KARACHI, Dec 11: On Tuesday, the company issued an ‘addendum’ marking supplementary agenda for the Annual General Meeting to be held on December 29, at its registered office in Karachi.

Cash dividend was reduced to 9 per cent for the financial year 2000, from 9.5 per cent paid the year before. But for the latest year ended June 30, 2001, directors propose to omit it altogether.

The supplementary agenda now notes that the shareholders would be asked to approve issue of 4 million right shares (40 per cent), at a discount of 30 per cent, for which the principal regulator has given its approval. The market price of the PGL stock being Rs7.50, the right issue is slated to be a little less expensive. But never mind the discount in the market price because as many as 32 of the 35 publicly traded leasing companies are quoting below par, though many are profitable and pay regular dividends to the shareholders.

The break-up value of PGL share worked out at Rs11.92 at June 30, 2001, which makes the right an attractive proposition. But the fear is that unless profitability rises a good deal, the company may find it even difficult to remunerate the expanded equity base.

After tax profit for the latest year amounted to Rs11.7 million, which was about the same as the earlier year’s taxed profit of Rs11.6 million. The board had paid Rs9 million to the shareholders in dividend in 2000, but opted to retain all of the profit this year. Directors explained that the profit had not been distributed because the company needed funds to extend operations and also to expand the equity base as desired by the SECP.

Directors also stated that the company had been following a judicious credit policy coupled with close monitoring procedures to minimize the incidence of over due rentals. The result of that cautious approach to leasing was said to reflect in the fact that the need for creating any loss reserves had not arisen. “However, out of abundant caution, and the visible slowdown of the economy in the current year effective 2001-02, out of its earnings, the company would create a general reserve for lease delinquency to safeguard shareholders interests”, directors stated.

On the balance sheet, apart from the statutory reserves of Rs9.6 million, up from Rs7.2 million at end-June 2000, there was now also the unappropriated profit of Rs9.7 million. Including the paid-up capital (unchanged since inception) at Rs100 million, the shareholders’ equity amounted to Rs119.2 million at end-June 2001.

Pak-Gulf Leasing had begun operations from September 16, 1996. By that reckoning, 2001 was the fourth full year of working. In the latest annual report issued in early December, directors said that the balance sheet footing of the company had increased 31 per cent to Rs188 million at end financial year 2001, from Rs143 million in 1999-00. During the year under review, 109 additional leases worth Rs98 million were written by the company.

After accounting for leases that matured during the year, the lease portfolio of the company expanded from Rs121 million to Rs162 million, representing increase of 33.32 per cent during the year. Gross revenue for the period amounted to Rs24.86 million, representing 2.4 per cent increase over last year. Income from leasing operations amounted to Rs22.9 million, which was about the same as last year’s Rs23 million. “Other income”, increased contribution to Rs1.9 million, from Rs1.3 million. Administrative and operating expenses could be reduced by a hefty 22 per cent to Rs8.1 million, from Rs10.3 million, which greatly helped in mitigating the impact of higher financial charges. Financial charges were up to Rs2.6 million, from Rs0.2 million the previous year. The company stated that the primary reason for a low rise of 1.4 per cent in net profit after tax to Rs2.3 million, from Rs2.2 million in 1999-00, was the increase in financial charges incurred on bank borrowings and increase in income taxes.