OUR STRENGTH IS OUR PEOPLE

Transcription

1 OUR STRENGTH IS OUR PEOPLE HALF YEARLY REPORT DECEMBER 2016

2 CONTENTS 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

3 COMPANY INFORMATION BOARD OF DIRECTORS LEGAL ADVISORS Mr. Adnan Asdar Ali Chairman Mohsin Tayebaly & Co. Mr. Rashid Abdulla Mr. Husain Lawai BANKERS Mr. S. Nadeem Ahmed Chief Executive Officer Albaraka Bank (Pakistan) Limited Mr. Zubair Palwala Bank Al Habib Limited Mr. Ayaz Abdulla Bank Alfalah Limited Mr. Shahid Abdulla Bank of Punjab Mr. Arshad Anis Dubai Islamic Bank Pakistan Limited Mr. Mufti Zia Ul Islam Faysal Bank Limited Habib Bank Limited BOARD OF AUDIT COMMITTEE Habib Metropolitan Bank Limited Mr. Husain Lawai Chairman MCB Bank Limited Mr. Ayaz Abdulla Member Meezan Bank Limited Mr. Arshad Anis Member National Bank of Pakistan Silk Bank Limited BOARD OF HR & REMUNERATION COMMITTEE Soneri Bank Limited Mr. Shahid Abdulla Chairman Standard Chartered Bank (Pakistan) Limited Mr. Ayaz Abdulla Member Summit Bank Limited Mr. Arshad Anis Member REGISTERED OFFICE CHIEF FINANCIAL OFFICER First Floor, N.I.C. Building, Abbasi Shaheed Road Mr. Mobeen Alam Off: Shahrah-e-Faisal, Karachi. COMPANY SECRETARY SHARE REGISTRAR Mr. 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-Faisal A.F.Ferguson & Co. Karachi

4 DIRECTORS REPORT TO THE MEMBERS We are pleased to present the financial information of your Company for the half year ended December 31, 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, In case where requirements differ, the provision of directives issued under the Companies Ordinance, 1984 have been followed. OPERATING RESULTS December 31, (Rupees in thousand) Revenue 5,336,756 4,743,092 Gross profit 2,074,792 1,814,133 Operating expenses 1,475,058 1,225,201 Other Operating expenses 98, ,671 Other Income 1,225, ,336 Operating profit 1,726,490 1,403,597 Profit before taxation 1,643,866 1,321,114 Profit 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, 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. Half Yearly Report December

5 DIRECTORS REPORT TO THE MEMBERS EARNINGS PER SHARE Basic earnings per share after taxation were Rs (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 2 outstanding as at December 31, DIVIDEND The board of directors has declared interim cash and stock dividend of 20% & 10% respectively, for the half year ended December 31, FUTURE OUTLOOK The 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 Karachi February 27, 2017 Syed Nadeem Ahmed Chief Executive Officer 4

6 Half Yearly Report December

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8 ئ ئ ی ی ٹ ٹ رز یک روپرٹ ب راےئصصح ی ااگتفن ر ڈا Half Yearly Report December

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10 UNCONSOLIDATED CONDENSED INTERIM BALANCE SHEET As at December 31, 2016 (Un-audited) (Audited) December 31, June 30, ASSETS Note Non-current assets Property, plant and equipment 5 888, ,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 Long-term deposits 1,598 1,598 6,805,266 6,000,647 Current assets Stores 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, ,147 Trade deposits and short-term prepayments 130, ,780 Other receivables 9 714, ,022 Taxation - payments less provision 409, ,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 Surplus on revaluation of property, 9,052,323 8,180,217 plant and equipment 296, ,961 LIABILITIES Non-current liabilities Long term financing 321, ,571 Deferred taxation 39,217 37,604 Retirement benefit obligations 43,837 42, , ,423 Current liabilities Trade and other payables 12 2,186,067 1,817,658 Accrued mark-up 14,017 11,706 Short term borrowings , ,577 Current portion of long term financing 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. Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director Half Yearly Report December

11 UNCONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT - UNAUDITED Quarter ended Half year ended December 31, December 31, December 31, December 31, Note 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, ,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 , ,472 1,225, ,336 Operating profit 872, ,424 1,726,490 1,403,597 Finance cost (57,030) (42,190) (82,624) (82,483) Profit before taxation 815, ,234 1,643,866 1,321,114 Income tax expense (69,424) (96,891) (157,999) (176,739) Profit after taxation 745, ,343 1,485,867 1,144,375 Other comprehensive income Total comprehensive income 745, ,343 1,485,867 1,144,375 Earnings per share - basic and diluted (Rupees) The annexed notes from 1 to 24 form an integral part of this condensed interim financial information. 10 Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director

