| Gillete Pakistan Ltd - 2005 |
=================================================================================== BALANCE SHEET AS AT DECEMBER 31, 2005 =================================================================================== 2005 2004 Notes Rupees in '000 =================================================================================== ASSETS: Property, plant and equipment 3 13,603 13,344 Intangible asset 4 64 1,487 Long term loans 5 1,400 700 Long term deposits 6 98 206 CURRENT ASSETS: Investments 7 13,029 36,245 Stocks 8 18,709 35,517 Trade debts 9 37,471 6,749 Loans and advances 10 606 1,517 Deposits, prepayments and other receivable 11 5,011 17,250 Taxation - net 14,174 5,667 Cash and bank balances 12 231,965 170,205 320,965 273,150 336,130 288,887 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES AUTHORISED SHARE CAPITAL: 20,000,000 ordinary shares of Rs 10/- each 200,000 20,000 Issued, subscribed and paid-up share capital 13 192,000 192,000 Reserves 36,189 21,746 228,189 213,746 Deferred taxation 14 107 491 CURRENT LIABILITIES: Trade and other payables 15 107,834 74,650 Contingencies and commitments 16 - - 336,130 288,887 =================================================================================== =================================================================================== PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2005 =================================================================================== Restated 2005 2004 Notes Rupees in '000 =================================================================================== Sales - net 18 696,962 491,883 Cost of goods sold 19 (497,797) (338,687) Gross profit 199,165 153,196 Selling, marketing and distribution expenses 20 (130,141) (101,360) Administrative expenses 21 (40,527) (28,817) (170,668) (130,177) Operating profit 28,497 23,019 Finance cost 22 (157) (255) Other operating expenses 23 (1,241) - (1,398) (1,091) Other income 24 16,823 9,230 Profit before taxation 43,922 31,158 Taxation 25 (28,317) (54,428) Profit /(loss) after taxation 15,605 (23,270) PROFIT / (LOSS) AFTER TAXATION ATTRIBUTABLE TO: - the parent company 11,979 (17,863) - other equity holders 3,626 (5,407) 15,605 (23,270) Rupees Earnings / (loss) per share - basic and diluted 26 0.81 (1.21) =================================================================================== ======================================================================================================================= STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2005 ======================================================================================================================= Reserves Issued, Unappropriated Unrealised Sub total Total subscribed profit gain/(loss) on and paid-up on revaluation share capital of investments Notes Rupees in '000 ======================================================================================================================= Balance as at January 1, 2004 192,000 123,267 - 123,267 315,267 - as reported earlier Effect of change in accounting policy 2.5 Unrealised gain on remeasurement of investments classified as available-for-sale transferred from profit and loss account to equity (3,783) 3,783 - - Deferred tax on unrealised gain 1,346 (1,346) - - Balance as at 1 January 2004- restated - - - 192,000 120,830 2,437 123,267 315,267 Loss for the year 2004 - as reported earlier (24,721) - (24,721) (24,721) Effect of change in accounting policy 2.5 Unrealised loss on remeasurement of investments classified as available-for-sale transferred from profit and loss account to equity 2,446 (2,446) - - Deferred tax on unrealised loss (995) 995 - - Loss for the year 2004 - restated / unrealised (loss) on revaluation of investments (net) (23,270) (1,451) (24,721) (24,721) Final dividend for the year ended December 31, 2003 declared subsequent to the year end (76,800) - (76,800) (76,800) Balance as at 31 December 2004- restated 192000 20,760 986 21,746 213,746 Decrease in reserves attributable to: - the parent company (18,977) - other equity holders (5,744) (24,721) Balance as at 1 January 2005 192,000 20,760 986 21,746 213,746 Effect of change in accounting policy 2.5 Unrealised loss on remeasurement of investments classified as available-for-sale (840) (840) (840) charged directly in equity Deferred tax on above 250 250 250 (590) (590) (590) Surplus realised during the year upon disposal of investment classified as available -for-sale included in the opening balance now transferred from equity to the profit and loss account (776) (776) (776) Deferred tax on above 204 204 204 (572) (572) (572) (1,162) (1,162) (1,162) Profit after taxation 15,605 - 15,605 15,605 (1,162) 14,443 14,443 Balance as at 31 December 2005 192000 36,365 (176) 36,189 228,189 INCREASE IN RESERVES ATTRIBUTABLE TO: - the parent company 11,087 - other equity holders 3,356 14,443 ======================================================================================================================= =================================================================================== CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2005 =================================================================================== 2005 2004 Notes Rupees in '000 =================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Cash generated from operations 27 69,869 152,946 Finance cost paid (157) (255) Taxes paid (36,754) (22,331) Long-term loans (700) 1,348 Long-term deposits 108 396 Net cash inflow from operating activities 32,366 132,104 CASH FLOWS FROM INVESTING ACTIVITIES: Fixed capital expenditure (5,243) (2,482) Interest/mark-up received on 11,610 4,182 investments and bank deposits Sale proceeds on disposal of available 21,292 - for-sale investments Sale proceeds on disposal of 1,741 8,403 property, plant and equipment Net cash inflow from investing activities 29,400 10,103 CASH FLOWS FROM FINANCING ACTIVITY: Dividend paid (6) (76,593) Net cash outflow from financing activity (6) (76,593) Net increase in cash and cash equivalents 61,760 65,614 Cash and cash equivalents 170,205 104,591 at the beginning of the year Cash and cash equivalents 12 231,965 170,205 at the end of the year ===================================================================================NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005 1. STATUS AND NATURE OF BUSINESS Gillette Pakistan Limited ("the company") was incorporated on 9 December 1986 as a public limited company under the Companies Ordinance, 1984. The registered office of the company is situated at Imperial Court Building, 2nd Floor, Dr Ziauddin Ahmed Road, Karachi and the company is listed on Karachi and Lahore Stock Exchanges. The principal activities of the company include marketing and selling of blades and razors, personal care products, alkaline batteries, household appliances and oral care products and contract manufacturing of tooth brushes. On October 1, 2005 The Procter and Gamble Company (P&G), USA has acquired the Gillette Company, USA, (previously the parent Company). As a result of this acquisition the Company's shares previously held by the Gillette Company, USA, have been transferred to Series Acquisition B.V. Netherlands (a wholly owned subsidiary of P&G, USA). Accordingly, now the ultimate parent Company is P&G, USA. