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TRG Pakistan: Profile and financial review

TRG Pakistan Limited provides business process outsourcing solutions and services in Pakistan, it is a holding company and holds 46 percent stake in TRG International Limited (TRGIL), which in turn owns stakes in over 20 companies that offer services such as software and artificial intelligence (Afiniti), call center (IBEX Global), market research (iSKY), etc.

Based in Karachi, Pakistan the company manages and maintains telephone answering services, call centers and information technology related services in Pakistan.

The company was incorporated in Pakistan as a public limited company on December 2, 2002 under the Companies Ordinance, 1984 and is listed on the Pakistan Stock Exchange (PSX). It obtained the certificate of commencement of business on February 27, 2003, while the operations of the company effectively started on April 11, 2003.

Vision/Mission
  • To be the global leader in providing business process outsourcing services.
  • Aim to be the most efficient provider of business process outsourcing services by setting the industry standards for cost and quality of services.

Our long term success will be driven by our relentless focus on recruiting and developing the most talented pool of human capital in our industry.

The principal activity of the company is to acquire, invest and manage operations relating to business process outsourcing, online customer acquisition, marketing of medicare related products, and contact center optimization services through its subsidiary The Resource Group International Limited.

It operates through four segments: call center, software and artificial intelligence business, medicare health insurance and market research. Its call center segment involves the provision of customer service support through telephone.

It’s Software and Artificial Intelligence (AI) segment provides optimized call outcomes for contact centers by pairing agents with callers based on behaviors and other related data. Its Medicare health insurance segment is engaged in marketing medicare insurance policies to senior citizens and other eligible individuals in the United States. Its market research segment provides analytical and consultation services.

Afiniti subsidiary

The largest portion of this increase materialized atour Afiniti subsidiary, with significant revenue increases within e-Telequote and Digital Globe Services subsidiaries.

The continuing increase in Afiniti revenues have driven a significant value accretion in that business given its underlying operating leverage, addressable market as well as its superior competitive position.

The Afiniti platform has attained a leading position among large corporate as the tool of choice to optimize performance within their contact center estate.

The company continued to invest into the Afiniti business, building out its global footprint as well as investing heavily into its technology delivery capabilities as well as its client facing presence.

 

Financial year ended June 30, 2017

During the course of fiscal year 2017, operating subsidiaries continued to enjoy significant top line growth, with an increase in accounting revenues of 17.5 percent compared to the previous year.

The Afiniti cost base during fiscal 2017 increased to Rupees 5.8 billion, up from Rupees 4 billion during fiscal 2016. Accordingly, Afiniti’s EBITDA loss widened slightly during fiscal 2017 to Rupees 2.7 billion, from Rupees 2.3 billion during fiscal 2016.

Course of the fiscal year was evidenced by further fund-raising activity in recent months, where company completed internal investments within Afiniti in fiscal 2017 with a recent external fund-raise of Rupees 3.5 billion from external investors.

All fiscal 2017 and recent investments are part of an ongoing equity financing round (now sized at Rupees 8.5 billion) priced off a discount to an eventual exit valuation.

During fiscal 2017, company took private two of portfolio companies (IBEX Global and Digital Globe Services) that had listed on the AIM board of the London Stock Exchange in fiscal 2013.

The company bought back the public float of IBEX Global and Digital Globe Services for a total amount of Rupees 2.4 billion.

During fiscal 2017, IBEX Global business experienced some operational challenges as two of its largest customers shifted their service delivery locations for reasons related to mergers and acquisition activity on their end.

During fiscal 2017, IBEX Global revenues were Rupees 26.5 billion, essentially unchanged from Rupees 26.6 billion during fiscal 2016 due to the impact of the transition period corresponding to the delivery location shift referred to above. During this period, our EBITDA (adjusted for any one time items) was Rupees 950 million in fiscal 2017, down from Rupees 1.9 billion in fiscal 2016, reflecting the transition costs referred to above.

TRG Pakistan Limited Stand Alone Financial Statements TRG Pakistan Limited essentially serves as a holding company, with its sole material asset being its investment in The Resource Group International Limited (TRGIL). The value of TRG Pakistan’s share in TRGIL as of June 30, 2017 is Rs. 13.5 billion. On a like for like basis, this value was Rs. 12.9 billion as of June 30, 2016. This represents an increase of Rs. 0.54 billion during the year and an overall increase that is more than doubles the value of its original investment. On a standalone basis, the Company recognized income of Rupees 214.4 million in its income statement, whereas it incurred expenses of Rupees 208.0 million associated with its holding company activities. In addition, tax expense amounting to Rupees 1.04 million was also incurred during the year.

As a result, TRG Pakistan Limited earned a net profit of Rupees 5.4 million for the year ended June 30, 2017. For the year ended June 30, 2017, consolidated revenues amounted to Rupees 35,990 million, which represents a 17 percent increase from revenues of Rupees 30,695 million for the comparative period in 2016. Higher losses can be attributed to higher administrative and general expenses, which stood at Rs3.25 billion as against Rs2.26 billion in the previous year. The finance cost also surged 35 percent to Rs 416.824 million during the period under review.

TRG Pakistan has posted a net loss of Rs 9.64 billion for the year ended June 30, 2017, which is around six times higher than the loss of Rs1.66 billion reported in the previous year. The loss per share (LPS) for the year under review stood at Rs8.03 as against LPS of Rs1.50 reported for the year ended June 30, 2016.

The company’s revenues for the year stood at Rs 35.99 billion, up 14 percent as against the revenues of Rs30.69 billion in the previous year.

An analyst at Topline Securities said steep decline in earnings primarily stemmed from higher administrative and general expenses, which were Rs11.2 billion for fiscal year 2017 over the previous year’s Rs4.9 billion.

Other than higher admin expenses, gross margin for fiscal year 2017 also declined to nine percent, which shows increasing competitions in its lines of businesses.

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