12 UNCONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS - UN-AUDITED CASH FLOWS FROM OPERATING ACTIVITIES December 31, December 31, Note Cash generated from operations 19 1,275, ,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 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. Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director Half Yearly Report December

13 UNCONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY - UNAUDITED Issued, subscribed and paid up capital Share premium Capital reserve Issue of bonus shares Revenue reserves General reserve Unappropriated profits Total reserves Total Balance as at July 01, , ,251 3,409,017 3,689,268 4,547,675 Total comprehensive income for the period ,144,375 1,144,375 1,144,375 Transactions with owners Transfer to reserve for issue of bonus shares ,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, Rs. 2 per share (171,681) (171,681) (171,681) 171, (343,363) (343,363) (171,681) Balance as at December 31, ,030, ,251 4,210,029 4,490,280 5,520,369 Balance as at July 01, ,227,523 1,630, ,251 5,041,469 6,952,694 8,180,217 Total comprehensive income for the period ,485,867 1,485,867 1,485,867 Transactions with owners Transfer to reserve for issue of bonus shares ,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, Rs. 5 per share (613,761) (613,761) (613,761) 171, (785,614) (785,614) (613,761) Balance as at December 31, ,399,376 1,630, ,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. Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director 12

14 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 1. LEGAL STATUS AND OPERATIONS The Searle Company Limited (the Company) was incorporated in Pakistan as a private limited company in October 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, Listed Company 74.19% 74.19% - IBL HealthCare Limited Unlisted Companies % % - Searle Pharmaceuticals (Private) Limited % % - Searle Laboratories (Private) Limited Pakistan % % - Searle Biosciences (Private) Limited % % - 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, 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, 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, Half Yearly Report December

15 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 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,

16 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 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, 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, PROPERTY, PLANT AND EQUIPMENT (Unaudited) (Audited) December 31, June 30, Operating assets - note , ,373 Capital work in progress 75,899 27, , , 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, Building on leasehold land 6, Plant and machinery 53,208 49,966 (55) - Furniture & fittings Vehicles 1,867 41,922 (5,385) (520) Office equipment 14,439 3,632 (294) - 76,486 95,520 (5,734) (520) 6. INTANGIBLES (Unaudited) (Audited) December 31, June 30, 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, ,114 69,885 Half Yearly Report December

17 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 6.1 This represents license for the production of product Tramal, amounting to Rs million from Grunenthal GMBH, Germany, for the period of 10 years. (Unaudited) (Audited) December 31, June 30, LONG-TERM INVESTMENTS Subsidiary companies (at cost) - note ,272,406 2,636, Subsidiary companies (Unaudited) (Audited) Note December 31, 2016 June 30, 2016 Equity Investment Equity Investment % held at cost % held at cost Listed security IBL HealthCare Limited 36,478,401 (June 30, 2016: 31,720,349) Ordinary shares of Rs. 10 each % 1,300, % 1,300,911 Market price as at December 31, 2016: Rs & (June 30, 2016: Rs ) per share ,300,911 1,300,911 Unlisted securities Searle Pharmaceuticals (Private) Limited 2,000,000 (June 30, 2016: 2,000,000) Ordinary shares of Rs. 10 each 100% % 400 Break up value as at December 31, 2016: Rs (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, % 125,000 Break up value as at December 31, 2016: Rs (June 30, 2016: Rs. 5.23) per share Searle Biosciences (Private) Limited 1,000,000 (June 30, 2016: 1,000,000) Ordinary shares of Rs. 10 each 100% 10, % 10,000 Break up value as at December 31, 2016: Rs (June 30, 2016: Rs ) per share IBL Identity (Private) Limited 9,500,000 (June 30, 2016: 9,500,000) Ordinary shares of Rs. 10 each 100% 49, % 49,875 Break up value as at December 31, 2016: Rs (June 30, 2016: Rs ) per share Nextar Pharma (Private) Limited 5,000,000 (June 30, 2016: 5,000,000) Ordinary shares of Rs. 100 each 70.34% 600, % 600,278 Break up value as at December 31, 2016: Rs (June 30, 2016: Rs ) per share 785, ,553 Advance against issue of shares IBL Identity (Private) Limited ,185, ,738 3,272,406 2,636,202 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).

