Company Information BOARD OF DIRECTORS Mr. M R Khan Mr. S M Nadim Shafiqullah Mr. Syed Nauman Akhtar Mr. Mohammed Khalid Ali Mr. Azim Azfar Mr. Shafiq

Transcription

1 Table of Contents Contents Page. No. Company Information 2 Directors Review 3 Auditors' Report To The Members 4 Condensed Interim Balance Sheet 6 Condensed Interim Profit and Loss Account 7 Condensed Interim Statement of Comprehensive Income 8 Condensed Interim Statement of Changes in Equity 9 Condensed Interim Cash Flow Statement 10 Condensed Interim Notes to the Financial Information 11 Security Leasing Corporation Limited

2 Company Information BOARD OF DIRECTORS Mr. M R Khan Mr. S M Nadim Shafiqullah Mr. Syed Nauman Akhtar Mr. Mohammed Khalid Ali Mr. Azim Azfar Mr. Shafiq-ur-Rehman Mr. Abdul Ghafoor Mr. Naeem Shafi AUDIT COMMITTEE Mr. Naeem Shafi Mr. S M Nadim Shafiqullah Mr. Abdul Ghafoor EXECUTIVE COMMITTEE Mr. M R Khan Mr. S M Nadim Shafiqullah Mr. Syed Nauman Akhtar Mr. Naeem Shafi Vice Chief Executive Officer Member Member Member Member Member HUMAN RESOURCE & REMUNERATION COMMITTEE Mr. Abdul Ghafoor Mr. Syed Nauman Akhtar Member Mr. Shafiq-ur-Rehman Member COMPANY SECRETARY EXTERNAL AUDITORS INTERNAL AUDITORS LEGAL ADVISORS Farah Azeem Avais Hyder Liaquat Nauman Chartered Accountants Anjum Asim Shahid Rahman & Company, Chartered Accountants Ali Raza Habb & Co. Advocates, Solicitors & Legal Advisor TAX CONSULTANTS Ernst & Young Ford Rhodes Sidat Hyder Chartered Accountants REGISTERED & HEAD OFFICE Block 'B', 5th Floor, Lakson Square No. 3, Sarwar Shaheed Road, Karachi Tel: UAN PRI Fax: Web: slcl@seclease.com BRANCH Lahore - North Region D-802, 8th Floor, City Towers, 6-K, Main Boulevard, Gulberg-II, Lahore Phone: Fax: SHARE REGISTRAR F. D. Registrar Services (SMC-Pvt) Ltd. Office # 1705, 17th Floor, Saima Trade Tower-A, I.I. Chundrigar Road, Karachi Tel: / Fax: fdregistrar@yahoo.com 02 Half Yearly Report 2015

3 DIRECTORS REVIEW The Directors of your Company are pleased to present before you the Financial Statements of your Company for the half year ended December 31, As at the end of the 2nd Quarter of the Financial Year on 31 December 2015, the Balance Sheet footing of the Company stands at Rs million, as compared to Rs million as on June 30, This was mainly due to the reduction in company's portfolio. During the second quarter under review the total revenue amounted to Rs million compared to Rs million during the second quarter ended 31st December The company had loss after tax of Rs million during the period under review compared to Rs million during the second quarter ended 31st December The loss per share as of 31st December 2015 was 0.42 compared to 2.08 as of 31st December The company has doubtless been under considerable pressure for sometime due to the delay in reaching settlement with the creditors. Negotiations with them are, however, continuing and hopefully a way forward would be found in the near future. The board also recognizes that the company needs additional equity which some investors are willing to inject after the creditors have agreed to a realistic restructuring arrangement. Meanwhile all possible measures have been taken to cut down drastically the company's administrative and staff costs. For and on behalf of the Board of Directors Syed Nauman Akhtar Chief Executive Officer February 19, 2016 Security Leasing Corporation Limited 03

