS - UN-AUDITED For the half year ended December 31, 2016
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
December 31, December 31,2016 2015
Note (Rupees in ‘000)CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 19 1,275,509 294,928 Retirement benefit obligations paid (511) (557)Finance cost paid (42,806) (56,213)Income taxes paid (35,386) (346,159)Decrease in long-term loans 80 208 Net cash generated from / (used in) operating activities 1,196,886 (107,793)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (125,066) (95,520)Sale proceeds on disposal of property, plant and equipment 6,306 3,524 Payments for investment properties (1,535) (7,495)Purchase of intangibles (119,466) (24,185)Additions to long-term investments (636,204) (474,483)
Net cash used in investing activities (875,965) (598,159)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid (580,449) (163,549)Proceeds from issue of shares - 2,877 Long-term finance paid (107,142) - Net cash used in financing activities (687,591) (160,672)
Net decrease in cash and cash equivalents (366,670) (866,624)
Cash and cash equivalents at the beginning of the period (387,689) (559,513)
Cash and cash equivalents at the end of the period 20 (754,359) (1,426,137)
The annexed notes from 1 to 24 form an integral part of this condensed interim financial information.
11Half Yearly Report December 2016
UNCONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY - UNAUDITEDFor the half year ended December 31, 2016
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
Issued, subscribed and paid up
capital
Capital reserve Revenue reserves
Total reserves Total Share premium Issue of
bonus sharesGeneral reserve
Unappro-priated profits
----------------------------------------------------- (Rupees in ‘000) -----------------------------------------------------
Balance as at July 01, 2015 858,407 - - 280,251 3,409,017 3,689,268 4,547,675
Total comprehensive income for the period - - - - 1,144,375 1,144,375 1,144,375
Transactions with ownersTransfer to reserve for issue of bonus shares - - 171,682 - (171,682) - -
Bonus shares issued during the period in the ratio of 20 shares for every 100 shares held 171,682 - (171,682) - - (171,682) -
Final dividend for the year ended June 30, 2015 @ Rs. 2 per share - - - - (171,681) (171,681) (171,681)
171,682 - - - (343,363) (343,363) (171,681)
Balance as at December 31, 2015 1,030,089 - - 280,251 4,210,029 4,490,280 5,520,369
Balance as at July 01, 2016 1,227,523 1,630,974 - 280,251 5,041,469 6,952,694 8,180,217
Total comprehensive income for the period - - - - 1,485,867 1,485,867 1,485,867
Transactions with ownersTransfer to reserve for issue of bonus shares - - 171,853 - (171,853) - -
Bonus shares issued during the period in the ratio of 14 shares for every 100 shares held 171,853 - (171,853) - (171,853) -
Final dividend for the year ended June 30, 2016 @ Rs. 5 per share - - - (613,761) (613,761) (613,761)
171,853 - - - (785,614) (785,614) (613,761)
Balance as at December 31, 2016 1,399,376 1,630,974 - 280,251 5,741,722 7,652,947 9,052,323
The annexed notes from 1 to 24 form an integral part of this condensed interim financial information.
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1. LEGAL STATUS AND OPERATIONS
The Searle Company Limited (the Company) was incorporated in Pakistan as a private limited company in October 1965. In November 1993, the Company was converted into a public limited company. Its shares are quoted on the Pakistan Stock Exchange. The Company is principally engaged in the manufacture of pharmaceutical and other consumer products. In addition, the Company is engaged in sale of food and consumer products, and manufacture of pharmaceutical products for other companies. The registered office of the Company is situated at 1st Floor, N.I.C. Building, Abbasi Shaheed Road, Karachi.
International Brands Limited is the holding company, which holds 55.36% shareholding in the Company.
Following are the subsidiary companies:
Principal place of business
“Effective %age of holding”
December 31, June 30,2016 2016
Listed Company 74.19% 74.19%- IBL HealthCare LimitedUnlisted Companies 100.00% 100.00%- Searle Pharmaceuticals (Private) Limited 100.00% 100.00%- Searle Laboratories (Private) Limited Pakistan 100.00% 100.00%- Searle Biosciences (Private) Limited 100.00% 100.00%- IBL Identity (Private) Limited 70.34% 70.34%- Nextar Pharma (Private) Limited
2. BASIS OF PREPARATION
The unconsolidated condensed interim financial information of the Company for the period ended December 31, 2016 has been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34, “Interim Financial Reporting” and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. This unconsolidated condensed interim financial information is being presented and submitted to the shareholders as required by Listing Regulations of Pakistan Stock Exchange and under Section 245 of the Companies Ordinance, 1984.
This unconsolidated condensed interim financial information does not include all information and disclosures required in the financial statements and should be read in conjunction with the financial statements of the Company for the year ended June 30, 2016.
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
13Half Yearly Report December 2016
2.1 Changes in accounting standards, interpretations and pronouncements
a) Standards, interpretations and amendments to published approved accounting standards that are effective and relevant
IAS 1, ‘Presentation of financial statements’ aims to improve presentation and disclosure in financial reports by emphasising the importance of understandability, comparability and clarity in presentation.
The amendment provides clarification on a number of issues, including:
- Materiality - an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance.
- Disaggregation and subtotals – line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity’s financial position or performance. There is also new guidance on the use of subtotals.
- Notes – confirmation that the notes do not need to be presented in a particular order.
- Other Comprehensive Income (OCI) - arising from investments accounted for under the equity method - the share of the OCI arising from equity - accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of comprehensive income.
b) Standards, interpretations and amendments to published approved accounting standards that are effective but not relevant
The other new standards, amendments and interpretations that are mandatory for accounting periods beginning on or after January 1, 2016 are considered not to be relevant for the Company’s financial statements and hence have not been detailed here.
C) Standards, interpretations and amendments to published approved accounting standards that are not yet effective but relevant
IAS 7, ‘Statement of cash flows’ amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB’s Disclosure Initiative.
3. SIGNIFICANT ACCOUNTING INFORMATION AND POLICIES
The accounting policies and method of computations adopted in the preparation of this unconsolidated condensed interim financial information are the same as those applied in the preparation of the financial statements for the year ended June 30, 2016.
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
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SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
4. ACCOUNTING ESTIMATES AND JUDGEMENTS AND FINANCIAL RISK MANAGEMENT
The preparation of this unconsolidated condensed interim financial information in comformity with approved accounting standards requires management to make estimates, assumptions and use judgements that affect the application of policies and reported amounts of assets and liabilities and income and expenses. Estimates, assumptions and judgements are continually evaluated and based on historical experience and other factors, including reasonable expectations of future events. Revisions to accounting estimates are recognised prospectively commencing from the period of revision.
Judgements and estimates made by the management in the preparation of this unconsolidated condensed interim financial information are the same as those that were applied to financial statements as at and for the year ended June 30, 2016.
