Directors report to the shareholders on condensed interim financial statements

Transcription

1 Contents Company information Directors report to the shareholders on condensed interim financial statements Condensed interim statement of financial position Condensed interim profit or loss account Condensed interim statement of comprehensive income Condensed interim statement of changes in equity Condensed interim statement of cash flows Notes to and forming part of the condensed interim financial statements Packages Group condensed consolidated interim financial statements Directors report to the shareholders on condensed consolidated interim financial statements Condensed consolidated interim statement of financial position Condensed consolidated interim profit or loss account Condensed consolidated interim statement of comprehensive income Condensed consolidated interim statement of changes in equity Condensed consolidated interim statement of cash flows Notes to and forming part of the condensed consolidated interim financial statements

2 COMPANY INFORMATION Board of Directors Towfiq Habib Chinoy (Chairman) (Non-Executive Director) Syed Hyder Ali (Chief Executive & Managing Director) (Executive Director) Asghar Abbas (Executive Director) Imran Khalid Niazi (Non-Executive Director) Josef Meinrad Mueller (Non-Executive Director) Atif Bajwa (Independent Director) Shamim Ahmad Khan (Non-Executive Director) Syed Aslam Mehdi (Non-Executive Director) Syed Shahid Ali (Non-Executive Director) Tariq Iqbal Khan (Non-Executive Director) Advisor Syed Babar Ali Chief Financial Officer Khurram Raza Bakhtayari Company Secretary Adi J. Cawasji Auditors A.F. Ferguson & Co. (Chartered Accountants) Legal Advisors Hassan & Hassan - Lahore Orr, Dignam & Co. - Karachi Shares Registrar FAMCO Associates (Pvt.) Ltd 8-F, Next to Hotel Faran Nursery, Block 6, P.E.C.H.S. Shahrah-e-Faisal Karachi PABX : (021) : (021) Fax : (021) info.shares@famco.com.pk Bankers & Lenders Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Al-Habib Limited Deutsche Bank A.G. Dubai Islamic Bank Pakistan Limited Habib Bank Limited Habib Metropolitan Bank Limited International Finance Corporation (IFC) JS Bank Limited MCB Bank Limited Meezan Bank Limited Samba Bank Limited Soneri Bank Limited Standard Chartered Bank (Pakistan) Limited The Bank of Punjab MUFG Bank Limited (Formerly The Bank of Tokyo- Mitsubishi UFJ, Ltd.) United Bank Limited Rating Agency PACRA Credit Rating Long Term : AA Short Term : A1+ 2

3 Head Office & Works Shahrah-e-Roomi P.O. Amer Sidhu Lahore , Pakistan PABX : (042) Fax : (042) Offices Registered Office & Regional Sales office 4 th Floor, The Forum Suite No , G-20, Block 9 Khayaban-e-Jami, Clifton Karachi-75600, Pakistan Zonal Sales Offices C-2, Hassan Arcade Nusrat Road Multan Cantt , Pakistan Tel & Fax : (061) nd Floor Sitara Tower Bilal chowk, Civil Lines, Faisalabad - Pakistan Tel : (041) Fax : (041) Web Presence PABX : (021) : (021) : (021) , , Fax : (021) Regional Sales Office 2 nd Floor, G.D. Arcade 73-E, Fazal-ul-Haq Road, Blue Area Islamabad-44000, Pakistan PABX : (051) : (051) Fax : (051)

4 DIRECTORS' REPORT ON CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED JUNE 30, 2018 The Directors of Packages Limited are pleased to present to its shareholders, the six monthly report along with the condensed interim un-audited financial statements of the Company for the half year ended June 30, Financial and Operational Performance Comparison of the un-audited financial results for the half year ended June 30, 2018 as against June 30, 2017 is as follows: For the second quarter Cumulative Apr - June 2018 Apr - June 2017 Jan - June 2018 Jan - June 2017 ( R u p e e s i n m i l l i o n ) Net sales 5,271 4,331 10,428 8,827 EBITDA - operations ,212 1,019 Depreciation and amortisation (182) (167) (361) (338) EBIT - operations Finance costs (112) (112) (201) (226) Other (expenses) / income - net (60) (59) (46) (161) Investment income 1,816 2,039 2,005 3,550 Earnings before tax 1,983 2,141 2,608 3,844 Taxation (436) (526) (528) (724) Earnings after tax 1,548 1,615 2,081 3,120 Basic earnings per share - Rupees During the first half of 2018, the Company has achieved net sales of Rs. 10,428 million against net sales of Rs. 8,827 million of corresponding period of last year, representing sales and overall volume growth of 18% and 9% respectively. The operations have generated Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) of Rs. 1,212 million during first half of the current period as compared to Rs. 1,019 million during the corresponding period of last year showing an increase of Rs. 193 million (19%), mainly due to revenue growth and improved capacity utilizations. The Company's investment income declined by Rs. 1,545 million in the current period as compared to the corresponding period of the last year due to timing difference of dividend declaration. This has resulted in lowering of earnings after tax and earnings per share. A brief review of the operations of the Company's business division during the period under review is as follows: 4