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1. BASIS OF PREPARATION These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 (the Ordinance), and the International Accounting Standards (IASs) issued by the International Accounting Standards Board (IASB) and interpretations issued by the Standing Interpretations Committee of the IASB (the interpretations), as adopted in Pakistan. However, the requirements of the Ordinance have been followed in case where its requirements are not consistent with the requirements of the IASs and the interpretations. Standards, interpretations and amendments to published approved accounting standards that are not yet effective: Following amendments to existing standards applicable to the Company have been published that are mandatory for the Company's accounting periods beginning on or after 1 January 2006: (i) IAS 19 (amendments) - employee benefits effective from 1 January 2006 (ii) IAS 1 presentation of financial statements - capital disclosures effective from 1 January 2007 (iii) IAS 39 (amendments) - financial instruments: recognition and measurements effective from 1 January 2006Adoption of the above amendments may only impact the extent of disclosures presented in the financial statements. 2.2. ACCOUNTING CONVENTION These financial statements have been prepared under the historical cost convention except for the available-for-sale investment which is carried at fair value as referred to in note 2.5 and recognition of certain staff retirement benefit at present value as referred to in note 2.9 to these financial statements. 2.3. PROPERTY, PLANT AND EQUIPMENT These are stated at cost less accumulated depreciation. Residual values are reviewed and adjusted if the impact on depreciation is significant, at each balance sheet date. Cost is depreciated over the estimated useful life of related assets under the straight line method, except for capital work-in-progress which is stated at cost. Depreciation rates are reviewed at each balance sheet date. Depreciation on additions is charged from the month in which the asset is put to use and on disposal up to the month of disposal at the rates stated in note 3 to these financial statements. Effective January 1, 2005 the Company has revised its estimates of useful life of certain items of property, plant and equipment. Due to change in accounting estimate the depreciation charge for the year has increased by Rs 0.606 million. Had there been no change in the accounting estimate the 'profit before tax' and the 'property, plant and equipment' balances would have been higher by Rs 0.606 million. Normal repairs and maintenance are charged to income as and when incurred. Major renewal and improvements are capitalised and assets so replaced, if any, are retired. Cost of acquisition of display stands is also charged to income currently. Gains and losses on disposal of assets are included in income currently. 2.4. INTANGIBLE ASSETS These are stated at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is charged over the estimated useful life of the asset on a systematic basis applying the straight line method at the rate specified in note 4 to these financial statements. Effective January 1, 2005 the company has revised its estimates of useful life of intangible assets. Due to change in accounting estimate the amortisation charge for the year has increased by Rs 0.885 million. Had there been no change in accounting estimate the 'profit before tax' and the 'intangible assets' balances would have been higher by Rs 0.885 million. Costs that are clearly associated with an identifiable asset which has a probable benefit beyond one year are recognised as intangible assets. The carrying amounts are reviewed at each balance sheet date to assess whether they are recorded in excess of their recoverable amounts and where carrying values exceed estimated recoverable amounts, assets are written down to their estimated recoverable amounts. 2.5. INVESTMENTS Financial assets at fair value through profit or loss. These are investments: -- acquired or incurred principally for the purpose of selling or repurchasing It in the near term; -- part of portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short term profit taking; -- a derivative; or -- upon initial recognition it is designated by the Company as at fair value through profit or loss. Held-to-maturity These are investments with fixed or determinable payments and fixed maturity and the Company has the positive intent and ability to hold such investments to maturity. Available-for-sale These are investments that do not fall under the 'financial asset at fair value through profit or loss', 'held-to-maturity' or 'loans and receivables' categories. Investments in quoted securities which are not at 'fair value through profit or loss' but may be sold in response to need for liquidity are also classified as available-for-sale investments. Available-for-sale investments are initially stated at cost inclusive of transaction costs and re-measured subsequently at fair value. The fair values are determined on the basis of year-end bid prices which, are rates quoted by Reuters on last working day of the accounting year. The company follows the trade date accounting for the purchases and sales of investments. Change in accounting policy Effective 1 January 2005 the Company has changed its accounting policy for recognition of unrealised gains and losses arising from changes in the fair value of available-for-sale investments which are now recognised directly in equity, through the statement of changes in equity, until the financial asset is derecognised, at which time the cumulative gain or loss previously recognise in equity shall be recognised in the profit or loss account. Previously such gains or losses were recognised in profit or loss in the period in which they arose. This accounting policy has been changed in order to comply with the revised requirements of International Accounting Standards No 39 'Financial Instruments: Recognition and Measurement' which became applicable to the Company effective 1 January 2005. The effects of this change in the accounting policy have been reflected in the statement of changes in equity. 2.6. STOCKS Stocks are valued at the lower of cost and estimated net realisable value. Costs are determined by using the first-in, first-out method except for goods-in-transit which are valued at actual cost accumulated to the balance sheet date. Net realisable value signifies the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. The cost of stocks includes expenditure incurred in acquiring / bringing the inventories to their existing location and condition. In the case of finished goods and work-in-process, cost includes appropriate share of overheads. 2.7. TRADE DEBTS Trade debts are carried at original invoice amount. Debts considered irrecoverable are written-off and provision is made against those considered doubtful of recovery. 