K-ELECTRIC

COMPANY
 INTRODUCTION

K Electric provides electricity to Karachi, the ‘City of Lights’. K-Electric Limited caters to the
city’s 6,500 square kilometers and supplies electricity to all the industrial, commercial,
agricultural and residential areas that come under its network. The organization has over 2.5
million customer accounts in Karachi, Dhabeji and Gharo in Sindh, and Hub, Uthal, Vindar
and Bela in Balochistan. It is the only vertically-integrated power utility in Pakistan, which
means we manage all three key stages – generation, transmission and distribution – of
producing and delivering energy to our consumers. K-Electric is also one of the city’s largest
employers, with nearly 11,000 members of staff. Formerly known as Karachi Electric Supply
Company Limited, the organization was established over a hundred years ago and is an integral
part of one of the world’s most populous cities. In 2009, The Abraaj Group acquired a
controlling stake in KES Power Limited, the majority shareholder, beginning a turnaround
which has thus far seen investments of over USD 1.4 billion. Our transition to K-Electric in the
face of numerous challenges has become a case study in business excellence and
transformation, and we continue to work hard to take KE forward and earn the trust of all our
stakeholders.
 FINANCIAL RATIOS OF K ELECTRIC
RATIOS 2013 2014 2015 2016 2017

Current Ratio 0.69 0.71 0.76 0.88 0.98

Acid Test Ratio 0.35 0.40 0.44 0.53 0.82

Gross profit Ratio 9.6 15.2 16.6 22.7 30.7

Net profit to sales 1.1 3.6 6.6 14.9 17.3

Debtor turnover ratio 2.16 1.98 1.76 1.54 1.54

Days in A/R 9 7 35 35 33

Debt ratio 0.23 0.39 0.32 0.63 0.36

Debt to equity 0.51 0.32 0.20 0.80 0.15

Pretax margin 1.1 2.1 4.9 7.9 13.7

Debt financial ratio 0.09 0.12 0.13 0.11 0.08

Return on equity ratio 1.9 3.7 7.8 11 16

Earnings per share 0.07 0.26 0.47 1.03 1.19

Price Earnings ratio 45.29 24 18.19 8.21 6.79

Breakup value for ordinary share 1.67 1.95 2.57 4.64 5.83

Cash flow from operations to (0.06) 0.01 0.07 0.10 0.22

revenue
 INTERPRETATION OF RATIOS

CURRENT RATIO

2013 2014 2015 2016 2017

Current Ratio 0.69 0.71 0.76 0.88 0.98

The current ratio is mainly used to give an idea of a company's ability to pay back its liabilities (debt and
accounts payable) with its assets (cash, marketable securities, inventory, and accounts receivable). As such,
current ratio can be used to make a rough estimate of a company's financial health. In this case however,
current ratio is maximum in 2017 so now it has maximum ability to back its liabilities as compared to the
previous years and hence is now more reliable.

ACID TEST RATIO

2013 2014 2015 2016 2017

Acid Test
Ratio 0.35 0.40 0.44 0.53 0.82

The acid-test or quick ratio or liquidity ratio measures the ability of a company to use its near cash or quick
assets to extinguish or retire its current liabilities immediately. Hence in this case, its ability to use its cash to
retire its payables has been increasing and is maximum in 2017

GROSS PROFIT RATIO

2013 2014 2015 2016 2017

Gross profit 9.6 15.2 16.6 22.7 30.7
Ratio

Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between gross profit and total net
sales revenue. It is a popular tool to evaluate the operational performance of the business. The ratio is
computed by dividing the gross profit figure by net sales. In this case, the ratio is highest in the year 2017.

NET PROFIT TO SALES

2013 2014 2015 2016 2017
Net profit sales 1.1 3.6 6.6 14.9 17.3
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining profit after all
costs of production, administration, and financing have been deducted from sales, and income taxes
recognized. In this case the net profit to sales is maximum at 2017 which is 17.3.

DEBTOR TURNOVER RATIO

2013 2014 2015 2016 2017
Debtor 2.16 1.98 1.76 1.54 1.54
turnover ratio

The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. A high ratio
implies either that a company operates on a cash basis or that its extension of credit and collection of accounts
receivable is efficient. In this case, the highest debtor turnover ratio is in the year 2013 which is 2.16.

DAYS IN A/R
2013 2014 2015 2016 2017
Days in A/R 9 7 35 35 33

It is calculated by taking the average daily charges for the past several months – adding up the charges posted
for the last six months and dividing by the total number of days in those months. Divide the total accounts
receivable by the average daily charges and we would then get the days in accounts receivable. In this case, the
most number of days in accounts receivable were in 2014 and 2015.

DEBT RATIO
2013 2014 2015 2016 2017
Debt ratio 0.23 0.39 0.32 0.63 0.36
The debt ratio is a financial ratio that measures the extent of a company's leverage. The debt ratio is defined as
the ratio of total debt to total assets, expressed as a decimal or percentage. It can be interpreted as the
proportion of a company's assets that are financed by debt. In this case however, the debt ratio is maximum in
the year 2016.

DEBT TO EQUITY RATIO

2013 2014 2015 2016 2017
Debt to 0.51 0.32 0.20 0.80 0.15
equity
It is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a
company's assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage. The
highest ratio in this regard was in 2016 that is 0.80.

PRETAX MARGIN
2013 2014 2015 2016 2017
Pretax margin 1.1 2.1 4.9 7.9 13.7

Pretax profit margin is a company's earnings before tax as a percentage of total sales or revenues. The higher
the pretax profit margin, the more profitable the company. Hence in this case, the highest profit margin was in
2017 that is 13.7.

