| Lease
Pak Limited |
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| Annual Report 1999 |
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| Contents |
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| Company Information |
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| Notice of Annual General
Meeting |
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| Directors Report |
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| Auditors Report |
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| Balance Sheet |
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| Profit and loss Account |
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| Statement
of Sources and Application of Funds |
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| Notes to the Accounts |
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| Pattern of Shareholding |
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| Company Information |
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| Chairman |
Mian Misbah-ur-Rehman |
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| President & CEO |
M.T. Farooqui |
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| Directors |
Mr. Abdul Rehman |
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|
Mr. Tariq Rehman |
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|
Mr. Naveed Masud |
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|
Agha Najeeb Raza |
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|
Mr. Immad Iftikhar Malik |
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|
Mian Assad
Shuja-ur-Rehman |
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| Company Secretary |
Agha Najeeb Raza |
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| Auditors |
Ford Rhodes, Robson,
Morrow |
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Chartered Accountants |
|
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| Bankers |
Allied Bank of Pakistan
Limited |
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|
Union Bank Limited |
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|
Muslim Commercial Bank
Limited |
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|
Albaraka Islamic Bank
B.S. C.[E.C] |
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|
Gulf Commercial Bank
Limited |
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| Legal Advisors |
Cornelius Lane &
Mufti Advocates & Solicitors |
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|
Mohammad Azeem
Malik-Advocate |
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| Share
Registrars |
M/s. Softlink (Pvt)
Limited |
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| Registered Office & Head
Office |
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| 11-C, Main Gulberg, Lahore |
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| Tel:
092-042-5764631-5764641-5756358 |
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| Fax: 092-042-5713080 |
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| Email:lplpak@brain.net.pk |
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| Notice
of Annual General Meeting |
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| Notice
is hereby given that the 8th Annual General Meeting of Lease Pak Limited will
be held at its Registered Office |
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| at
11-C, Main Gulberg, Lahore on Thursday 23rd December, 1999 at 11:00 A.M. to
transact the following |
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| business: |
|
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| (1)
To Confirm the Minutes of the 7th Annual General Meeting held on 31 st
December, 1998. |
|
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| (2)
To receive and adopt the Audited Accounts of the Company for the year ended
30thJune, 1999 together with |
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| Directors
and Auditors Report thereon. |
|
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| (3)
To appoint auditors of the Company for 1999-2000 and fix their remuneration.
The present auditors M/s |
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| Ford, Rhodes, Robson, Morrow, Chartered
Accountants retire and being eligible offer themselves for |
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| reappointmenl. |
|
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| (4)
To transact any other business with the permission of the Chair. |
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|
By order of the Board |
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| Lahore |
|
Agha Najeeb Raza |
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| Dated: December 02,1999 |
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Company Secretary |
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| Notes: |
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| 1.
The share transfer books of the Company will remain closed from December 17,
1999 to December 23, |
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| 1999 (both days inclusive). |
|
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| 2.
A member of the Company entitled to attend and vole may appoint another
member as his/her proxy to |
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| attend
and vote instead of him/her. Proxies must be received at the Registered
Office of the Company not less |
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| than
48 hours before the time of holding the meeting. |
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|
| 3.
Members are advised to lodge shares for transfer al the office of our
registrars M/S Softlink (Pvt) Limited, |
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| Wings Arcade, 1-K (Commercial), Model Town,
Lahore. |
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| 4.
Members are requested to notify any change in their address immediately to
the Share |
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| Registrar of the Company. |
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| Directors Report |
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| The
Directors have pleasure in presenting the Audited Accounts for the year ended
June 30, 1999. |
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| Financial Results |
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|
1999 |
1998 |
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|
Rupees |
Rupees |
|
|
|
|
| Revenue |
|
83,919,816 |
98,794,562 |
|
| Expenditure |
|
84,475,625 |
86,389,783 |
|
|
------------------ |
------------------ |
|
| Profit/(Loss)
before provisions and tax |
|
(5,55,809) |
12,404,779 |
|
| Provision
for diminution in value of shares |
|
15,451,070 |
5,046,990 |
|
| Provision for doubtful debts |
|
15,455,369 |
1,665,401 |
|
|
------------------ |
------------------ |
|
| Profit/(Loss) before tax |
|
(31,462,248) |
5,692,388 |
|
| Provision for taxation |
|
| Current |
|
1,17.5,000 |
1,000,000 |
|
| Deferred |
|
8,900,000 |
-- |
|
|
------------------ |
------------------ |
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| Profit/(Loss) after tax |
|
(41,537,248) |
4,692,388 |
|
| Un-appropriated
profit brought forward |
|
44,236 |
10,751,848 |
|
|
------------------ |
------------------ |
|
| Profit available for
appropriation |
|
(41,493,012) |
15,444,236 |
|
|
| Appropriations |
|
|
| Interim Dividend |
|
-- |
12,000,000 |
|
| Transfer to capital reserve |
|
-- |
940,000 |
|
| Reserve for contingencies |
|
-- |
2,460,000 |
|
|
------------------ |
------------------ |
|
|
-- |
15,400,000 |
|
|
------------------ |
------------------ |
|
| Profit/(Accumulated
loss) carried forward |
|
(41,493,012) |
44, 236 |
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|
========== |
========== |
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| The Economy |
|
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| The
economy during the year under review progressed in an ambiance of
uncertainty. Despite perceptible public |
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| infrastructure
building, the private sector continued to suffer from inertia and disbelief.