2.8. TAXATION Current Provision for current taxation is based on taxable income at the current rates of taxation and tax paid on presumptive basis or minimum tax at the rate of 0.5% of turnover whichever is higher. Deferred The company accounts for the deferred taxation using the balance sheet liability method on all major temporary differences between the amounts attributed to assets and liabilities for financial reporting purposes and amount used for taxation purposes. This is recognised on the basis of expected manner of settlement of carrying amount of assets and liabilities using the tax rate enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised. 2.9. STAFT RETIREMENT BENEFITS Defined benefit plan The company operates a defined benefit plan i.e. an approved funded pension scheme for all its permanent employees subject to prescribed qualifying age limit. Contributions are made to the fund on the basis of actuarial recommendations. Actuarial valuation is carried out using projected unit credit method. Actuarial gains / losses exceeding 10 percent of the higher of projected benefit obligation and fair value of plan assets, at the beginning of the year, are amortised over average future service of the employees. Defined contribution plan The company operates an approved funded provident fund scheme for all its permanent employees. Equal monthly contributions are made, both by the Company and its employees, to the fund at the rate of 10 percent of basic salaries of employees. Compensated absences The liability in respect of compensated absences of employees is accounted for in the period in which the absences accrue. 2.10. PROVISIONS Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economics benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. 2.11. FOREIGN CURRENCY TRANSLATION Transactions in foreign currencies are recorded in Pakistan rupees at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities in foreign currencies are reported in Pakistan rupees at the rates of exchange approximating those prevalent at the balance sheet date. Exchange differences are charged to income currently. 2.12. REVENUE RECOGNITION Sales are recognised on dispatch of goods to customers. Mark-up / return on bank balances / investments are recognised on a time proportion basis on the principal amount outstanding and at the rate applicable. 2.13. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise of cash in hand, bank balances and term deposits. 2.14. DIVIDENDS Dividend is recognised as a liability in the period in which it is declared. 2.15. SEGMENT REPORTING A segment is a distinguishable component within a company that is engaged in providing products (business segment), which is subject to risks and rewards that are different from those of other segments. The company accounts for segment reporting using the business segments as the primary reporting format based on Company's practice of reporting to the management on the same basis. Assets, liabilities and capital expenditure that are directly attributable to segments have been assigned to them while the carrying amount of certain assets used jointly by two or more segments have been allocated to segments on a reasonable basis. Those assets and liabilities which cannot be allocated to a particular segment on reasonable basis are reported as unallocated corporate assets and liabilities. 2.16. FINANCIAL INSTRUMENTS All financial assets and liabilities are recognised at the time when the company becomes a party to the contractual provision of the instruments. Any gain or loss on the recognition and de-recognition of the financial assets and liabilities is included in the net profit and loss for the period in which it arises. 2.17. TRANSACTIONS WITH RELATED PARTIES The company enters into transactions with related parties for purchase of goods and services on an arm's length basis. 2.18. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. Assumptions and estimates used in the area of taxation (refer notes 16 & 25) are significant to the financial statements and it involves management's judgement. Estimates and judgements, if any, are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. 3. PROPERTY, PLANT AND EQUIPMENT ============================================================================================================================
Plant and Furniture & Office Motor Fork Sub total Capital work- Total
machinery fixture equipment vehicles lifters in progress-
Furniture
and fixture
Rupees in 000
============================================================================================================================
At January 1 2004
Cost 10,050 3,554 12,259 15,156 2,716 43,735 - 43,735
Accumulated depreciation 3,345 1,247 6,579 11,.547 2,163 24,881 - 24,881
Net book value 6,705 2,307 5,680 3,609 553 18,854 - 18,854
Year ended December 31, 2004
Opening net book value 6,705 2,307 5,680 3,609 553 18,854 - 18,854
Additions - 151 662 1,189 - 1,.982 500 2,482
DISPOSALS:
Cost 998 1,534 2,008 9,208 2,716 16,464 - 16,464
Depreciation 774 585 1,655 2,355 12,421 - 12,421
(224) (949) (353) (2,156) (361) (4,043) - (4,043)
Depreciation charge
for the year (572) (221) (1,461) (1,503) (192) (3,949) - (3,949)
closing net book value 5,909 1,288 4,528 1,119 - 12,844 500 13,344
at December 31, 2004 -
Cost 9,052 2,171 10,913 7,117 - 29,253 500 29,753
Accumulated depreciation (3,143) (883) (6,385) (5,998) - (16,409) - (16,409)
Net book value 5,909 - 1,288 1,288 4,528 1,119 - 12,844 500 13,344
Year ended December 31, 2005
Opening net book value 5,909 1,288 4,528 1,119 - 12,844 500 13,344
Additions - 298 350 4,595 - 5,243 - 5,243
* transfers *500 *500 *(500)
Disposals/*write off
Cost - 401 39 4,403 - 4,843 - 4,843
*424 *396 *820 *820
Depreciation - 148 39 4,403 - 4,590 - 4,590
*177 *270 *447 *447
- (253) - - - (253) - (253)
*(247) *(126) *(373) '(373)
Depreciation charge
For the year (595) (114) (1,611) (2,038) - (4,358) - (4,358)
Closing net book value 5,314 1,472 3,141 3,676 - 13,603 - 13,603
at December 31, 2005
cost 9,052 2,144 10,828 7,309 - 29,333 - 29,3331
Accumulated depreciation (3,738) (672) (7,687) (3,633) - (15,730) - (15,730)
Net book value 5,314 1,472 3,141 3,676 - 13,603 - 13,603
Depreciation rates 5-7.5% 6.67-20% 5-20% 33.33%
============================================================================================================================3.1. All items of plant and machinery are in the possession of a third party.3.2. Disposals of property, plant and equipment during the year are as follows: =======================================================================================================================
Particulars Mode of Cost Accumulated Written down Sates Gain / Particulars of purchaser
disposal depreciation value proceeds (loss)
Rupees in '000
=======================================================================================================================
Furniture and Fixture
Product display counter Tender 297 105 192 12 (180) Hasnain Akram,
Ex-Employee.
