| NATIONAL
DEVELOPMENT LEASING CORPORATION LIMITED |
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| (Annual
Report 1997) |
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| Contents |
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| Board
of Directors |
|
| Directors'
Report |
|
| Financial
Highlights |
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| Auditors'
Report |
|
| Financial
Statements |
|
| Pattern
of Shareholding |
|
| Company
Information |
|
| Notice
of Meeting |
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|
| Board
of Directors |
|
| Mr.
Mohammad Naseem |
|
Chairman |
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| Mr.
Mohammad Salim |
|
Director |
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| Mr.
S.M. Saleem |
|
Director |
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| Mr.
Abdul Shakoor |
|
Director |
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| Mr.
Mohammad Sharif |
|
Director |
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| Syed
Ghulam Abbas |
|
Director |
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| Mr.
Shahid Hassan |
|
Director |
|
| Mr.
Mubashir A. Akhtar |
Managing Director &
Chief Executive |
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|
|
| Directors'
Report to the Shareholders |
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| The
Board of Directors are pleased to announce the financial results for the
twelve months |
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| ended
June 30, 1997. |
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|
| Board
of Directors |
|
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| The
composition of the Board of Directors has changed since the last Annual
General Meeting |
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| as under: |
|
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| Mr.
Mohammad Naseem, Mr. Mohammad Salim, Mr. S.M. Saleera, Mr. Abdul Shakoor,
Syed Ghulam |
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| Abbas
and Mr. Shahid Hassan became due for election during the year 1997 and were
elected to the |
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| Board
in the Extra Ordinary General Meeting held on August 8, 1997. Mr. S.M. Naseem
did not offer |
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| himself
for directorship. The Board wishes to place on record its appreciation for
his services rendered |
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| to
the Corporation. In his position, Mr. Mohammad Sharif was elected as
Director. Mr. Tayyeb Afzal |
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| resigned
as Managing Director & Chief Executive and Mr. Mubashir A. Akhtar took
charge on |
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| October
16, 1997 as Managing Director & Chief Executive. |
|
|
| Financials |
|
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| Your
Directors are pleased to report an after tax profit of Rs 102.156 million
during the twelve |
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| months
ended June 30, 1997, and propose that profits be appropriated as under: |
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|
(Rupees in 000's) |
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|
Eighteen |
|
|
months to |
|
|
Note |
Jun 30 |
Jun 30 |
|
|
|
| Profit
before Taxation |
|
129,656 |
266,619 |
|
| Provision
for Taxation |
|
27,500 |
55,000 |
|
|
-------- |
-------- |
|
| Profit
after Taxation |
|
102,156 |
211,619 |
|
| Unappropriated
profit brought forward |
|
4,195 |
983 |
|
|
-------- |
-------- |
|
| Profit
available for appropriation |
|
106,351 |
212,602 |
|
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|
|
| APPROPRIATIONS |
|
| Proposed
Final Dividend 15% (30% ... 1996) |
|
53,914 |
107,827 |
|
| Reserve
for issue of Bonus Shares |
|
17,976 |
- |
|
| Transfer
to General Reserve |
|
28,000 |
90,000 |
|
| Transfer
to Special Reserve |
|
5,108 |
10,580 |
|
|
|
104,998 |
208,407 |
|
|
-------- |
-------- |
|
| Unappropriated
Profit carried forward |
|
1,353 |
4,195 |
|
|
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|
========= |
========= |
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| Dividend |
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| Your
Directors are pleased to recommend a cash dividend of 15% and issue of Bonus
Shares |
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| at
5.0012% for the year ended June 30, 1997. |
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|
| The
Economy |
|
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| The
financial year saw three governments with as many strategic policy
directions. No |
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| wonder
uncertainties resulted in macro indicators depicting a slowing down in
economic |
|
| growth.