The Company’s financial risk management objectives and policies are consistent with those disclosed in the financial statements as at and for the year ended June 30, 2016.
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
5. PROPERTY, PLANT AND EQUIPMENT
Operating assets - note 5.1 812,866 781,373 Capital work in progress 75,899 27,319
888,765 808,692
5.1 Details of additions and disposals to operating assets during the period were as follows:
Additions (at cost) Disposals (at net book value)
December 31, 2016
December 31, 2015
December 31, 2016
December 31, 2015
--------------------------- (Rupees in ‘000) ---------------------------Building on leasehold land 6,887 - - - Plant and machinery 53,208 49,966 (55) - Furniture & fittings 85 - - - Vehicles 1,867 41,922 (5,385) (520)Office equipment 14,439 3,632 (294) -
76,486 95,520 (5,734) (520)
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
6. INTANGIBLES
Brand names 20,417 22,917 Product license 106,041 - Computer software 6,730 4,542 Capital work in progress - at cost 46,926 42,426
180,114 69,885
15Half Yearly Report December 2016
6.1 This represents license for the production of product “Tramal”, amounting to Rs. 111.6 million from Grunenthal GMBH, Germany, for the period of 10 years.
(Unaudited) (Audited)December 31, June 30,
2016 20167. LONG-TERM INVESTMENTS (Rupees in ‘000)
Subsidiary companies (at cost) - note - 7.1 3,272,406 2,636,202
7.1 Subsidiary companies(Unaudited) (Audited)
Note December 31, 2016 June 30, 2016Equity Investment Equity Investment% held at cost % held at cost
(Rupees in ‘000) (Rupees in ‘000)Listed securityIBL HealthCare Limited36,478,401 (June 30, 2016: 31,720,349) Ordinary shares of Rs. 10 each 7.1.1 74.19% 1,300,911 74.19% 1,300,911 Market price as at December 31, 2016: Rs. 170.16 &
(June 30, 2016: Rs. 158.82) per share 7.1.2 1,300,911 1,300,911
Unlisted securitiesSearle Pharmaceuticals (Private) Limited 2,000,000 (June 30, 2016: 2,000,000) Ordinary shares of Rs. 10 each 100% 400 100% 400 Break up value as at December 31, 2016: Rs. 0.34 (June 30, 2016: Rs. 0.64) per share
Searle Laboratories (Private) Limited 20,000,000 (June 30, 2016: 20,000,000) Ordinary shares of Rs. 10 each 100% 125,000 100% 125,000 Break up value as at December 31, 2016: Rs. 4.66 (June 30, 2016: Rs. 5.23) per share
Searle Biosciences (Private) Limited1,000,000 (June 30, 2016: 1,000,000) Ordinary shares of Rs. 10 each 100% 10,000 100% 10,000 Break up value as at December 31, 2016: Rs. 573.65 (June 30, 2016: Rs. 116.94) per share
IBL Identity (Private) Limited 9,500,000 (June 30, 2016: 9,500,000) Ordinary shares of Rs. 10 each 100% 49,875 100% 49,875 Break up value as at December 31, 2016: Rs. 103.58 (June 30, 2016: Rs. 53.83) per share
Nextar Pharma (Private) Limited 5,000,000 (June 30, 2016: 5,000,000)Ordinary shares of Rs. 100 each 70.34% 600,278 100% 600,278 Break up value as at December 31, 2016: Rs. 99.30(June 30, 2016: Rs. 103.65) per share
785,553 785,553 Advance against issue of shares
IBL Identity (Private) Limited 7.1.3 1,185,942 549,738 3,272,406 2,636,202
7.1.1 During the current period, IBL HealthCare Limited announced issue of bonus shares in proportion of 15 share for every 100 share held (the Company was entitled to 4,758,052 shares).
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
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7.1.2 This includes 853,869 shares (June 30, 2016: 539,139 shares) freezed in the Central Depository Company (CDC) account in lieu of 5% withholding tax under section 236M of the Income Tax Ordinance, 2001. The Company has filed a petition against such provision and the case is pending before the High Court.
7.1.3 This represents advance given to IBL identity (Private) Limited for further issue of shares.
(Unaudited) (Audited)December 31, June 30,
2016 20168. TRADE DEBTS (Rupees in ‘000)
Considered good
- Export debtors - secured 82,019 56,211 - Due from:
- associated companies - unsecured - note - 8.1 2,128,928 2,173,678 - subsidiary company - unsecured 154,752 1,820 - others - unsecured 357,544 346,262
2,641,224 2,521,760 Considered doubtful 622 622 Less: Provision for doubtful debts (622) (622)
- - 2,723,243 2,577,971
8.1 The receivable is stated net of amounts payable aggregating Rs. 115.9 million (June 30, 2016: Rs. 615.34 million) on account of expenses claimed by IBL Operations (Private) Limited - the associated company.
(Unaudited) (Audited)December 31, June 30,
2016 20169. OTHER RECEIVABLES (Rupees in ‘000)
Receivables from related parties Due from subsidiary companies:
- IBL HealthCare Limited 418 164 - Searle Pharmaceuticals (Private) Limited - note - 9.1 448,300 125,633 - Searle Laboratories (Private) Limited 394 330 - Searle Biosciences (Private) Limited - note - 9.1 154,291 227
603,403 126,354 Due from associated companies:
- IBL Operations (Private) Limited 39,642 39,687 - International Franchises (Private) Limited 1,505 5,558 - Habitt 16,626 10,838
57,773 56,083 Surplus arising under retirement benefit fund 5,250 5,250
Receivables from other than related partiesOthers, considered good 48,217 53,335
714,555 241,022
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
17Half Yearly Report December 2016
9.1 This represents dividend receivable from the subsidiary companies.
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
10. CASH AND BANK BALANCES
Cash at bank
- current accounts 61,603 85,395 - deposit accounts 10 9
Cash in hand 2,714 2,484 64,327 87,888
11. SHARE CAPITAL
Authorised share capital
(Unaudited) (Audited) (Unaudited) (Audited)December 31, June 30, December 31, June 30,
2016 2016 2016 2016 (Rupees in ‘000)
Ordinary shares of 200,000,000 140,000,000 Rs. 10 each 2,000,000 1,400,000
Issued, subscribed and paid up capital
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Number of shares)
Shares allotted for 12,553,074 12,553,074 consideration paid in cash 125,531 125,531
Shares allotted for consideration other than
24,000 24,000 cash 240 240
Shares allotted as 127,360,506 110,175,190 bonus shares 1,273,605 1,101,752
139,937,580 122,752,264 1,399,376 1,227,523
11.1 During the period, the company increased its authorised share capital for ordinary shares from Rs. 1.4 billion to Rs. 2 billion in its annual general meeting held on October 28, 2016.