5-8/II, East Street, Phase-I,
DHA, Karachi
Assets having book value
below Rs 50,000 Tender 104 43 61 7 (54) Various
401 148 253 19 (234)
MOTOR VEHICLES:
Suzuki Bolan Tender 325 325 - 270 270 Faisal Abbas Hashmi
House No A-159, Street 3,
Block-11, Gulshan-e-Iqbal,
Karachi.
BMW Tender 3,269 3,269 - 734 734 Azhar M. Aqil,
Ex - Chief Executive
210. Marina Elevation,
Block II Clifton Karachi.
Toyota Corolla Tender 809 809 - 715 715 Syed Athar Hussain
FL-3, Town House No 11
Block-3, Gulshan-e-Iqbal,
Karachi
4,403 4,403 - 1,719 1,719
OFFICE EQUIPMENT
Assets having book value
below Rs 50,000 Tender 39 39 - 3 3 Various
2005 4,843 4,590 253 1,741 1,488
2004 16,464 12,421 4,043 8,403 4,360
=======================================================================================================================4. INTANGIBLE ASSET===================================================================================
Computer software
Rupees in '000
===================================================================================
At January 1, 2004
Cost 5,938
Accumulated amortisation (3,714)
Net book value 2,224
Year ended 31 December 2004
Opening net book value 2,224
Additions -
Disposals -
Cost -
Amortisation -
Amortisation charge for the year 737
Closing net book value 1487
at 31 December 31, 2004
Cost 5,938
Accumulated amortisation (4,451)
Net book value 1487
Year ended 31 December 2005
Opening net book value 1,487
Additions -
DISPOSALS:
Cost -
Amortisation -
Amortisation charge for the year
Closing net book value 64
at December 31, 2005
Cost 5,938
Accumulated amortisation
Net book value 64
Amortisation rate 20%
===================================================================================4.1. Depreciation and amortisation charges for the year have been allocated as under:========================================================================================
Depreciation Amortisation 2005 2004
Notes (Rupees in '000)
========================================================================================
Cost of goods sold 19 595 - 595 572
Selling, marketing and
distribution expenses 20 1,606 - 1,606 1,916
Administrative expenses 21 2,157 1,423 3,580 2,198
4,358 1,423 5,781 4,686
========================================================================================5. LONG TERM LOANS - SECURED, CONSIDERED GOOD5.1. OTHERS ===================================================================================
2005 2004
Notes (Rupees in '000)
===================================================================================
Due from employees 5.2 1,834 1,026
Receivable within one year 10 (434) (326)
1,400 700
===================================================================================5.2. These interest-free loans have been given to employees of the company for purchase of vehicles in accordance with their terms of employment.The original repayment of these loans is over a period of five year in equal monthly instalments. The registration documents of the vehicles contain an endorsement in favour of the Company. 6. LONG TERM DEPOSITS ===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
Central Depository Company Limited 37 75
- registration deposit
Others 61 131
98 206
===================================================================================7. INVESTMENTS7.1. OTHERS, AVAILABLE-FOR-SALE ===================================================================================================
Face value Description Date at maturity Period of Mark-up Fair value
2005 2004 maturity rate 2005 2004
(Rs in '000) % (Rs in '000)
===================================================================================================
10,000 10,000 Pakistan Investment Bond 21 November 2006 5 years 11 10,780 10,780
2,500 2,500 Pakistan Investment Bond 13 February 2006 5 years 13 2,528 2,528
- 20,000 Pakistan Investment Bond 27 January 2007 5 years 11 - 21,600
12,500 32,500 13,308 34,908
(Deficit) / Surplus on re-to fair value (279) 1,337
13,029 36,245
===================================================================================================7.2. The fair values of the above investments have been determined on the basis of rates quoted by Reuters as on December 31, 2005.7.3. The above investments shall mature between the period February 13, 2006 to 21 November 2006. However, the Company may consider partial or full realisation of these investments on or before maturity and therefore these investments have been classified as 'available-for-sale'. 8. STOCKS ===================================================================================
2005 2004
Note (Rupees in '000)
===================================================================================
Raw material 1,885 2,362
Work in process 551 583
Finished goods 8.1 16,273 32,572
18,709 35,517
===================================================================================8.1. Finished goods include goods-in-transit amounting to Rs 3.650 million (2004: Rs 4.111 million).8.2. All stocks are in the possession of third party. 9. TRADE DEBTS ===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
Unsecured, considered good 37,471 6,749
===================================================================================10. LOANS AND ADVANCES -CONSIDERED GOOD===================================================================================
2005 2004
Notes (Rupees in '000)
===================================================================================
Loans due from employees - secured 5 434 326
ADVANCES - UNSECURED:
- suppliers - 504
- chief executives 10.1 3 -
- executives 10.1 35 -
- employees 134 687
606 1,517
===================================================================================10.1. The maximum aggregate amounts of advances due at the end of any month during the year are as follows:===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
- From chief executive 280 10
- From executives 72 291
===================================================================================11. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES===================================================================================
2005 2004
Notes (Rupees in '000)
===================================================================================
Deposits 60 140
Pre payments 1,461 1,365
Receivables from related
parties - unsecured,
considered good 11.1 & 11.2 449 9,956
