It has been
declaring regular and modest dividend since commencement of operations
By SHABBIR H. KAZMI
Feb 28 - Mar 05, 2000
First Habib Modaraba (FHM) maintained its steady and balanced growth in
1998-99. It posted operating income of Rs 352 million, before tax profit of Rs 67 million
and paid 20 per cent cash dividend for the year. FHM, ever since its inception, has been
regularly paying dividend to its certificate holders. It paid the second-highest dividend
for 1998-99 among the 52 listed modarabas.
The results appear to be outstanding if one looks at the slow growth of
the economy of the country and the performance of other modarabas operating in the
country. The outstanding performance of FHM is due to two factors, stringent control on
operating expenses and diversified asset portfolio. Asset-wise exposure consist of three
main categories. These are plant and machinery and office equipment (50%), vehicles (48%),
and furniture and fixture (2%).
Before examining the results in detail it is necessary to review the
overall performance of the various sectors. In 1998-99 the country remained in the grip of
constantly declining economic activities and most of the indicators of the trend of the
economy reflected negative growth. The GDP growth rate came down from 4.3 per cent in
1997-98 to 3.1 per cent in the year under review. The poor GDP growth was mainly due to
lower growth of the agriculture, large-scale manufacturing and services sectors.
Contrary to the overall performance of the economy, FHM registered
steady and balanced growth. The new leases executed during the year amounted to Rs 303
million compared to Rs 294 million for the previous year. Consequently, the net investment
in lease rose from Rs 527 million to Rs 567 million during the corresponding period. The
gross lease rental increased from Rs 300 million to Rs 349 million. This shows excellent
recovery during the year. Profit after tax improved from Rs 48 million to Rs 65 million
a growth of 35 per cent.
The factors responsible for this outstanding performance, despite
economic slow down, were: efficient utilization of funds in good quality earning assets in
prudent manner, vigorous monitoring of recovery of rentals and stringent control on
operating expenses. While the income increased by 16 per cent the expenses increased by 14
per cent. The efficient operation resulted in improvement in balance sheet footing from Rs
544 million in the previous year to Rs 599 million at the end of June, 1999. While the
paid-up capital of FHM is Rs 250 million the total equity of certificate holders was Rs
The current assets of FHM mainly comprise of short-term investment in
the shares of public limited companies. As on June 30, 1999 total short-term investment
was over Rs 28.7 million.
FHM has a diversified certificate holding pattern. It is important to
note that 51 per cent certificates are held by individuals while 38 per cent are held by 5
modaraba companies. Balance is held by investment companies, financial institutions and
joint stock companies etc.
FHM was floated in 1985 as a perpetual and multipurpose modaraba.
Starting with a paid-up capital of Rs 25 million, within 14 years, the amount has
increased to Rs 252 million. Drawing the strength from extensive and varied expertise of
the Habib Group in the financial, industrial and commercial sectors, FHM enjoys the
experience and knowledge of the local market. The most valuable asset of FHM, in day to
day operations, is the strength of the management to make timely decision which benefit
the certificate holders and the clients.
The growth of FHM, by all standards, is simply phenomenal and shows the
incomparable expertise and financial acumen of the management headed by Wazir H. Jafree,
chairman and chief executive.
Keeping in view the extensive efforts of the management and the
positive impact of the recent measures taken by the government, the buoyancy of the
economy is expected to translate into new lease writing. Dividend income of FHM is also
expected to improve further in the year 1999-2000.