Remittance and retail cambio revenues have helped to reverse the losses recorded by Lasco Financial Services in 2020. For the financial year ending March 31, the company’s net profit soared 375% to $156 million, up from the $56 million it made a year earlier.  

The company’s operating profit also jumped around 94% from $230 million in 2020 to $447 million in 2021.  Research and Strategy Analyst at Sagicor Investments, Jodian Aris explained on Taking Stock with Kalilah Reynolds that the increase was the result of a 9% fall in total expenses.

According to Aris, the rebound of remittance inflows into the island as well as positive development in the foreign exchange market augured well for the company’s finances over the year.

Research and Strategy Analyst at Sagicor Investments, Jodian Aris,

“We’d have known that remittance has been doing well so when we look at the remittance data during 2021, we’re seeing an improvement as well as when you look at the FX market and you consider volatility and the upward movements and the gains that were there you can see that those two business lines actually performed well,” she reasoned.

Aris pointed out that the growth from those two segments were able to counter the slow growth in the company’s microfinancing subsidiary, Lasco Microfinance Limited. The subsidiary provides loans to microenterprises.  It also offers personal and other business loans.

“What was really a hang for them is the micro financing subsidiary. You can see that during the period of the pandemic for Las-F, persons who may have borrowed may not have been able to pay and thinking of persons who are microlenders, these are persons that have businesses that would have been much more of a direct hit or impacted because of a period such as COVID-19 and they would have suffered credit losses in 2020,” she explained.

Based on the financials, as at March 31, the group expects credit losses to be around $130 million this year. This compares to the $651 million it had recorded for the previous year. 

Aris said this improvement would have been due to the expectation that economic activities will pick up this financial year.

“We’re actually seeing some amount of improvement and overall the company is in a better position and seems to be going in a better hand than they were in March 2020,” she said.

Meanwhile, Aris said there was no surprise that Lasco Financial has curtailed its expenses.  She said this falls in line with the trend among several other companies during the health crisis.

Lasco Financial Services’ operating expenses went down 19% to $1.85 billion, when compared with the $2.28 billion reported for 2020.  Finance costs fell to $187 million, down from $208 million.

“When you look at the balance sheet, you’re seeing the cash and balances increasing which is part of the parcel you see in the pandemic for a lot of companies. You’re going into a period of high uncertainty and what they did is that they buffer the cash position in the event that they may have gone wrong in some way,” she reasoned. 

Assistant Manager, Private Equity at PROVEN Management, Julian Morrison agreed that several firms would have had to slash expenses in order to make up for the fall in revenues. 

Assistant Manager, Private Equity at PROVEN Management, Julian Morrison

He said the reduction in expenses forms part of the risk assessment of companies, especially in the context of the lingering uncertainty brought on by the pandemic.

“They’ve slashed their expenses very aggressively across the companies (Lasco Financial, Lasco Distribution) which is a good sign in terms of being responsive to economic shock, being proactive and that’s what we need to look for in management, to see the response to see how agile they are and how decisive they can be when they are under stress,” he said

Catch THE ANALYSTS in Taking Stock with Kalilah Reynolds.  New episodes premiere Tuesdays at 7pm on YouTube, kalilahreynolds.com and all podcast platforms.

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