Interest receivable 963 1,775
Receivable from pension fund 31 952 -
Sales tax refundable - 3,199
Receivable from customs authority 815 815
Others 311 -
5,011 17,250
===================================================================================11.1. This includes an amount receivable from following related parties:===================================================================================
2005 2004
Notes (Rupees in '000)
===================================================================================
The Gillette Poland 11.1.1 449 1,401
Braun Germany 11.1.1 - 255
The Gillette Group South Africa 11.1.1 - 277
The Gillette Company, USA 11.1.1 - 8,023
449 9,956
===================================================================================11.1.1. This relates to amounts receivable on account of contribution to provident fund of an employee working for the related party (2004: contribution to provident fund, pension fund and other expenses incurred in respect of certain employees working for these related parties).11.2. The maximum aggregate amount receivable at the end of any month during the year was Rs 2.730 million (2004: Rs 9.956 million). 12. CASH AND BANK BALANCES ===================================================================================
2005 2004
Note (Rupees in '000)
===================================================================================
WITH BANKS ON:
- Current accounts 7,542 13,598
- Saving accounts 21,332 66,308
- Deposit accounts 12.1 203,000 90,000
231,874 169,906
Cash in hand 91 299
231,965 170,205
===================================================================================12.1. This represents deposits which shall mature between the period 4 January 2006 to 10 January 2006.13. ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL ================================================================================
2005 2004 2005 2004
(Number of shares) (Rupees in '000)
================================================================================
Ordinary shares of Rs 10 each
15,936,000 15,936,000 fully paid in cash 159,360 159,360
Ordinary shares of Rs 10 each
issued for consideration other
3,264,000 3,264,000 than cash 32,640 32,640
19,200,000 19,200,000 192,000 192,000
================================================================================13.1. The Series Acquisition B.V., Netherlands, and its nominiees held 14,739,004 (2004: The Gillette Company, USA and its nominees held 14,739,004) ordinary shares of Rs 10 each of the Company.14. DEFERRED TAXATION ===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
(Debit) / Credit balances arising in respect of timing
differences relating to:
- Revaluation of investment (103) 351
- Excess of accounting written down value of
property, plant and equipment
and tax written down value 210 140
107 491
===================================================================================15. TRADE AND OTHER PAYABLES===================================================================================
2005 2004
Notes (Rupees in '000)
===================================================================================
Trade creditors 15.1 7,809 4,963
Accrued liabilities 15.2 90,954 60,933
Bills payable 6,936 4,973
Sales tax payable 1,435 -
Unclaimed dividend 519 525
Advances from customers 181 3,256
107,834 74,650
===================================================================================15.1. This represents amount payable to related parties which includes Braun Germany and the Gillette Company, USA amounting to Rs 3.690 million and Rs 4.119 million respectively on account of imports (2004: Rs 0.703 million payable to the Braun Germany on account of imports and Rs 4.260 million payable to the Gillette Company, Canada on account of royalty).15.2. Accrued liabilities include provision for severance cost amounting to Rs 40.326 million in respect of certain employees. 16. CONTINGENCIES AND COMMITMENTS 16.1. Commitments in respect of capital expenditure amounted to Rs Nil (2004: Rs 0.400 million). 16.2. Outstanding bank contracts amounted to Rs Nil (2004: Rs 13.239 million). 16.3. The income tax assessments of the company have been finalised up to and including tax year 2005 (income year ended December 31, 2004), except for the assessment year 1989-1990 (income year ended November 30, 1988). During the year ended 31 December 2003 the Company had filed appeals with the Commissioner of Income Tax (CIT) Appeals against the assessment orders for the assessment tax years 2000-2001 and 2001-2002 in which the assessing officer did not agree to treat the consideration received from Gillette Czech s.r.o. (an associated undertaking) on account of sale of certain limited local customer base as a capital receipt and as a result, an additional tax liability of Rs 40 million was assessed by the tax department. The appeals filed with the Commissioner of Income Tax (CIT) Appeals pertaining to the assessment years 2000-2001 and 2001-2002 were decided against the company. The company filed appeals with the Income Tax Appellate Tribunal (ITAT) against the order of the CIT (Appeals) which are pending. After consultation with its tax advisor the company had, on the grounds of prudence and as a matter of abundant caution and without prejudice to its contention in the appeals, made a provision of Rs 30 million in its financial statements for the year ended 31 December 2004 in this respect which is being carried as at 31 December 2005. 17. SEGMENT RESULTS =========================================================================================================================================
Blades and Razors Personal Care Braun Others Total
2005 2004 2005 2004 2005 2004 2005 2004 2005 2004
Notes Rupees in '000
=========================================================================================================================================
Sales - net 18 483,591 336,618 69,780 49,884 71,119 60,252 72,472 45,129 696,962 491,883
Cost of goods sold 19 (352,638) (232,304) (46,982) (35,338) (51,716) (39,154) (46,461) (31,891) (497,797) (333,687)
profit 130,953 104,314 22,798 14,546 19,403 21,098 26,011 13,238 199,165 153,196
Selling, marketing and
distribution expenses 20 (88,813) (69,210) (9,512) (8,538) (13,928) (13,169) (17,888) (10,443) (130,141) (101,360)