11.2 Movement in issued, subscribed and paid-up capital
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
18
(Unaudited) (Audited)December 31, June 30,
2016 201612. TRADE AND OTHER PAYABLES (Rupees in ‘000)
Creditors - note - 12.1 769,769 455,581 Bills payable in foreign currency 199,383 251,089 Accrued liabilities 793,355 804,467 Advance from customers 16,332 48,749 Unclaimed dividend 49,516 16,204 Workers’ Profit Participation Fund 256,037 135,159 Workers’ Welfare Fund 13,178 22,882 Other liabilities 88,497 83,527
2,186,067 1,817,658
12.1 This includes amount payable to Searle Pharmaceutical (Private) Limited amounting to Rs. 574.6 million (June 30, 2016: Rs. 215.6 million) on account of contract manufacturing services.
(Unaudited) (Audited)December 31, June 30,
2016 201613. SHORT TERM BORROWINGS (Rupees in ‘000)
Running finances under mark-up arrangements - note - 13.1 754,686 455,577 Export re-finance 64,000 20,000
818,686 475,577
13.1 The facilities available from various banks amount to Rs. 1,413 million (June 30, 2016: Rs. 1,413 million). The mark-up on running finances ranges between 4% to 8.01% (June 30, 2016: 4% to 9.14%) per annum.
The running finances under mark-up arrangements are secured jointly by registered mortgage of Rs. 210.5 million (June 30, 2016: Rs. 210.5 million) of immovable property together with joint pari passu charge on all current assets of the Company to the extent of Rs. 1,859 million (June 30, 2016: Rs. 1,859 million).
(Unaudited) (Audited) (Unaudited) (Audited)December 31, June 30, December 31, June 30,
2016 2016 2016 2016 (No. in ‘000) (Rupees in ‘000)
122,752,264 85,840,745 Opening share outstanding 1,227,523 858,407 17,185,316 28,327,445 Share allotted as bonus shares 171,853 283,275
- 8,584,074 Share allotted as right shares - 85,841 139,937,580 122,752,264 1,399,376 1,227,523
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
19Half Yearly Report December 2016
14. CONTINGENCIES AND COMMITMENTS
14.1 Contingencies
14.1.1 There has been no significant changes in the status of contingencies as reported in the note 24 and 32.3 of annual audited financial statements of the Company for the year ended June 30, 2016.
14.1.2 Exemption provided to the companies falling under Group Relief (section 59B of Income Tax Ordinance, 2001), from tax on intercorporate dividend as mentioned under Clause (103A) of Part I of the Second Schedule of the Income Tax Ordinance, 2001, is not applicable now on account of deletion of Section 59B from the said clause, through the Finance Act, 2016. The Company has filed petition against withholding tax on dividend received from the subsidiary companies in the Honorable High Court of Sindh and has obtained a stay order against the same. The total exposure amounts to Rs. 136.4 million. However, legal advisor of the Company is of the view that the case will be decided in favour of the Company.
14.2 Commitments
14.2.1 The facility for opening letters of credit and guarantees as at December 31, 2016 amounted to Rs. 1,255 million (June 30, 2016: Rs. 1,255 million) of which the amount remaining unutilised as at the period end amounted to Rs. 689.9 million (June 30, 2016: Rs. 652 million).
14.2.2 Future rentals payable against operating lease arrangement
The Company has taken factory building in Karachi on rent for a period of 5 years with effect from July 01, 2012. The rent agreement was renewed in December 2014.
Further, the Company has also entered into lease arrangements with Myplan Pharmaceuticals (Private) Limited and S. A. Pharma, a pharmaceutical concern, respectively, for a period of 20 years for land, building and plant and machinery located at Lahore.
The details of future rentals payable over lease period are as follows:
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
Not later than one year 17,617 20,523 Later than one year but not later than five years 85,037 83,136 Later than five years 143,174 150,394
245,828 254,053
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
20
December 31, December 31,2016 2015
(Rupees in ‘000)15. REVENUE
Gross salesLocal sales 5,025,664 4,350,610 Export sales 483,808 460,069
5,509,472 4,810,679
Toll manufacturing 149,218 146,152 5,658,690 4,956,831
Sales tax (57,545) (82,831) 5,601,145 4,874,000
Less:
Discounts, rebates and allowances 225,142 112,598 Sales return 39,247 18,310
264,389 130,908
5,336,756 4,743,092
16. COST OF SALES
This includes inventory written-off during the period amounting to Rs. 11.3 million (December 31, 2015: Rs. 7.52 million)
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
17. OTHER INCOME
Income from financial assetsDividend income
- IBL HealthCare Limited 31,181 30,738 - Searle Pharmaceuticals (Private) Limited 936,700 820,000 - Searle Biosciences (Private) Limited 154,000 -
1,121,881 850,738
Income from non - financial assets
Gain on disposal of property, plant and equipment 572 3,004 Insurance claim recovery - note - 17.1 18,874 - Rental income from investment property 50,680 51,096 Others 33,091 31,499
103,217 85,599 1,225,098 936,337
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
21Half Yearly Report December 2016
17.1 This represents claim amount received against a fire incident occurred on June 24, 2016 at one of the Company’s third party warehouses located at main Hawksbay Road, Karachi.
December 31,2016
December 31,2015
(Rupees in ‘000)18. EARNINGS PER SHARE
- BASIC AND DILUTED
Profit after taxation attributable to ordinary shareholders 1,485,867 1,144,375
Weighted average number of ordinary shares in issue during the period (in thousand) 139,938 139,938
Earnings per share - Basic and diluted (Rupees) - note 18.1 10.62 8.18
18.1 A diluted earnings per share has not been presented as the Company did not have any convertible instruments in issue as at December 31, 2016 and December 31, 2015 which would have any effect on the earnings per share if the option to convert is exercised.