5 Consumer Products Division Consumer Products Division has registered net sales of Rs. 2,400 million during the first half of 2018 as compared to Rs. 2,205 million of corresponding period of 2017, representing sales growth of 9%. The impact of dollar devaluation has impacted the division adversely. However, the Division hopes that it would be able to recover this by increasing volumes and various cost saving initiatives. The Company has also geared up promotional activities across various platforms as part of its strategy to increase market share. Packaging Division Packaging Division has achieved net sales of Rs. 7,946 million during first half of 2018 as compared to Rs. 6,509 million in corresponding period of last year representing sales growth of 22%. The Company has focused on volume growth and improvement of product mix through innovative approach. The sales growth along with controls over fixed cost have improved operating results by 42%. The production statistics for the period under review along with its comparison with the corresponding period are as follows: Jan - June Jan - June Consumer products produced - tons 8,185 7,384 Carton Board & Consumer Products converted - tons 21,260 20,588 Plastics all sorts converted - tons 10,655 10,044 Future Outlook As part of its diversification strategy, the Company hopes to continue exploring new investment opportunities. Despite increasing competition in packaging business, the Company would continue its efforts to improve shareholders' value by increasing and diversifying revenue and expanding customer base, investment in new technology and production efficiencies. Company's Staff and Customers We wish to record our appreciation of the commitment of our employees to the Company and continued patronage of our customers. (Towfiq Habib Chinoy) Chairman Lahore, August 27, 2018 (Syed Hyder Ali) Chief Executive & Managing Director Lahore, August 27,

6 2, , , , , 20,588 21,260 10,044 10,655 6

7 ,827 10,428 4,331 5,271 1,019 1, (338) (361) (167) (182) (226) (201) (112) (112) (161) (46) (59) (60) 3,550 2,005 2,039 1,816 3,844 2,608 2,141 1,983 (724) (528) (526) (436) 3,120 2,081 1,615 1,

8 PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION (UN-AUDITED) as at June 30, 2018 EQUITY AND LIABILITIES CAPITAL AND RESERVES Note June 30, 2018 Un-audited December 31, 2017 Audited Authorised capital 150,000,000 (December 31, 2017: 150,000,000) ordinary shares of Rs. 10 each 1,500,000 1,500,000 22,000,000 (December 31, 2017: 22,000,000) 10% non-voting preference shares / convertible stock of Rs. 190 each 4,180,000 4,180,000 Issued, subscribed and paid up capital 89,379,504 (December 31, 2017: 89,379,504) ordinary shares of Rs. 10 each 893, ,795 8,186,842 (December 31, 2017: 8,186,842) 10% non-voting preference shares / convertible stock of Rs. 190 each 606, ,222 Reserves 60,673,518 57,673,481 Un-appropriated profit 2,809,074 6,492,264 NON-CURRENT LIABILITIES 64,982,609 65,665,762 Long term finances 6 1,593,390 2,254,100 Liabilities against assets subject to finance lease - 13,195 Deferred taxation 7 335, ,673 Retirement benefits 378, ,264 Deferred liabilities 336, ,181 CURRENT LIABILITIES 2,643,711 3,294,413 Current portion of non-current liabilities 1,321,420 1,334,309 Finances under mark up arrangements - secured 3,489, ,596 Trade and other payables 3,572,682 3,104,993 Accrued finance costs 123, ,760 8,507,129 4,928,658 CONTINGENCIES AND COMMITMENTS ,133,449 73,888,833 The annexed notes 1 to 21 form an integral part of these condensed interim financial statements. 8

9 ASSETS NON-CURRENT ASSETS Note June 30, December 31, Un-audited Audited Property, plant and equipment 9 5,512,959 5,184,739 Investment properties 132, ,696 Intangible assets 10 69,693 4,688 Investments 11 60,290,095 60,166,443 Long term loans and deposits 10,945 18,204 66,016,004 65,508,770 CURRENT ASSETS Stores and spares 496, ,218 Stock-in-trade 2,843,873 1,954,668 Trade debts 2,925,877 2,392,215 Current portion of long term investments 11 10,000 - Loans, advances, deposits, prepayments and other receivables 890, ,868 Income tax receivable 12 2,828,969 2,699,887 Cash and bank balances 121, ,207 10,117,445 8,380,063 76,133,449 73,888,833 Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 9

10 PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF PROFIT OR LOSS ACCOUNT (UN-AUDITED) for the three month and six month period ended June 30, 2018 Local sales 6,214,568 5,113,168 12,304,684 10,415,989 Export sales 14,322 3,097 17,409 11,376 6,228,890 5,116,265 12,322,093 10,427,365 Sales tax (957,896) (784,994) (1,893,746) (1,600,481) Net sales 5,270,994 4,331,271 10,428,347 8,826,884 Cost of sales 13 (4,279,674) (3,462,117) (8,347,980) (7,017,868) Gross profit 991, ,154 2,080,367 1,809,016 Administrative expenses (269,582) (301,011) (526,073) (543,846) Distribution and marketing costs (382,478) (295,440) (703,764) (584,099) Other operating expenses (130,240) (117,230) (185,742) (266,479) Other income 70,101 58, , ,186 Profit from operations 279, , , ,778 Finance costs (111,665) (112,063) (201,184) (226,462) Investment income 1,815,853 2,039,119 2,005,431 3,549,831 Profit before taxation 1,983,309 2,140,977 2,608,280 3,844,147 Taxation 14 (435,586) (525,767) (527,586) (724,013) Profit for the period 1,547,723 1,615,210 2,080,694 3,120,134 Earnings per share Note Three month Six month period ended period ended June 30, June 30, June 30, June 30, Un-audited Un-audited Un-audited Un-audited ( R u p e e s i n t h o u s a n d ) Basic Rupees Diluted Rupees The annexed notes 1 to 21 form an integral part of these condensed interim financial statements. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 10