Administrative expenses 21 (27,964) (19,595) (4,053) (2,882) (4,052) (3,746) (4,458) (2,594) (40,527) (28.817)
Operating profit 14 176 15 509 9 233 3,126 1,423 4,183 3,665 201 28, 497 23, 019
Segment assets 51,191 38,826 7,359 5,711 3,239 6,908 8,058 5,652 69,847 57,097
Unallocated corporate assets - - - - - - - - 266,283 231,790
Total assets 336,130 `
Segment liabilities 19,821 8,669 1,268 1,620 10,628 8,544 6,746 6,991 38,463 25,824
located corporate liabilities - - - - - - - - 69,478 49,317
Total liabilities 107,941 75,141
Depreciation mortisation 3,989 3,186 578 469 578 469 636 562 5,781 4,686
Capital expenditure 3,618 1,688 524 248 524 298 577 248 5,243 2,482
=========================================================================================================================================18. SALES - NET===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
Gross sales 817,708 582,949
Trade discounts (13,512) (13,687)
Sales tax (107,234) (77,379)
Net sales 696,962 491,883
===================================================================================19. COST OF GOODS SOLD===================================================================================
2005 2004
Note (Rupees in '000)
===================================================================================
Opening stock of raw material 2,362 2,907
Purchases of raw material 4,368 4,745
Raw material available for consumption 6,730 7,652
Closing stock of raw material (1,885) (2,362)
Raw material consumed 4,845 5,290
Other manufacturing expenses 19.1 3,939 5,221
Opening stock of work-in-process 583 597
Closing stock of work-in-process (551) (583)
Cost of goods manufactured 8,816 10,525
Opening stock of finished goods 32,572 75,251
Purchases of finished goods 472,682 285,483
505,254 360,734
Closing stock of finished goods (16,273) (32,572)
Cost of goods sold 497,797 338,687
===================================================================================19.1. This includes depreciation amounting to Rs 0.595 million (2004: Rs 0.572 million).20. SELLING, MARKETING AND DISTRIBUTION EXPENSES ===================================================================================
2005 2004
Note (Rupees in '000)
===================================================================================
Salaries, wages and other benefits 17,971 20,220
Contribution to provident fund 581 586
Pension 31.2 (619) 398
Travelling and conveyance 3,937 5,675
Printing and stationery 663 188
Rent, rates and taxes 288 463
Communication 922 1,771
Advertising and sales promotion 70,233 59,274
Sales meetings and salesmen incentives 1,062 1,696
Inventory written-off - 3,733
Depreciation and amortisation 4.1 1,606 1,916
Motor vehicles and maintenance 1,099 940
Freight and forwarding 4,350 2,344
Market research 2,313 2,039
Severance cost 25,362 -
Others 373 117
130,141 101,360
===================================================================================21. ADMINISTRATIVE EXPENSES===================================================================================
2005 2004
Notes (Rupees in '000)
===================================================================================
Salaries, wages and other benefits 9,742 8,082
Contribution to provident fund 313 316
Pension 31.2 (333) 215
Travelling and conveyance 850 856
Rent, rates and taxes 2,418 2,606
Insurance 171 208
Repair and maintenance 1,394 2,752
Printing and stationery 224 286
Communication 1,022 1,661
Depreciation and amortisation 4.1 3,580 2,198
Motor vehicles and maintenance 877 916
Lighting, heating and cooling 1,269 2,552
Auditor's remuneration 21.1 955 879
Legal and professional 1,211 3,992
Professional tax 100 100
Donations 400 -
Severance cost 14,964 -
Others 1,370 -
40,527 28,817
===================================================================================21.1. AUDITORS' REMUNERATION===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
Audit fee 200 150
Half yearly review and other certifications 120 95
Tax advisory services 570 603
Out of pocket expenses 65 31
955 879
===================================================================================22. FINANCE COST===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
Bank charges 157 255
===================================================================================23. OTHER OPERATING EXPENSES===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
Loss on disposal of investment
classified as available-for-sale:
Loss on disposal 1,084 -
Surplus realised during the year
upon disposal of investment
classified as available-for-sale
included in opening balance
now transferred from equity to the (776) -
profit and loss account
308 -
Minor equipment written-off 221 651
Property, plant and equipment written off 373 -
Exchange loss (net) 339 185
1,241 836
===================================================================================24. OTHER INCOME===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
INTEREST / MARK-UP ON:
- available-for-sale investments 1,561 3,625
- bank deposits 9,237 809
10,798 4,434
Gain on disposal of property, 1,488 4,360
plant and equipment
Liabilities written back 4,537 436
16,823 9,230
===================================================================================25. TAXATION===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
CURRENT:
-for the year 37,483 21,809
- for prior years (9,236) 32,459
Deferred 70 160
28,317 54,428
===================================================================================25.1. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
Profit before taxation 43,922 31,158
Tax at the applicable rate of 35% (2004: 35%) 15,373 10,905
Tax effect of expenses that are not allowable in
determining taxable income 1,029 968
Tax effect of permanent differences 240 (93)
Effect of income assessed under 20,162 10,345
presumptive tax regime
Tax effect of income tax provision (9,236) 32,459
relating to prior years
Tax impact arising due to origination 749 (156)
of temporary differences
28,317 54,428
===================================================================================26. EARNINGS / (LOSS) PER SHARE - BASIC AND DILUTED===================================================================================
2005 2004
===================================================================================
Profit / (loss) after taxation 15,605 (23,270)
Weighted average number of ordinary
shares outstanding during the year 19,200,900 19,200,000