December 31,2016
December 31,2015
(Rupees in ‘000)19. CASH GENERATED FROM OPERATIONS
Profit before taxation 1,643,866 1,321,114
Add / (less): Adjustments for non-cash charges and other itemsDepreciation 62,601 52,132 Gain on disposal of property, plant and equipment (572) (3,004)Amortisation 9,237 3,188 Provision for retirement benefits obligation 2,100 1,500 Finance cost 82,624 82,483
Profit before working capital changes 1,799,856 1,457,413
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
22
December 31,2016
December 31,2015
(Rupees in ‘000)Effect on cash flow due to working capital changes
(Increase) / decrease in current assets
Stores and spares (9) - Stock-in-trade 91,616 49,789 Trade debts (145,272) (874,392)Loans and advances (300,071) (241,438)Trade deposits and short-term prepayments (15) (37,202)Other receivables (473,533) 152,425
(827,284) (950,818)Increase / ( decrease ) in current liabilities
Trade and other payables 297,590 (211,456)Sales tax payables 5,347 (211)
302,937 (211,667)
Cash flows generated from operations 12,75,509 294,928
20. CASH AND CASH EQUIVALENTS
Cash and bank balances 64,327 23,248 Short term borrowings (818,686) (1,449,385)
(754,359) (1,426,137)
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
23Half Yearly Report December 2016
21. SEGMENT INFORMATION
Pharmaceutical Consumer Investment Property TotalDecember 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
2016 2015 2016 2015 2016 2015 2016 2015------------------------------------------------------------- (Rupees in ‘000) -------------------------------------------------------------
Segment revenue 4,747,173 4,097,876 589,583 645,216 50,680 51,096 5,387,436 4,794,188
Segment result 641,155 599,398 22,378 56,829 (12,559) (24,691) 650,974 631,536
Unallocated income and expenses
Other expenses (98,342) (121,671)Other income 1,146,291 864,614 Finance cost (55,057) (53,365)Profit before taxation 1,643,866 1,321,114 Income tax expense (157,999) (176,739)Total comprehensive income 1,485,867 1,144,375
Pharmaceutical Consumer Investment Property TotalDecember 31, June 30, December 31, June 30, December 31, June 30, December 31, June 30,
2016 2016 2016 2016 2016 2016 2016 2016------------------------------------------------------------- (Rupees in ‘000) -------------------------------------------------------------
Segment assets and liabilities
Segment assets 223,742 166,302 27,788 55,434 2,462,112 2,483,919 2,713,642 2,705,655 Unallocated assets 10,280,198 8,800,843 Total assets 12,993,840 11,506,498
Segment liabilities - - - - 535,715 642,857 535,715 642,857 Unallocated liabilities - - - - - - 3,108,841 2,386,463 Total liabilities 3,644,556 3,029,320
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
24
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
25
22. TRANSACTIONS WITH RELATED PARTIES
The following transactions were carried out with related parties during the period :
December 31,2016
December 31,2015Nature of relationship Nature of transactions
(Rupees in ‘000)Holding company
- Corporate service charges 36,000 36,000 Subsidiaries
- Revenue 190,985 - - Purchase of consumables 25,496 64 - Outside processing charges 1,214,932 1,099,014 - Dividend income 1,121,881 850,738
Associated companies- Revenue 4,585,937 4,023,105- Salaries and wages 4,747 2,159 - Purchases 4,885 802 - Carriage and duties 12,011 9,909 - Discounts claimed 187,757 94,646 - Rent expense 6,310 2,319 - Rent income 23,610 22,356- Stock claims 97,972 60,259 - Internet services 2,541 2,310 - Architect fee 2,563 5,062 - Payment under group tax relief 1,558 - - Utilities 17,436 6,171- Royalty 7,119 10,379 - Others 10,813 15,988
Staff retirement benefits- Contributions to
Provident Fund 18,525 14,271 - Benefits paid 15,523 25,319
Key management employees compensation - Salaries and other
employee benefits 167,106 123,775 - Contributions to
Provident Fund 1,614 1,145 - Directors’ fees 16 14
23. SUBSEQUENT EVENTSThe Board of Directors of the Company in its meeting held on February 27, 2017 has approved the following appropriation:
December 31,2016
December 31,2015
(Rupees in ‘000)- Issue of 10 bonus shares for every
100 shares (December 31, 2015: 10 shares for every 100 shares) held 139,938 111,593
- Cash dividend 20% (December 31, 2015: Nil) 279,875 -
24. DATE OF AUTHORISATION FOR ISSUEThis unconsolidated condensed interim financial information was approved and authorised for issue by the Board of Directors of the Company on February 27, 2017.
SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
25Half Yearly Report December 2016
ConsolidatedFinancialStatements
DIRECTORS’ REPORT TO THE MEMBERS
We are pleased to present the financial information of the holding Company for the half year ended December 31, 2016. These financial statements have been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34 – ‘Interim Financial Reporting’ and the provisions of the directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provision of directives issued under the Companies Ordinance, 1984 have been followed.
OPERATING RESULTS
December 31,2016 2015(Rupees in thousand)
Revenue 6,599,340 5,600,823Gross profit 3,605,815 2,940,586Operating expenses 1,865,008 1,336,470Other Operating expenses 123,153 180,693Other Income 120,896 109,046Operating profit 1,738,550 1,532,469Profit before taxation 1,654,362 1,449,378Profit after taxation 1,367,409 1,177,737
The Searle group has a proven track record of developing, manufacturing and marketing high quality pharmaceutical formulations. In order to embark on a new era as a resource-rich and fully integrated group, we are broadening our business horizon and are diversifying our operations to optimize shareholders value. In lieu of the same philosophy, we have penetrated further by stepping into biosimilar medicines and complex branded generic products with emerging Nutritional range. We have also initiated our presence in the growing textile sector.
Financial highlights are summarized below:
• Net sales of the holding Company amounted to Rs. 6,599.34 million, registering a growth of 18% over the corresponding period of last year.
• Gross profit margins were 55% as compared with 53% of the corresponding period of the prior year.
• Operating expenses as percentage of sales increased by 4% and stood at 28% as compared to 24% in the corresponding period of the last year.
• Operating profit, Profit before taxation and Profit after taxation of the holding company increased by 13%, 14% and 16% respectively.
Though our conventional business scaled new heights, the consolidated results were diluted after incorporating the financial results of the pre-mature portfolio of biosimilar and textile business. Nevertheless, the holding company reported revenue of 6.599 billion, registering a growth of 18% as compared with the preceding period of the last year, further, profit after tax of the holding company also increased by 16% as compared with prior period. The growth was driven by expanding doctor coverage, maturing product portfolio, higher volumes, richer product mix, branding efforts and strengthened demand.
27Half Yearly Report December 2016
DIRECTORS’ REPORT TO THE MEMBERS
EARNINGS PER SHARE
Basic earnings per share after taxation were Rs. 9.63 (2015: Rs.8.07).
There is no dilution effect on the basic earnings per share of the holding Company, as the holding Company has no convertible dilutive potential ordinary shares outstanding as at December 31, 2016.
DIVIDENDThe board of directors of the holding company has declared interim cash and stock dividend of 20% and 10% respectively, for the half year ended December 31, 2016.
FUTURE OUTLOOKThe sum and substance of the existence of Searle group, is based on the doctrine, ‘service of mankind’. We are functioning in full swing to make availability of adequate healthcare solutions certain. Nationally and throughout the rapidly increasing cross border destinations, people rely on Searle group to help them get healthy throughout their lives.
We are persistently working for patients across the country and the respective markets, where we exist. Continuing our endeavors, we are developing Nutritional products and supplements and are trying to explore the possibilities for setting up a manufacturing facility in Europe and proceeding for USFDA approval for Bio Similar range.
In the long-term, Searle group is targeting sustainable growth, faster than the market, both locally and internationally. Close focus on Bio Similar business will add significant high value to the patient’s life along with more profits for the shareholders.