18 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 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, The Company has filed a petition against such provision and the case is pending before the High Court This represents advance given to IBL identity (Private) Limited for further issue of shares. (Unaudited) (Audited) December 31, June 30, TRADE DEBTS Considered good - Export debtors - secured 82,019 56,211 - Due from: - associated companies - unsecured - note ,128,928 2,173,678 - subsidiary company - unsecured 154,752 1,820 - others - unsecured 357, ,262 2,641,224 2,521,760 Considered doubtful Less: Provision for doubtful debts (622) (622) - - 2,723,243 2,577, The receivable is stated net of amounts payable aggregating Rs million (June 30, 2016: Rs million) on account of expenses claimed by IBL Operations (Private) Limited - the associated company. (Unaudited) (Audited) December 31, June 30, OTHER RECEIVABLES Receivables from related parties Due from subsidiary companies: - IBL HealthCare Limited Searle Pharmaceuticals (Private) Limited - note , ,633 - Searle Laboratories (Private) Limited Searle Biosciences (Private) Limited - note , , ,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 parties Others, considered good 48,217 53, , ,022 Half Yearly Report December

19 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 9.1 This represents dividend receivable from the subsidiary companies. 10. CASH AND BANK BALANCES (Unaudited) (Audited) December 31, June 30, Cash at bank - current accounts 61,603 85,395 - deposit accounts 10 9 Cash in hand 2,714 2,484 64,327 87, SHARE CAPITAL Authorised share capital (Unaudited) (Audited) (Unaudited) (Audited) December 31, June 30, December 31, June 30, Ordinary shares of 200,000, ,000,000 Rs. 10 each 2,000,000 1,400,000 Issued, subscribed and paid up capital (Unaudited) (Audited) December 31, June 30, (Number of shares) Shares allotted for 12,553,074 12,553,074 consideration paid in cash 125, ,531 Shares allotted for consideration other than 24,000 24,000 cash Shares allotted as 127,360, ,175,190 bonus shares 1,273,605 1,101, ,937, ,752,264 1,399,376 1,227, 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, Movement in issued, subscribed and paid-up capital 18

20 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED (Unaudited) (Audited) (Unaudited) (Audited) December 31, June 30, December 31, June 30, (No. in 000) 122,752,264 85,840,745 Opening share outstanding 1,227, ,407 17,185,316 28,327,445 Share allotted as bonus shares 171, ,275-8,584,074 Share allotted as right shares - 85, ,937, ,752,264 1,399,376 1,227,523 (Unaudited) (Audited) December 31, June 30, TRADE AND OTHER PAYABLES Creditors - note , ,581 Bills payable in foreign currency 199, ,089 Accrued liabilities 793, ,467 Advance from customers 16,332 48,749 Unclaimed dividend 49,516 16,204 Workers Profit Participation Fund 256, ,159 Workers Welfare Fund 13,178 22,882 Other liabilities 88,497 83,527 2,186,067 1,817, This includes amount payable to Searle Pharmaceutical (Private) Limited amounting to Rs million (June 30, 2016: Rs million) on account of contract manufacturing services. (Unaudited) (Audited) December 31, June 30, SHORT TERM BORROWINGS Running finances under mark-up arrangements - note , ,577 Export re-finance 64,000 20, , , 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 million (June 30, 2016: Rs 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). Half Yearly Report December

21 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 14. CONTINGENCIES AND COMMITMENTS 14.1 Contingencies 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, 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, 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 million. However, legal advisor of the Company is of the view that the case will be decided in favour of the Company Commitments 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 million (June 30, 2016: Rs. 652 million) 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, The rent agreement was renewed in December 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, 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, , , ,053 20

22 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 15. REVENUE December 31, December 31, Gross sales Local sales 5,025,664 4,350,610 Export sales 483, ,069 5,509,472 4,810,679 Toll manufacturing 149, ,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, ,598 Sales return 39,247 18, , , COST OF SALES 5,336,756 4,743,092 This includes inventory written-off during the period amounting to Rs million (December 31, 2015: Rs million) (Unaudited) (Audited) December 31, June 30, OTHER INCOME Income from financial assets Dividend income - IBL HealthCare Limited 31,181 30,738 - Searle Pharmaceuticals (Private) Limited 936, ,000 - Searle Biosciences (Private) Limited 154,000-1,121, ,738 Income from non - financial assets Gain on disposal of property, plant and equipment 572 3,004 Insurance claim recovery - note ,874 - Rental income from investment property 50,680 51,096 Others 33,091 31, ,217 85,599 1,225, ,337 Half Yearly Report December

