First IBL Modaraba (FIBLM), a Shariah-compliant financial institution, has reported a robust financial performance for the quarter ended September 30, 2025, showcasing a significant 43% increase in net profit compared to the same period last year. This impressive growth was primarily fueled by a surge in Ijarah income and stringent cost management, effectively offsetting a decline in Musharaka investment profits. However, investors should note the absence of any dividend declaration for the period.
Financial Performance Overview
FIBLM's net profit soared to PKR 7.45 million for the quarter, a substantial rise from PKR 5.20 million in the corresponding period of the previous year. This translated into an improved earnings per Modaraba Certificate (EPS) of PKR 0.34, up from PKR 0.24. Total income remained largely stable at PKR 13.05 million, a marginal 0.92% increase from PKR 12.93 million year-on-year. The real story, however, lies in expense control, with total expenses plummeting by over 37% to PKR 4.26 million, down from PKR 6.80 million.
On the balance sheet, total assets saw a modest increase of 3.4% to PKR 283.22 million as of September 30, 2025, compared to June 30, 2025. Equity also grew by 3.05% to PKR 251.64 million, primarily driven by a significant reduction in accumulated losses and an increase in statutory reserves, bolstering the Modaraba's capital base. Current liabilities, however, increased by 9.24% quarter-on-quarter, mainly due to higher trade payables and the current portion of long-term security deposits.
The cash flow statement presents a more nuanced picture. Net cash generated from operating activities significantly decreased by 79.13% to PKR 7.71 million for the quarter, a sharp drop from PKR 36.95 million in the preceding quarter (June 30, 2025). Furthermore, the company experienced a net cash outflow of PKR 17.25 million from investing activities, a substantial shift from the PKR 38.94 million inflow in the previous quarter. This resulted in an overall net decrease in cash and cash equivalents of PKR 9.54 million for the quarter, bringing the total cash and bank balances to PKR 172.49 million.
Key Drivers of Profitability
The primary driver of the improved profitability was a remarkable nearly 59.6% increase in Income from Ijarah, reaching PKR 6.43 million. This strong performance in the core leasing segment effectively compensated for a significant 55.6% decline in Profit on Musharaka investments, which fell to PKR 2.40 million. Other income also contributed positively, primarily from a substantial 164.3% increase in profit on deposits, further diversifying revenue streams.
The dramatic 37.4% reduction in overall expenses was a critical factor in boosting the bottom line. This was largely attributable to:
- A nearly 57.8% decrease in administrative expenses, reflecting strong cost control measures.
- A modest 11.0% reduction in depreciation on assets under Ijarah.
Management Actions & Strategic Signals
The financial position indicates a strategic reallocation of assets. While long-term Musharaka receivables decreased from PKR 31.77 million to PKR 19.44 million, there was a new entry of PKR 30 million in short-term Musharaka receivables, suggesting a shift in the maturity profile of these investments. The company also made new purchases of assets under Ijarah arrangements amounting to PKR 5.97 million during the quarter, signaling continued investment in its core leasing business.
Notably, the management has not recommended any cash dividend, bonus, or right certificates for the period, indicating a preference for retaining earnings within the business or perhaps a cautious outlook despite the strong profit growth.
Investor Takeaway
FIBLM's latest results present a mixed but generally positive outlook for investors. The significant jump in net profit and EPS, driven by robust Ijarah income and exceptional cost management, is a clear positive signal. It suggests that the company is effectively navigating its operational landscape and improving efficiency.
However, the notable decline in operating cash flow and the shift to a net outflow from investing activities warrant close attention. While the company is investing in its core Ijarah assets, the overall reduction in cash balances needs to be monitored for sustainability. The absence of a dividend, despite strong earnings, might temper some investor enthusiasm. Rational investors should watch for the sustainability of Ijarah growth, the strategic direction of Musharaka investments, and the company's ability to generate stronger operating cash flows in the coming quarters. These factors will be crucial in assessing FIBLM's long-term value proposition.