ACKNOWLEDGEMENT
We wish to thank the customers for their faith in our products, and their continuing patronage. We also take this opportunity to thank our suppliers, bankers and distributors for providing us with their valuable support throughout the period. Finally we wish to thank our staff who remained committed to deliver towards the growth of the group.
For and on behalf of the board
0
2
4
6
8
10
12
2.293.25
5.13
8.079.63
20162015201420132012
KarachiFebruary 27, 2017
Syed Nadeem Ahmed Chief Executive Officer
28
29Half Yearly Report December 2016
0
2
4
6
8
10
12
2.293.25
5.13
8.079.63
20162015201420132012
30
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31Half Yearly Report December 2016
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
CONSOLIDATED CONDENSED INTERIM BALANCE SHEETFor the half year ended December 31, 2016
(Un-audited) (Audited)December 31, June 30,
2016 2016ASSETS Note (Rupees in ‘000)
Non-current assets
Property, plant and equipment 5 1,693,489 1,437,042 Investment properties 2,585,700 2,607,507 Intangible 6 355,688 247,961 Long-term loans and advances 7 762,003 320,534 Long-term deposits 5,026 5,026 Deferred cost 66,680 66,680
5,468,586 4,684,750 Current assetsStores and spares 1,013 1,004 Stock-in-trade 1,403,374 1,533,770 Trade debts 8 3,630,768 2,988,769 Loans and advances 9 1,169,243 882,701 Trade deposits and short-term prepayments 144,385 186,947 Interest accrued 7,260 3,045 Other receivables 256,369 420,582 Investments - at fair value through profit or loss 10 141,177 99,593 Taxation - payments less provision 394,390 560,088 Cash and bank balances 11 192,699 136,001
7,340,678 6,812,500 Total assets 12,809,264 11,497,250
EQUITY AND LIABILITIES
Share capital and reserves12 1,399,376 1,227,523
Share capitalReserves 6,717,124 6,154,517 Attributable to owners of The Searle Company 8,116,500 7,382,040 Limited-Holding Company
Non-Controlling interest 402,815 395,203 8,519,315 7,777,243
Surplus on revaluation of property, plant and equipment 296,961 296,961
LIABILITIES
Non-current liabilitiesLong term financing 378,328 486,953 Deferred taxation 39,217 37,603 Retirement benefit obligations 43,837 42,248
461,382 566,804 Current liabilities
Trade and other payables 13 2,476,650 2,153,003 Accrued mark-up 14,017 11,706 Short term borrowings 14 818,686 475,577 Current portion of long term financing 214,286 214,286 Sales tax payable 7,967 1,670
3,531,606 2,856,242 Total liabilities 3,992,988 3,423,046
Contingencies and commitments 15
Total equity and liabilities 12,809,264 11,497,250
The annexed notes from 1 to 24 form an integral part of this consolidated condensed interim financial information.
32
CONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT - UNAUDITED For the half year ended December 31, 2016
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
Quarter ended Half year endedDecember 31, December 31, December 31, December 31,
2016 2015 2016 2015Note -------------------------- (Rupees in ‘000) ---------------------------
Revenue 16 3,230,597 2,882,124 6,599,340 5,600,823
Cost of sales 17 (1,424,247) (1,355,956) (2,993,525) (2,660,237)
Gross profit 1,806,350 1,526,168 3,605,815 2,940,586
Distribution cost (792,941) (598,358) (1,484,177) (1,153,641)
Administrative expenses (228,554) (94,939) (380,831) (182,829)
Other operating expenses (53,583) (114,687) (123,153) (180,693)
Other income 65,323 84,602 120,896 109,046
Operating profit 796,595 802,786 1,738,550 1,532,469
Finance cost (57,820) (42,553) (84,188) (83,091)
Profit before taxation 738,775 760,233 1,654,362 1,449,378
Income tax expense (140,977) (149,394) (286,953) (271,641)
Profit after taxation 597,798 610,839 1,367,409 1,177,737
Other comprehensive income - - - -
Total comprehensive income 597,798 610,839 1,367,409 1,177,737
Total comprehensive income is attributable to:
Owners of the The Searle Company Limited - Holding Company 588,328 586,078 1,348,221 1,129,509
Non-controlling interests 9,470 24,761 19,188 48,228 597,798 610,839 1,367,409 1,177,737
(Re-stated) (Re-stated)Earnings per share - basicand diluted (Rupees) 18 4.20 4.19 9.63 8.07
The annexed notes from 1 to 24 form an integral part of this consolidated condensed interim financial information.
33Half Yearly Report December 2016
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS - UNAUDITED For the half year ended December 31, 2016
December 31, December 31,2016 2015
Note (Rupees in ‘000)CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 19 1,410,412 449,808 Retirement benefit obligations paid (511) (605)Finance cost paid (44,370) (56,213)Income taxes paid (119,641) (525,543)Interest income received 7,258 594 Decrease in long-term deposits - (65,211)Decrease in long-term loans (441,469) (4,968)Net cash generated from / (used in) operating activities 811,679 (202,138)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (243,372) (95,780)Sale proceeds on disposal of property, plant and equipment 6,306 4,974 Payments for investment properties (1,534) (7,494)Purchase of intangibles (121,500) (26,725)Acquisition of subsidiary, net of cash acquired - Nextar Pharma (Private) Limited - (366,497)Acquisition of subsidiary, net of cash acquired - IBL Identity (Private) Limited - (42,914)Long term investments - 87,708 Additions to investments - at fair value through profit or loss (169,000) (95,000)Proceeds from redemption of investments - at fair value through profit or loss 129,830 108,413
Net cash used in investing activities (399,270) (433,315)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid (590,195) (192,611)Long-term finance paid (108,625) - Advance against issue of right shares - 49,795 Net cash used in financing activities (698,820) (142,816)
Net decrease in cash and cash equivalents (286,411) (778,269)
Cash and cash equivalents at the beginning of the period (339,576) (529,458)
Cash and cash equivalents at the end of the period 20 (625,987) (1,307,727)
The annexed notes from 1 to 24 form an integral part of this consolidated condensed interim financial information.