Sanctions imposed by the |
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| international
community, the paucity of expendable foreign exchange and high tariff on raw
material and inputs |
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| further hampered industrial
recovery. |
|
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| Issues
facing the economy and the deepening recession have been around for three
years. Evidently these could not |
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| have
been resolved in a short period of time. Still the domestic investor
confidence and external capital flows |
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| together
seemed to touch the bottom. The leasing industry already in the throes,
barring a handful of exceptions did |
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| not
see any new openings. The brutal ingredients of the impasse were the
thoughtless default by the borrower |
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| combined
with the reticence of the banks in offering fresh credit lines to small and
medium size leasing enterprises. |
|
|
| Clearly
the achievement of a turnaround which energizes industry and stimulates new
investment will require the |
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| implementation
of an internally consistent structural reform. The reform package should
include action against smuggling, |
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| over-capitalization
and willful defaults in conjunction with an across the board lowering of
interest rates and rationalizing |
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| of
tariffs. The financial institutions also need to be encouraged to reduce the
spread between the deposit and lending |
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| rates
and to lend to new projects as well as to the smaller leasing enterprises
based on the merits of their Business |
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| Proposals
thus minimizing the influence of extraneous considerations in making the
credit decisions. |
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| Operating Performance |
|
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| In
the fiscal year 1999 the management focused on reducing the mismatch between
its borrowings and long term funds. The |
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| company
has been conservative in writing new leases and the policy of promoting the
small and medium enterprises and |
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| consumer
leasing was maintained. The exposure of lease portfolio did not exceed 20% in
any single sector. |
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| Due
to a conservative policy on new commitments as well as restricted
availability of long term financing on |
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| reasonable
rate, the net investment in lease declined from 462 million to 359 million at
the close of the year. The |
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| Company
though continued to diversify its marketing mix as well as asset exposure the
investment in plant and |
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| machinery
was reduced to 77% of the total portfolio at the end of the current year from
80% in the previous year. |
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| The
company aims to stabilize its exposure in plant and machinery to 50% within
next three years. |
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| The
company made a nominal operating loss of Rs. 0.55 million. The policy of
making provisions for |
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| diminution
in value of its stock portfolio as well as for doubtful rentals was
continued. After making |
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| provisions
for diminution in value of shares and doubtful debt of Rs. 30.906 million the
company |
|
| incurred
a net loss of Rs. 31.462 million. To present a correct financial position of
the company Rs. |
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| 10.775
million have been provided inclusive of Rs. 8.90 million of deferred tax
liability in accordance |
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| with the requirement of the
ICAP. |
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| With
concerted efforts it was possible to bring down the average cost of borrowing
from 20% to 17.5% |
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| and
to restructure short term and long-term debt to match the terms of leases and
cash flaws. The |
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| company