GDP in real terms grew at less than half the target rate of 6.3%, and only
slightly |
|
| above
the population growth rate, implying virtually no improvement. Industrial as
well as |
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| agricultural
production contracted. While the abnormally low growth in the agriculture |
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| was
attributable to natural vagaries, large scale industrial output was impacted
by its |
|
| inability
to adjust to the more competitive domestic and international environment,
rising |
|
| costs
of imported inputs and low labour productivity. |
|
|
| In
addition, lack of investor confidence resulted in the level of Gross Fixed
Investment actually |
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| declining
by 3.6%. This proved to be a significant inhabiting factor for the economy
and |
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| particularly
for the leasing sector, which relies heavily on the overall investment
climate. |
|
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| While
the above factors subdued economic expansion, the full effect of the broad
based |
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| structural
reforms introduced in the last few months of the financial year are expected |
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| to
be apparent in the coming year. Resilience of the agriculture sector will
help attain |
|
| GDP
growth in the medium to long term. |
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|
| The
Year in Review |
|
| In
a less than an encouraging economic backdrop, your Corporation, which
commands a |
|
| significant
presence in the sector, has been touched by the variables affecting the
economy. Your |
|
| Corporation
adopted a conscious approach in realigning the business prospects and |
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| consolidating
its financial position. Accordingly, the focus has been to accelerate
recoveries, |
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| maintain
a diversified lease portfolio and manage the mismatch of funds. We believe
that to |
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| reduce
undue sensitivity to economic uncertainties it is prudent to tread safely and
not |
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| accumulate
risky assets rather than demonstrate growth in business. |
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| Your
Corporation has endeavoured to improve the quality of lease portfolio through |
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| sectorial
diversification, venturing into hitherto unexplored profitable sectors of the |
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| economy.
Prudent risk management assisted in streamlining risk profiles keeping more
in |
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| mind
the long term benefits. In the face of rising financial charges, we adopted
for a |
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| conservative
approach in recognising income. |
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| With
improved market conditions, we expect recoveries to better existing levels.
We continue to |
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| make
concerted efforts to improve recoveries, especially from defaulters. Your
Corporation did not |
|
| hesitate
in initiating several legal proceedings. |
|
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| In
order to increase our approach in the retail segment of the market, your
Corporation launched |
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| another
new product - Flexilease - in collaboration with a major automobile
manufacturing concern, |
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| employing
advanced advertising techniques that ensure greater market penetration. The
opening |
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| of
retail branch in Karachi bears witness to our commitment to tap the retail
market. |
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| On
the asset creation side, we are also focusing on leasing small ticket items
in the form of General |
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| Product
Leasing. Having developed a substantial portfolio of big ticket items, we are
confident that |
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| your
Corporation has developed the requisite expertise that is crucial for success
in a retail |
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| environment. |
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| Credit
Rating |
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| By
the Grace of Almighty Allah, your Corporation received from the Pakistan
Credit Rating Agency |
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| (PACRA),
an 'AI' rating for Short Term Credit and an 'A' rating for Long Term Credit.
We believe |
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| these
ratings are an illustration of the financial resilience of the Corporation,
given changing |
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| industry
dynamics. In reaching the size that we are, care has been taken to build, in
the words of |
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| PACRA,
"a large pool of reserves that provide adequate cushion to absorb
potential loan losses." |
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| Funding
for the Future |
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| The
industry inherently faces the challenge of mismatch between tenors of sources
of |
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| funds
and their utilisation. We therefore, continue to solicit long term lines from
multilateral |
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| agencies
with whom our past performance has held us in good stead. At the same time, |
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| your
Corporation is evaluating non traditional avenues of funding like Asset |
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| Securitisation,
Term Finance Certificates, etc. |
|
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| We
have also been successful in establishing credit lines worth Rs 500 million.
In |
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| addition,
we have undrawn approved lines worth USD13.8 million from multilateral |
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| agencies.