11 PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) for the three month and six month period ended June 30, 2018 Three month period ended June 30, June 30, Un-audited Un-audited Six month period ended June 30, June 30, Un-audited Un-audited ( R u p e e s i n t h o u s a n d ) Profit for the period 1,547,723 1,615,210 2,080,694 3,120,134 Other comprehensive (loss) / income: Items that may be reclassified subsequently to profit or loss Changes in fair value of available for sale financial assets (4,196,634) 4,032, ,379,097 Total comprehensive (loss) / income for the period (2,648,911) 5,647,629 2,080,731 7,499,231 The annexed notes 1 to 21 form an integral part of these condensed interim financial statements. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 11

12 PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) for the six month period ended June 30, 2018 ( R u p e e s i n t h o u s a n d ) Balance as on January 1, 2017 (audited) 893, ,222 3,766,738 28,858,325 1,615,000 15,310,333 1,734,057 52,784,470 Appropriation of reserves Transfer from general reserve (1,000,000) 1,000,000 - Transaction with preference shareholders Participating dividend on preference shares / covertible stock (45,000) (45,000) Transaction with owners, recognised directly in equity Final dividend for the year ended December 31, 2016 of Rs per share (2,234,487) (2,234,487) Total comprehensive income for the period ended June 30, 2017 Profit for the period ,120,134 3,120,134 Other comprehensive income for the period ,379, ,379,097 Total comprehensive income for the period ,379, ,120,134 7,499,231 Balance as on June 30, 2017 (un-audited) 893, ,222 3,766,738 33,237,422 1,615,000 14,310,333 3,574,704 58,004,214 Balance as on January 1, 2018 (audited) 893, ,222 3,766,738 37,981,410 1,615,000 14,310,333 6,492,264 65,665,762 Appropriation of reserves Transfer to general reserve ,000,000 (3,000,000) - Transaction with preference shareholders Participating dividend on preference shares / convertible stock - note (82,499) (82,499) Transaction with owners, recognised directly in equity Final dividend for the year ended December 31, 2017 of Rs per share (2,681,385) (2,681,385) Total comprehensive income for the period ended June 30, 2018 Issued, subscribed and paid up capital Ordinary share capital Preference shares / convertible stock Share premium Profit for the period ,080,694 2,080,694 Other comprehensive income for the period Total comprehensive income for the period ,080,694 2,080,731 Balance as on June 30, 2018 (un-audited) 893, ,222 3,766,738 37,981,447 1,615,000 17,310,333 2,809,074 64,982,609 The annexed notes 1 to 21 form an integral part of these condensed interim financial statements. Capital reserves Fair value reserve Reserves Capital redemption reserve General reserve Revenue reserves Un-appropriated profit Capital and reserves Total Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 12

13 PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF CASH FLOWS (UN-AUDITED) for the six month period ended June 30, 2018 Six month period ended June 30, 2018 June 30, 2017 Note Un-audited Un-audited Cash flow from operating activities Cash generated from operations , ,597 Finance cost paid (267,682) (329,466) Income tax paid (664,925) (882,840) Payments for accumulating compensated absences (18,440) (14,567) Retirement benefits paid (11,895) (10,537) Net cash outflow from operating activities (834,988) (725,813) Cash flow from investing activities Fixed capital expenditure (789,242) (491,191) Investments made in equity securities (133,616) - Investments made in Government securities - (1,449,997) Proceeds from disposal of Government securities - 1,452,831 Long term loans and deposits - net (6,719) 2,168 Proceeds from disposal of property, plant and equipment 34,781 33,985 Dividends received 1,920,346 3,549,831 Net cash inflow from investing activities 1,025,550 3,097,627 Cash flow from financing activities Repayment of long term finances - secured (660,710) (285,710) Repayment of liabilities against assets subject to finance lease - net (13,504) (8,544) Participating dividend on preference shares paid (82,499) (45,000) Dividend paid (2,684,868) (2,234,693) Net cash outflow from financing activities (3,441,581) (2,573,947) Net decrease in cash and cash equivalents (3,251,019) (202,133) Cash and cash equivalents at the beginning of the period (117,389) (1,286,421) Cash and cash equivalents at the end of the period 18 (3,368,408) (1,488,554) The annexed notes 1 to 21 form an integral part of these condensed interim financial statements. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 13

