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Pace (Pakistan) Q3 FY26: Revenue Rebounds as Disposal Gains Dominate Earnings

Pace’s Q3 revenue rebounded, but investment-disposal and FX gains drove much of the profit surge while operating cash flow remained deeply negative.

Sep 24, 2026

Verdict

Pace (Pakistan) Limited’s parent-company Q3 FY26 result looks much stronger at the bottom line than it does underneath. Revenue for the quarter ended March 31, 2026 rose 67.9% year on year to Rs232.04 million and gross profit increased 24.3% to Rs139.34 million, but gross margin fell to 60.0% from 81.1%. Profit after tax jumped 257.3% to Rs124.52 million. The key quality issue is that the quarter included Rs78.19 million of other income, almost exactly matching the Rs78.18 million gain disclosed on the partial disposal of Pace Barka Properties. That one transaction was equivalent to roughly 56% of quarterly profit before tax.

The underlying operating picture was therefore more mixed. If other income is removed from profit from operations simply to isolate the pre-other-income operating result, Q3 produced about Rs76.45 million versus Rs82.99 million a year earlier, a decline of roughly 7.9%. A Rs17.00 million exchange gain on the foreign-currency convertible bonds also replaced a Rs35.93 million exchange loss in the comparable quarter. Finance cost improved modestly, falling 10.6% to Rs35.67 million. The result is a quarter in which reported earnings improved dramatically, while the recurring operating engine improved much less.

The nine-month picture reinforces that distinction. Revenue fell 43.1% to Rs641.64 million because property inventory sales were far lower than a year earlier, yet profit after tax increased 170.0% to Rs672.63 million. The jump was driven primarily by gains on investment disposals and a favorable foreign-exchange swing rather than by stronger property sales. Meanwhile, net operating cash flow was negative Rs882.61 million versus positive Rs14.46 million a year earlier. Pace is monetizing assets and reshaping its portfolio, but cash generation from operations and the still-large current-liability gap remain the central financial risks.

Results at a glance

  • Company: Pace (Pakistan) Limited
  • Ticker: PACE
  • Reporting period: quarter and nine months ended March 31, 2026
  • Primary analytical basis: parent-company condensed interim unconsolidated financial statements, unaudited, prepared under IAS 34; consolidated statements are discussed separately
  • Q3 revenue: Rs232.04 million, up 67.9% year on year
  • Q3 gross profit: Rs139.34 million, up 24.3%; gross margin 60.0% versus 81.1%
  • Q3 profit from operations: Rs154.64 million, up 35.5%
  • Q3 finance cost: Rs35.67 million, down 10.6%
  • Q3 profit after tax: Rs124.52 million, up 257.3%; EPS Rs0.40 versus restated Rs0.11
  • 9MFY26 revenue: Rs641.64 million, down 43.1%; PAT Rs672.63 million, up 170.0%
  • 9MFY26 operating cash flow: negative Rs882.61 million versus positive Rs14.46 million
  • Board payout decision for the period: no cash dividend, bonus shares or rights issue

What improved

Quarterly revenue recovered sharply from a weak comparable base. Q3 revenue of Rs232.04 million was Rs93.83 million higher than a year earlier. The company also entered a new revenue line during the quarter: the print and digital media assets acquired from related party Media Times Limited became effective from December 31, 2025, and generated Rs28.87 million of advertising revenue during the nine months. Because the operations only commenced at the end of December, that amount effectively belongs to Q3. The associated production cost was Rs20.29 million, implying that the new media activity contributed revenue but at a materially lower gross margin than the legacy property-and-service mix.

The more encouraging recurring trend is visible in the nine-month revenue composition. Service-charge income rose 22.7% to Rs174.26 million and rental income from investment property increased 85.1% to Rs85.30 million. Together, service charges and rental income grew 38.0% to Rs259.57 million. This matters because these streams are structurally more repeatable than large property-inventory transfers. Management attributes the service-charge growth to improved occupancy and higher service-charge rates at First Capital Tower.

Funding costs also moved in the right direction. Nine-month finance cost declined 8.7% to Rs111.72 million, while the quarter’s finance cost fell 10.6% to Rs35.67 million. Management describes this as the result of debt-management and deleveraging efforts. The balance sheet shows that the current maturity of long-term liabilities declined to Rs5.78 billion from Rs5.87 billion at June 2025, although that reduction is small relative to the overall liability burden.

Equity erosion also eased materially. Parent-company equity improved from negative Rs1.21 billion at June 2025 to negative Rs254.31 million at March 2026, supported by nine-month profit and the issue of 30.99 million shares under the employee share option scheme. This is a meaningful improvement in the accounting deficit, but it does not yet amount to a normalized capital structure because equity remains negative and the current-liability gap remains very large.