4 AUDITORS' REPORT TO THE MEMBERS ON REVIEW OF CONDENSED INTERIM FINANCIAL INFORMATION Introduction We have reviewed the accompanying condensed interim balance sheet of Security Leasing Corporation Limited as at December 31, 2015 and the related condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim statement of changes in equity, condensed interim cash flow statement and notes to the accounts for the six months period ended (here-in-after referred to as the "interim financial information"). Management of the Company is responsible for the preparation and fair presentation of this interim financial information in accordance with approved accounting standards as applicable in Pakistan, provisions of and directives issued under the Companies Ordinance, 1984, Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 and Non-Banking Finance Companies and Notified Entities Regulations, Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of condensed interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Basis for adverse conclusion a) As described in Note 1.2 to the condensed interim financial information, the financial information has been prepared on going concern basis. The Company has incurred a loss of Rs million in the current interim period (2014: Rs million). As at interim balance sheet date, accumulated loss of the company was Rs million (June 30, 2015: Rs million) as against the issued, subscribed and paid up capital of Rs million (June 30, 2015: Rs million) and current liabilities of the company exceed its current assets by Rs million (June 30, 2015: Rs million). The Company is, therefore, facing operational and financial problems. There is no sufficient appropriate audit evidence that the management's plans are feasible and ultimate outcome will improve the Company's current situation. The going concern assumption used in the preparation of this interim financial information is inappropriate; therefore, the Company may not be able to realize its assets and discharge its liabilities in the normal course of business.

5 b) The Company has recorded deferred tax asset of Rs million (June 30, 2015: Rs million) based on its future plans which projects that future taxable profit would be available against which such deferred tax assets could be utilized. However, there is no sufficient appropriate audit evidence that the management's plans are feasible and ultimate outcome will improve the Company's current situation as discussed in (a) above, therefore, sufficient future taxable profits will not be available against which deferred tax asset could be utilized. Further, deferred tax asset should be de-recognised. Had the deferred tax asset been de-recognised, deferred tax asset and equity would have been lower by and loss for the period would have been higher by Rs million. (c) During the period, the Company has not recorded unwinding expense on financial liabilities amounting to Rs million. Had this expense been recorded, the financial liability would have been lower by Rs million and equity would have been lower by and loss for the year would have increased by Rs million. Conclusion Our review indicates that, because of the significant matters stated in the proceeding paragraphs, this accompanying interim financial information as of and for the half year ended December 31, 2015 is not prepared, in all material respects, in accordance with approved accounting standards as applicable in Pakistan, provisions of and directives issued under the Companies Ordiance,1984, Non-Banking Finance Companies (Establishment and Regulation) Rules,2003 and Non-Banking Finance Companies and Notified Entities Regulations,2008 for interim financial reporting. Other Matter The figures of the condensed interim profit and loss account and condensed interim comprehensive income for the quarters ended December 31, 2015 and 2014 have not been reviewed, as we are required to review only the cumulative figures for the half year ended December 31, Chartered Accountants Karachi Dated: Engagement Partner: Adnan Zaman

6 ASSETS Current assets CONDENSED INTERIM BALANCE SHEET AS AT DECEMBER 31, 2015 Note Un-audited 31 December 2015 Audited 30 June 2015 Cash and bank balances 5 32,047,183 27,419,693 Short term finances- secured 10,000,000 10,000,000 Advances, prepayments and other receivables 1,748,417 1,706,317 Accrued return on investments - 5,775 Taxation-net 4,066,767 3,546,886 Current maturity of non-current assets 6 297,459, ,506,309 Total current assets 345,321, ,184,980 Non-current assets Net investment in finance leases 7 46,216,473 65,907,748 Long-term deposits 504, ,500 Property and equipment 8 87,999,505 93,423,187 Deferred tax asset 9 346,621, ,621,261 Total non-current assets 481,341, ,456,696 Total assets 826,663, ,641,676 LIABILITIES Current liabilities Accrued and other liabilities 72,336,152 75,269,264 Current maturity of non-current liabilities ,310, ,856,601 Total current liabilities 455,646, ,125,865 Non-current liabilities Long -term finances ,817, ,327,773 Long-term deposits 24,776,721 29,678,831 Total non-current liabilities 249,594, ,006,604 Total liabilities 705,240, ,132,469 NET ASSETS 121,422, ,509,208 REPRESENTED BY SHAREHOLDERS' EQUITY Share capital and reserve Issued, subscribed and paid-up share capital12 438,027, ,027,750 Reserves 13 (346,854,971) (334,983,831) 91,172, ,043,919 Surplus on revaluation of fixed assets 30,249,563 33,465,289 Total shareholders' equity 121,422, ,509,208 CONTINGENCIES AND COMMITMENTS 14 The annexed notes from 1 to 17 form an integral part of these financial statements. Syed Nauman Akhtar Chief Executive Officer M. R. Khan 06 Half Yearly Report 2015

