Nov 2010 Financial News

Lasco companies post mixed results

Nov 03, 2010

LASCO Manufacturers Limited (JSE: LASM) more than doubled its net profit for the six months ending September 30, 2010, when compared to the corresponding period in 2009.

Its sister companies — Lasco Distributors (JSE: LASD) and Lasco Financial (JSE: LASF) — on the other hand, posted lacklustre results during the period as LASD reported flat pre-tax profit while LASF saw its net profit plunge by 60 per cent.

Lower taxes on LASD's books during the review period actually meant that the distributor posted an eight per cent increase in net profit to $97.4 million, but less tax being deducted from the bottom line wouldn't have gone a far way to help LASF, as profits from cambio services plunged from $9.8 million to $508,000, while remittance services and properties services saw profit declines of 19 per cent and 57 per cent, respectively.

In its report to shareholders, LASM said its net profit increased by 118 per cent to $201 million, from $92 million during the six months to September 30, 2009, as sales locally and overseas climbed during the review period, while lower finance cost due to a "combination of improved working capital management and interest rate reduction on loans".

"Our strategic plan articulated the expansion in export market, new markets have been identified and contractual agreements are under discussion with prospective distributors," said LASM's report to shareholders. "Additional marketing support will be provided to both established and new markets. Among the many initiatives to contain the costs of operations, the management of the company decided to pay out all the loans in October 2010. In addition, the management team, under the guidance of the CEO, has been working assiduously to meet our objectives in the area of relocation, expansion and modernisation of the manufacturing facility. The expansion should allow Lasco Manufacturing to further reduce operational costs, diversify the product portfolio with consequent increased sales and profitability."

LASD's pre-tax profit inched up by one per cent — from $117.7 million for the six months to September 30, 2009, to $118.9 million during the review period — but lower taxation meant that the bottom line increased by eight per cent to $90.3 million.

Increased operating expenses at LASD turned a seven per cent increase in gross profit into a 10 per cent fall in operating profit but a 38 per cent decline in finance cost brought back flat profit before tax for the distributor.

LASD's management said in its report to shareholders that it "will continue to have a two pronged approach in managing expenses; Cost Control and Cost Reduction Initiatives, which includes repayment of its loan with First Caribbean International Bank".

LASF saw its net profit fall from year-earlier levels of $26.7 million to $10.5 million, mainly due to the appreciation of the Jamaican dollar, which dragged down the profits fom its remittance and cambio services.

"We stepped up our marketing, expanded our branch network, and increased our float inventory throughout our network," said LASF of its growth strategy in its report to shareholders.

"These increases are reflected in our administrative expenses, the most significant of which is licence and asset tax, financing, salaries and rental."

LASF, which is seeking to establish itself as the key cambio provider in the Kingston area and to expand its payroll loan business beyond that of loans to LASCO employees and contractors, said "our Payday loan is set to expand in November and we are now formalising our arrangements with an institution which will see them adding about 10 locations from their group to Lasco MoneyGram Agent network".

The three companies listed on the Jamaica Stock Exchange (JSE) Junior Market in mid-October.

Since listing, LASM saw its share price increase from the listed price of $2.50 a share to $3.30. At the close of trade yesterday, LASD stood at $3.18 while LASF stood at $2.70. Both shares also listed at $2.50 a share.


Source:
Jamaica Observer
Wednesday November 3, 2010

http://www.jamaicaobserver.com/business/Lasco-companies-post-mixed-results_8114242