Lasco Financial Services (LFSL) reported profit of $10 million for the March 2015 quarter, down from $41 million made in 2014 but revved things up to a 14 increase in June quarter to $54 million as revenues climbed 8 percent to $192 million and well over the $148 million generated in the March quarter.
For the March quarter revenue that compared with the 2014 quarter expenses grew by $28 million due mainly to increase spend on marketing and selling expenses. Jacinth Hall-Tracey, Managing director indicated that the period suffered from squeezed margins in March quarter on foreign exchange trading and foreign exchange losses in the quarter, resulting from the revaluation of the Jamaican dollar and greater stability of the exchange rate. Loan disbursements slowed as credit rating data used in assessing potential clients resulted in lower loan approvals.
Total expenses for the first quarter increased by 5.5 percent to $137 million compared to the corresponding period. This is primarily due to a 36 percent increase in administrative expenses and 16 percent decrease in selling and promotion expenses. “The net increase is reflecting the expansion of our network, staff cost and software support to manage operational efficiencies and to build customer relationships. LFSL continues to review its marketing tactics which gave rise to a reduction in selling and promotion expenses”, Hall-Tracey said. She went on to say “During the quarter, our growth initiatives included the launch of our motorcycle loan product and the opening of our new cambio branch in Port Antonio”. The opening of the new branch would have added to administrative cost against which revenues would not cover.
The company has cash of $563 million and is generating over $200 million per year. If the company can find the formula to ramp up good quality lending successfully, the profit outlook can be transformed considerably with high profit margins for lending. “We are working on a number of initiatives that will help in the transition from lower income in foreign exchange activity” Hall-Tracey said in response to questions posed after the company released the Full year results to March. The area of credit approval is one that they is being revisited as the use of credit rating information is stymying lending. But Hall-Tracey expects profit for this year that ends March 2016 to be higher than for the year just ended, subject to taxes on profit which the company will start bearing at fifty percent of the official tax rate of 25 percent.
The equity capital of Lasco is $868 million and is well below that of its two siblings who have equity in equity of more than $2.4 billion each, as such the possibility for strong growth is probably more present here than with the bigger entities over time.
The company has done well from the money remittance and cambio operations but it is in the lending that the future growth prospects seems to rest. Hence the connection between Mayberry Investments with the know-how having been exposed at Access Financial. The company has adequate free capital to increase lending with only $147 million in loans at March. Earnings per share of 0.45 cents for the quarter should end around 20 cents for the year to March 2016. The stock last traded at $1.80, investors need to keep an eye for the possibility that Mayberry Investments could increase their holdings in the company.