First IBL Modaraba (FIBLM) has delivered a remarkably strong financial performance for the year ended June 30, 2025, with profit after tax soaring by an impressive 144% and Earnings Per Certificate (EPS) jumping 143%. This significant bottom-line growth was primarily driven by strategic asset re-allocations and robust cash generation. However, a key decision for investors is the board's recommendation of no cash dividend or other corporate entitlements, signaling a clear focus on reinvestment and balance sheet strengthening for sustainable long-term value.
Financial Performance Highlights
FIBLM's profit after taxation soared by 144.4% to PKR 26.8 million for the year ended June 30, 2025, a substantial increase from PKR 10.9 million in the prior year. This translated into a robust EPS of PKR 1.24, marking a 143.1% increase from PKR 0.51. Total income from operations saw a modest 4.5% increase to PKR 54.4 million from PKR 52.0 million, while operating profit improved by 10.2% to PKR 26.2 million from PKR 23.8 million, indicating enhanced operational efficiency.
Despite the strong operating performance, profit before income tax saw a 10.1% decline to PKR 19.2 million from PKR 21.4 million, mainly due to a sharp increase in provisions for levies. Crucially, a significant positive income tax figure of PKR 7.5 million was recorded (a stark contrast to a PKR 10.4 million tax expense in the prior year), providing a substantial, albeit potentially non-recurring, boost to the final profit.
The balance sheet reflects an improved position, with total equity growing by 12.7% to PKR 244 million from PKR 216 million. Notably, accumulated losses were significantly reduced by 41.5% from PKR 51.5 million to PKR 30.1 million, a key indicator of improving financial health. The Modaraba also demonstrated excellent liquidity, with cash and bank balances surging by 71.3% to PKR 182 million from PKR 106 million.
Cash flow generation was robust, with net cash from operating activities increasing by 34.4% to PKR 36.9 million. More strikingly, net cash from investing activities turned strongly positive, generating PKR 38.9 million, a significant turnaround from a net outflow of PKR 3.4 million in the prior year.
Key Drivers & Strategic Shifts
The impressive financial results were largely driven by several strategic moves and income streams:
- Asset Re-allocation: A major catalyst was the disposal of investment property, which generated PKR 43.5 million in proceeds. This strategic move significantly boosted the Modaraba's cash position, enabling further investments and contributing substantially to the positive investing cash flow.
- Musharakah Portfolio Shift: There was a notable shift in the musharakah portfolio. Short-term musharakah receivables, which stood at PKR 44 million last year, were fully realized, contributing to cash inflows. Concurrently, long-term musharakah receivables increased substantially by 569% to PKR 31.7 million from PKR 4.7 million, signaling a strategic move towards a more enduring investment profile, potentially seeking higher, more stable returns.
- Ijarah Growth: Income from ijarah arrangements increased by 26.1% to PKR 19.6 million from PKR 15.5 million, reflecting continued robust activity in this core segment. The Modaraba also strategically invested PKR 30 million in new ijarah assets, reinforcing this income stream.
- Profit on Bank Deposits: A significant profit of PKR 18.7 million was earned from bank deposits, contributing substantially to 'Other income' and overall profitability, highlighting effective treasury management in the current interest rate environment.
Strategic Vision & Management Actions
The board's decision to recommend NIL cash dividend, bonus certificates, or any other corporate entitlement, despite the stellar profit growth, sends a clear strategic signal: management is prioritizing long-term value creation through reinvestment, strengthening the Modaraba's financial position, and significantly reducing accumulated losses and building statutory reserves. This proactive approach to asset portfolio management, including the disposal of investment property and the shift towards long-term musharakah, underscores a commitment to sustainable growth and stability.
Key Considerations for Investors
For investors, First IBL Modaraba's latest results present a mixed but generally positive picture. The significant increase in profit after tax and EPS, coupled with robust cash generation, a stronger balance sheet, and the substantial reduction in accumulated losses, are undoubtedly encouraging long-term developments.
However, the absence of a dividend will likely disappoint income-focused investors, highlighting a trade-off between immediate shareholder distributions and management's focus on long-term growth. Investors should closely monitor the sustainability of the current profit drivers, especially the contribution from bank deposits and the performance of the newly acquired ijarah assets and long-term musharakah investments.
Furthermore, the substantial positive income tax figure for the year is a critical element of the improved profitability, and investors should assess whether this is a recurring benefit or a one-off reversal of prior provisions. Conversely, the sharp increase in provisions for levies, from negligible amounts to PKR 4.4 million, warrants attention as it impacted the pre-tax profit. The upcoming Annual Review Meeting on December 30, 2025, might provide further clarity on management's future strategy and dividend policy.