July 15, 2020

Lasco Financial Services Limited (LASF), recorded trading income of $2.40 billion, this represents a growth of 13% when compared to $2.12 billion posted at the end of 2019 while trading income for the fourth quarter amounted to $587.89 million (2019: $489.76 million). LASF noted that, “the segment revenue is comprised of $1.6B from the Money Service Business and $900M from its subsidiary LASCO Microfinance (LASMF).”

Other income increased to $102.87 million versus $92.37 million in 2019. This resulted in overall income of $2.51 billion, a growth of 13% when compared to $2.21 billion for the corresponding period in 2019. For the fourth quarter, total income closed at $579.23 million (2019: $472.98 million).

Operating expenses amounted to $2.28 billion, 38% more than the $1.65 billion reported the year prior. Of this:

Administrative costs closed at $1.08 billion (2019: $880.42 million) at end of March 2020.

Selling and promotional costs amounted to $1.19 billion (2019: $765.64 million) for end of 2020 financial year.

Consequently, due to the increase in total expenses, profit from operations declined by 59% to total $230.31 million relative to the $565.45 million booked last year.  As for the quarter, LASF booked a loss from operations of $109.90 million relative a profit of $98.43 million recorded at the end of 2019.

Finance costs increased to $208.35 million (2019: $168.80 million), resulting in a profit before tax of $21.97 million relative to the $396.65 million booked at the end 2019. For the quarter, loss before tax closed at $170.19 million relative to a profit experienced in 2019 of $60.72 million.

Net loss closed the period under review at $56.92 million versus a profit of $281.76 million posted the same period last year. Taxes for the period amounted to $78.89 million (2019: $114.89 million). Net loss for the quarter amounted to $133.85 million relative to 2019 fourth quarter profit of $14.04 million.

Loss per share amounted to $0.045 (2019 EPS: $0.22), while for the quarter, LPS closed at $0.11 (2019 EPS: $0.01). The number of shares used in our calculations amounted to 1,264,694,391 units. LASF closed the trading period on June 15, 2020 at $2.49.

LASF noted that, “the year over year change in total comprehensive income is attributed largely to a high provision for credit losses made by LASMF, based on customer payment trends, compounded in the last quarter by the COVID-19 Pandemic and its expected impact on the segment we serve.”

With regards the impact of COVID-19, LASF stated that, “COVID-19 has created a tidal wave of disruption affecting all of our business lines. Our remittance business has exhibited the most resilience as we were able to efficiently deliver the service to our new and existing customers both through legacy cash channels and digital channels. As the Government of Jamaica navigated its response to the pandemic, several businesses became victims of curfew hours, quarantine restrictions and fall off in demand for their goods and services. The business segments most impacted are the segments who rely heavily on us for microfinancing: bars, small shops, tourist related and school related entities. Consequently, as a precautionary measure, LFSL recognized an additional $61M in expected credit loss even as we put measures in place to assist our customers through insurance claims, payment moratoriums and restructuring.”

Furthermore, Management highlighted that, “the economy is slowly reopening but the lingering impact from COVID-19 still affects our business. Our main course of action has been to reduce expenses and preserve cash and to assist our customers to access our services digitally and manage their own cashflow.”

Balance Sheet Highlights:

As at March 31, 2020, the Company’s total asset closed the period at $3.96 billion, 2% more than its value of $3.89 billion a year ago. This increase was largely due to ‘Cash and cash equivalents’, ‘Rights of use Assets’ and ‘Short term Deposits’ which closed at $487.44 million (2019: $282.81 million) , $190.55 million (2019: nil) and $235.49 million (2019: $79.04 million), respectively. However, these were tempered by a decline in ‘Receivables’ by $451.76 million to $1.91 billion (2019: $2.37 billion).

Shareholders’ equity attributable to stockholders of the company amounted to $1.54 billion relative to $1.59 billion booked in 2019. This translates to a book value per share of $1.21 (2019: $1.25).

Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.

Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.