Earnings / (loss) per share - basic and diluted 0.81 (1.21)
===================================================================================27. CASH GENERATED FROM OPERATIONS===================================================================================
2005 2004
Note (Rupees in '000)
===================================================================================
Profit before taxation 43,922 31,158
ADJUSTMENT FOR NON-CASH CHARGES AND OTHER ITEMS:
Depreciation and amortisation 5,781 4,686
Property, plant and equipment written-off 373 -
Inventory written-off - 3,733
Loss on disposal of available-for-sale investments 308 -
Gain on disposal of property, plant and equipment (1,488) (4,360)
Finance cost 157 255
Interest income (10,798) (4,434)
Liabilities written-back (4,537) -
Working capital changes 27.1 36,151 121,908
69,869 152,946
===================================================================================27.1. WORKING CAPITAL CHANGES===================================================================================
2005 2004
(Rupees in '000)
===================================================================================
DECREASE / (INCREASE) IN CURRENT ASSETS:
Stocks 16,808 39,505
Trade debts (30,722) 85,062
Loan and advances 911 469
Deposits, prepayments and other receivables 11,427 (11,504)
(1,576) 113,532
INCREASE / (DECREASE) IN CURRENT LIABILITIES:
Trade and other payables 37,727 8,376
36,151 121,908
===================================================================================28. TRANSACTIONS WITH RELATED PARTIESThe related parties comprise the holding company. (The Series Acquisition BV., Netherlands), the ultimate parent company (The Procter & Gamble Company, USA), related group companies, companies in which directors are interested, staff retirement benefits, directors, key management personnel and close members of the family of all the aforementioned related parties. The company in the normal course of business carries out transactions with various related parties. Significant balances and transactions with related parties are as follows: ========================================================================================================
Name Relationship with Nature of transaction
the Company
========================================================================================================
The Gillette
Company, USA Former parent company Purchases of finished goods 318,198 160,221
Braun, Germany Associate Purchases of finished goods 36,172 28,495
The Gillette Dividend declared in respect of
Company, USA Former parent company parent company - 58,956
Gillette Pakistan
Pension fund Retirement benefits plan Contribution to pension fund - 4,218
Gillette Pakistan
Provident Fund Retirement benefits plan Contribution to provident fund 895 902
_ Key management personnel Compensation 11,868 5,760
- Key management personnel Provision for severance 37,424 -
========================================================================================================29. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES29.1. The aggregate amount charged in these financial statements for remuneration, including certain benefits to the Chief Executive, the Director and Executives of the company, are as follows: ========================================================================================================
Chief Executive Director Executives
2005 2004 2005 2004 2005 2004
Rupees in '000
========================================================================================================
Managerial remuneration 3,507 1,610 1,263 1,161 1,557 1,672
Bonus 1,769 288 338 207 261 270
Housing 1,578 724 568 522 701 753
Utilities 351 161 126 116 156 167
Medical expenses 210 136 116 102 51 86
Leave fare assistance /
leave encashment 603 125 174 90 239 130
Membership 521 8 276 13 -
Retirement benefits 340 273 126 223 156 246
Severance cost 25,362 - 12,062 - - -
34,241 3,325 15,049 2,434 3,121 3324
Number of persons during the year 3 1 1 1 2 2
========================================================================================================29.2. The aggregate amount of fees paid to three non-executive directors was Rs 80,000 (2004: three non-executive directors Rs 95,000).Chief Executive, a working director and executives of the Company are also provided with free use of company maintained cars. 30. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES 30.1. INTEREST RATE RISK Interest mark-up rate risk arises from the possibility that changes in interest! mark-up rates will affect the value of financial instruments. In respect of income earning financial assets and interest mark-up bearing financial liabilities, the following table provides information about the exposure of the company to interest mark-up rate risk at the balance sheet date based on contractual re-pricing or maturity dates, whichever is earlier. ===================================================================================================
2005 2004
Interest/ Non -Interest/mark-up bearing Total Total
mark-up
bearing
Maturity upto Maturity upto Maturity after Sub-total
one year one year one year
(Rupees in 000)
===================================================================================================
FINANCIAL ASSETS:
Long term loans - 434 1,400 1,834 1 834 1,026
Long term deposits - - 98 98 98 206
Investments 13,029 - - 13.029 36,245
Trade debts - 37,471 - 37,471 37,471 6.749
Loans and advances - 172 172 172 687
Deposits, prepayments and
other receivables - 1,783 1,783 1,783 11,871
Cash and bank balances 224,332 7,633 - 7,633 231,965 170,205
2005 237,361 47,493 1,498 48,991 286,352 226,989
2004 192,553 33,530 906 34,436 226,989
FINANCIAL LIABILITIES:
Trade and other payables - (106,218) - (106,218) (106,218) (71,394)
2005 - (106,214) - (106,218) (106,218) (71,394)
2004 (71,394) - (71,394) (71,394)
===================================================================================================The effective interest / mark-up rates as at December 31, for financial instruments are as follows:===================================================================================
2005 2004
(Percent)
===================================================================================
Investments - Pakistan Investment Bonds 11.00- 13.00 9.80-12.65