Another GBP 7.5 million is under negotiation. It is heartening to report that
in |
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| addition
we have a Foreign Currency Deposit base well in excess of USD 15 million, |
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| which
includes a deposit from an off shore foreign bank acquired after careful
analysis |
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| by
them of our financials. |
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| Mission
Statement |
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| National
Leasing will continue to play its role as a premier leasing company. We will
focus on |
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| our
core business, while diversifying the portfolio. In continuation of our
policy, exposure |
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| in
textile sector reduced to 21% compared to 25% in June 1996. We have curbed
activities |
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| in
equity markets, which are expected to show volatility. |
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| We
strongly believe that the important factor that will empower us to ride
through the upcoming |
|
| challenges
are based upon striking a balance between accumulating good assets,
accelerating |
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| recoveries
and consolidating. |
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| Your
Corporation is poised to face upcoming challenges in an ever changing
environment. |
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| We
intend to step into the next century with a more focused outlook on planning,
management |
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| and
a clear, long term vision encompassing all aspects of the business. The
potential is |
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| immense,
and we hope to set our sights with undistracted attention to the business we
know |
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| best
- leasing. |
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|
| Auditors |
|
| The
retiring auditors Messrs Ford, Rhodes, Robson, Morrow, Chartered Accountants,
being |
|
| eligible,
offer themselves for reappointment. |
|
|
| Acknowledgment |
|
| We
offer our sincere gratitude to the Board of Directors, for their continued
guidance and support. |
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| Their
insight has given us the edge over competition, and allowed us the leverage
to adapt |
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| to
an aggressively changing environment. |
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| Our
sincere thanks to the thousands of Customers and Clients for their faith and
trust in us |
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| and
for their patience and understanding in dealing with us. |
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| We
also wish to place on record our appreciation of all staff members, who have
demonstrated |
|
| unflinching
support for the Corporation, and have risen to the demands of the
organisation |
|
| time
and again. |
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|
| Shareholding
Pattern |
|
| A
statement reflecting the pattern of shareholding is attached to the Annual
Report. |
|
|
| On
behalf of the Board |
|
|
| Mubashir
A. Akhtar |
|
| Managing
Director |
|
| &
Chief Executive |
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| Karachi,
November 7, 1997. |
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|
| Financial
Highlights |
|
|
Rupees |
|
|
| Year
ended June 30 |
|
1997 |
1996 |
|
|
| Shareholders'
Equity |
|
1,118 m |
1,139 m |
|
|
|
|
| Balance
Sheet Footings |
|
5,312 m |
5,272 m |
|
|
| Total
Assets Leased |
|
8,623 m |
8,080 m |
|
| Lease
Income |
|
625 m |
581 m |
|
|
| Current
Ratio |
|
0.99 |
0.81 |
|
|
|
| Auditors'
Report to the Members |
|
| We
have audited the annexed balance sheet of National Development Leasing
Corporation Limited |
|
| as
at June 30, 1997 and related profit and loss account and statement of changes
in financial |
|
| position,
together with the notes forming part thereof, for the period then ended and
we state that |
|
| we
