The year under review has been quite successful year despite rising interest rate for borrowings and at the same time difficult bargain on lease business's implicit rates of interest because of fierce competition unleashed by large commercial banks.
The company's lease portfolio was higher and its total asset base expanded to Rs 4.5 billion (FY 2003-04: Rs 3.84 billion) and gross revenue was only marginally lower. The directors are thinking to diversifying its business to improve profitability.
Because of its sound business processes and linkage with strong private bank, the company has access to borrowings from a number of banks. In addition, it has large long term deposits and funds through certificates of investment.
During the year the company booked pre-tax profit of Rs 74.13 million (FY 2003-04: Rs 100.33 million) showing 26.11% decline. But net profit for the year was Rs 84.13 million compared to Rs 76.33 million registering 10.22% increase. This was because of tax reversed during the year under review as compared to tax charged in the previous year.
Union Leasing Limited was incorporated as a public limited company on October 2, 1993 having its registered office located at 2nd Floor LDA Plaza, Egerton Road, Lahore. The shares are listed on all the three stock exchanges of the country ie Karachi, Lahore and Islamabad.
The main business activity of the company is leasing of moveable assets. It is operating from its principal office at Karachi and branch offices at Faisalabad, Islamabad, Sialkot, Hyderabad and Peshawar.
The company has capital base of Rs 355.76 million (FY 2003-04: Rs 301.77 million) comprising 35.576 million paid-up shares of Rs 10 each. Its holding company Union Bank Ltd owns 23.561 million shares (FY 2003-04: 19.729 million shares) which works out to 66.23 percent of the company's total paid-up shares.
Its total 3602 investors from local general public own 25.18% of Union Leasing Ltd's stock. NIT owns 4% of the company's stock.
At present the company's share is trading at Rs 14.50 per share carrying 45% premium over the par value. During the last one year the market value of the share ranged between relatively wide price band of Rs 10.50 and Rs 20.50 per share.
During the last five years the company has been regular in dividend distribution at a relatively modest payout rate. The payout for the year under review was recommended at Rs 2 per share similar to last year's. Out of the total 20% payout during the year, the dividend in cash is 10% and dividend in bonus stock is also 10%.
During the year under review, the company booked a total of Rs 895 new leases (2004: 1004 new leases) amounting to Rs 1.970 billion (2004: Rs 2.019 billion) new lease business booked was less due to uncertain lending rates and pressure on margins.
The Net Investment in Lease Finances (after allowance for potential lease losses) amounted to Rs 3.892 billion (FY 2003-04: Rs 3.318 billion) showing 17.3% expansion in lease asset base. The growth rate is commendable particularly in the backdrop of uneven playing field emerging from bank's entry in the leasing business.
The large commercial banks have entered in a big way in leasing particularly in machinery and auto lease businesses.
Hence the competition has forced the leasing companies to accept lower IRR. On the other hand the interest rates on resource mobilisation are rising and hence margins have come under pressure for the short run. The directors indicated that various options to diversify operations are under study to remain competitive and increase profitability.
During the year under review, the company generated gross revenue at Rs 366 million as against Rs 376.61 million posted in the preceding year showing marginal decrease of 2.82% lease income was 4.2% lower at Rs 324.84 million.
Administrative expenses depicted an increase because of new hiring and increasing business volume.
Due to higher investment portfolio, the company's borrowings also increased. At the same time cost of bank borrowings also rose in line with Kibor. This translated into higher financial charges.
In the field of resource mobilisation its borrowings came from Union Bank Ltd, Muslim Commercial Bank, The Bank of Punjab, United Bank Ltd, Faysal Bank Ltd and Allied Bank Ltd.
In addition, sources of larger amount finance for the company are certificates of investment and Long Term Deposits.
The company posted net profit after taxation at Rs 84.13 million which works out to EPS at Rs 2.40 (FY 2003-04: Rs 2.60).
============================================================
Performance Statistics (Million Rupees)
============================================================
30th June 2005 2004
============================================================
Share Capital-paid-up: 355.76 301.77
Reserves: 186.44 162.66
Shareholders Equity: 542.20 464.43
Unrealized Loss on
Investment Securities: (1.01) (1.56)
L.T. Debts: 541.10 479.08
L.T. Deposits: 655.58 393.21
L.T. Certificates of Investment: 941.53 1,206.78
Deferred Liabilities: 73.74 90.20
Current Liabilities: 1,737.70 1,204.95
Fixed Assets-Tangible: 27.73 24.81
Net Investment in Lease Finances: 2,526.35 1,955.62
L.T. Investment: 274.22 268.38
L.T. Loans: 18.45 14.54
L.T. Deposits & Deferred Cost: 1.36 2.44
Current Assets: 1,642.23 1,571.30
Total Assets: 4,490.84 3,837.09
------------------------------------------------------------
Revenue, Profit & Pay Out
------------------------------------------------------------
Income from Lease Operations: 324.84 339.10
Other Operating Income: 41.16 37.51
Gross Revenue: 366.00 376.61
Financial & Bank (Charges): (233.60) 214.81
Admin & Selling & Operating (Expenses): (56.44) (44.83)
Allowances for Potential Lease,
Loans & Receivable Losses: (1.83) (16.64)
Total (Expenditure): (291.87) (276.28)
Profit Before Taxation: 74.13 100.33
Profit After Taxation: 84.13 76.33
Earning Per Share (Rs): 2.40 2.60
Dividend Per Share (Rs): 2.00 2.00
Share Price (Rs) on 10/10/05: 14.50 -
------------------------------------------------------------
Financial Ratios
------------------------------------------------------------
Price/Earning Ratio: 6.04 -
Book Value Per Share (Rs): 15.24 15.39
Price Book Value Ratio: 0.95 -
Current Ratio: 0.95 1.30
Lease Income/Total Income (%): 88.75 90.00
Net Profit/Total Income (%): 22.99 20.27
R.O.E (%): 15.52 16.43
R.O.A (%): 1.87 1.99
R.O.C.E (%): 3.06 2.90
============================================================