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Fuel & Energy

Genertech Pakistan Limited

Year Ended June 30, 1999

Overview

This independent power producing company has produced higher financial and operating results. On the other hand long term borrowings declined and shareholders equity base expanded due to higher reserve. The total asset base has contracted because of mainly decrease in long term borrowings. Higher profitability has improved the liquidity. Liquidity also improved because trade debts' outstanding balances also declined. On the other hand both operating and gross margin improved with the rise in sales. The plant's operating efficiency improved to 84.25% from the previous year's 78.8%. the company has been able to increase cash dividend at Rs 2 per share as the company generated earning per share at Rs 4.53. Genertech Pakistan Limited is primarily engaged in owing, managing and operating electric power generation facilities. The plant is located on 49th kilometer, at Lahore Multan Road, Near Bhaiphero at Tehsil Chunian, District Kasur. The company is one of the constituents of Elahi Group of Companies.

Profits and gains of the company are exempted from the levy of income and minimum taxes, by virtue of clause 176 of part I of Second Schedule to the Income Tax Ordinance, 1979.

This public limited company's shares are listed on all three stock exchanges of the country i.e. Islamabad, Lahore and Karachi. The shares were listed at Karachi Stock Exchange in 1994.

There are 3758 shareholders in Genertech Pakistan Ltd. holding total 18 million shares with total share capital of Rs 180 million. In addition to share capital, there are large reserves in the equity.

The share capital remained constant for several years but the shareholders' equity increased to Rs 479.14 million which amount is 166% of its capital.

The equity comprises, the paid-up capital of Rs 180 million revenue reserve of Rs 175.00 million, premium on the issue of shares at Rs 114.95 million and unappropriated profit at Rs 9.19 million. Substantial rise in the revenue reserve has been the main cause of 10.5% rise in its shareholders equity.

In the shareholding profit, the largest category of shareholders comprised 3671 individual investors almost 97.7% of total shareholders and there aggregate stake in the company's equity was to the extent of 48.12% of the stock.

Among the institutional investors there were 23 joint stock companies and they held 35.02% of its share. This was followed by 14 financial institutions, 24 investment companies and four insurance companies whose aggregate holding compared 15.375 of the company's stock.

The other sellers of finance of the company are supplies credit at Rs 156.65 million, liabilities against assets subject to finance lease at Rs 101.55 million, short term running finance at Rs 132.07 million. While the current portion of the long term liabilities, and running finance increased. But the long term borrowings and lease finance outstanding balance sharply declined which led to shrinking of the total size of the balance sheet.

Suppliers credit was obtained in Japanese yen, against the guarantee given by Emirates Ban International (EBI), for the purchase of generating sets. The liability for repayment was fixed in Pak Rupees, against the payment of exchange risk fee of 7.5% p.a. at the rate of exchange prevailing at the time of disbursement.

The guarantee is secured against first charge on present and future assets of the company and financial guarantees of banks/financial institutions.

The loan carries interest at the rate of 7.6% per annum and is repayable is 12 equal half yearly installments, commend from 28th October, 1995.

The lease financing carries average interest rate between 20.50% and 22%. Hence the cost is much higher than other modes of finances availed.

Short-term running finance facility has been availed from ABN Amro Bank against credit line of Rs 60 million, secured against first charge on the current assets of the company. Mark-up applied at 16% per annum on quarterly basis.

The other short term finance is in the shape of Musharika finance as well as pro-note discounting facilities for an aggregate amount of Rs 61 million sanctioned on renewable basis by Trust Investment Bank Ltd at a mark-up rate of 20.5% per annum. This facility is also secured against a floating charge on current assets of the company.

Other financings are Morabaha facility of Rs 20 million by Escort Investment Bank Ltd, credit facility of Rs 21 million was sanctioned by MCBL. Credit facility of Rs 10 million was sanctioned by Saudi Pak Leasing Company. Escort Bank's facility carries mark-up rate at Rs 21% and MCBL as well as Saudi Pak Leasing's facility carries mark-up rate at 16% and 19.25% respectively.

The company's sales at Rs 588.01 million, operating profit at Rs 141.9 million and profit for the year at Rs 81.49 million increased by 8.8%, 10.9% and 42.7% respectively over the preceding year's. Profit is exempt from income tax and minimum tax.

At the current market value of the share in the company at Rs 11.60 per 10-rupee share and EPS of Rs 4.53 the PER is placed at 2.6x. The company declared dividend at 20% which is an improvement over previous year's Rs 17.5%.

PERFORMANCE STATISTICS (MILLION RUPEES)

June 30 1999 1998

Capital & Liabilities

Paid-up Capital 180.00 180.00

Revenue Reserves 175.00 130.00

Premium on issue of shares 114.95 114.95

Unapp. Profit 9.19 8.71

Equity 479.14 433.66

L. T. Debts 140.02 255.55

Current Liabilities 330.37 310.84

Assets

Fixed Assets Ñ Tangible 712.84 738.55

L. T. Deposits 15.82 17.61

Deferred Cost Ñ 1.06

Current Assets 220.87 242.83

Total Assets 949.53 1,000.05

Sales, Profit & Payout

Sales (Net) 588.01 540.29

Gross Profit 149.48 127.86

Operating Profit 141.86 121.69

Depreciation 71.76 74.49

Financial & Other Charges 56.09 61.58

Profit for the year 81.49 57.10

Dividend Cash 20% (1998: 17.5%) 36.00 31.50

Financial Ratios

Share price (Rs) 23/2/2000 11.60 Ñ

Book Value Per Share (Rs) 26.62 24.09

Price Book Value Ratio 0.44 Ñ

Debt/Equity Ratio 23:77 37:63

Current Ratio 0.67 0.78

Asset Turn Over Ratio 0.62 0.54

Days Receivables 63 77

Gross profit Margin (%) 25.42 23.66

Operating Margin (%) 24.12 22.52

Net Profit Margin (%) 13.86 10.57

EPS (Rs) 4.53 3.17

Price/Earning Ratio 2.56 Ñ

R. O. E. (%) 17 13.17

R. O. A. (%) 8.58 5.71

R. O. C. E. (%) 13.15 8.28

Company Information:

Chairman: Jahangir Elahi; Chief Executive: Alamgir Elahi; Director/s....: Company Secretary: Humayun Nabi Jan; Registered Office Ghalib Road, Gulberg III, Lahore. Plant 49-KM Lahore Multan Road, Near Bhai Pheru Ñ Tehsil Chunian, District Kasur.