Highnoon boasts domestic sales growth this year of 15.78% compared with 12.7% for the pharmaceutical industry as a whole. It is the 16th largest pharmaceutical company in Pakistan.
The bottom line is an earning per share of Rs 3.55, of which a generous portion - Rs 2.50 is given as cash dividend.
The Company expects to maintain its tempo of increasing sales and earnings through upgrading of its production facilities, launch of new products, emphasis on research and development and on Human Resources.
It is good to see a Pakistani enterprise growing steadily and profitably in this highly specialised field.
Incorporated in 1984 as a private limited company and listed on the country's Stock Exchanges in 1994, Highnoon is engaged in the manufacture, import and marketing of pharmaceutical and "allied consumer products".
Over the 6 years (for which the data has been provided in the Report), Highnoon has continuously improved its EPS (from Rs 1.03 in 1998 to Rs 3.78 in 2002) except for 2003 in which there was a small fall to Rs 3.55.
Regular and generous payouts to shareholders are a welcome feature of Highnoon's way of working. These have ranged from 66% of the net earning to as much as 92% over the last 5 years.
In 2003 sales totalled Rs 885 millions (up nearly 16% over 2002 sales). A small part of this - Rs 26 mln (36 mln) represents exports.
Exports come in for special mention in the Report. We are informed that as many as 175 products are registered in various countries and "numerous potential regions are being added every year to achieve the overall organisation objective of increasing exports". No reason is given for the fall in exports this year compared to 2002.
The Chairman claims for the Company "an exclusive honour of developing a novel research product patented in Pakistan".
The product, however, is not identified. The company developed and launched 7 new formulations in 2003.
Another "almost more than a dozen" have been also developed to be launched in "near future" after obtaining regulatory approvals. Expenditure on Research and Development amounted to Rs 3.8 millions (3.8 millions).
On the production side, we are informed, the Company "keeps on investing in new machinery and equipment with consistent up-gradation of production facilities". Some specifics of this are given in the report.
Selling and promotion costs jumped 18% to Rs 162 millions (137 millions). However reduction in financial charges, in line with cheaper availability of finances in the country, to Rs 36.1 millions (47.6 millions) provided some relief to the bottom line.
Tax on pre-tax income of Rs 63.5 millions (45.7 millions) was higher at 43% (versus 24% for 2002). This is due to deferred component amounting to Rs 9.4 millions, whereas there was a write back of Rs 4.2 millions in 2002.
The company is totally free from long term loans, the outstanding amount of Rs 4.9 millions under this head in 2002 stands liquidated. The Company is thus using only internal resources for its BMR and R & D activities.
The Chairman makes a case for "regulatory rationalisation" quoting the example of neighbouring countries where this has enabled the industry to be competitive.
He reiterates the Company's commitment to "providing adequate returns to the shareholders through a number of strategic initiatives".
On the strength of its agenda of pursuing quality, diversification, Research and Development, control of non productive expenses and emphasis on developing human resources, the Company looks forward to the future with confidence. The Chairman's review is rather verbose and could do with some pruning and editing.
The pattern of shareholding is interesting. "Directors, CEO & their spouses & minor children" hold a substantial chunk - nearly 48% - of equity. Organisations of various descriptions hold another 11.4 %.
Non-resident companies own 8.3%. A thick slice - 31.2% - is owned by 3,015 individuals ("General Public") none of whom hold more than 10% equity.
We see from these statistics that: 1) the Directors have a substantial stake in the Company and 2) the ownership is nevertheless more widely dispersed than is normally the case with limited companies in Pakistan.
The share is quite liquid. Around 835 thousand shares changed hands in the month of April 04 at prices ranging between Rs 33.25 and 46.75 for the 10-Re share.
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Performance Statistics (Million Rupees)
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Year Ending 31 December... 2003 2002
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Liabilities:
Authorised Capital: 150 150
Paid-up Capital: 101 92.2
Reserves: 114 108
Equity: 216 200
Non-Current Liabilities: 121 104
Current Liabilities: 332 370
Total Liabilities: 717 727
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Assets:
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Operating Assets: 324 312
Capital Work in Progress: 2.3 -
Other Non-Current Assets: 0.4 0.5
Current Assets: 390 414
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Sales, Profits & Payout:
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Net Sales: 885 777
Gross Profit: 338 299
Operating Profit: 94.0 88.4
Other Income: 5.6 4.8
Financial & other charges: 36.1 47.6
Profit Before Tax: 63.5 45.7
Profit After Tax: 36.1 34.9
Cash dividend (Rs): 2.50 1.50
Stock Dividend (%): Nil 10.0
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Ratios:
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Earning/Share (Rs): 3.55 3.78*
Cash Payout Ratio (%): 70.4 66.1
Share Price on 4/5/04 (Rs): 35.50 -
P/E Ratio: 10.0 -
Book Value of 10 Re Share: 21.28 21.67
P/BV Ratio: 1.67 -
Gross Margin (%): 38.2 38.5
Net Margin (%): 4.1 4.5
Debt/Equity Ratio: 0:100 0:100
Current Ratio: 1.17 1.12
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