20000328

Brief

recordings

- BY SCANNER -

Modarabas

First Imrooz Modaraba

Year Ended June 30, 1999

Overview.........

This is relatively small Modaraba but it has made its mark by being most viable and vibrant enterprise in its sector of 52 Modarabas. The market value of its 10-rupee certificate has invariably been much higher than par value unlike most of the Modarabas whose certificates are trading around a quarter of the par value. The Modaraba's dividend payout history is replete with more than 50% yearly payouts. Only this year the dividend is at 17.5% because of low EPS at Rs 1.99 because there was large provision for taxation. It may be mentioned that pre-tax profit was identical to last year's. Last year the payout rate was 50%. The balance sheet's financial health is formidable because there is no long term debt and current ratio at 1.62 is much higher than "ONE". Both total asset base and equity base have enlarged. "The management has been able to enhance customer base and bring a slight change in its product mix. Consequently, the pre-tax profit has been maintained at the previous year's level," - reported Chief Executive Naveed Riaz.

--------------

First Imrooz Modaraba was formed under Modaraba companies and Modaraba (Floatation & Control) Ordinance, 1980. The Modaraba floated its share capital to the general public in February 1994 and after obtaining the minimum subscription certificate from the Registrar Modaraba, started commercial business. Initially Modaraba's certificate was floated for specific purpose of trading in approved commodities and other products. Later on, in 1998 the Registrar Modaraba also accorded approval for conversion of the Modaraba from Specific to Multi-purpose Modaraba.

The 10-rupee certificate in Imrooz Modaraba was listed on the Karachi Stock Exchange in 1994. In its sector of nearly 52 Modarabas, the certificate in Imrooz Modaraba has invariably been quoted at highest market value. At present there are only three Modarabas whose certificates are quoted at above par value, and Imrooz Modaraba certificate is trading at Rs 37 which is the highest certificate price in its sector. After that Grindlays and Paramount Modarabas are quoted at Rs 17 and Rs 11 respectively.

During the last financial year (July '98 to June '99), the market prices of the certificate in Imrooz Modaraba Oscillated between high and low of Rs 31.75 and Rs 27.25. The certificate was never traded below par value. Highest price of the certificate reached at Rs 47 in 1997 and the lowest price was recorded at Rs 10.90 in the year of its listing at the stock exchange.

The Modaraba has excellent track record of profit distribution as it has never missed dividend payout except in the initial year. Generally the Modaraba has cash dividend at 50% or more. The highest payout rate was made in 1995 at 65%. Last year the payout was at 50%. For the period under review the Modaraba had announced dividend at 17.5% which is the lowest payout-rate in its career.

The reason for the lowest payout rate is essentially a relatively low net profit at Rs 5.97 million which works out to earning per share (EPS) at Rs 1.99. The net profit was 70% lower and EPS was Rs 4.67 less than previous year's.

The decline in net profit has been ascribed to very high provision for taxation. Profit before taxation at Rs 23 million was identical to last year's.

The relevant notes annexed to the accounts elaborate the position about the taxation.

"Provision for current taxation is based on taxable income of the year at the current rates of taxation after taking into account tax credits available, if any except for items covered under presumptive tax regime, for which provision is made according to the presumptive tax rates provided in the Income Tax Ordinance."

The Chief Executive of the Modaraba Naveed Riaz is confident in saying that presumptive tax does not apply on Modaraba. He has given his views in the Directors Report.

"We are of the opinion that presumptive tax does not apply on Modaraba. However, taking a prudent view the Management has provided for a tax liability applying presumptive tax rates.

This has obviously affected the Modaraba's net profit, as it works out to more than 74% of the Modaraba's net profit. Consequently it has effected the payout history of the Modaraba.

The core business of the Modaraba remain trading despite being multi-purpose Modaraba. However the flavour of businesses in security investment, Musharika investment and leasing has been retained and there business have also remunerative commensurate to the size of each portfolio.

At the end of the day of the financial year under review, the balance in the account of the short term investment in NIT units was in the sum of Rs 0.80 million after booking provision for diminution of Rs 0.82 million. The investment in the NIT units was in compliance with the requirements of NBFIs circulars.

Sales at Rs 339.03 million and operating profit at Rs 25.25 million decreased by 10.7% and 9.5% respectively over the preceding year's. Both gross and operating margins improved marginally. It appears that the Modaraba's trading business is in mainly pharmaceutical and chemical products. Although sales declined, but inventory of increased by 32.61% to Rs 75.56 million (1997-98: Rs 56.98 million) and trade debts increased by 27.6% to Rs 21.24 million.

--------------

Performance Statistics (Million Rupees)

June 30 1999 1998

Capital & Liabilities.........

Paid-up Capital: 30.00 30.00

Statutory Reserves: 19.29 18.09

Unappropriated Profit: 2.16 2.63

Equity: 51.45 50.72

Current Liabilities: 77.24 58.90

Assets.........

Fixed Assets - Tangible: 2.54 1.75

Assets - Leased Out: 0.82 -

Deferred Cost: - 0.20

Current Assets: 125.33 107.67

Total Assets: 128.69 109.62

Revenue, Profit & Payout.........

Sales: 339.03 379.50

Gross Profit: 34.82 36.51

Operating Profit: 25.25 27.91

Depreciation: 1.04 0.57

Financial Charges: 0.78 0.98

Other Income: 0.13 0.37

Modaraba Company Management Fee: 2.30 2.31

Profit Before Taxation: 22.99 23.08

Profit After Taxation: 5.97 19.98

Dividend Cash 17.5% (1998: 50%): 5.25 15.00

Financial Ratios.........

Certificate Price (Rs) 14/3/2000: 37.00 -

Book Value Per Share (Rs): 17.15 16.9

Price/Book Value Ratio: 2.16 -

Debt/Equity Ratio: 0:100 0:100

Current Ratio: 1.62 1.86

Asset Turnover Ratio: 2.63 3.46

Operating Margin (%): 7.44 7.35

Gross Profit Margin (%): 10.27 9.62

Net Profit Margin(%): 1.76 5.26

EPS (Rs): 1.99 6.66

Price/Earning Ratio: 18.59 -

R.O.E. (%): 11.60 39.39

R.O.A. (%): 4.63 18.23

R.O.C.E. (%): 11.60 39.39

Credit Risk Exposure: 23.36 13.24

Concentration Credit Risk

Chemical & Pharmaceutical: 15.56 NA

Currency Risk $: 6.01 NA

Currency Risk œ: 14.58 NA

Currency Risk DM: 12.75 NA

--------------

Modaraba Information.........

Modaraba Company: A.R. Management Services (Private) Ltd. Chief Executive: Naveed Riaz. Directors: Ameer Riaz/Omar Mohammad Khan/Ms. Saadat Khan. Principal Place of Business: 119-120 Qamar House, M.A. Jinnah Road, Karachi.