23 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 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. 18. EARNINGS PER SHARE - BASIC AND DILUTED December 31, 2016 December 31, 2015 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 Earnings per share - Basic and diluted (Rupees) - note 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. 19. CASH GENERATED FROM OPERATIONS December 31, 2016 December 31, 2015 Profit before taxation 1,643,866 1,321,114 Add / (less): Adjustments for non-cash charges and other items Depreciation 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 22

24 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED Effect on cash flow due to working capital changes December 31, 2016 December 31, 2015 (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 Increase / ( decrease ) in current liabilities (827,284) (950,818) 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, , 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) Half Yearly Report December

25 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 21. SEGMENT INFORMATION Pharmaceutical Consumer Investment Property Total December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, Segment revenue 4,747,173 4,097, , ,216 50,680 51,096 5,387,436 4,794,188 Segment result 641, ,398 22,378 56,829 (12,559) (24,691) 650, ,536 Unallocated income and expenses Other expenses (98,342) (121,671) Other income 1,146, ,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 Segment assets and liabilities Pharmaceutical Consumer Investment Property Total December 31, June 30, December 31, June 30, December 31, June 30, December 31, June 30, Segment assets 223, ,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 , , , ,857 Unallocated liabilities ,108,841 2,386,463 Total liabilities 3,644,556 3,029,320 24

26 SELECTED NOTES TO THE UNCONSOLIDATED CONDENSED 22. TRANSACTIONS WITH RELATED PARTIES The following transactions were carried out with related parties during the period : Nature of relationship Nature of transactions December 31, 2016 December 31, 2015 Holding company - Corporate service charges 36,000 36,000 Subsidiaries - Revenue 190, Purchase of consumables 25, Outside processing charges 1,214,932 1,099,014 - Dividend income 1,121, ,738 Associated companies - Revenue 4,585,937 4,023,105 - Salaries and wages 4,747 2,159 - Purchases 4, 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, 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, ,775 - Contributions to Provident Fund 1,614 1,145 - Directors fees SUBSEQUENT EVENTS The Board of Directors of the Company in its meeting held on February 27, 2017 has approved the following appropriation: December 31, 2016 December 31, Issue of 10 bonus shares for every 100 shares (December 31, 2015: 10 shares for every 100 shares) held 139, ,593 - Cash dividend 20% (December 31, 2015: Nil) 279, DATE OF AUTHORISATION FOR ISSUE This unconsolidated condensed interim financial information was approved and authorised for issue by the Board of Directors of the Company on February 27, Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director Half Yearly Report December

27 Consolidated Financial Statements

28 DIRECTORS REPORT TO THE MEMBERS We are pleased to present the financial information of the holding Company for the half year ended December 31, 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, In case where requirements differ, the provision of directives issued under the Companies Ordinance, 1984 have been followed. OPERATING RESULTS December 31, (Rupees in thousand) Revenue 6,599,340 5,600,823 Gross profit 3,605,815 2,940,586 Operating expenses 1,865,008 1,336,470 Other Operating expenses 123, ,693 Other Income 120, ,046 Operating profit 1,738,550 1,532,469 Profit before taxation 1,654,362 1,449,378 Profit 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, 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 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. Half Yearly Report December

29 DIRECTORS REPORT TO THE MEMBERS EARNINGS PER SHARE Basic earnings per share after taxation were Rs (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, DIVIDEND The 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, FUTURE OUTLOOK The 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 Karachi February 27, 2017 Syed Nadeem Ahmed Chief Executive Officer 28

