The Hub Power Company announced its FY12 annual results yesterday, reporting a massive 51 percent year-on-year increase in after-tax profits. The commendable top line growth translated in the impressive bottom line performance as the Company rode on higher revenues owing to multiple factors. Hubcos turnover grew by 42 percent year on year as the ROE component of the tariff soared by 8 percent year on year. Moreover, the Narowal power projects tariff approval also had its share and is expected to have contributed nearly Re.1/share to the bottom line. The Narowal power project successfully completed its first year of operation and the electricity generated was significantly higher than that of the previous year. A near 5 percent depreciation in rupee versus the greenback also played in favour of the IPP, as the tariff continues to be pegged with the US dollar. During FY12, Hubcos plant is believed to have operated at relatively low load factor as the inter-corporate circular debt resulted in delayed payments from major customers-WAPDA and NTDC. The plant is expected to have operated at 74 percent load factor generating 7,653Gwh, against the 77 percent load factor achieved in FY11. Operating costs moved in tandem with revenues, yet the gross profit margin marginally increased by 150bps to 9 percent for FY12. This is primarily attributable to higher tariff and rupee depreciation and also the arrears charged on the hefty overdue trade debts. The merciless circular debt has continued to hamper the Companys profitability and the IPPs continue to be the victims. The finance cost for FY12 more than doubled against the corresponding period of last year, crossing Rs.7 billion. Hubcos receivables had reached Rs.116 billion as at March 30, 2012, compelling it to arrange for short-term borrowings, hence, the increased financial cost. The financial charges on short-term borrowings constitute nearly 40 percent of the overall finance cost, which is a huge cause of concern as it hampers the bottom line. The short-term borrowings had reached Rs.12.6 billion by March end 2012, which showcases the liquidity issues arising due to the delayed payments from customers. Hubco, in return, also owes nearly a similar amount to its suppliers, and ends up paying interest charges, negating the positive impact of arrears received on its trade debts. That said, the Company has continued to delight its shareholders by maintaining its history of high payout ratio, as evident from Rs.3/share final dividend announced yesterday. That the Company is still able to dole out dividends despite being engulfed in the circular debt crisis, speaks volume of the inherent strength of the Companys business model.
============================================== HUB POWER COMPANY ============================================== (Rs mn) FY12 FY11 chg ============================================== Turnonver 174,712 123,310 42% Operating costs 159,062 114,093 39% Gross profit 15,651 9,217 70% Gross margin 9.0% 7.5% Finance cost 7,083 3,382 109% Profit 8,190 5,425 51% EPS (Rs) 7.09 4.69 ==============================================
Source: KSE notice
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