14 PACKAGES LIMITED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL STATEMENTS (UN-AUDITED) for the six month period ended June 30, Legal status and nature of business Packages Limited (the 'Company') is a public limited company incorporated in Pakistan and is listed on Pakistan Stock Exchange Limited. It is principally engaged in the manufacture and sale of packaging materials and tissue products. The registered office of the Company is situated at 4th floor, the Forum, Suite No , G-20, Block 9, Khayaban-e-Jami, Clifton, Karachi, Pakistan. Head office and factory is located at Shahrah-e-Roomi, P.O. Amer Sidhu, Lahore, Pakistan. The Company also holds investments in companies engaged in the manufacture and sale of inks, flexible packaging material, paper, paperboard and corrugated boxes, biaxially oriented polypropylene ('BOPP') film and cast polypropylene ('CPP') film, production and sale of ground calcium carbonate products, and companies engaged in insurance, power generation and real estate business. 2. Basis of preparation These condensed interim financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan for interim financial reporting. The accounting and reporting standards as applicable in Pakistan for interim financial reporting comprise of: i) International Accounting Standard ('IAS') 34, 'Interim Financial Reporting', issued by International Accounting Standards Board ('IASB') as notified under the Companies Act, 2017, and ii) Provisions of and directives issued under the Companies Act, 2017 Where provisions of and directives issued under the Companies Act, 2017 differ with the requirements of IAS 34, the provisions of and directives issued under the Companies Act, 2017 have been followed. 3. Significant accounting policies 3.1 The accounting policies adopted for the preparation of this condensed interim financial statements are the same as those applied in the preparation of preceding annual published financial statements of the Company for the year ended December 31, Initial application of standards, amendments or interpretations to existing standards The following amendments to existing standards have been published that are applicable to the Company's condensed interim financial statements covering annual periods, beginning on or after the following dates: Standards, amendments and interpretations to approved accounting standards that are effective in the current period Certain standards, amendments and interpretations to approved accounting standards are effective for accounting periods beginning on January 1, 2018, but are considered not to be relevant or to have any significant effect on the Company s operations (although they may affect the accounting 14

15 for future transactions and events) and are, therefore, not detailed in these condensed interim financial statements, except for the following: Amendments to IAS 40, Investment property relating to transfers of investment property (effective for periods beginning on or after January 1, 2018). These amendments clarify that to transfer to, or from, investment properties there must be a change in use. To conclude if a property has changed use, there should be an assessment of whether the property meets the definition. This change must be supported by evidence. The Company's current accounting treatment is already in line with the requirements of this standard. IFRIC 22, Foreign currency transactions and advance consideration (effective for periods beginning on or after January 1, 2018). This IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice. The Company's current accounting treatment is already in line with the requirements of this interpretation Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company There are certain standards, amendments to the approved accounting standards and interpretations that are mandatory for the companies having accounting periods beginning on or after July 1, 2018 / January 1, 2019 but are considered not to be relevant or to have any significant effect on the Company's operations and are, therefore, not detailed in these condensed interim financial statements, except for the following: IFRS 9, Financial instruments': (effective for periods beginning on or after January 1, 2018). This standard has been notified by the SECP to be effective for annual periods beginning on or after July 1, This standard replaces the guidance in IAS 39, 'Financial instruments: Recognition and measurement'. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. The Company is yet to assess the full impact of the standard. Amendment to IFRS 9, 'Financial instruments, on prepayment features with negative compensation': (effective for periods beginning on or after January 1, 2019). This amendment confirms that when a financial liability measured at amortised cost is modified without this resulting in de-recognition, a gain or loss should be recognised immediately in profit or loss. The gain or loss is calculated as the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate. This means that the difference cannot be spread over the remaining life of the instrument which may be a change in practice from IAS 39. The Company is yet to assess the full impact of the ammendment. IFRS 15, Revenue from contracts with customers : (effective for periods beginning on or after January 1, 2018). This standard has been notified by the SECP to be effective for annual periods beginning on or after July 1, This standard deals with revenue recognition and establishes principles for reporting useful information to users of the financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18, Revenue, and IAS 11, Construction contracts, and related interpretations. The Company is yet to assess the full impact of the standard. 15