7 CONDENSED INTERIM PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED DECEMBER 31, 2015 (UN-AUDITED) Note Half Year Ended December 31, 2015 December 31, 2014 Quarter ended December 31, December 31, REVENUE Income from: Finance leases 2,074,012 5,305, ,146 2,317,810 Other operating income 4,191,863 7,023,788 2,391,645 2,464,120 6,265,875 12,328,819 2,766,791 4,781,930 Unwinding of financial liability - (32,911,871) - (16,537,979) - (32,911,871) - (16,537,979) EXPENSES 6,265,875 (20,583,052) 2,766,791 (11,756,049) Administrative and selling 20,534,941 52,128,006 12,760,260 33,981,662 Finance costs 505,840 2,172, , ,143 Direct cost of finance leases - 1,217, ,000 Provision & Write-offs - (979,295) ,040,781 54,538,617 13,002,806 35,390,805 Operating (Loss) before Income tax (14,774,906) (75,121,669) (10,236,015) (47,146,854) Income tax expense - current (312,000) (220,000) (85,000) (106,000) (312,000) (220,000) (85,000) (106,000) Loss for the period (15,086,906) (75,341,669) (10,321,015) (47,252,854) Loss per share 15 (0.42) (2.08) (0.28) (1.30) The annexed notes from 1 to 17 form an integral part of these financial statements. Syed Nauman Akhtar Chief Executive Officer M. R. Khan Security Leasing Corporation Limited 07

8 CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED DECEMBER 31, 2015 (UN-AUDITED) Half Year Ended December 31, 2015 December 31, 2014 Quarter ended December 31, December 31, Loss for the period (15,086,906) (75,341,669) (10,321,015) (47,252,854) Other comprehensive income Surplus on revaluation of property 3,215, ,151 3,215, ,151 Total Comprehensive income for the period (11,871,140) (74,937,518) (7,105,249) (46,848,703) The annexed notes from 1 to 17 form an integral part of these financial statements. Syed Nauman Akhtar Chief Executive Officer M. R. Khan 08 Half Yearly Report 2015

9 CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED DECEMBER 31, 2015 (UN-AUDITED) Balance as at June 30, ,027, ,867,005 (494,990,202) - 124,904,552 Change in equity for the year ended December 31, 2014 Transferred from surplus on revaluation of fixed assets - incremental depreciation (net of tax) 404, ,151 Loss for the period - - (75,341,669) - (75,341,669) Total recognised loss for the period - - (74,937,518) - (74,937,518) Balance as at December 31, ,027, ,867,005 (569,927,720) - 49,967,034 Change in equity for the year ended June 30, 2015 Transferred from surplus on revaluation of fixed assets - incremental depreciation (net of tax) 6,660,787 6,660,787 Loss for the year (28,521,421) (28,521,421) Total recognised loss for the year - - (21,860,634) - (21,860,634) Balance as at June 30, ,027, ,867,005 (516,850,836) - 103,043,919 Change in equity for the year ended December 31, Reserves Share Capital Revenue Unrealised Total Capital Statutory (loss)/gain on Unappropriated reserve remeasurement losses of available for sale investments Transferred from surplus on revaluation of fixed assets 3,215,766 3,215,766 Loss for the period (15,086,906) (15,086,906) Total recognised loss for the period - - (11,871,140) - (11,871,140) Balance as at December 31, ,027, ,867,005 (528,721,976) - 91,172,779 The annexed notes from 1 to 17 form an integral part of these financial statements. Syed Nauman Akhtar Chief Executive Officer M. R. Khan Security Leasing Corporation Limited 09