have obtained all the information and explanations which to the best of our
knowledge and |
|
| belief
were necessary for the purposes of our audit and, after due verification
thereof, we |
|
| report
that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the Company as
required by |
|
| the
Companies Ordinance, 1984; |
|
|
| (b)
in our opinion: |
|
|
| (i)
the balance sheet and profit and loss account together with the notes thereto
have |
|
| been
drawn up in conformity with the Companies Ordinance, 1984 and are in |
|
| agreement
with the books of account and are further in accordance with accounting |
|
| policies
consistently applied; |
|
|
| (ii)
the expenditure incurred during the period was for the purpose of the
Company's |
|
| business;
and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during |
|
| the
period were in accordance with the objects of the Company; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given to |
|
| us,
the balance sheet, profit and loss account and the statement of changes in
financial |
|
| position,
together with the notes forming part thereof, give the information required
by |
|
| the
Companies Ordinance, 1984 in the manner so required and respectively give a
true and |
|
| fair
view of the state of the Company's affairs as at June 30, 1997 and of the
profit and the |
|
| changes
in financial position for the period then ended; and |
|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,
1980, |
|
| was
deducted by the Company and deposited in the Central Zakat Fund established
under |
|
| Section
7 of that Ordinance. |
|
|
| Karachi,
November 13, 1997. |
|
Ford, Rhodes, Robson,
Morrow |
|
|
Chartered Accountants |
|
|
| Balance
Sheet as at June 30, 1997 |
|
|
|
(Rupees in 000's) |
|
|
|
|
|
Note |
Jun 30 |
Jun 30 |
|
| Capital
and Liabilities |
|
|
1997 |
1996 |
|
|
| SHARE
CAPITAL AND RESERVES |
|
| Authorised
Capital |
|
| 100,000,000 Ordinary
Shares of ' Rs 5 each |
|
500,000 |
500,000 |
|
|
|
========= |
========= |
|
| Issued,
Subscribed and Paid-up Capital |
3 |
359,424 |
359,424 |
|
| Reserves |
|
4 |
828,240 |
779,998 |
|
|
|
-------- |
-------- |
|
| Shareholders'
Equity |
|
1,187,664 |
1,139,422 |
|
|
|
|
| DEFERRED
LIABILITIES |
|
| Provision for Gratuity |
|
4,417 |
3,280 |
|
|
| LONG TERM FINANCE AND LIABILITIES |
|
| Long Term Finance |
|
5 |
1,012,420 |
738,150 |
|
| Certificates
of Investment |
|
6 |
139,957 |
221,528 |
|
| Deposits on Lease Contracts |
|
7 |
480,282 |
466,988 |
|
| Obligation
under Finance Lease |
|
8 |
1,551 |
- |
|
|
|
|
|
1,634,210 |
1,426,666 |
|
| CURRENT LIABILITIES |
|
| Short
Term Finance |
|
9 |
423,512 |
478,365 |
|
| Current
Maturity |
|
|
|
| Long
Term Finance |
|
5 |
265,222 |
255,951 |
|
| Certificates
of Investment |
|
6 |
1,436,454 |
1,533,915 |
|
| Deposits
on Lease Contracts |
|
7 |
51,688 |
48,538 |
|
| Obligation
under Finance Lease |
|
8 |
1,027 |
- |
|
| Accrued
Expenses and Other Liabilities |
10 |
252,965 |
264,715 |
|
| Provision
for Taxation |
|
11 |
904 |
13,286 |
|
| Proposed
Final Dividend |
|
53,914 |
107,827 |
|
|
|
2,485,686 |
2,702,597 |
|
| COMMITMENTS
AND CONTINGENCIES |
|
12 |
|
|
--------- |
--------- |
|
|
5,311,977 |
5,271,965 |
|
|
========= |
========= |
|
|
| The
annexed notes form an integral part of the financial statements. |
|
| The
auditors' report is annexed thereto. |
|
|
|
(Rupees in 000's) |
|
|
|
Note |
Jun 30 |
Jun 30 |
|
| Property
and Assets |
|
|
1997 |
1996 |
|
|
|
|
| FIXED
ASSETS |
|
13 |
60,104 |
56,307 |
|
| LONG
TERM ADVANCES |
|
14 |
9,663 |
12,238 |
|
| LONG
TERM DEPOSITS |
|
15 |
268,790 |
115,714 |
|
| LONG
TERM INVESTMENTS |
|
16 |
55,182 |
49,667 |
|
| NET
INVESTMENT IN LEASE FINANCE |
17 |
2,427,185 |
2,840,463 |
|
| LONG
TERM PREPAYMENTS & DEFERRED COSTS |
18 |
11,379 |
10,638 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
| Short
Term Finance |
|
19 |
248,853 |
293,613 |
|
| Current
Maturity |
|
|
|
| Net
Investment in Lease Finance |
17 |
1,339,798 |
1,130,535 |
|
| Long
Term Deposits |
|
15 |
66,692 |
- |
|
| Short
Term Investments |
|
20 |
422,699 |
353,870 |
|
| Income
Accrued or Due |
|
|
51,343 |
47,977 |
|
| Advances,
Deposits, Prepayments and |
|
|
| Other
Receivables |
|
21 |
268,923 |
224,636 |
|
| Cash
and Bank Balances |
|
22 |
81,366 |
136,307 |
|
|
|
