By Ashford W. Meikle, Staff Reporter 
Managing director of Lascelles, William 'Bill' McConnell.
ITS REVENUE was up by 37 per cent but conglomerate Lascelles deMercado returned a staggering 338 per cent increase in its net profits for its first quarter which ended December 31, 2004 according to its unaudited financial accounts.
In a quarter dominated by a tight lid on operation costs and a magnanimous return on its investment in cigarette producer, Carreras, Lascelles earned 'super' profits of $1.1 billion. The $253 million earned for the same period in 2003 pales in comparison.
The growth in the conglo-merate's operating revenue while increasing by 37 per cent, outstripped the growth in cost of sales which went up by 27 per cent. Operating revenue increased to $5.2 billion while cost of operating revenue moved up to $3 billion.
And based on this statistical anomaly a boon to Lascelles since, superficially, it suggests the group is doing more with less - the conglomerate earned a healthy 231 per cent increase in its operating profit which jumped to $1 billion dollars compared to the $324 million in 2003.
BENEFITS FROM CIGARETTE INVESTMENTS
Tight cost controls also contributed to the huge increase in operating profits. For example, administrative, marketing and selling expenses increased by just one per cent totalling, $1.1 billion. This is commendable and is a feat of no small order considering that inflation for the December quarter stood at 6.4 per cent.
Looking at Lascelles' overall performance it is clear that it continues to reap benefits from its investments in cigarette producers, Carreras. A similar scenario was evident in Lascelles' year-end results (to September, 2004). To understand the magnitude of the contribution of Carreras to Lascelles' bottom line one needs to turn to the conglomerate's segmental results.
For example, of the $1.2 billion profit earned before net finance costs and taxation, the investment arm contributed almost $730 million or 59 per cent. And, with its 74 million shareholding in Carreras, Lascelles would have benefited handsomely from the manufacturer's special cash distribution to shareholders of $4 per stock unit last September. Though the payment was made on the last day in September the cheque, ultimately, would be reflected in Lascelles' first quarter.
That special cash distribution was a result of Carreras selling its Twickenham Insurance Company to Globe Holdings (a Lascelles subsidiary) for US$32 million.
It is likely that the investment arm of Lascelles will continue to drive its profits based on two recent decisions by the Carreras board. In the first instance, a special cash distribution of $9.80 per stock unit was paid to Carreras' shareholders on January 14 this year. And, at a recent meeting, the board declared a dividend payment of $1 per stock unit which will be paid on February 22 this year.
Shareholders, therefore, can expect Lascelles to continue to reap benefits from Carreras certainly, at least, for the second quarter. Incidentally, the conglomerate's investment segment leaped by 1,300 per cent. But, while the investment segment returned an exceptional performance, the results of the other segments show healthy performance.
MERCHANDISE DIVISION GREW
Returning profits of approximately $12 million, the general merchandise division grew by a little under 28 per cent, contributing almost one per cent to Lascelles' bottom line. The general insurance segment experienced a 107 per cent increase, earning profits of $215 million.
This segment's performance is exceptional given the fact that claims from Hurricane Ivan are reflected in the quarter's results. Contributing 17 per cent to Lascelles' net profit, this division continues to play a significant role in the conglomerate's operations.
The liquors, rums and wine segment, was responsible for 22 per cent of Lascelles net profit, although its profits went up by 41 per cast. The division continues to show improvement and growth, largely as a result of Lascelles expanding overseas markets (in Mexico, Aruba, Canada and Australia).
Perhaps, the most noteworthy performance came from the transportation segment which recovered from the $5 million loss posted in the first quarter of 2003. Though its contribution to Lascelles' bottom line was only half of one per cent, a respectable $6 million net profit was posted.
In a recent interview with Wednesday Business, finance director for Lascelles, Anthony J. Bell, was upbeat about Lascelles' year end results and the conglomerate's prospects for 2005.
"The future is very bright. The liquor segment is growing from strength to strength (and) the insurance segment is regrouping. It has been a year of settling down (for the insurance segment). The general merchandise division is poised to do better and the transportation segment will continue to grow."
Note: figures approximated.