30 Half Yearly Report December

31

32 ئ ی ٹ ڈا ر رز یک روپرٹ ب راےئصصح ی ااگتفن Half Yearly Report December

33 CONSOLIDATED CONDENSED INTERIM BALANCE SHEET (Un-audited) (Audited) December 31, June 30, ASSETS Note 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, ,961 Long-term loans and advances 7 762, ,534 Long-term deposits Deferred cost 5,026 66,680 5,026 66,680 Current assets 5,468,586 4,684,750 Stores and spares Stock-in-trade 1,013 1,403,374 1,004 1,533,770 Trade debts 8 3,630,768 2,988,769 Loans and advances 9 1,169, ,701 Trade deposits and short-term prepayments 144, ,947 Interest accrued 7,260 3,045 Other receivables 256, ,582 Investments - at fair value through profit or loss ,177 99,593 Taxation - payments less provision Cash and bank balances , , , ,001 Total assets 7,340,678 12,809,264 6,812,500 11,497,250 EQUITY AND LIABILITIES Share capital and reserves 12 1,399,376 1,227,523 Share capital Reserves 6,717,124 6,154,517 Attributable to owners of The Searle Company Limited-Holding Company 8,116,500 7,382,040 Non-Controlling interest 402, ,203 Surplus on revaluation of property, plant and equipment 8,519,315 7,777, , ,961 LIABILITIES Non-current liabilities Long term financing 378, ,953 Deferred taxation 39,217 37,603 Retirement benefit obligations 43,837 42,248 Current liabilities 461, ,804 Trade and other payables Accrued mark-up 13 2,476,650 14,017 2,153,003 11,706 Short term borrowings , ,577 Current portion of long term financing Sales tax payable 214,286 7, ,286 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 Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director

34 CONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT - UNAUDITED Quarter ended Half year ended December 31, December 31, December 31, December 31, Note 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, , ,046 Operating profit 796, ,786 1,738,550 1,532,469 Finance cost (57,820) (42,553) (84,188) (83,091) Profit before taxation 738, ,233 1,654,362 1,449,378 Income tax expense (140,977) (149,394) (286,953) (271,641) Profit after taxation 597, ,839 1,367,409 1,177,737 Other comprehensive income Total comprehensive income 597, ,839 1,367,409 1,177,737 Total comprehensive income is attributable to: Owners of the The Searle Company Limited - Holding Company 588, ,078 1,348,221 1,129,509 Non-controlling interests 9,470 24,761 19,188 48, , ,839 1,367,409 1,177,737 (Re-stated) (Re-stated) Earnings per share - basic and diluted (Rupees) The annexed notes from 1 to 24 form an integral part of this consolidated condensed interim financial information. Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director Half Yearly Report December

35 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS - UNAUDITED CASH FLOWS FROM OPERATING ACTIVITIES December 31, December 31, Note Cash generated from operations 19 1,410, ,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, 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, ,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 Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director

36 CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY - UNAUDITED Issued, subscribed Capital reserve Revenue reserves Non- Sub - Total Controlling Total and paid up reserves interest capital Share Issue of General Unappropripremium bonus shares reserve ated profit Balance as at July 01, , ,251 3,562,012 3,842, ,627 5,019,297 Total comprehensive income for the period ,129,509 1,129,509 48,228 1,177,737 Acquisition of subsidiary , ,099 Transactions with owners Transfer to reserve for issuance of bonus shares ,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, Rs. 2 per share (171,681) (171,681) - (171,681) Dividend pertaining to non-controlling interests (29,062) (29,062) 171, (343,363) (343,363) (29,062) (200,743) Balance as at December 31, ,030, ,251 4,348,158 4,628, ,892 6,271,390 Balance as at July 01, ,227,523 1,630, ,251 4,243,292 6,154, ,203 7,777,243 Total comprehensive income for the period ,348,221 1,348,221 19,188 1,367,409 Transactions with owners Transfer to reserve for issue of bonus shares ,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, Rs. 5 per share (613,761) (613,761) - (613,761) Dividend pertaining to non-controlling interests (11,576) (11,576) 171, (785,614) (785,614) (11,576) (625,337) Balance as at December 31, ,399,376 1,630, ,251 4,805,899 6,717, ,815 8,519,315 The annexed notes from 1 to 24 form an integral part of this consolidated condensed interim financial information. Syed Nadeem Ahmed Chief Executive Officer Rashid Abdulla Director Half Yearly Report December

37 SELECTED NOTES TO THE CONSOLIDATED CONDENSED 1. LEGAL STATUS AND OPERATIONS The Searle Company Limited (the Company) was incorporated in Pakistan as a private limited company in October 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, Listed Company 74.19% 74.19% - IBL HealthCare Limited Unlisted Companies % % - Searle Pharmaceuticals (Private) Limited % % - Searle Laboratories (Private) Limited Pakistan % % - Searle Biosciences (Private) Limited % % - 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, 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, 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, Changes in accounting standards, interpretations and pronouncements 36 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.

38 SELECTED NOTES TO THE CONSOLIDATED CONDENSED 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, 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, Half Yearly Report December