10 CONDENSED INTERIM CASH FLOWS STATEMENT FOR THE PERIOD ENDED DECEMBER 31, 2015 (UN-AUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Note December 31, 2015 December 31, 2014 Loss before tax (14,774,906) (75,121,669) Depreciation 5,234,219 5,092,965 Gain on disposal of property and equipment - (6,999) Finance costs 505,840 2,172,905 Amortization of issue cost of sukuk/ unwinding of financial liability 463,039 32,911,871 Provision for potential lease and other losses - (979,295) 6,203,098 39,191,447 Operating loss before working capital changes (8,571,808) (35,930,223) Working capital changes Decrease in net investment in finance leases 36,738,371 2,012,633 (Increase )/ Decrease in advances, prepayments and other receivables (42,100) 78,996 Decrease in accrued return on investments 5, ,659 (Increase)/Decrease in deposits from leases (8,445,760) 1,740,030 (Increase)/Decrease in accrued and other liabilities (2,933,112) 1,697,332 25,323,174 5,718,650 Cash from operations after working capital changes 16,751,366 (30,211,573) Financial charges paid (505,840) (2,333,164) Taxes paid (831,881) (763,221) (1,337,721) (3,096,385) Net cash from operating activities 15,413,645 (33,307,957) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment - (37,000) Long term finance - 43,959,707 Proceeds from disposal of property and equipment(net) 189,500 6,736,286 Long term deposits - 315,150 Net cash from investing activities 189,500 50,974,143 CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long term finances (10,975,655) (23,535,265) Net cash used in financing activities (10,975,655) (23,535,265) Net increase in cash and cash equivalents 4,627,490 (5,869,079) Cash and cash equivalents at beginning of the period 27,419,693 36,562,506 Cash and cash equivalents at end of the period 16 32,047,183 30,693,426 The annexed notes from 1 to 17 form an integral part of these financial statements. Syed Nauman Akhtar Chief Executive Officer M. R. Khan 10 Half Yearly Report 2015

11 NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION FOR THE PERIOD ENDED DECEMBER 31, 2015 (UN-AUDITED) 1 LEGAL STATUS AND NATURE OF BUSINESS 1.1 Security Leasing Corporation Limited ("the Company") was incorporated in Pakistan on December 6, 1993 and commenced its operations on May 21, The Company is a Non- Banking Finance Company (NBFC) under Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 and engaged in the business of leasing. The registered office of the Company is situated at Block B, 5th Floor, Lakson Square Building No.3, Sarwar Shaheed Road, Karachi, Pakistan. The Company is listed on Karachi and Lahore Stock Exchanges. 1.2 The Company is licensed to operate as leasing Company by Securities and Exchange Commission of Pakistan (SECP) and its forbearance of the license was extended up to July The renewal request is submitted with the Commission. Since the start of the financial and economic crisis in Pakistan in October 2008, the financing facilities of the Company were abruptly withdrawn by the banks which resulted in reduction of portfolio of leasing and other finances. The private sector especially NBFCs could not attract any funding in form of either equity or financing facility due to crowding out by high fiscal borrowings of government in the last 4 years. The Company was feeling extraordinary pressure on its repayment capacity due to constant reduction of portfolio and absence of sizeable fresh business. Therefore, the Company negotiated on different occasion in last four years with its lenders of long and short term funding for the reprofiling of its financial liabilities and now the Company has requested all its lenders to make full and final settlement by offering Specific leased assets under charge, additional lease assets from the portfolio and all the properties owned by the Company. Mitigating Factors The main objective of requesting the lenders for full and final settlements of financial liabilities was to increase cash flows and equity of the Company. In addition to these measure, the Company also taking drastic steps to reduce the administrative costs by laying of its staff from all cadres as well as revising certain staff benefits. These measures helped operationally for the Company as a going concern entity. The Management is hopeful that settlement with lenders will assist in reducing losses and improving the equity of the Company. This will make the company attractive for equity participation/merger /acquisition to inject additional equity. The Company is making efforts to improve equity level through bringing fresh equity. In this regard some positive progress has been made. The company is constantly looking for options to increase the equity levels by soliciting investor for cash and in kind equity investment. The Board and its management are hopeful that these measures would bring stability to the Company and results would start to improve in the coming periods. Security Leasing Corporation Limited 11

