20000209

Brief recordings

BY SCANNER

Fuel & Energy

D.G. Khan Electric Company Limited

Year Ended June 30, 1999

Overview

During the year under review the output of the company substantially improved. However its generation capacity remained grossly under-utilised due to low demand by its only consumer Ñ D.G. Khan Cement Company Ltd. which is also under the spell of 'depressed market,' 'economic instability' and 'worst recessionary trend' as stated by the directors. They also informed, "the chances of sale of surplus electric power are also remote in view of the fact, WAPDA has surplus power and has reduced and may further reduce electric tariff. There is also no industrial undertaking in the vicinity of the power project to attract the purchase of electricity from the Company." The directors have decided to merge the Company with D.G. Khan Cement Company Ltd. During the year, the Company's sales at Rs 386.74 million net profit at Rs 115.63 increased by 13.2% and 56.7% respectively. The Company announced maiden cash dividend at 25%.

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D.G. Khan Electric Company Limited was incorporated in the province of Sindh on 26th July 1994 as a public limited company under the Companies Ordinance. While its registered office is located at Lawrence Road Lahore, the power generation unit is located in KHOFLI SATTAI in District Dera Ghazi Khan in the province of Punjab.

During the financial year 1998-99, the period under review, the unit generated power at 112,781 MWH against the annual plant's generation capacity of 208 838 MWH. The output increased by 15.76% as compared to 97423 MWH power generated in the last financial year 1997-98. Although the output increased substantially but the power generation capacity remained grossly under-utilised because the capacity utilisation could reach only 54% (FY 1997-98: 46.6%). Reasons for lower generation has been given in one of the notes annexed to the account that there was low demand from the only consumer. The consumer is its associated company Ñ D.G. Khan Cement Company.

High on the agenda of the AGM of the shareholders which was scheduled on 31st December 1999 at Nishat House Lahore, was a special business.

The agenda about the special business was to pass with or without modification(s) the resolutions u/s 284 r/w section 287 of the Companies Ordinance 1984, regarding merger of D.G. Khan Electric Company Ltd. (the company) into D.G. Khan Cement Company Ltd. The agenda further stated, "whereas the merger of the company into D.G. Khan Cement Company Limited has been proposed by the Board of Directors in view of benefits to the merged companies as a consequence to the shareholders."

The statement u/s 160(I)(b) of the Companies Ordinance 1984 contains the detailed explanation of the merger. The first two paragraphs of the statement are "the management of the company has considered various options for consolidating its activities and thereby effecting economies to the benefit of the Company and ultimately to the shareholders.

It is with this goal before it, that the management of the Company, in consultation with technical experts in the field, has reached to the conclusion that D.G. Khan Electric Company Ltd., a power generation company, supplying electricity only to D.G. Khan Cement Company Limited be merged into D.G. Khan Cement Company Limited."

The Report under review stated that profits and gains of the Company are exempt from levy of income tax under clause 176 of Part-I and clause 20 of Part-IV of Second Schedule to the Income Tax Ordinance 1979. Therefore the company made no provision for income tax, as it was not required.

During the year under review the company posted sales in terms of value at Rs 386.74 million (FY 1997-98: Rs 341.63 million), gross profit at Rs 139.32 million (FY 1997-98: Rs 115.30 million), operating profit at Rs 135.33 million (FY 1997-98: Rs 112.80 million) which reflected growth by 13.2%, 20% and 20.8% respectively over the corresponding figures recorded in the preceding financial year.

Financial and other charges declined by 12.5%. "Other" income increased to Rs 22.4 million, almost 2.5 times of Rs 9.1 million posted in the previous year.

Depreciation and amortisation at Rs 46.33 million also diminished relative to preceding year's Rs 56.69 million. Reduction in this case is by Rs 10.36 million or 18.3% of the previous year's figure.

The Company posted profit for the year at Rs 115.63 million, which works out to earning per share (EPS) at Rs 5.78 which is Rs 2.09 per 10-rupee share higher than the EPS posted in the preceding year.

The company announced cash dividend at 25% for the first time after listing at the stock exchange in 1995.

The share in the company is trading at Rs 9.5 per share at this price the PER is placed at 1.64x. Highest price of the share was quoted at Rs 21 in 1996.

At the last count of shares in the Company, there were 834 individual shareholders whose aggregate holdings were 7.32% of the Company's total 20 million ordinary shares of 10-rupees. Among the institutional investors, the largest category of shareholders compressed 6 joint stock companies whose aggregate stake in the company's equity was to the extent of 44.88%. This was followed by 6 foreign investors who held 31.74% of the company's stock. Three investment companies and four financial institutions owned 9.59% and 5.69% respectively of the company's stock.

Financial health of the balance sheet remained robust as depicted by the debt to equity, current ratio and break-up value of the share.

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Performance Statistics (Million Rupees)

June 30 1999 1998

Capital & LiabilitiesÉÉÉ

Paid-up Capital: 200.00 200.00

Capital Reserve Premium on Issue of Share: 120.00 120.00

Revenue Reserve & Surplus: 172.91 107.29

Equity: 492.91 427.29

L.T. Debts: 70.32 112.22

Current Liabilities: 160.56 154.01

AssetsÉÉÉ

Fixed Assets: 416.83 455.94

L.T. Investments (Equity): 90.27 90.27

L.T. Deposits & Deferred Cost: 22.66 23.46

Current Assets: 194.03 123.85

Total Assets: 723.79 693.52

Sales, Profit & PayoutÉÉÉ

Sales: 386.74 341.63

Gross Profit: 139.32 115.30

Operating Profit: 135.33 112.80

Other Income: 22.41 9.12

Depreciation & Amortisation: 46.33 56.69

Financial Charges: 34.91 43.08

Profit For the Year: 115.63 73.79

Dividend Cash 25%: 50.00 Ñ

Financial RatiosÉÉÉ

XD-Share Price (Rs) 22/1/2000: 9.50 Ñ

Book Value Per Share (Rs): 24.65 21.36

Price/Book Value Ratio: 0.39 Ñ

Debt/Equity Ratio: 12:88 21:79

Current Ratio: 1.19 0.80

Asset Turnover Ratio: 0.53 0.49

Gross Profit Margin (%): 36.02 33.75

Operating Margin (%): 35.00 33.02

Net Profit Margin (%): 29.90 21.60

EPS (Rs): 5.78 3.69

Price/Earning Ratio: 1.64 Ñ

R.O.E. (%): 23.46 21.60

R.O.A. (%): 15.98 10.64

R.O.C.E. (%): 20.53 13.68

Plant Capacity & Actual Power Generation (MWH)ÉÉÉ

A) Plant Capacity: 208,838 208,838

Actual Power Generation: 112,781 97,423

Capacity Utilisation (%): 54.00 46.65

B) "Reasons for low power generation: Power generation is low due to low demand by the consumer (associated undertaking)."

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Company information: Chief Executive: Raza Mansha. Directors: Aftab Ahmad Khan, Khalid Qadeer Qureshi. Company Secretary: Khalid Mahmood Chohan. Registered Office: 53-A, Lawrence Road, Lahore, Phone: 6367812, Fax: 6367414. Power Generation Project: Khofli Sattai, Distt: Dera Ghazi Khan, Phone: 600025-7/69063.