16 Amendments to IFRS 15, Revenue from contracts with customers (effective for periods beginning on or after January 1, 2018). IFRS 15 has been notified by the SECP to be effective for annual periods beginning on or after July 1, These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance. The IASB has also included additional practical expedients related to transition to the new revenue standard. The Company is yet to assess the full impact of the amendments. IFRS 16, 'Leases': (effective for periods beginning on or after January 1, 2019). This standard has been notified by the SECP to be effective for annual periods beginning on or after January 1, This standard replaces the current guidance in IAS 17, 'Leases' and is a far reaching change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a right-of-use asset for virtually all lease contracts. The IASB has included an optional exemption for certain short term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. The Company is yet to assess the full impact of this standard. IFRIC 23, 'Uncertainty over income tax treatments': (effective for periods beginning on or after January 1, 2019). This IFRIC clarifies how the recognition and measurement requirements of IAS 12 Income taxes, are applied where there is uncertainty over income tax treatments. The IFRIC explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. The IFRIC applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates. The Company is yet to assess the full impact of the interpretation. Amendments to IAS 28 Investments in associates, on long term interests in associates and joint ventures: (effective for periods beginning on or after January 1, 2019). These amendments clarify that companies account for long term interests in an associate or joint venture to which the equity method is not applied using IFRS 9. The Company is yet to assess the full impact of these amendments. 4. Income tax expense comprises current and deferred tax. SECP vide its certificate dated December 14, 2017, has registered the Company and its wholly-owned subsidiary Bulleh Shah Packaging (Private) Limited ('BSPPL') (together the 'Group') as a Group and has also, vide its certificate dated January 1, 2018, designated the Group for the purpose of group taxation under Section 59AA of the Income tax Ordinance, Consequent to the filing of declaration for group taxation for the tax year 2019 by the Company and BSPPL, the Group will be taxed as one fiscal unit for the tax year Income tax expense is recognised based on management s best estimate of the weighted average annual income tax rate expected for the full financial year. Current and deferred taxes based on the consolidated results of the Group are allocated within the Group on the basis of separate return method, modified for determining realisability of tax credits and tax losses which are assessed at Group level. Any adjustments in the current and deferred taxes of the Company on account of group taxation are credited or charged to profit and loss account in the period in which they arise. 16

17 5. The preparation of these condensed interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed interim financial statements, the significant judgements made by management in applying the Company s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended December 31, 2017, with the exception of changes in estimates that are required in determining the provision for income taxes as referred to in note Long term finances Note June 30, 2018 Un-audited December 31, 2017 Audited Local currency loans - secured 6.1 1,982,160 2,642,870 Preference shares / convertible stock - unsecured 932, ,650 2,914,810 3,575,520 Current portion shown under current liabilities (1,321,420) (1,321,420) 6.1 Local currency loans - secured 1,593,390 2,254,100 Opening balance 2,642,870 3,214,290 Repayments during the period / year (660,710) (571,420) Closing balance 1,982,160 2,642, Deferred tax asset on tax losses representing minimum tax available for carry forward under section 113 of the Income Tax Ordinance, 2001 is recognised to the extent that the realisation of related tax benefits through future taxable profits of the Group is probable. The Company has not recognised deferred tax asset of Rs million (December 31, 2017: Rs million), set to lapse in the accounting year 2022, in respect of minimum tax available for carry forward arisen after the formation of the Group, as sufficient taxable profits would not be available to the Group to utilise these in the foreseeable future. Deferred tax asset has also not been recognised on aggregate minimum taxes prior to the formation of the Group amounting to Rs million (December 31, 2017: Rs million) as the same can not be realised against the taxable profits of the Group. However, in case the Company opts out of the Group, these minimum tax credits will become available for realisation against the taxable profits of the Company. Out of these minimum tax credits, Rs million is set to lapse in the accounting year 2018 and Rs million is set to lapse in the accounting year Contingencies and commitments 8.1 Contingencies (i) (ii) Claims against the Company by ex-employees not acknowledged as debts amounting to Rs million (December 31, 2017: Rs million). Standby letter of credit issued by Habib Bank Limited - Pakistan ('HBL Pakistan') in favor of Habib Bank Limited - Bahrain ('HBL Bahrain') on behalf of the Company amounting to USD million equivalent to Rs. 1, million (December 31, 2017: USD million equivalent to Rs. 1, million) to secure long term finance facility provided by HBL Bahrain 17

18 to Anemone Holdings Limited ('AHL'), wholly-owned subsidiary of the Company. The standby letter of credit is secured against pledge of Nestle Pakistan Limited's shares owned by the Company. (iii) Letters of guarantees issued to various parties aggregating to Rs million (December 31, 2017: Rs million). 8.2 Commitments in respect of (i) Letters of credit and contracts for capital expenditure amounting to Rs. 1, million (December 31, 2017: Rs million). (ii) Letters of credit and contracts for other than capital expenditure amounting to Rs million (2017: Rs million). June 30, December 31, 9. Property, plant and equipment Note Un-audited Audited Operating fixed assets - at net book value Owned assets 9.1 4,489,874 4,168,989 Assets subject to finance lease - 29, ,489,874 4,198,010 Capital work-in-progress , ,160 Major spare parts and stand-by equipment ,840 61,569 5,512,959 5,184, A portion of the land on which the Company s factory is situated is on lease from the Government of Punjab for the past 60 years. The term of this lease expired in December 2015 and the Company has filed an application with the relevant authorities for its renewal. June 30, December 31, 9.2 Operating fixed assets Note Un-audited Audited Opening net book value 4,198,010 4,093,392 Additions during the period / year , ,475 Disposals during the period / year at book value (27,127) (55,140) Depreciation charged during the period / year (355,156) (668,717) (382,283) (723,857) Closing net book value 4,489,874 4,198, Additions during the period / year Freehold land - 121,247 Buildings on freehold land 15,929 47,490 Buildings on leasehold land Plant and machinery 546, ,675 Other equipments 70, ,814 Furniture and fixtures 1,381 4,719 Vehicles 39, , , ,475 18