What weakened / needs attention

The main operating weakness is the quality of the revenue rebound. Q3 cost of revenue rose to Rs92.70 million from Rs26.11 million, a 255.0% increase, far faster than revenue. Gross margin therefore contracted by about 21 percentage points. Part of this reflects mix: new media operations carried Rs20.29 million of direct production cost against Rs28.87 million of revenue, while property transfers and service income have different margin characteristics. The company does not disclose a full quarterly revenue-by-line bridge, so it would be inappropriate to assign the entire margin decline to any single activity.

Administrative and selling expenses also more than doubled in Q3 to Rs62.89 million from Rs29.11 million. As a result, the pre-other-income operating result did not keep pace with revenue. On a simple analytical basis, subtracting other income from reported profit from operations gives about Rs76.45 million in Q3 FY26 versus Rs82.99 million in Q3 FY25. That is not an accounting measure reported by the company, but it is useful for showing why the headline 35.5% increase in operating profit overstates the improvement in recurring operating economics.

Cash conversion is the largest financial warning. Despite Rs806.17 million of nine-month profit before tax, operations used Rs866.12 million of cash before taxes and Rs882.61 million after taxes. The cash-flow reconciliation shows Rs439.83 million of gain on disposal of investments and Rs95.08 million of other non-cash income removed from accounting profit, followed by a Rs1.17 billion working-capital outflow. The largest item in that working-capital movement was a reduction in creditors, accrued and other liabilities of roughly Rs1.03 billion.

Pace therefore funded the period through portfolio monetization and financing actions rather than operating cash generation. Investment disposals brought in Rs1.31 billion; the company spent Rs543.15 million on investment property and Rs160.00 million on operating fixed assets, while the ESOS share issue generated Rs278.88 million. Ending cash was only Rs19.27 million, barely changed from Rs18.87 million at June 2025. The cash balance staying flat should not be mistaken for strong internal cash generation.

Why revenue and profit are telling different stories

The nine-month revenue decline is mainly a property-sales comparison problem. Sales of shops and plots fell 62.5% to Rs352.49 million from Rs939.49 million. Management says the prior-year period benefited from large property transactions at First Capital Tower, while the current period had lower inventory sales. This explains why total revenue fell even as rental and service-charge income grew strongly.

Profit moved in the opposite direction because the company monetized investments. Other income for 9MFY26 surged to Rs534.90 million from Rs42.44 million. The largest disclosed components were a Rs361.64 million gain on disposal of the entire 56.79% stake in Pace Super Mall to related party First Capital Securities Corporation and a Rs78.18 million gain from selling 16.29% of Pace Barka Properties for Rs860 million. These are genuine realized gains, but they are non-recurring: repeating them requires selling additional assets or investments.

The quarter itself appears particularly exposed to that distinction. Q3 other income was Rs78.19 million, almost identical to the disclosed Rs78.18 million gain on the Pace Barka disposal. This strongly indicates that the disposal explains essentially all of the quarter’s other-income line; that is an inference from the official figures rather than an explicit quarterly attribution by management. The gain alone equaled about 56% of Q3 profit before tax.

Foreign exchange added another non-operating boost. Pace recognized a Rs17.00 million Q3 exchange gain on its foreign-currency convertible bonds compared with a Rs35.93 million loss a year earlier. Across nine months, the exchange gain was Rs80.82 million versus a Rs39.59 million loss in the comparable period. Because this line depends on the rupee value of a legacy foreign-currency obligation, it should not be treated as a stable operating earnings stream.

Cash flow and liquidity: the restructuring is not finished

The balance sheet remains the decisive risk factor. At March 31, parent-company current assets were Rs2.42 billion against current liabilities of Rs8.44 billion, leaving a working-capital deficit of Rs6.03 billion. That deficit improved only modestly from Rs6.10 billion at June 2025. The going-concern note explicitly states that current liabilities exceed current assets, accumulated losses remain large and equity has eroded, creating a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.

Two legacy financing obligations dominate the picture. The company’s term-finance certificates remain in breach of revised repayment terms, causing the outstanding amount to be classified as current. Separately, the foreign-currency convertible bonds had a carrying amount of Rs4.89 billion at March 31 and were also shown within current liabilities. Management says it is negotiating settlements and restructuring arrangements with TFC holders and other lenders, but the March accounts do not show those obligations as resolved.