34
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY - UNAUDITEDFor the half year ended December 31, 2016
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
Issued, subscribed and paid up
capital
Capital reserve Revenue reserves Sub - Total reserves
Non- Controlling
interestTotal
Share premium
Issue of bonus shares
General reserve
Unappropri- ated profit
----------------------------------------------------- (Rupees in ‘000) -----------------------------------------------------
Balance as at July 01, 2015 858,407 - - 280,251 3,562,012 3,842,263 318,627 5,019,297
Total comprehensive income for the period - - - - 1,129,509 1,129,509 48,228 1,177,737
Acquisition of subsidiary - - - - - - 275,099 275,099
Transactions with ownersTransfer to reserve for issuance of bonus shares - - 171,682 - (171,682) - - -
Bonus shares issued during the period in the ratio of 20 shares for every 100 shares held 171,682 - (171,682) - - (171,682) - -
Final dividend for the year ended June 30, 2015 @ Rs. 2 per share - - - - (171,681) (171,681) - (171,681)
Dividend pertaining to non-controlling interests - - - - - - (29,062) (29,062) 171,682 - - - (343,363) (343,363) (29,062) (200,743)
Balance as at December 31, 2015 1,030,089 - - 280,251 4,348,158 4,628,409 612,892 6,271,390
Balance as at July 01, 2016 1,227,523 1,630,974 - 280,251 4,243,292 6,154,517 395,203 7,777,243
Total comprehensive income for the period - - - - 1,348,221 1,348,221 19,188 1,367,409
Transactions with ownersTransfer to reserve for issue of bonus shares - - 171,853 - (171,853) - - -
- Bonus shares issued during the period in the ratio of 14 shares for every 100 shares held 171,853 - (171,853) - - (171,853) - -
Final dividend for the year ended June 30, 2016 @ Rs. 5 per share - - - - (613,761) (613,761) - (613,761)
Dividend pertaining to non-controlling interests - - - - - - (11,576) (11,576)
171,853 - - - (785,614) (785,614) (11,576) (625,337)
Balance as at December 31, 2016 1,399,376 1,630,974 - 280,251 4,805,899 6,717,124 402,815 8,519,315
The annexed notes from 1 to 24 form an integral part of this consolidated condensed interim financial information.
35Half Yearly Report December 2016
1. LEGAL STATUS AND OPERATIONS
The Searle Company Limited (the Company) was incorporated in Pakistan as a private limited company in October 1965. In November 1993, the Company was converted into a public limited company. Its shares are quoted on the Pakistan Stock Exchange. The Company is principally engaged in the manufacture of pharmaceutical and other consumer products. In addition, the Company is engaged in sale of food and consumer products, and manufacture of pharmaceutical products for other companies. The registered office of the Company is situated at 1st Floor, N.I.C. Building, Abbasi Shaheed Road, Karachi.International Brands Limited is the Holding Company, which holds 55.36% shareholding in the Company.
Following are the subsidiary companies:
Principal place of business
“Effective %age of holding”
December 31, June 30,2016 2016
Listed Company 74.19% 74.19%- IBL HealthCare LimitedUnlisted Companies 100.00% 100.00%- Searle Pharmaceuticals (Private) Limited 100.00% 100.00%- Searle Laboratories (Private) Limited Pakistan 100.00% 100.00%- Searle Biosciences (Private) Limited 100.00% 100.00%- IBL Identity (Private) Limited 70.34% 70.34%- Nextar Pharma (Private) Limited
2. BASIS OF PREPARATION
The consolidated condensed interim financial information of the Company for the period ended December 31, 2016 has been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34, “Interim Financial Reporting” and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. This consolidated condensed interim financial information is being presented and submitted to the shareholders as required by Listing Regulations of Pakistan Stock Exchange and under Section 245 of the Companies Ordinance, 1984.
This consolidated condensed interim financial information do not include all information and disclosures required in the financial statements and should be read in conjunction with the financial statements of the Company for the year ended June 30, 2016.
2.1 Changes in accounting standards, interpretations and pronouncements
a) Standards, interpretations and amendments to published approved accounting standards that are effective and relevant
IAS 1, ‘Presentation of financial statements’ aims to improve presentation and disclosure in financial reports by emphasising the importance of understandability, comparability and clarity in presentation.
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
36
The amendment provides clarification on a number of issues, including:
- Materiality - an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance.
- Disaggregation and subtotals – line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity’s financial position or performance. There is also new guidance on the use of subtotals.
- Notes – confirmation that the notes do not need to be presented in a particular order.
- Other Comprehensive Income (OCI) - arising from investments accounted for under the equity method - the share of the OCI arising from equity - accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of comprehensive income.
b) Standards, interpretations and amendments to published approved accounting standards that are effective but not relevant
The other new standards, amendments and interpretations that are mandatory for accounting periods beginning on or after January 1, 2016 are considered not to be relevant for the Company’s financial statements and hence have not been detailed here.
c) Standards, interpretations and amendments to published approved accounting standards that are not yet effective but relevant
IAS 7, ‘Statement of cash flows’ amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB’s Disclosure Initiative.
3. SIGNIFICANT ACCOUNTING INFORMATION AND POLICIES
The accounting policies and method of computations adopted in the preparation of this unconsolidated condensed interim financial information are the same as those applied in the preparation of the financial statements for the year ended June 30, 2016.
4. ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of this consolidated condensed interim financial information in comformity with approved accounting standards requires management to make estimates, assumptions and use judgements that affect the application of policies and reported amounts of assets and liabilities and income and expenses. Estimates, assumptions and judgements are continually evaluated and based on historical experience and other factors, including reasonable expectations of future events. Revisions to accounting estimates are recognised prospectively commencing from the period of revision.
Judgements and estimates made by the management in the preparation of this consolidated condensed interim financial information are the same as those that were applied to financial statements as at and for the year ended June 30, 2016.
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
37Half Yearly Report December 2016
The Company’s financial risk management objectives and policies are consistent with those disclosed in the financial statements as at and for the year ended June 30, 2016.
6.1 This represents license for the production of product “Tramal”, amounting to Rs. 111.6 million from Grunenthal GMBH, Germany, for the period of 10 years.
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
5. PROPERTY, PLANT AND EQUIPMENT
Operating assets - note 5.1 1,030,504 812,925 Capital work in progress 662,985 624,117
1,693,489 1,437,042
5.1 Details of additions and disposals to operating assets during the period were as follows:
Additions (at cost) Disposals (at net book value)
December 31, 2016
December 31, 2015
December 31, 2016
December 31, 2015
--------------------------- (Rupees in ‘000) ---------------------------Leasehold land 70,000 - - - Leasehold improvements 75,963 - - - Building on leasehold land 6,887 - - - Plant and machinery 86,032 49,966 (55) - Furniture & fittings 3,800 96 - - Vehicles 1,903 41,922 (5,385) (1,769)Office equipment 25,919 3,796 (294) -
270,504 95,780 (5,734) (1,769)
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
6. INTANGIBLES
Brand names 20,417 22,916 Product license - note - 6.1 106,041 4,363 Computer software 9,080 5,032 Goodwill 169,104 169,104 Capital work in progress - at cost 51,046 46,546
355,688 247,961
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
38
7. LONG TERM LOANS AND ADVANCES - unsecured
7.1 This represents loan to International Brands Limited. The tenure of this loan is 5 years with a grace period of 1 year payable in equal semi-annual installments. The rate of mark-up is 12 months KIBOR+1%. The said loan was approved in the extra ordinary general meeting of IBL HealthCare Limited held on January 14, 2015 as per the requirements of section 208 of the Companies Ordinance, 1984.
