First Habib Modaraba improves its dividend payout for the year 2000

Dec 18 - 24, 2000

To a large extent the country continued to face political and economic uncertainties during 1999-2000. The financial sector could not remain immune to this. The leasing sector also not only experienced a general decline in business but also faced intense competition from other players in the financial sector. First Habib Modaraba (FHM) stood up to these challenges and has posted not only higher profit for the year ending June 30, 2000 but also decided to pay higher dividend among the Modaraba certificate holders. The Board of Directors have recommended 22.5 per cent dividend for the year 2000 as against a payout of 20 per cent for the previous year.

The operating result for the year under review reflects diligent and consistent efforts of the management. FHM has been able to maintain its growth pattern in terms of business as well as asset size in spite of declining economic activities. Fresh leases disbursed during the year amounted to Rs 361 million as compared to Rs 303 million for the previous year. The gross lease rentals also increased from Rs 349 million to Rs 363 million during this period. Thus the net profit also increased from Rs 65 million for the year 1999 to Rs 68.5 million for the year 2000.

The performance of FHM for the year 2000 once again emerged outstanding. This clearly indicates the prudent decision making of the management. While the management has been able to exercise stringent control on operating expenses, the diversified portfolio has helped in maintaining no provision against doubtful lease. This was despite the fact the profitability of business entities remained under pressure. Asset-wise exposure consist of two main categories. These are plant and machinery and office equipment (50%) and vehicles (49%) and remaining one per cent in furniture and fixture.

The other factors responsible for the performance were: efficient utilization of funds in good quality earning assets and vigorous monitoring of recovery of rentals. Income for the year 2000 was Rs 365.8 million as against that of Rs 351.8 million for the previous year. Expense grew from Rs 278 million for the year 1999 to Rs 287 million for the year under review. The efficient operations have further improved the balance sheet footing from Rs 599 million as at June 30, 1999 to Rs 687 million as at June 30, 2000. An observation in the balance is worth mentioning. The balance sheet footing of Rs 687 million, on the asset side, mainly comprise of fixed assets leased out at Rs 639.6 million and current assets around Rs 47 million.

FHM commenced its operations in March 1985 with an initial capital of Rs 25 million. As on June 30, 2000 certificate holders' equity exceeded Rs 357 million. Over the years, FHM has shown gradual and consistent improvement in business growth and successfully built-up a quality asset portfolio. This has enabled the Modaraba to payout good return to its certificate holders and excellent recovery with no default. The lease portfolio is well diversified with investment in almost all the major sectors of the economy.

So far only two modarabas have been placed in 'A' category by Pakistan Credit Rating Agency (PACRA) and FHM is one of them. Based on the financial results for the year ending June 30, 1999, FHM has been awarded credit rating of 'A3'. Under PACRA's rating definition only those modarabas are rated in this category which are considered to be in outstanding financial condition with a consistent record of above average performance.

The growth of FHM is enviable and exhibits the incomparable expertise of management of the Modaraba having vast experience of prudent risk management. Keeping in view the improving economic fundamentals and the efforts of the management, FHM is expected to further improve its financial results in the following years. Wazir H. Jafree is the Chairman and Chief Executive Officer of FHM.