12 2 BASIS OF MEASUREMENT These financial statements have been prepared under historical cost convention except for certain property and equipment which have been stated at revalued amounts and financial assets and financial liabilities which have been stated at their fair values, cost or amortized cost. The financial statements have been prepared following the accrual basis of accounting except for the cash flow information. 3 STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the approved accounting standards, as applicable in Pakistan and the requirements of the Companies Ordinance, 1984 (the Ordinance), the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the Rules) and the Non- Banking Finance Companies and Notified Entities Regulations, 2008 (the Regulations). Approved accounting standards comprise such International Financial Reporting Standard (IFRS) issued by International Accounting Standard Board (IASB) as are notified under the provisions of the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, Wherever, the requirements of the Ordinance, the Rules and the Regulations differ with the requirements of IFRS, the requirements of the Ordinance, the Rules or the Regulations shall prevail. 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted for the preparation of these quarterly accounts are the same as those applied in the preparation of the preceding annual published accounts of the company for the year ended June 30, CASH AND BANK BALANCES Note Un-audited December 31, 2015 Audited June 30, 2015 Cash in hand 2,434 1,691 Balance with State Bank of Pakistan in current account 39,430 16,089 Balances with other banks in: -Current accounts 31,989,968 27,386,830 -Saving accounts 15,351 15,083 Term deposit receipt ,047,183 27,419,693 6 CURRENT MATURITY OF NON - CURRENT ASSETS Net investments in leases 7 297,459, ,506, ,459, ,506,309 7 NET INVESTMENT IN FINANCE LEASE Net investment in finance leases 343,675, ,414,058 Less: current portion of net investment in finance leases (297,459,214) (314,506,309) 46,216,473 65,907, Half Yearly Report 2015

13 Dec,2015 June 2015 Not Later than one year Later than one year Total Not Later than one year Later than one year Total Lease rentals receivable 328,775,223 21,738, ,513, ,965,435 36,580, ,545,510 Add: Residual value of leased assets 152,291,552 24,776, ,068, ,295,202 31,221, ,517,134 Gross investment in finance leases 481,066,775 46,515, ,582, ,260,637 67,802, ,062,644 Less: Unearned lease income 1,430, ,939 1,729,397 4,577,225 1,894,258 6,471,483 Income suspended 56,896,067-56,896,067 56,896,067-56,896, ,740,250 46,216, ,956, ,787,345 65,907, ,695,094 Provision for potential lease losses 125,281, ,281, ,281, ,281,036 Net investment in leases 297,459,214 46,216, ,675, ,506,309 65,907, ,414, ,459,214 46,216, ,675, ,506,309 65,907, ,414,058 8 PROPERTY AND EQUIPMENT Un-audited December 31, 2015 Audited June 30, 2015 Property and equipment -owned 87,999,505 93,423,187 Opening WDV of property and equipment 147,271, ,440,140 Additions to property and equipment - 37, ,271, ,477,140 Depreciation charge 57,377,005 53,848,328 Disposals/ transfers made at WDV 1,895,000 20,205,625 Closing WDV of property and equipment 87,999,505 93,423, During the period disposal of vehicle is made to Muhammad Rasheed Khan in accordance with the terms of employement. 8.2 Details of additions and disposals in operating fixed assets during the period. Additions Un-audited 31 December 2015 Deletions Audited 30 June 2015 Additions Deletions Furniture and fixtures ,845,000 Office equipment ,000 Computer equipment ,800 Vehicles - 1,895,000-18,051,825 1,895,000 37,000 20,205,625 9 DEFERRED TAX ASSET 346,621, ,621,261 Amount shown in deferred taxation represents balances as at June 30, No further deferred tax has been recognized during the period and shall be recorded in annual financial statements, if applicable. Security Leasing Corporation Limited 13