DEBT FINANCIAL RATIO

2013 2014 2015 2016 2017
Debt financial 0.09 0.12 0.13 0.11 0.08
ratio

The debt ratio is a financial ratio that measures the extent of a company's leverage. The debt ratio is defined as
the ratio of total debt to total assets, expressed as a decimal or percentage. It can be interpreted as the
proportion of a company's assets that are financed by debt. In this case, the debt financial ratio was highest in
the year 2015 that is 0.13.

RETURN ON EQUITY RATIO

2013 2014 2015 2016 2017
Return on 1.9 3.7 7.8 11 16
equity ratio

The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate profits
from its shareholders investments in the company. In other words, the return on equity ratio shows how much
profit each dollar of common stockholders' equity generates. However, in the case of K electric return on
equity ratio was highest in the year 2017 that is 16.

EARNINGS PER SHARE

2013 2014 2015 2016 2017
Earnings per 0.07 0.26 0.47 1.03 1.19
share
Earnings per share (EPS) ratio measures how much amount of net income have been earned by each share of
common stock. It is a famous tool that measures the profitability of a company. The highest EPS in the case of
K electric is 1.19 in 2017.

PRICE EARNINGS RATIO

2013 2014 2015 2016 2017
Price Earnings 45.29 24 18.19 8.21 6.79
ratio

Price-earnings ratio indicates the amount an investor can expect to invest in a company in order to receive one
dollar of that company's earnings. The price earnings ratio in this case was highest in 2013 that is 45.29

BREAKUP VALUE FOR ORDINARY SHARE

2013 2014 2015 2016 2017
Breakup
value for 1.67 1.95 2.57 4.64 5.83
ordinary
share

The breakup value is the sum-of-parts value of a publicly traded company. Investors derive this value by
analyzing each business segment of a company independently. Breakup value is usually applied to large cap
stocks that are likely to operate in several different markets or industries. The breakup value for ordinary share
was highest in 2016 for k electric that is 4.64.

CASH FLOW FROM OPERATIONS TO REVENUE

2013 2014 2015 2016 2017
Cash flow
from (0.06) 0.01 0.07 0.10 0.22
operations to
revenue

Cash flow from operating activities (CFO) or free cash flow from operations (FCFO), refers to the amount of
cash a company generates from the revenues it brings in, excluding costs associated with long-term investment
on capital items. The CFO in this regard was highest in 2017 that is 0.22.
 VERTICAL ANALYSIS
ITEMS 2017% 2016% 2015% 2014% 2013%
Equity and Liability
Share capital and 45.525 38.758 34.645 35.659 34.092
reserves

Non-Current
Liability
Long Term Financing 3.589 2.636 6.562 9.225 15.837
Current Liability
Trade and other 38.456 42.593 39.042 35.642 36.268
Short term borrowing 11.044 14.794 16.179 13.932 8.589
Current Maturity 1.384 1.219 3.573 5.543 5.214

ASSETS
Non-Current
Property, Plant, 68.195 69.848 66.881 70.379 75.378
Equipment
Intangible 0.019 0.044 0.148 0.216 0.008
Long term Deposits 0.003 0.003 0.042 0.045 0.053
Long term Loans 0.008 0.009 0.012 0.018 0.022
Current
Stores, Spares parts 2.425 2.219 2.344 1.969 1.953
Trade debts 28.450 27.202 29.733 26.857 21.841
Loans and advances 0.236 0.261 0.584 0.179 0.222
Cash & bank balances 0.665 0.414 0.257 0.338 0.524

INTERPRETATION

Vertical analysis of last five year is done by the formula % = each item/total*(100). We can analyze the
performance of the company by comparing their vertical analysis. The base amount (100%) is total assets; the
base amount is also total liabilities and equity because they are exactly same. It highlights changes in an item
from year to year or over time. Every other item on the statement is then its base amount which is the 100%
figure.
 HORIZONTAL ANALYISIS
ITEMS 2017% 2016% 2015% 2014% 2013%
Equity and Liability
Share capital and - - - - 15
reserves

Liability
Non-Current
Long term financing 15 (64) (26) (42.3) (8.4)
Current Liability
Trade and other (23.1) (2.4) 12.7 (2.7) 31.3
Short term borrowing (36.4) (18.2) 19.5 60.5 9.5
Current Maturity (3.3) (69.5) (33.6) 5.2 35.4

ASSETS
Non-Current
Property, Plant, 4.4 25.5 3.4 (3.3) 1.7
Equipment
Intangible (52.3) (64.3) (25.4) 16.4 (16.6)
Long term Deposits 4.9 (92.5) 1.1 (11.8) 54.3
Long term Loans (6.9) (5.2) (28.7) (16.3) (19.8)
Current
Stores, Spares parts 17 13.9 29.5 4.3 (28.1)
Trade debts 11.9 10 20.5 27.2 25.5
Loans and advances (3.3) (46.3) 25.4 (16.3) 8.1
Cash & bank balances 71.8 94 (17.3) (33.2) (6.7)

INTERPRETATION
The horizontal analysis of the K electric company is done by the formula, Dollar amount of change/base
period*(100). By putting the values of data of every year we can get the horizontal analysis of the company.
Here is the horizontal analysis of balance sheet of each year. So we can see easily that there is the difference in
the amount between each year. Horizontal analysis compares one year to the next. It provides comparison of a
company’s performance in different years.