7.2 This represents interest free loan to a former director, Mr. Naseem A. Satar of IBL Identity (Private) Limited. This loan will be repaid by the borrower on a mutually agreed future date.
8.1 The receivable is stated net of amounts payable aggregating Rs. 115.9 million (June 30, 2016: Rs. 615.34 million) on account of expenses claimed by the associated company.
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
7. LONG TERM LOANS AND ADVANCES - unsecured
Loans - considered good 87,258 98,000 - Related party - note 7.1 (22,698) (22,184)Less: current portion of long term loan 64,560 75,816
- Employees 443 718 - Loan to Ex-Director - note 7.2 16,000 16,000 Advance to Habitt - an associated company 681,000 228,000
762,003 320,534
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
8. TRADE DEBTS
Considered good
- Export debtors: secured 82,019 56,211
- Due from:
- associated companies - unsecured - note - 8.1 2,768,907 2,406,638
- others - unsecured 779,842 525,920 3,548,749 2,932,558
Considered doubtful 2,287 2,287
Less: Provision for doubtful debts (2,287) (2,287) - -
3,630,768 2,988,769
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
39Half Yearly Report December 2016
9.1 This loan is repayable within 1 year and carries mark-up at the rate of 12 months KIBOR + 2%. The said loan was approved in the extra ordinary general meeting of IBL HealthCare Limited, held on May 18, 2016 as per the requirements of section 208 of the Companies Ordinance, 1984.
10. INVESTMENTS - AT FAIR VALUE THROUGH PROFIT OR LOSS
10.1 The rating of the Meezan Fund and NAFA Fund is ‘AA+’ and ‘A-’ as per the credit rating agency JCR-VIS and PACRA respectively.
10.2 The fair value of these investments is the Net Asset Value (NAV) as assessed by the respective Asset Management Company.
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
9. LOANS AND ADVANCES
Loans to International Brands Limited 22,698 23,213 - Current portion of long term loan - note 7.1 200,000 200,000 - Short term loan - note 9.1 222,698 223,213
Advances 4,442 - - To Related party - International Brands Limited 64,390 56,755 - To employees 833,384 595,179 - Suppliers 44,329 7,554 - Others 946,545 659,488
1,169,243 882,701
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Rupees in ‘000)
11. CASH AND BANK BALANCES
Cash at bank
- current accounts 189,304 122,977 - PLS saving accounts 27 26
Cheques in hand - 10,000 Cash in hand 3,368 2,998
192,699 136,001
(Unaudited) (Audited) (Unaudited) (Audited)December 31, June 30, December 31, June 30,
2016 2016 2016 2016Number of units (Rupees in ‘000)
2,262,766 1,536,775 Meezan Sovereign Fund 119,067 78,073 2,269,207 2,269,207 NAFA Islamic Aggressive 21,520
4,531,973 3,805,982 141,177 99,593
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
40
12. SHARE CAPITAL
Authorised share capital
(Unaudited) (Audited) (Unaudited) (Audited)December 31, June 30, December 31, June 30,
2016 2016 2016 2016 (Rupees in ‘000)
Ordinary shares of 200,000,000 140,000,000 Rs. 10 each 2,000,000 1,400,000
Issued, subscribed and paid up capital
(Unaudited) (Audited)December 31, June 30,
2016 2016 (Number of shares)
Shares allotted for 12,553,074 12,553,074 consideration paid in cash 125,531 125,531
Shares allotted for
24,000 24,000 consideration other than cash 240 240
Shares allotted as 127,360,506 110,175,190 bonus shares 1,273,605 1,101,752
139,937,580 122,752,264 1,399,376 1,227,523
12.1 During the year, the company increased its authorised share capital for ordinary shares from Rs. 1.4 billion to Rs. 2 billion in its annual general meeting held on October 28, 2016.
12.2 Movement in issued, subscribed and paid-up capital
(Unaudited) (Audited) (Unaudited) (Audited)December 31, June 30, December 31, June 30,
2016 2016 2016 2016 (No. in ‘000) (Rupees in ‘000)
122,752,264 85,840,745 Opening share outstanding 1,227,523 858,407 17,185,316 28,327,445 Share allotted as bonus shares 171,853 283,275
- 8,584,074 Share allotted as right shares - 85,841 139,937,580 122,752,264 1,399,376 1,227,523
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
41Half Yearly Report December 2016
(Unaudited) (Audited)December 31, June 30,
2016 201613. TRADE AND OTHER PAYABLES (Rupees in ‘000)
Creditors 331,255 418,324 Bills payable in foreign currency 319,496 420,015 Accrued liabilities 874,557 876,436 Advance from customers 408,934 113,961 Unclaimed dividend 55,446 20,304 Workers' Profit Participation Fund 256,037 135,159 Workers' Welfare Fund 110,113 94,973 Due to Habitt - an associated company 32,000 - Payable under defunct staff retirement benefits scheme 260 2,566 Others 88,552 71,265
2,476,650 2,153,003
14. SHORT TERM BORROWINGS
Running finances under mark-up arrangements - note - 13.1 754,686 455,577 Export re-finance 64,000 20,000
818,686 475,577
14.1 The facilities available from various banks amount to Rs. 1,413 million (June 30, 2016: Rs. 1,413 million). The mark-up on running finances ranges between 4% to 8.01% (June 30, 2016: 4% to 9.14%) per annum.
The running finances under mark-up arrangements are secured jointly by registered mortgage of Rs. 210.5 million (June 30, 2016: Rs. 210.5 million) of immovable property together with joint pari passu charge on all current assets of the Company to the extent of Rs. 1,859 million (June 30, 2016: Rs. 1,859 million).
15. CONTINGENCIES AND COMMITMENTS
15.1 Contingencies
15.1.1 There has been no significant changes in the status of contingencies as reported in note 26.1 and 35.3 of consolidated annual audited financial statements of the Company for the year ended June 30, 2016.
15.1.2 "Exemption provided to the companies falling under Group Relief (section 59B of Income Tax Ordinance, 2001), from tax on intercorporate dividend as mentioned under Clause (103A) of Part I of the Second Schedule of the Income Tax Ordinance, 2001, is not applicable now on account of deletion of Section 59B from the said clause, through the Finance Act, 2016. The Company has filed petition against withholding tax on dividend received from the subsidiary companies in the Honorable High Court of Sindh and has obtained a stay order against the same. The total exposure amounts to Rs. 136.4 million. However, legal advisor of the Company is of the view that the case will be decided in favour of the Company."
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
42
15.2 Commitments
15.2.1 The facility for opening letters of credit and guarantees as at December 31, 2016 amounted to Rs. 1,538 million (June 30, 2016: Rs. 1,520 million) of which the amount remaining unutilised as at the period end amounted to Rs. 900 million (June 30, 2016: Rs. 751 million).