14 Note 10 CURRENT MATURITY OF NON- CURRENT LIABILITIES Un-audited December 31, 2015 Audited June 30, 2015 Long term finances ,062, ,065,029 Long term deposits 152,247, ,791, ,310, ,856, LONG-TERM FINANCES - secured Other than related party Privately Placed Term finance certificates 45,704,734 45,704,734 Privately Placed SUKUKs 251,469, ,006,870 Long-term loans 158,113, ,113,751 Term Finance Certificates 591,790 11,567, ,880, ,392,802 Transfer to liabilities directly associated with the assets held for sale ,880, ,392,802 Less: Current maturity due but not paid Privately Placed Term finance certificates 15,234,375 10,156,250 Privately Placed SUKUKs 83,789,059 55,859,373 Long-term loans 39,140,255 27,314,799 Term Finance Certificates ,163,689 93,330,422 Less: Current maturity shown under current liabilities Privately Placed Term finance certificates 10,156,250 10,156,250 Privately Placed SUKUKs 55,859,373 55,859,373 Long-term loans 26,418,132 26,418,132 Term Finance Certificates 465,054 8,300,852 92,898, ,734, ,062, ,065, ,817, ,327, SHARE CAPITAL Authorised capital 75,000,000 (30 June 2015: 75,000,000) ordinary shares of Rs. 10 each 750,000, ,000,000 50,000,000 (30 June 2015: 50,000,000) preference shares of Rs. 10 each 500,000, ,000,000 1,250,000,000 1,250,000,000 Issued, subscribed and paid-up share capital 22,100,000 (30 June 2015: 22,100,000) ordinary shares of Rs. 10 each fully paid in cash 221,000, ,000,000 14,200,000 (30 June 2015: 14,200,000) ordinary shares of Rs. 10 each issued as fully paid bonus shares 142,000, ,000, ,000, ,000,000 Preference shares 7,502,775 (30 June 2015: 7,502,775) preference shares-class A of Rs. 10 each fully paid in cash 75,027,750 75,027, ,027, ,027, Half Yearly Report 2015

15 13 RESERVES Note Un-audited December 31, 2015 Audited June 30, 2015 Capital reserve Statutory reserves 181,867, ,867,005 Revenue reserve Accumulated loss (528,721,976) (516,850,836) (346,854,971) (334,983,831) 14 CONTINGENCIES AND COMMITMENTS Commitments for lease disbursements - - Half Year Ended December 31, 2015 December 31, 2014 Quarter ended December 31, December 31, (LOSS) PER SHARE - Basic and diluted Loss attributable to ordinary Shareholders (15,086,906) (75,987,183) (10,321,015) (47,252,854) Number of ordinary shares issued and subscribed 36,300,000 (75,987,183) 36,300,000 36,300,000 Loss per share- (0.42) (2.08) (0.28) (1.30) (Loss) per share has been calculated by dividing (loss)/profit for the period attributable to the ordinary shareholders outstanding at the period end by the weighted average number of shares outstanding during the period. 16 CASH AND CASH EQUIVALENTS Balances with banks 5 32,047,183 30,693,426 32,047,183 30,693, DATE OF AUTHORIZATION These interim condensed financial information were authorized for issue on 19 February 2015 by the Board of Directors of the Company. Syed Nauman Akhtar Chief Executive Officer M. R. Khan Security Leasing Corporation Limited 15

16