20000124

Brief recordings

BY SCANNER

Modarabas

First UDL Modaraba

Year Ended June 30, 1999

Overview

UDL Modaraba's account reflects significant impact of its strategic decision to consolidate its operation. Relatively large provisions have been booked in almost all its business activities i.e. leasing, Musharika financing, and investment portfolio. Even then the Modaraba has been able to announce cash dividend for the first time after 1994. Its certificate price also improved to Rs 6 from the certificate price of Rs 2 recorded in 1998 which was nearly lowest price in the Modaraba's history. The Modaraba's balance sheet size also expanded to Rs 870 million from previous year's Rs 843 million. During the year the Modaraba wrote new lease contracts for Rs 158 million which amount was 19.6% higher than previous year's Rs 132 million. However the size of lease portfolio declined by 2.4%. The Modaraba recorded total income at Rs 209 million showing increase by 7.3%.

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First UDL Modaraba (FUM) was formed in 1991 under the Modaraba companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Rules framed thereunder and is managed by UDL Modaraba Management (Private) Limited, a company incorporated in the province of Sindh.

It is a perpetual, multi purpose and multidimensional Modaraba by virtue of which it can diversify in various Shari'a based financing arrangement, such as Morabaha and Musharika financial transactions, leasing, commodity trading and trading in listed and non-interest bearing securities. Nevertheless, FUM's core business remained leasing business as out of total assets, the leased assets comprised 48.1%; and out of total income, the income from leasing operations constituted 72.3%.

At the close of the financial year under review, (FY 1998-99), FUM's balance in leased assets account amounted to Rs 418.73 million and reflected 2.4% decline as compared to the figure of Rs 429.15 booked on the last date of the previous financial year (FY 1997-98). Leased assets are at stated at cost less accumulated amortisation. Amortisation is charged to income applying annuity method whereby the amortisable values of assets are amortised over the lease period. The directors reported about their strategic decisions to resort to consolidation in view of difficult economic and business conditions.

Chief Executive Khalid Malik, also shared his perception about future prospects, with the certificate holders. He recorded his views about the outlook for the forthcoming year 1999-2000.

"The adverse economic conditions are likely to continue well into Fiscal Year 2000. The industrial growth is not going to be very promising. We feel that leasing sector is going to be further competitive due to intense rate war initiated by banks and DFI's entry into the leasing activity. Your Management, however, is proactively finalising the plans to over-come the adverse factors by entering into: (a) consumer leasing (b) car leasing and small scale machinery leasing where IRR rates are better and defaults are minimum. We will continue to maintain high quality portfolio with prudent diversification of risk. We hope and pray to be able to maintain the sustained growth in our leasing activity with improved profitability".

During the year under review, First UDL Modaraba earning per certificat (EPC) eroded by 30 paisas from EPC of 1.69 last year to EPC of Rs 1.39 in the financial year under review.

The certificate in the Modaraba is trading at Rs 6 at 40% discount to its par value of Rs 10. This present price of the UDL Modaraba certificate places the PER (price earning ratio) at the multiple of 4.3. This price also signifies 80% diminution in market capitalisation compared to its 6-year highest price at Rs 30 recorded in 1994. At the same time, the present price showed excellent resilience as compared to the lowest price of Rs 2 recorded in the 1998.

The Modaraba reopened its dividend account after 1994 when the Modaraba had announced bonus stock dividend at 32%. For the financial year under review, the Modaraba announced 10% cash dividend although the net profit of the year was lower at Rs 36.63 million by Rs 5.81 million from net profit of Rs 42.44 million of recorded in the previous year.

FUM's investment portfolio has suffered relatively massive diminution so large provisions popped up. The long-term investment in associated undertakings plus Modarabas and other quoted companies was booked at cost for Rs 59 million but its market-value was recorded at Rs 25 million at the rates prevalent on the last date of the financial year. Inevitably, the Modarabas booked diminution in value for Rs 34 million.

Out of the total long-term investment of Rs 59 million, the investment in the shares of associated companies amounted to Rs 44.35 million, at cost. These associated companies are Gillette Pakistan, and Searle Pakistan.

The Modaraba has also relatively large short-term investment portfolio. After booking provision for Rs 11.53 million the short-term investment portfolio was reduced to the amount of Rs 48 million.

In the current assets, trade debts increased to Rs 99 million from Rs 91 million in the preceding year. Provision for doubtful debts increased to Rs 24.64 million from the preceding year's 16.64 million.

The Modaraba's short-term Musharika receivable decreased to Rs 11.54 million from previous year's Rs 31.44 million. But provision for doubtful debts remained at Rs 3.65 million as in the previous year.

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Performance Statistics (Million Rupees)

June 30 1999 1998

Capital & LiabilitiesÉÉÉ

Paid-up Capital: 263.87 263.87

Reserves & Profit: 64.96 54.71

Equity: 328.83 318.58

L.T Debts: 361.75 352.59

Security Deposits: 53.89 73.55

Deferred Liabilities: 0.30 Ñ

Current Liabilities: 125.51 98.22

AssetsÉÉÉ

Fixed Assets Ñ Own Use: 3.59 3.83

AssetsÊÑÊLeased Out: 418.73 429.15

L.T. Investments: 24.91 50.73

Other Non Current Assets: 1.71 2.51

Current Assets: 421.34 356.72

Total Assets: 870.28 842.94

Revenue, Profit & PayoutÉÉÉ

Revenue:.........

Income From Leasing Operations: 223.88 206.63

Income From Musharika Finance: 6.93 6.50

Income From Investments: 76.93 68.43

Income From Other Sources: 1.56 6.57

Total Revenues: 309.30 288.13

Financial Charges: 78.05 87.55

Other Expenditure/Provision Management Fee: 194.62 154.94

Total Expenses: 272.67 242.49

Profit Before Tax: 36.63 45.64

Net Profit: 36.63 42.44

Dividend Cash 10% (1998: Nil): 26.39 Ñ

Financial Ratios... ... ...

Certificate Price (Rs): 20/1/2000 6.00 Ñ

Book Value Per Certificate (Rs): 12.46 12.07

Price/Book Value Ratio: 0.48 Ñ

Debt/Equity Ratio: 52:48 52:48

Current Ratio: 3.36 3.63

Lease Income/Total Income %: 72.38 71.71

Net Profit Margin (%): 11.84 14.73

EPC (Rs): 1.39 1.69

Price/Earning Ratio: 4.32 Ñ

R.O.E. (%): 11.14 13.32

R.O.A. (%): 4.20 5.03

R.O.C.E. (%): 4.92 5.69

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Company information

Modaraba Company: UDL Modaraba Management (Private) Limited. Chairman Abdul Malik. Chief Executive: Khalid Malik. Managing Director: A.W. Rahi. Director: Farooq Ahmed Bhatty (ICP). Company Secretary: Zubair Razzak Palwala. Registered Office: NIC Building (Ist Floor), Abbasi Shaheed Road, Phone N.A. e-mail N.A web site N.A.