Leasing Companies: NETWORK LEASING CORPORATION LIMITED - Year Ended 30th June 2005

In its 10th year of operation and this leasing company has made satisfactory progress. Total Assets increased to Rs 1.867 billion from Rs 1.404 billion and Investment in Leases increased to Rs 914.60 million as against Rs 698.95 million by 30.9% over the previous financial year.
Lease income amounted to Rs 118.28 million (FY 2003-04: Rs 112.76 million) registering 4.9% increase over the preceding year. Gross Revenue shot up to Rs 154.05 million by 24.7% as compared to Rs 123.54 million booked in the preceding year.
Total expenditure was also on the higher side. However, the company's pre-tax profit, increased to Rs 13.73 million by Rs 5.64 million over Rs 8.09 million booked in the preceding year. Last year there was favourable write back of taxation of substantial amount. Hence last year's net profit remained higher than the figure of net profit of the year under review.
The company succeeded in its effort of the resource mobilisation of Rs 500 million. This is important side of the lease operation as resource mobilisation is the mainstay of the leasing business.
Network Leasing Corporation Ltd was incorporated in the province of Sindh on August 19, 1993. Commercial operation effectively began in January 1995. The company is listed on all stock exchanges of the country and is principally engaged in lease financing of assets, which is conducted through offices in Karachi, Lahore and Peshawar.
The company is classified as non-banking financial company (NBFC) by the Security Exchange Commission of Pakistan.
It has made long term investment in its sister concerns. Its investment in Technology Ventures (Private) Ltd amounts to Rs 8.52 million which represents 97% equity of the investee company. It has also 20% holding in the equity of network Microfinance Bank Ltd and this investment amounts to Rs 20.0 million.
The company's mission statement reflects its emphasis to cater to financial and development needs of micro and small enterprises (MSE). In this connection during 2004-05, regular visits of its senior executives and programme officers were made to the urban and semi urban areas in Sindh, Punjab and NWFP. In the pattern of its shareholding on June 30, 2005, its 1024 individual investors had 95.5% of the company's stock and remaining shareholding was with institutional investors.
On October 6, 2005, the company's share was quoted at Rs 5 per 10-rupee share. During the last one year the company's share price did not touch the par value as its market value ranged between Rs 5 and Rs 8 per share.
Since the last three years the company has been regular in dividend recommendations. Last year the pay out rate was @5% and for the financial year 2004-05, the directors recommended dividend @3%.
Pakistan Credit Rating Agency (Pacra) maintained their assigned A-3 short term, BBB long term for entity rating. Rating for TFC was maintained at BBB+.
During the financial year ended June 30, 2005 (FY 2004-05), the company generated gross revenue amounting to Rs 154.05 million as against Rs 123.54 million posted in the previous financial year (FY 2003-04) registering 24.69% increase. This would reflect that the company has made steady progress in its 10th year of operation. The directors of the company emphasise that leasing to small and micro enterprises has been progressing well on a nation-wide basis.
Health and education have been the two key areas which not only effect the present but coming generations as well. Consequently, considerable efforts are directed by the company towards these sectors in all low income areas. Women and children are the main beneficiaries in these sectors. The company's officers are endeavouring to reach the women at the grass-root level. They have succeeded to a certain extent by extending their outreach to the main cities and surrounding villages.
But this process takes time since they accord high priority to the clients' income generating capabilities in order to maintain the company's recovery rate.
The directors reported that the rental recovery continues to be satisfactory. The overdue rental position was 4.10% of the total portfolio.
During the period under review the company's lease portfolio made substantial expansion at Rs 914.60 million from Rs 698.95 million in the previous year. During the year under review, the company earned income from lease operations at Rs 118.28 million as against Rs 112.76 million in the preceding year, showing 4.9% increase. But expenditure was also on the higher side as can be seen from the Performance Statistics appended with this column. Provision and write off shot up to Rs 81.14 million from Rs 64.10 million in the preceding year. Amortisation of deferred costs were also on the higher side.

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Performance Statistics                (Million Rupees)

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30th June                            2005         2004

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Share Capital Paid-up:             175.00       175.00

Reserves & Profit:                  50.22        38.99

Shareholders Equity:               225.22       213.99

Surplus on Revaluation of

Fixed Assets:                       32.60       213.99

L.T. Debts:                        616.33       565.50

Deposits on Lease Contract:        157.60       114.85

Current Liabilities:               835.59       509.63

Fixed Assets-Tangible:             121.42        72.44

Net Investments in Lease Finance:  557.41       408.39

L.T. Investments:                  356.99       323.56

L.T. Loans & Advance:               34.07        20.01

Deferred Costs:                     22.52        33.57

Deferred Tax Assets:                15.88        15.89

Current Assets:                    759.05       530.11

Total Assets:                    1,867.34     1,403.97

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Revenue, Profit & Pay Out

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Income from Lease Operations:      118.28       112.76

Investment Income:                  35.27        12.35

Other Income:                        2.47         4.57

Net (Change) in Fair Value of

Investment held for Trading-Net:    (1.97)      (6.14)

Gross Revenue:                     154.05       123.54

Direct (Cost) of Leases:            (8.76)      (9.77)

Admin & Operating (Expenses):      (33.42)     (29.31)

Financial (Charges):               (81.14)     (64.10)

Amortisation of Deferred Costs:    (11.42)      (8.24)

(Provision) & Write Offs:           (5.58)      (4.03)

Total (Expenditure):              (140.32)    (115.45)

Profit Before Taxation:             13.73         8.09

Profit After Taxation:              11.94        13.57

Earning Per Share (Rs):              0.68         0.75

Dividend @ 3%/5%:                    5.25         8.75

Share Price (Rs) on 06/10/05:        5.00            -

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Financial Ratios

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Price/Earning Ratio:                 7.35            -

Book Value Per Share (Rs):          12.87        12.23

Price Book Value Ratio:              0.39            -

Debt/Equity Ratio:                  76:24        72:28

Current Ratio:                       0.91         1.04

Lease Income/Total Income (%):      76.78        91.27

Net Profit/Total Income (%):         7.75        10.98

R.O.E     (%):                       5.30         6.34

R.O.A     (%):                       0.63         0.97

R.O.C.E (%):                         1.16         1.52

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