19 9.3 Capital work-in-progress Note June 30, 2018 Un-audited December 31, 2017 Audited Civil works 64, ,797 Plant and machinery 705, ,549 Advances to suppliers 194,835 47, Major spare parts and stand-by equipment 964, ,160 Balance at the beginning of the period / year 61,569 61,729 Additions during the period / year 550 1,831 Transfers made during the period / year (3,279) (1,991) Balance at the end of the period / year 58,840 61, Intangible assets Opening book value 4,688 9,866 Additions during the period / year 69,096 1,026 Amortization charged during the period / year (4,091) (6,204) Closing book value 69,693 4, Investments Opening balance 60,166,442 50,077,782 Investments made during the period / year , ,526 Gain on exchange of shares in associates - 7,050 Changes in fair value of available for sale financial assets 37 9,123,084 Current portion shown under current assets (10,000) - Closing balance 60,290,095 60,166, Investments made in related parties during the period / year Bulleh Shah Packaging (Private) Limited - 833,578 Anemone Holdings Limited 133, , , , As of June 30, 2018, an aggregate of 775,000 shares (December 31, 2017: 775,000 shares) of Nestle Pakistan Limited having market value Rs. 8,912 million (December 31, 2017: Rs. 8,912 million) have been pledged in favor of HBL Pakistan. Out of aggregate shares pledged, 410,000 shares (December 31, 2017: 410,000 shares) are pledged against issuance of standby letter of credit in favor of HBL Bahrain as referred to in note 8.1 and the remaining 365,000 shares (December 31, 2017: 365,000 shares) are pledged against the term finance loan obtained from HBL Pakistan. 12. Income tax receivable (i) In 1987, the then Income Tax Officer ('ITO') re-opened the Company s assessments for the accounting 19

20 years ended December 31, 1983 and 1984 disallowing primarily tax credit given to the Company under section 107 of the Income Tax Ordinance, The tax credit amounting to Rs million on its capital expenditure for these years was refused on the grounds that such expenditure represented an extension of the Company s undertaking which did not qualify for tax credit under this section in view of the Company s location. The assessments for these years were revised by the ITO on these grounds and taxes reassessed were adjusted against certain sales tax refunds and the tax credits previously determined by the ITO and set off against the assessments framed for these years. The Company had filed an appeal against the revised orders of the ITO before the then Commissioner of Income Tax (Appeals) ['CIT(A)'], Karachi. CIT(A) in his order issued in 1988, held the assessments reframed by the ITO for the years 1983 and 1984 presently to be void and of no legal effect. The ITO has filed an appeal against the CIT(A) s order with the then Income Tax Appellate Tribunal ('ITAT'). The ITAT has in its order issued in 1996 maintained the order of CIT(A). The assessing officer after the receipt of the appellate order passed by CIT(A), had issued notices under section 65 of the Income Tax Ordinance, 1979 and the Company had filed a writ petition against the aforesaid notices with the High Court of Sindh, the outcome of which is still pending. The amount recoverable of Rs million represents the additional taxes paid as a result of the disallowance of the tax credits on reframing of the assessments. The Company has not made any provision against the above order as the management is confident that the ultimate outcome of the writ petition would be in favor of the Company, inter alia on the basis of the advice of the tax consultant and the relevant law and the facts. (ii) In respect of tax year 2014, the department, against taxable loss of Rs million as per return filed by the Company, assessed a taxable income of Rs. 2, million and amended the deemed order for the year raising a tax demand of Rs million. In this order, among other issues, the income tax department did not accept the Company s contention for non-taxation of the transfer of paper and paperboard and corrugated business segments to BSPPL under section 97 of the Income Tax Ordinance, Such transfer has been taxed as capital gain on the value of assets transferred. Further, certain other disallowances interalia including on account of allocation of various expenses towards dividend and other incomes, effectively reducing the available tax losses by approximately Rs. 1,200 million, were also made by the department in respect of previous tax years. The Company being aggrieved of this order filed an appeal before the Commissioner Inland Revenue (Appeals) ['CIR(A)']. CIR(A), through order dated March 2, 2018, has accepted all the contentions of the Company except non-taxation of the transfer of paper and paperboard and corrugated business segments to BSPPL and taxation of provision for retirment benefits on accrual basis thereby reducing the tax refundable claimed by the Company from Rs million to Rs million. The Company has filed an appeal against the above order before Appellate Tribunal Inland Revenue ('ATIR') and has not made any provision against the above demand and disallowance as the management is confident that the ultimate outcome of the appeal would be in favour of the Company, inter alia on the basis of the advice of the tax consultant and the relevant law and the facts. (iii) In respect of tax year 2016, the department, against taxable income of Rs. 1, million as per return filed by the Company, assessed a taxable income of Rs. 2, million and amended the deemed order for the year raising a tax demand of Rs million. The Company being aggrieved of the said order filed the appeal before CIR(A). CIR(A), through order dated December 11, 2017, has accepted all the contentions of the Company except the allowability of provision for workers profit participation fund on payment rather than accrual basis and remanded back credit for minimum tax thereby reducing the tax demand to Rs million. The Company has filed an appeal before ATIR against the issues maintained by CIR(A) and has not made any provision against the above disallowance as the management is confident that the ultimate outcome of the appeal would be in favor of the Company, inter alia on the basis of the advice of the tax consultant and the relevant law and the facts. 20