2,479,674 |
2,186,938 |
|
|
|
|
|
--------- |
--------- |
|
|
5,311,977 |
5,271,965 |
|
|
========== |
========== |
|
|
|
|
|
| Mohammad
Salim |
|
Mubashir A. Akhtar |
|
| Director |
|
Managing Director |
|
|
& Chief Executive |
|
|
| Profit
and Loss Account for the year ended June 30, 1997 |
|
|
|
(Rupees in 000's) |
|
|
|
Eighteen |
|
|
|
months to |
|
|
Note |
Jun 30 |
Jun 30 |
|
|
|
1997 |
1996 |
|
|
| INCOME |
|
| Lease
Income |
|
624,683 |
806,810 |
|
| Income
from Investments / Finance |
23 |
144,839 |
252,187 |
|
| Other
Income |
|
24 |
15,422 |
56,044 |
|
|
|
|
|
|
784,944 |
1,115,041 |
|
| EXPENDITURE |
|
|
|
| Financial
charges / return on borrowings |
25 |
241,517 |
277,715 |
|
| Return
on Certificates of Investment |
|
275,527 |
366,768 |
|
| Administrative
and Operating Expenses |
26 |
82,364 |
110,045 |
|
|
599,408 |
754,528 |
|
|
--------- |
--------- |
|
| OPERATING
PROFIT BEFORE PROVISIONS |
|
185,536 |
360,513 |
|
|
|
|
|
| PROVISIONS
- Doubtful Debts |
|
55,473 |
34,503 |
|
|
- Investments - provision
/ write-off |
407 |
59,391 |
|
|
|
55,880 |
93,894 |
|
|
--------- |
--------- |
|
|
| PROFIT
BEFORE TAXATION |
|
129,656 |
266,619 |
|
| PROVISION
FOR TAXATION |
|
11 |
27,500 |
55,000 |
|
|
--------- |
--------- |
|
| NET
PROFIT AFTER TAXATION |
|
102,156 |
211,619 |
|
| UNAPPROPRIATED
PROFIT BROUGHT FORWARD |
|
4,195 |
983 |
|
| PROFIT
AVAILABLE FOR APPROPRIATION |
|
106,351 |
212,602 |
|
|
|
|
| APPROPRIATIONS |
|
|
| Proposed
Final Dividend 15% (1996: 30%) |
|
53,914 |
107,827 |
|
| Transfer
to General Reserve |
|
28,000 |
90,000 |
|
| Transfer
to Special Reserve |
|
5,108 |
10,580 |
|
| Reserve
for Issue of Bonus Shares |
|
17,976 |
- |
|
|
|
104,998 |
208,407 |
|
|
--------- |
--------- |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD |
|
1,353 |
4,195 |
|
|
========= |
========= |
|
| The
annexed notes form an integral part of the financial statements. |
|
|
| Mohammad
Salim |
|
Mubashir A. Akhtar |
|
| Director |
|
Managing Director |
|
|
& Chief Executive |
|
|
|
|
|
| Statement
of Changes in Financial Position (Cash Flow Statement) |
|
| for
the year ended June 30,1997 |
|
|
|
|
(Rupees in 000's) |
|
|
|
Eighteen |
|
|
|
|
|
months to |
|
|
|
|
Jun 30 |
Jun 30 |
|
|
1997 |
1996 |
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Profit
before taxation |
|
129,656 |
266,619 |
|
| Add:
Adjustments to reconcile profit to net |
|
| cash
provided by operating activities |
|
| Fixed
assets - depreciation |
|
8,831 |
10,972 |
|
|
- profit on sale |
|
(184) |
(5,053) |
|
| Provision |
- for doubtful debts |
|
55,473 |
34,523 |
|
|
- for gratuity |
|
1,137 |
1,690 |
|
|
- for investments |
|
407 |
59,391 |
|
| Amortisation
of deferred costs |
|
637 |
3,041 |
|
| Income
from long term investments |
|
(20,205) |
(38,554) |
|
| Mark-up
from borrowings and return on |
|
| Certificates
of Investment |
|
517,044 |
485,246 |
|
|
|
563,140 |
551,256 |
|
|
|
692,796 |
817,875 |
|
| Increase
in operating assets |
|
(86,786) |
(309,853) |
|
| (Decrease)/increase
in operating liabilities |
(66,603) |
325,569 |
|
|
-------- |
-------- |
|
|
539,407 |
833,591 |
|
| Income
tax paid |
|
(39,882) |
(85,797) |
|
|
-------- |
-------- |
|
| Net
cash generated from operating activities |
499,525 |
747,794 |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
| Long
Term Deposits |
|
(219,768) |
(115,714) |
|
| Long Term Investments - income |
|
20,205 |
38,554 |
|
|
-
additions |
|
(5,922 |
(2,950) |
|
|
|
| Fixed
Assets |
- sale |
|
1,017 |
9,090 |
|
|
- purchases |
|
(13,463) |
(18,038) |
|
|
| Investment
in lease finance (net of recoveries) |
163,608 |
(1,262,788) |
|
| Long
term advances (net of recoveries) |
|
2,575 |
(4,472) |
|
| Recoveries
of long term finance |
|
- |
17,807 |
|
|
| Net
cash used in investing activities |
|
(51,748) |
(1,338,511) |
|
|
-------- |
-------- |
|
| Total
carried forward |
|
447,777 |
(590,717) |
|
|
========= |
========= |
|
|
|
| Total
brought forward |
|
447,777 |
(590,717) |
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Mark-up
on borrowings/Certificates |
|
|
|
| of
Investment |
|
(517,044) |
(485,246) |
|
| Repayment
of long term finance |
|
286,119 |
56,606 |
|
| Certificates
of Investment |
|
(179,032) |
873,724 |
|
| Deposits
from lessees - net |
|
16,444 |
176,099 |
|