Bank deposits 7.55 - 7.75 3.75 - 4.00
Bank balances in saving accounts 0.50 0.50_1.00
===================================================================================30.2. CREDIT RISK AND CONCENTRATION OF CREDIT RISKCredit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted. To manage exposure to credit risk, the Company applies credit limits to its customers. Out of Rs 37.471 million of trade debts Rs 37.465 million (2004: Rs 6.749 million) are receivable from a distributor of the Company's products in Pakistan. 30.3. FOREIGN EXCHANGE RISK MANAGEMENT Foreign currency risk arises mainly where receivables and payables exist due to transactions entered into foreign currencies. The company is exposed to foreign currency risk on certain transactions with group companies that are entered in a currency other than Pakistan Rupees. The company uses forward foreign exchange contracts to hedge its foreign currency risk, when considered appropriate. 30.4. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair values is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm's length transaction. Consequently, differences may arise between the carrying amounts and the fair value estimates. As at December 31, 2005 the net fair value of all financial assets and financial liabilities are estimated to approximate their carrying values based on the valuation methodology outlined below: (a) Available-for-sale investments The fair value of the investments have been determined on the basis of rates quoted by the Reuters as on December 31, 2005. (b) Other financial instruments The fair value of all other financial instruments is estimated to approximate their carrying value. 31. PENSION The actuarial valuation of pension plan was carried out as of 31 December 2005. The projected unit credit method, using the following significant financial assumptions, has been used for the actuarial valuation: ===================================================================================
2005 2004
(Percent)
===================================================================================
Discount rate - per annum compound 10.00 9.00
Expected rate of increase in salaries - per annum 10.00 9.00
Expected rate of return on plan assets - per annum 10.00 9.00
=================================================================================== The amounts recognised in the balance sheet are as follows:===================================================================================
2005 2004
Note (Rupees in '000)
===================================================================================
Fair value of plan assets 69,177 63,824
Present value of defined benefit obligation (52,955) (40,125)
Surplus 16,222 23,699
Unrecognised net actuarial gains (15,270) (23,699)
Receivable from the pension fund 952 -
MOVEMENT IN NET LIABILITY
IN THE BALANCE SHEET IS AS FOLLOWS:
Opening balance of net liability - (2,743)
(Income) for the year 31.1 (952) (1,475)
Contributions made during the year to the fund - 4,218
Closing balance of net (asset) (952) -
===================================================================================31.1. This includes an amount of Rs Nil (2004: Rs 0.862 million) representing contribution to the pension fund in respect of certain employees presently working for various Gillette entities. An amount of Rs Nil (2004: Rs 0.535 million) is receivable at year end.31.2. The following amounts have been charged to income in respect of the pension plan: ===================================================================================
2005 2004
Notes (Rupees in '000)
===================================================================================
Current service cost 2,624 3,431
Interest cost 3,611 2,957
Expected return on plan assets (5,744) (4,120)
Expense for the year 491 2,268
Actuarial gains amortised (1,443) (793)
(Income) / expense according (952) 1,475
to actuarial valuation
Adjustment for employees working with
various Gillette entities 31.1 & 11.1 - (862)
(Income) / expense recognised in these
financial statements 20 & 21 (952) 613
===================================================================================32. RUNNING FINANCE FACILITIESThe company has arranged short-term running finance facility with a bank under the mark-up arrangement aggregating Rs 20 million (2004: Rs 40 million). The agreement was renewed on July 27, 2005 and shall expire on July 26, 2006. The mark-up rate on this facility is 9.50 percent (2004: 3.8 percent to 5.4 percent) per annum payable on quarterly basis. This facility remained unutilised during the year and as of December 31, 2005. The facility is secured by a promissory note issued by the Company in favour of the bank. 33. CORRESPONDING FIGURES 33.1. Consequent to the amendments in Fourth Schedule to the Companies Ordinance, 1984 the selling, administrative and distribution expenses presented upto last year have now been split into 'selling, marketing and distribution expenses' and 'administrative expenses' as reflected in notes 20 and 21 respectively. 33.2. In order to comply with the revised requirements of International Accounting Standard No 39 'Financial Instruments: Recognition and Measurement' made applicable to the Company with effect from 1 January 2005 the unrealised gain loss on remeasurement of available for sale investments is now recognised in equity directly through the statement of changes in equity. Accordingly, the corresponding figures of other operating expenses and taxation in the profit and loss account and the corresponding figure of unappropriated profit in the statement of changes in equity have been restated for the purpose of comparison. 33.3. For the purpose of better presentation, minor equipment written off has been reclassified in other operating expenses. Accordingly, the corresponding figures of administrative expenses and other operating expenses have been restated for the purpose of comparison in notes 21 and 23 respectively. 33.4. An amount of Rs 10,064 million has been included in comparative figures of trade discounts under net sales which was adjusted in gross sales in the prior year. Accordingly, the corresponding figures of gross sales and trade discounts have been restated for the purpose of comparison in note 18. 34. DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue on March 1, 2006 by the Board of Directors of the Company. |