was at the same time able to rehabilitate a chunk of the company's sick
assets. The management |
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| devoted
special efforts to recover past due rentals and it succeeded in increasing
its recovery ratio from |
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| 82% to 90%. |
|
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| Whereas
the foregoing operational results present a difficult scenario, our
shareholders would appreciate |
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| that
the measures undertaken would lead to restoring health of the company and
positioning it to take |
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| advantage of future
opportunities. |
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|
| Resource Mobilization |
|
|
| Mobilization
of long term credit at reasonable rates remained difficult to secure. Still
the company has |
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| managed
to renew a long term credit line for four years 1o the tune of Rs. 75 million
at a reduced |
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| markup rate of 17 percent. |
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| Future Outlook |
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| For
the fiscal year 2000 the management anticipates a breakeven operational
performance before the |
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| prudential
provisioning and is confident that the company would thereafter return to a
sustained period |
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| of profitability and growth. |
|
|
| Lease
Pak is in advance stage of setting a comprehensive business plan for the
future years. The salient |
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| elements
of the plan for the core leasing business are listed hereunder: |
|
|
| *
Mobilizing long to medium term financing on an ongoing basis in order to meet
its evolving market |
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| activities and targets |
|
|
| *
Structuring its credit and financing packages in a manner that optimum cash
flows as well moderates |
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| the overall financial cost
are ensured |
|
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| *
Targeting high growth businesses with emphasis on service sector including
HRD, health, education |
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| and leisure. |
|
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| *
Pricing of lease facilities on a competitive basis with terms and conditions
tailored according to the |
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| client cash flows |
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| The
financial restructuring plan initiated during the year and aimed at improving
the operational |
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| performance
would be completed during fiscal year 2000. The salient features of the plan
are: |
|
|
| *
Horizontal and vertical integration with institutional sponsors by seeking
additional equity as well as |
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| within the sector merger with good lease
company to benefit from scale, diversification and geographic |
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| penetration |
|
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| * Liquidation of unproductive
assets |
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| The year 2000 compliance |
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| The
company has addressed the year 2000 compliance in relation to the computer
hardware and |
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| software.
All the computer systems are duly Y2k compliant. |
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|
| Acknowledgment |
|
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| We
would like to thank our valued lenders for their financial support and
investors and shareholders |
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| who
have shown patience and have extended cooperation through the year. We would
also like to |
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| thank
the Securities and Exchange Commission of Pakistan and the State Bank of
Pakistan for providing |
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| guidance and support as
needed. |
|
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| We
extend deep appreciation to the company employees for their noteworthy
efforts and dedication in |
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| these difficult times. |
|