21 13. Cost of sales Materials consumed 3,188,370 2,493,950 6,245,563 4,925,335 Salaries, wages and amenities 395, , , ,253 Travelling 8,631 7,388 12,811 12,030 Fuel and power 235, , , ,403 Production supplies 115,561 92, , ,502 Rent, rates and taxes 9,392 8,037 18,139 16,075 Insurance 8,636 9,309 16,844 16,510 Repairs and maintenance 63,751 77, , ,417 Packing expenses 79,673 76, , ,131 Depreciation on property, plant and equipment 162, , , ,394 Amortisation of intangible assets 246 1, ,919 Technical fee and royalty 17,966 6,440 29,768 11,245 Other expenses 67,403 62, , ,799 4,353,139 3,503,489 8,509,774 6,969,013 Opening work-in-process 253, , , ,626 Closing work-in-process (276,882) (237,831) (276,882) (237,831) Cost of goods manufactured 4,329,857 3,515,483 8,451,461 6,950,808 Opening stock of finished goods 592, , , ,573 Closing stock of finished goods (642,369) (497,513) (642,369) (497,513) 14. Taxation Current Three month period ended June 30, 2018 Un-audited June 30, 2017 Un-audited Six month period ended June 30, 2018 Un-audited June 30, 2017 Un-audited ( R u p e e s i n t h o u s a n d ) 4,279,674 3,462,117 8,347,980 7,017,868 For the period 352, , , ,925 Prior years 97, ,612 97, , , , , ,537 Deferred (15,257) 44,476 (8,257) 9, , , , , Through the Finance Act, 2018, an amendment has been made to section 5A of the Income Tax Ordinance, As per the amended provision, income tax at the rate of 5% of accounting profit before tax for tax year 2019 and onwards is applicable where the Company does not distribute at least 20% of its after tax profits, in the form of cash, within six months of the end of tax year. Liability in respect of such income tax, if any, is recognised when the prescribed time period for distribution expires. The Company has already distributed requisite percentage of its after tax profits for the tax year 2018 to avoid incidence of this tax. 15. As per the terms of Subscription Agreement dated March 25, 2009 with International Finance Corporation ('IFC'), in addition to the preferred right of return at the rate of 10 percent per annum, either in cash or ordinary shares on a non-cumulative basis till the date of settlement of preference shares / convertible stock, the preference shareholders also have the right to share the excess amount with the ordinary shareholders on an as-converted basis in case the amount of dividend per share paid to an ordinary shareholder exceeds that paid to a preference shareholder. Since ordinary dividend of Rs per share was approved for the year ended December 31, 2017, which exceeded the 21

22 preferred return for that year, the additional preference dividend to be paid to the preference shareholders has been distributed to the preference shareholders as participating dividend and charged directly to the equity. 16. Transactions and balances with related parties Relationship with the Company Nature of transactions Six month period ended June 30, June 30, Un-audited Un-audited i. Subsidiaries Purchase of goods and services 2,472, ,450 Sale of goods and services 49,022 74,038 Dividend income 225, ,451 Rental income and others 63,230 18,434 Management and technical fee 35,894 29,226 ii. Joint ventures Purchase of goods and services - 1,259,127 Sale of goods and services 18,591 51,474 Rental income and others ,005 Sale of property, plant and equipment - 1,168 iii. Associates Purchase of goods and services 1,031, ,255 Sale of goods and services 7,842 12,957 Insurance premium paid 98,283 82,032 Commission earned 4,738 3,544 Insurance claims received 2,029 1,656 Rental income and other income 9,733 5,329 Dividend income 286, ,334 Dividend paid 739, ,740 iv. Retirement benefit Expense charged in respect obligations of retirement benefit plans 77,579 61,594 Dividend paid 84,973 70,811 v. Key management personnel Salaries and other employee benefits 85,283 58,977 Dividend paid 68,618 57,182 vi. Other related party Donations made 23,882 45,580 All transactions with related parties have been carried out on mutually agreed terms and conditions. There are no transactions with key management personnel other than under the terms of employment. Period / year end balances June 30, December 31, Un-audited Audited Receivable from related parties Subsidiaries 258, ,635 Joint ventures 33,135 3,714 Associates 49,628 29,515 Payable to related parties Subsidiaries 330, ,146 Associates 124,765 67,686 Retirement funds 20,167 17,165 These are in the normal course of business and are interest free. 22