15.2.2 Future rentals payable against operating lease arrangement
The Company has taken factory building in Karachi on rent for a period of 5 years with effect from July 01, 2012. The rent agreement was renewed in December 2014.
Further, The Company has also entered into lease arrangements with Myplan Pharmaceuticals (Private) Limited and S. A. Pharma, a pharmaceutical concern, respectively, for a period of 20 years for land, building and plant and machinery located at Lahore.
The details of the future petal payable over lease period are as follows.
December 31, December 31,2016 2015
(Rupees in ‘000)
Not later than one year 17,617 20,523 Later than one year but not later than five years 85,037 83,136 Later than five years 143,174 150,394
245,828 254,053
December 31, December 31,2016 2015
(Rupees in ‘000)16. REVENUE
Manufactured goodsGross salesLocal sales 6,646,856 5,467,492 Export sales 491,248 460,069
7,138,104 5,927,561
Toll manufacturing 149,218 146,152 7,287,322 6,073,713
Sales tax (59,404) (82,960)
Less:Discounts, rebates and allowances 518,745 366,489 Sales return 109,833 23,441
628,578 389,930 6,599,340 5,600,823
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
43Half Yearly Report December 2016
17. COST OF SALES
This includes inventory written-off during the period amounting to Rs. 11.3 million (December 31, 2015: Rs. 7.52 million)
December 31, December 31,2016 2015
(Rupees in ‘000)18. EARNINGS PER SHARE - BASIC AND DILUTED
Profit after taxation attributable to ordinary shareholders 1,348,221 1,129,509
Weighted average number of ordinary shares in issue during the period (in thousand)
139,938 139,938
Earnings per share - Basic and diluted (Rupees) - (Re-stated) note 18.1 9.63 8.07
18.2 A diluted earnings per share has not been presented as the Company did not have any convertible instruments in issue as at December 31, 2016 and 2015 which would have any effect on the earnings per share if the option to convert is exercised.
December 31, December 31,2016 2015
(Rupees in ‘000)19. CASH GENERATED FROM OPERATIONS
Profit before taxation 1,654,362 1,449,378
Add / (less): Adjustments for non-cashcharges and other itemsDepreciation 70,532 58,871 Gain on disposal of property, plant and equipment - net (572) (3,270)Amortisation 13,773 5,600 Provision for retirement benefits obligation 2,100 1,500 "Unrealised gain on investments - at fair value" through profit or loss (2,035) (3,036)Realised gain on investments - at fair value through profit or loss (379) (1,189)Gain on bargain purchase - (14,242)Fair value measurement - Nextar Pharma (Private) Limited - 35,084 Interest income (11,473) (4,245)Finance cost 84,188 82,483
Profit before working capital changes 1,810,496 1,606,934
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
44
December 31, December 31,2016 2015
(Rupees in ‘000)Effect on cash flow due to working capital changes
(Increase) / decrease in current assetsStores and spares (9) - Stock-in-trade 130,396 93,463 Trade debts (641,999) (1,387,506)Loans and advances (352,542) (514,453)Trade deposits and short term prepayments 42,562 (59,867)Other receivables 164,213 (172,476)
(657,379) (2,040,839)
Increase / (decrease) in current liabilitiesTrade and other payables 250,998 883,653 Sales tax payable 6,297 60
257,295 883,713
Cash flows generated from operations 1,410,412 449,808
20. CASH AND CASH EQUIVALENTS
Cash and bank balances 192,699 141,658 Short term borrowings (818,686) (1,449,385)
(625,987) (1,307,727)
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
45Half Yearly Report December 2016
21. SEGMENT INFORMATION
The financial information regarding operating segments is as follows:
Pharmaceutical Consumer Investment Property TotalDecember 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
2016 2015 2016 2015 2016 2015 2016 2015----------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------
Segment revenue 5,282,271 4,671,991 1,317,069 928,832 52,880 51,096 6,652,220 5,651,919
Segment result 1,846,427 1,514,170 (41,821) 157,241 (10,359) (24,691) 1,794,247 1,646,720
Unallocated income and expenses
Other expenses (123,153) (180,693)Other income 39,889 37,324 Finance cost (56,621) (53,973)Profit before taxation 1,654,362 1,449,378 Income tax expense (286,953) (271,641)Total comprehensive 1,367,409 1,177,737 income
Pharmaceutical Consumer Investment Property TotalDecember 31, June 30, December 31, June 30, December 31, June 30, December 31, June 30,
2016 2016 2016 2016 2016 2016 2016 2016------------------------------------------------------ (Rupees in ‘000) ---------------------------------------------------------
Segment assets and liabilities
Segment assets 201,627 216,781 27,788 13,837 2,585,700 2,607,507 2,815,115 2,838,125 Unallocated assets 9,994,149 8,659,125 Total assets 12,809,264 11,497,250
Segment liabilities - - - - 535,715 642,857 535,715 642,857 Unallocated liabilities - - - - - - 3,457,273 2,780,189 Total liabilities 3,992,988 3,423,046
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
46
22. TRANSACTIONS WITH RELATED PARTIES
The following transactions were carried out with related parties during the period :
December 31, December 31,Nature of relationship Nature of transactions 2016 2015
(Rupees in ‘000)Holding company
- Corporate service charges 36,000 36,000 Subsidiaries
- Revenue 5,038,088 4,501,311 - Salaries and wages 4,747 2,159 - Purchases 4,885 802
Associated companies Carriage and duties 12,011 9,909 - Discounts claimed 187,757 94,646 - Rent expense 6,310 2,319 - Rent income 23,610 22,356 - Stock claims 97,972 60,259 - Internet services 2,541 2,310 - Architect fee 2,563 5,062 - Payment under group tax relief 1,558 - - Utilities 17,436 6,171 - Royalty 7,119 10,379 - Shared costs 1,377 1,531 - Interest income 11,473 4,245 - Others 10,813 15,988
- Contributions to Staff retirement benefits Provident Fund 19,890 15,538
- Benefits paid 15,523 25,319
Key management Salaries and other employees employee benefits 174,626 130,120 compensation - Contributions to
Provident Fund 1,614 1,145- Directors' fees 316 354
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
47Half Yearly Report December 2016
23. SUBSEQUENT EVENTS
The Board of Directors of the Company in its meeting held on February 27, 2017 has approved the following appropriation:
December 31, December 31,2016 2015
(Rupees in ‘000)
- Issue of 10 bonus shares for every 100 shares (December 31, 2015: 10 shares for every 100 shares) held 139,938 111,593
- Cash dividend 20% (December 31, 2015: Nil) 279,875 -
24. DATE OF AUTHORISATION FOR ISSUE
This consolidated condensed interim consolidated financial information was authorised for issue by the Board of Directors of the Company on February 27, 2017.
Rashid Abdulla Director
Syed Nadeem Ahmed Chief Executive Officer
SELECTED NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION - UNAUDITEDFor the half year ended December 31, 2016
48