Management’s mitigation plan is asset monetization, project completion, recurring property income and sponsor support. Pace Tower’s lobby is complete and finishing work on remaining units, mainly floors 16 to 21, is in progress. Management said it was seeking buyers and intended to use proceeds for new development and debt reduction. That plan can improve liquidity, but it also means future cash generation depends materially on executing asset sales rather than only on rental and service cash flows.

Strategic reshaping: property disposals alongside a move into media

PACE is simultaneously shrinking parts of its property-investment portfolio and adding a new operating business. During the nine months it exited Pace Super Mall, partially disposed of Pace Barka Properties and acquired print and digital media assets from Media Times Limited for stated cash consideration of Rs860 million. The acquired brands and platforms include Daily Times, Aaj Kal, Sunday Times Magazine and several digital media properties.

The strategic logic is diversification: management expects advertising, digital content and brand monetization to broaden the revenue base. The financial evidence is still early. The new media assets generated Rs28.87 million of revenue in their first reported quarter and carried Rs20.29 million of direct production cost. The next reporting period should therefore show whether this business can scale without adding disproportionate overhead or consuming liquidity needed for legacy debt settlement.

Consolidated overlay: deconsolidation changes the group picture

The consolidated accounts tell a slightly different story because the group lost control of subsidiaries during the period. Consolidated Q3 profit after tax was Rs122.34 million versus Rs18.89 million a year earlier. Of the current quarter’s profit, Rs46.97 million came from continuing operations and Rs75.37 million from discontinued operations. Profit attributable to owners of the parent was Rs86.32 million, while Rs36.02 million was attributable to non-controlling interests.

The disposal of Pace Super Mall and the reduction of Pace Barka to an associate also changed the consolidated balance sheet substantially. Consolidated total assets fell to Rs10.51 billion from Rs16.44 billion at June 2025, while non-controlling interests dropped sharply. This is why the parent-company basis is the cleaner basis for the headline quarter analysis, while the consolidated accounts are essential for understanding how the group perimeter changed.

Sector and peer context

The company’s directors described Pakistan’s real-estate market as cautious through March 2026, with high financing costs and limited liquidity restraining activity. Independent monetary-policy evidence is consistent with a still-tight funding environment: the State Bank of Pakistan kept its policy rate at 10.5% in both January and March 2026. That does not prove PACE-specific sales weakness, but it supports the broader financing backdrop described by management.

Listed peer evidence also argues against reading PACE’s Q3 revenue rebound as a simple sector-wide boom. TPL Properties reported broadly stable operating contributions from its core platforms in the March 2026 period, while its consolidated result was dominated by a large unrealized loss on TPL REIT Fund I. The businesses are not directly comparable, so this is context only. The common lesson is that listed property-company earnings in this period were heavily affected by company-specific portfolio, valuation and financing events.

Recurring versus non-recurring drivers

Service charges, rental income, recurring plaza operations and—if sustained—the new media advertising business are the clearest recurring revenue streams. Their nine-month trajectory improved, with service and rental income together up 38.0%. Property-inventory sales can recur, but they are inherently lumpy and depend on completion and transaction timing.

The Rs361.64 million Pace Super Mall disposal gain, the Rs78.18 million Pace Barka disposal gain and the foreign-exchange gain on FCCBs should be separated from recurring earnings. They were critical to the nine-month profit increase but are not evidence that the underlying operating margin has normalized. The sharp negative operating cash flow further reinforces the need to distinguish accounting profit from repeatable cash earnings.

What to monitor next

  • Property-sales mix: whether monetization of Pace Tower and other inventory can generate cash without relying on exceptional investment gains.
  • Recurring income: whether service-charge and rental growth continues after their combined 38.0% increase in 9MFY26.
  • Media economics: revenue growth, direct production margin and any incremental administrative cost from the newly acquired print and digital assets.
  • Operating cash flow: whether the Rs882.61 million nine-month outflow reverses and working-capital movements stop absorbing cash.
  • Legacy liabilities: progress on settlement or restructuring of the TFCs and foreign-currency convertible bonds, both of which remain central to liquidity risk.
  • Working-capital deficit and equity: whether the Rs6.03 billion current-liability gap narrows materially and parent-company equity returns to positive territory.
  • Portfolio actions: additional disposal of the remaining Pace Barka interest and the cash-versus-accounting impact of any further asset sales.

AlphaGen model outputs

  • Alpha QoQ Score: 66.89
  • TTM Performance Score: 50.40
  • 3Y Business Perf Score: 58.47
  • Sector Leadership Score: 82.60

These four measures are AlphaGen model outputs, not company-reported figures.

Sources

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