Lasco companies in growth mode
The three Lasco-affiliated companies are hunting for more business and new markets.
The companies, which are chaired and majority held by Lascelles Chin, are already generating more cash than before the pandemic. The smallest of the three affiliates, Lasco Financial Services Limited, or LasF, plans to grow by expanding its Visa card network to offset the shift from in-branch remittance collection to online transfers.
Lasco Distributors Limited, LasD, plans to export to new markets while building a larger portfolio, after securing the Slimfast diet drink brand to sell in May this year.
Lasco Manufacturers Limited, LasM, which is second in revenue but top in profit, plans to look for acquisitions amid a reduced debt load that has fallen fourfold over three years to $310 million.
LasM Managing Director James Rawle reported to shareholders at the company’s annual general meeting on Wednesday that it continues to grapple with shipping challenges, citing the example of a product ordered in January arriving in June. Inflation also continues to affect purchases of raw material for manufacturing.
“Because prices are going up, there will be price increases but in a measured way, considering the impact on consumers,” said Rawle. “It has to be done in a measured and responsible way.”
LasM made a profit of $414 million on revenue of $2.6 billion for the June quarter, compared to $402 million on revenue of $2.3 billion a year earlier.
“We are continuing to explore strategic partnerships and alliances to drive top-line growth,” said Rawle. “We are not looking to acquire for acquiring sake, or engage in a business that is dilutive to our business. It has to be a business and opportunities that generate value for the shareholders. It would have no less than the margins in our present situation.”
“People walking in to do transactions have not returned to pre-pandemic levels. That’s because people are not travelling at the rates that they used to, and perhaps not working overseas like they used to,” LasF Managing Director Jacinth Hall-Tracey said in her address to shareholders at the company’s annual general meeting.
The three affiliated companies held separate meetings at the AC Marriott Hotel in New Kingston.
The Lasco Gold Visa card allows the sending and receiving of cash from overseas. Cardholders can withdraw funds in-branch and at ATM machines. Hall-Tracey said that the market will eventually shift from in-branch transactions toward digital transactions.
“The card is a no-brainer, but requires teaching,” she said.
Consumers incur fewer fees for digital transactions, but the shift negatively affects LasF network of dealers, who prefer to deal with customers in-branch to earn higher fees.
“We are formulating strategies to make it a win-win situation. But the agents know that the business model will no longer exist in five or six years,” she said.
LasF, which is in the business of microlending and money services, made its first loss in its financial year ending March 2020 due to a provision of expected credit losses. The provision was largely non-cash, but done in anticipation that some clients would have loan repayment challenges with the onset of the pandemic.
Hall-Tracey said that the lockdowns, which reduced traffic into its remittance and cambio outlets, resulted in the company rethinking its business model and cost management strategies. LasF subsequently returned to earning higher revenue and profit than before the pandemic. But key ratios, including the return on average assets and returns on equity, are faltering, Hall-Tracey said.
“These returns are not above pre-pandemic levels. A lot has changed in the industry, giving us the urgency to adjust this business model to scale faster. For us, we operate on margins and commissions, and so it’s all about scaling to keep the business and perform ace ratios ahead and to keep us sustainable,” she said.
LasD, the largest affiliate by revenue, plans to grow by adding new products, while exporting to Colombia and the Dominican Republic as new markets. The company exports to a dozen key markets, mostly in the region, including the United States. Consequently, the company increased its inventory by nearly a third to $3.7 billion as of June, compared to $2.8 billion a year earlier. Also, its payables to suppliers are growing, hitting $5.8 billion from $4.9 billion a year earlier.
“This is directly related to carrying higher levels of inventory to ensure that we continue to have supplies to meet consumer demand,” said LasD Managing Director John de Silva.
Higher inventory and payables will remain for the short to medium term: “This is indicative of how the business is going to grow. We need to pay for supplies, and we need to buy more products,” de Silva said.
LasD earned profit of $325 million on $6.3 billion in revenue for its June first quarter. That’s up from $292 million on $5.8 billion in revenue a year earlier. The growth was the result of improved performance in all its divisions, led by consumer and pharmaceutical goods.