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| For
and on behalf of the Board of Director |
|
|
|
M. T. Farooqui |
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|
President & CEO |
|
|
|
|
| Auditors
Report to the Members |
|
|
| We
have audited the annexed Balance Sheet of Lease Pak Limited as at June 30,
1999 and the related profit and |
|
| loss
account and statement of sources and application of funds, together with the
notes forming part thereof, far the |
|
| year
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 |
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| 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 thereon
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 year was for the purposes of the
Company's business; and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during
the year were in accor- |
|
| dance
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 sources and application of funds, 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, 1999 |
|
| and of the profit and the changes in
sources and application of funds for the year then ended; and |
|
|
| (d)
in our opinion, no Zakat was deductible at source under Zakat and Ushr
Ordinance 1980. |
|
|
| Lahore |
|
Ford, Rhodes, Robson,
Morrow |
|
| December
25, 1999 |
|
Chartered Accountants |
|
|
|
|
|
|
|
| Balance
Sheet as at June 30, 1999 |
|
|
Notes |
1999 |
1998 |
|
|
|
Rupees |
Rupees |
|
| Share Capital and Reserves |
|
|
| Authorised capital |
|
| 30,000,000 (1998' 30,000,000) |
|
| ordinary shares of Rs. 10/-
each |
|
300,000,000 |
300,000,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
3 |
133,201,800 |
133,201,800 |
|
|
| Reserves |
|
| Capital reserve |
|
4 |
7,639,000 |
7,639,000 |
|
| Reserve for ,contingencies |
|
5 |
6,500,000 |
6,500,000 |
|
| Unappropriated profit |
|
(41,493,012) |
44,236 |
|
|
----------------- |
----------------- |
|
|
(27,354,012) |
14,183,236 |
|
|
| Redeemable capital |
|
6 |
20,000,000 |
55,220,000 |
|
| Long term loans |
|
7 |
90,905,940 |
103,440,269 |
|
| Obligation
under assets subject to finance lease |
|
8 |
1,646,764 |
2,768,809 |
|
| Deposit on lease contracts |
|
9 |
60,595,517 |
71,997,084 |
|
| Deferred liability |
|
10 |
9,334,550 |
759,801 |
|
|
| Current liabilities |
|
| Current
maturity of redeemable capital |
|
68,920,000 |
48,000,000 |
|
| Current maturity of long term
loans |
|
25,999,947 |
31,708,398 |
|
| Current maturity of
obligations under |
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| assets subject to finance
lease |
|
985,506 |
1,134.,656 |
|
| Current
maturity of deposits on lease contracts |
|
13,542,962 |
5,437,913 |
|
| Short term Certificates of
Investment |
|
11 |
30,250,000 |
45,000,000 |
|
| Short term finances |
|
12 |
40,234,644 |
79,351,256 |
|
| Accrued and other liabilities |
|
13 |
41,616,608 |
21,939,983 |
|
| Unclaimed dividend |
|
168,552 |
204,475 |
|
| Income Tax payable |
|
195,942 |
177, 111 |
|
|
----------------- |
----------------- |
|
|
|
221,914,161 |
232,953,792 |
|
| Contingencies and commitments |
|
14 |
----------------- |
----------------- |
|
|
510,244,720 |
614,524,791 |
|
|
========== |
========== |
|
|
| Tangible fixed assets |
|
15 |
13,617,020 |
15,431,860 |
|
| Net investment in lease
finance |
|
16 |
|
| Minimum lease payments
receivable |
|
384,481,044 |
536, 831,707 |
|
| Add: Residual Value |
|
80,736,671 |
84,744,987 |
|
|
----------------- |
----------------- |
|
| Gross lease payments
receivable |
|
465,217,715 |
621,576,694 |
|
| Less: Unearned finance income |
|
106,045,400 |
159,264,328 |
|
|
----------------- |
----------------- |
|
| Net investment in lease
finance |
|
359,172,315 |
462,312,366 |
|
| Less:
Current maturity of net investment in lease finance |
|
116,118,883 |
114,880,071 |
|
| Less:
Provision for doubtful receivables |
|
3,534,436 |
768,090 |
|
|
----------------- |
----------------- |
|
|
239,518,996 |
346,664,205 |
|
|
| Long term investments |
|
17 |
22,723,445 |
37,282,496 |
|
| Long term advances |
|
18 |
78,995 |
4,902,816 |
|
| Long
term deposits and deferred costs |
|
19 |
2,259,687 |
5,627,467 |
|
|
|
|
|
|
| Currents assets |
|
| Current
maturity of net investment in lease finance |
|
16.1 |
115,474,160 |
114,692,484 |
|
| Short term finance-
considered good |
|
20 |
40,300,000 |
35,300,000 |
|
| Advances, deposits,
prepayments |
|
| and other receivables |
|
21 |
52,062,947 |
29,468,689 |
|
| Short term investments |
|
22 |
1,000,100 |
1,000,100 |
|
| Accrued income |
|
23 |
22,365,037 |
21,749, 196 |
|
| Cash and bank balances |
|
24 |
844,333 |
2,405,478 |
|
|
|
----------------- |
----------------- |
|
|
232,046,577 |
204,615,947 |
|
|
----------------- |
----------------- |
|
|
510,244,720 |