23 17. Cash generated from operations Profit before tax 2,608,280 3,844,147 Adjustments for non-cash items: Depreciation on property, plant and equipment 355, ,558 Depreciation on investment properties 2,384 3,317 Amortisation on intangible assets 4,091 4,316 Capital gain on disposal of Government securities - (2,834) Provision for accumulating compensated absences 30,000 52,210 Provision for retirement benefits 31,795 18,642 Profit on disposal of property, plant and equipment (7,653) (5,416) Exchange loss - net 14,042 9,149 Finance costs 201, ,462 Provision for doubtful debts 3,433 - Reversal of provision for doubtful debts - (1,024) Liabilities no longer payable written back (10,212) (852) Capital work-in-progress charged to profit and loss account - 1,172 Provision for obsolete / slow-moving stores and spares 22,076 3,176 Provision for obsolete / slow-moving stock-in-trade 8,928 6,748 Dividend income (2,005,431) (3,549,831) Profit before working capital changes 1,258, ,940 Effect on cash flow due to working capital changes Increase in trade debts (537,095) (262,929) Increase in stores and spares (93,182) (47,226) Increase in stock-in-trade (898,133) (218,269) Increase in loans, advances, deposits, prepayments and other receivables (75,415) (103,725) Increase in trade and other payables 473, , Cash and cash equivalents (1,130,119) (428,343) 127, ,597 Cash and bank balances 121,357 66,928 Finances under mark up arrangements - secured (3,489,765) (1,555,482) 19. Financial risk management 19.1 Financial risk factors Six month period ended June 30, June 30, Un-audited Un-audited (3,368,408) (1,488,554) The Company's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual financial statements as at December 31, There have been no significant changes in the risk management policies since the year end. 23

24 19.2 Fair value estimation The different levels for fair value estimation used by the Company have been explained as follows: - Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The following table presents the Company s material financial assets and liabilities that are measured at fair value at June 30, Un-audited Assets Level 1 Level 2 Level 3 Total Recurring fair value measurements Available for sale investments 41,966, ,966,353 Liabilities The following table presents the Company s material financial assets and liabilities that are measured at fair value at December 31, Audited Assets Level 1 Level 2 Level 3 Total Recurring fair value measurements Available for sale investments 41,966, ,966,316 Liabilities During the period, there were no significant changes in the business or economic circumstances that affect the fair value of the Company s financial assets and financial liabilities. Furthermore, there were no reclassifications of financial assets. 20. Date of authorisation for issue These condensed interim financial statements were authorised for issue on August 27, 2018 by the Board of Directors of the Company. 21. Corresponding figures In order to comply with the requirements of International Accounting Standard 34 - Interim Financial Reporting, the condensed interim statement of financial position has been compared with the balances of annual audited financial statements of preceding financial year, whereas, the condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim statement of changes in equity and condensed interim statement of cash flows have been compared with the balances of comparable period of immediately preceding financial year. Corresponding figures have been re arranged and reclassified, wherever necessary, for the purposes of comparison. However, no significant reclassifications have been made. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 24

25 Packages Group Condensed Consolidated Interim Financial Statements

26 DIRECTORS' REPORT ON CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED JUNE 30, 2018 The Directors of Packages Limited are pleased to present the un-audited condensed consolidated interim financial statements of the Group for the half year ended June 30, Group results The comparison of the un-audited results for the half year ended June 30, 2018 as against June 30, 2017 is as follows: Jan - June 2018 (Rupees in million) Jan - June 2017 Invoiced sales - net 26,715 13,215 Profit from operations 1,319 1,300 Share of profit in associates and joint venture - net of tax Investment income 1,494 3,248 Profit after tax 1,069 3,232 During the first half of 2018, the Group has achieved net sales of Rs. 26,715 million against net sales of Rs. 13,215 million achieved during corresponding period of last year. In October 2017, Bulleh Shah Packaging Private Limited ( BSPPL ) status was changed from being a Joint Venture ( JV ) to a fully owned subsidiary of the Group. For consolidation purposes, as a JV, equity accounting was applied in line with accounting principles, under the new accounting policy, only the JV's proportionate share of profit/loss was recognised as the subsidiary, each individual line item of the Balance Sheet and Profit or Loss Account are being added. Consequently, at the Group level, sales achieved by BSPPL amounting to Rs. 11 billion have been included in the results of the current period. Further, Packages Mall, a project of packages construction (private) Limited was inaugurated in April 2017 and sales for the current period amounting to Rs. 1,602 million have been included in the accounts. The Group's distribution and marketing cost has increased by Rs. 577 million. It is mainly due to distribution expense of BSPPL which is not included in the comparative for the reason explained above. Also, the marketing expense of Packages Mall has been increased by Rs. 137 million in the current period. The Group had an operating profit of Rs. 1,319 million compared to Rs. 1,300 million generated during the corresponding period of the last year. This increase in profit is primarily attributable to improved performance of the Parent Company on account of higher sales. The Group is exercising strict cost controls and is in the process of implementing various initiatives to bring down fixed costs and to increase sales volume. The Group's finance cost has increased by 512 million which is primarily due to finance cost of BSPPL which has been included in the current period. In current period, finance cost incurred by BSPPL amounts to Rs. 305 million. Further, the finance cost being incurred by the Mall prior to inauguration was being capitalised and not expensed out in line with accounting principles. Accordingly, finance cost of Mall has increased by Rs. 212 million in the current period. The Group's investment income has declined by 1,763 million in the current period as compared to the corresponding period of the last year due to timing difference of dividend declaration which has correspondingly resulted in decrease in earnings after tax. 26