LEASING BUSINESS PICKS UP GROWTH MOMENTUM

Askari Leasing Limited has retained its position as the second largest leading company by disbursing Rs 3.6 billion during 2004-05

From SHAMIM AHMED RIZVI, Islamabad
Jan 02 - 08, 2006

Leasing business has gained back its growth momentum after passing through a difficult period during the financial year 2004-05 mainly because of the decline in interest rate on lending which affected the profitability despite growth in volume of business. Increased lending rates during the current fiscal year have improved the prospects of leasing industry in the country.

Despite the difficult environment during the last year Askari Leasing Limited, a subsidiary of Army Welfare Trust, has retained its position as the second largest leasing company of Pakistan. Askari disbursed Rs. 3.6 billion during the financial year 2004-05 against Rs. 2.7 billion in the last year showing an increase of about 33.3 percent as compared to previous year. The lease income during this period, however, decreased by 0.86 percent.

Askari Leasing Limited (ALL) was incorporated in August 1993 with an authorized share capital of Rs. 500 million and is listed on all three stock exchanges of the country. The company has generated enough resources to adequately finance its leasing operations, mainly by securing funds through Certificates of Investment, which is reflective of the confidence the COI holders repose in the company's management and its business potential. The company's operations are based on sound appraisal criteria & standards and are focused on quality lease business. Major areas of financing include consumer auto leasing and big ticket leasing to large local and multinational companies. Askar, the auto lease package has firmly placed the company in auto finance market. Funds have been deployed in a well-diversified lease portfolio and the company is successfully playing its role in the growth of national economy.

An spokesman of Askari Leasing told this correspondent that the year 2004-05 was characterized by difficult environment for the leasing industry on the face of the existing low interest rate regimes, lack of credit appetite in the corporate sector and very aggressive posturing by the large commercial banks in the consumer financing and auto sector. In this difficult business environment, the management of the company embarked upon the strategies to counter the unfavorable trends. The company entered into marketing alliances with vehicle manufacturers to ensure prompt delivery to customers of small cars. This had the desired positive effect on the brand name "Askar". Asklife, Askari Leasing's product in leasing of consumer durable products to customers has won wide recognition.

During the year, to further improve company's service and delivery, Gujranwala SBO was upgraded to a full branch status. "The branch is already making healthy contribution in building up our SME portfolio in Gujranwala region. Faisalabad Branch was shifted to bigger premises to better serve the expanded business. Management is confident of favorable impact on disbursement as well as profitability during the year to follow."

The lease income for the year under review decreased by 0.86% as compared to its corresponding period. The cause of this variation was the gradual declining trend of the interest rates in the country; accordingly the company had to concede and offer new business volumes at prevailing market competitive rates. "However our financial charges also decreased by 11.2% evidencing the ability of the company to generate low cost funds, thereby well absorbing the impact of loss due to falling rates on our assets." To seek a sustainable growth level, ultimately switching into maximization of shareholders wealth, the company thrived in disbursing Rs. 3.6 billion in auto finance, corporate, and SMEs sector and consumable durables, against Rs. 2.7 billion in the comparable period, registering an increase of 33.3% as compared to previous year.

The company has been able to maintain the pretax profit level of Rs. 126 million that is only 9.6% less than its corresponding period. An important factor to be noted, however, is the favorable net profit ratio, compared to the corresponding period. Last year, the company realized a signified amount of capital gain of Rs. 56.2 million (2005: Rs. 3.8 million), which came out of the pure treasury transactions. It, therefore, needs to be appreciated that the net interest income derived through the spread between interest income and interest expense improved by 47% over the period under review, signifying improvement in core earnings. In this very competitive environment in which the cost leaders, i.e. the commercial banks have been more or less dictating the market, this achievement is an appreciable feat. With some increase in the lending rate during the current financial year, the company is hoping for improved profitability.

BALANCE SHEET
Askari Leasing Limited
(UN-AUDITED)

AS AT SEPTEMBER 30, 2005

September 2005

June 2005

ASSETS

CURRENT ASSETS

RUPEES

RUPEES

Cash and balance with central bank

1,413,448

1,606,214

Balances with other banks

66,747,181

76,987,891

Money market placements

100,000,000

-

Investments

1,028,696,382

1,256,796,293

Financing against deposits

7,327,519

11,507,350

Advances, deposits, prepayments and other receivables

298,149,871

207,081,451

Income tax recoverable

192,181,313

190,670,176

Assets held for lease

39,734,390

56,772,390

Current portion of net investment in lease finance

2,417,417,302

2,324,992,300

.

4,151,667,406

4,126,414,065

NON CURRENT ASSETS

Net investment in lease finance

4,992,379,482

4,588,228,125

Long term loans

5,716,961

4,362,224

Long term investments

108,491,822

110,131,140

Investment property

30,822,887

31,964,477

Property, plant and equipment - tangible

49,762,927

51,227,283

.

5,187,174,079

4,785,913,249

TOTAL ASSETS

9,338,841,485

8,912,327,314

LIABILITIES

CURRENT LIABILITIES

Accrued and other liabilities

406,383,764

414,224,539

Short term borrowings

1,167,315,914

613,196,636

Current maturity of long term liabilities

1,216,738,727

1,563,407,288

.

2,790,438,405

2,590,828,463

NON CURRENT AND DEFERRED LIABILITIES

Long term loans

436,650,000

493,320,000

Certificates of investment

3,254,516,679

3,235,260,369

Long term accrued mark up on certificates of investment

114,638,355

108,051,001

Deposits on lease contracts

1,715,529,755

1,477,350,913

Deferred tax

214,443,605

214,463,071

.

5,735,778,394

5,528,445,354

TOTAL LIABILITIES

8,526,216,799

8,119,273,817

NET ASSETS

812,624,686

793,053,497

REPRESENTED BY:

Share capital

324,000,000

324,000,000

Reserves

488,624,686

469,053,497

.

812,624,686

793,053,497