614,524,791 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| M. T. Farooqui |
|
Agha Najeeb Raza |
|
| Chief Executive |
|
Director |
|
|
|
| Profit and loss account |
|
| for
the year ended June 30, 1999 |
|
|
Notes |
1999 |
1998 |
|
|
|
Rupees |
Rupees |
|
| Revenue |
|
|
|
| Income from leasing
operations |
|
25 |
77,024,493 |
86,766,663 |
|
| Income from bank deposits |
|
|
75,455 |
335,488 |
|
| Income on long term
investments |
|
26 |
858,858 |
983, 151 |
|
| Other income |
|
27 |
5,961,010 |
10,709,260 |
|
|
|
----------------- |
----------------- |
|
|
|
83,919,816 |
98,794,562 |
|
| Expenditure |
|
| Return
on borrowings and financial charges |
|
28 |
66,172,035 |
70,290,582 |
|
| Administrative
and operating expenses |
|
29 |
18,018,653 |
15,029,417 |
|
| Amortization of deferred
costs |
|
19.1 |
284,937 |
1,069,784 |
|
|
|
----------------- |
----------------- |
|
|
|
84,475,625 |
86,389,783 |
|
|
|
----------------- |
----------------- |
|
| (Loss)/profit
before provisions and tax |
|
|
(555,809) |
12,404,779 |
|
| Provision
for diminution in value of shares |
|
|
15,451,070 |
5,046,990 |
|
| Provision for doubtful debts |
|
|
15,455,369 |
1,665,401 |
|
|
|
----------------- |
----------------- |
|
|
|
30,906,439 |
6,712,391 |
|
|
|
----------------- |
----------------- |
|
| (Loss)/Profit before tax |
|
|
(31,462,248) |
5,692,388 |
|
|
| Provision for taxation -
Prior year |
|
- |
85,273 |
|
|
- Current year |
|
1,175,000 |
914,727 |
|
|
- Deferred tax |
|
8,900,000 |
-- |
|
|
----------------- |
----------------- |
|
|
10, 075,000 |
1,000,000 |
|
|
----------------- |
----------------- |
|
| (Loss)/Profit after tax |
|
(41,537,248) |
4,692,388 |
|
| Unappropriated
profit brought forward |
|
44,236 |
10,751,848 |
|
|
----------------- |
----------------- |
|
| (Loss)/Profit
available for appropriations |
|
(41,493,012) |
15,444,236 |
|
|
| Appropriations |
|
|
| Interim
dividend Rs. Nil (1998: @ 10%) |
|
-- |
12,000,000 |
|
| Transfer to capital reserve |
|
-- |
940,000 |
|
| Reserve for contingencies |
|
-- |
2,460,000 |
|
|
----------------- |
----------------- |
|
|
-- |
15,400,000 |
|
|
----------------- |
----------------- |
|
| (Accumulated
Ioss)/Unappropriated profit carried forward |
|
(41,493,012) |
44, 236 |
|
|
----------------- |
----------------- |
|
| Earning Per Share |
|
30 |
(3.12) |
0.37 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| Statement
of sources and application of funds (cash flow) |
|
| for the year ended June 30,
1999 |
|
|
Notes |
1999 |
1998 |
|
|
|
Rupees |
Rupees |
|
|
| Net cash from operating
activities |
|
A |
(65,957, 173) |
26, 125,872 |
|
| Cash flow from investing
activities |
|
| Purchase of fixed assets |
|
(484,950) |
(4,997,900) |
|
| Sale
proceeds on disposal of fixed assets |
|
493,711 |
257,607 |
|
| Investment in lease finance |
|
(21,593,970) |
136,083,325) |
|
| Repayment
of investment in lease finance |
|
124,734,021 |
77,339,285 |
|
| Long term investments |
|
(751,262) |
(1 ,847,244) |
|
| Long term advances- disbursed |
|
(152,898) |
(3,975,696) |
|
| Long term advances-recovered |
|
474,777 |
1,853,768 |
|
| Long term deposits and
deferred cost |
|
(1,212,908) |
(2,805,700) |
|
|
----------------- |
----------------- |
|
| Net cash from investing
activities |
|
101,506,521 |
(70,259,205) |
|
| Cash flow from financing
activities |
|
| Share capital |
|
-- |
13,201,800 |
|
| Redeemable capital |
|
(14,300,000) |
3,220,000 |
|
| Long term loan |
|
(18,242,780) |
1,982,000 |
|
| Obligalion
under finance lease- acquired |
|
325,000 |
4,318,975 |
|
| Obligation
under finance lease- repaid |
|
(1,596,195) |
(864,608) |
|
| Marginal
deposit on lease arrangements |
|
6,173,171 |
24,650, 110 |
|
| Marginal
deposit on lease arrangements- adjusted |
|
(9,469,689) |
660,845) |
|
|
----------------- |
----------------- |
|
| Net cash used in financing
activities |
|
(37,110,493) |
45 847,432 |
|
|
----------------- |
----------------- |
|
| Net
(decrease)/increase in cash and cash equivalents |
|
(1,561,145) |
1 714,099 |
|
| Cash
and cash equivalents at the beginning of the year |
B |
2,405,478 |
691,379 |
|
|
|
----------------- |
----------------- |
|
| Cash
and cash equivalents at the end of the year |
|
B |
844,333 |
2,405,478 |
|
|
========== |
========== |
|
| M. T. Farooqui |
Agha Najeeb Raza |
|
| Chief Executive |
Director |
|
|
|
| Notes
to the statement of sources and application of funds (cash flow) |
|
| for
the year ended June 30, 1999 |
|
|
|
1999 |
1998 |
|
|
Rupees |
Rupees |
|
| A.
Cash flow from operating activities |
|
|
| Net (loss)/profit before tax |
|
(31,462,248) |
5,692,388 |
|
|
| Adjustments for: |
|
| Depreciation |
|
1,635,368 |
1,897,255 |
|
| Loss/(Gain)
on disposal of fixed assets |
|
170,711 |
(103,994) |
|
