Monday 10 August, 2020

Lasco Financial wary of continued COVID-19 impact

Managing Director of Lasco Financial Services, Jacinth Hall-Tracey.

Managing Director of Lasco Financial Services, Jacinth Hall-Tracey.

Though the Jamaican economy is reopening, Lasco Financial Services said it remains wary of the continued impact of the coronavirus (COVID-19) pandemic.

Due to credit provisions already made, loss per share for the year ended March 2020, was 4.43 cents compared with 22.28 cents earnings per share in the previous year.

In the report to shareholders attached to the financials, Jacinth Hall-Tracey, the company’s managing director said, “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, preserve cash and to assist our customers to access our services digitally and manage their own cash flow,” she said.

High provision for credit losses made by subsidiary Lasco Microfinance (LASMF), based on customer payment trends, was compounded in the last quarter by COVID-19 and its expected impact on the segment served.

Segment revenue for the year was $1.6 billion from the Money Service Business and $900 million from Lasco Microfinance.

The increase in revenues was inadequate, however, to compensate for the 38 per cent increase in expenses from $1.6 billion in the previous year to $2.3 billion.

The end result was a consolidated net loss of $56.9 million compared with a net profit of $254.2 million in March 2019.

Hall Tracey said COVID-19 created “a tidal wave of disruption affecting all of our business lines.”

The company’s remittance business, she noted, 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.”

However, the company head outlined that 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.

Business segments most impacted as a consequence were segments that rely heavily on Lasco for microfinancing such as bars, small shops, tourist-related and school-related entities.

As a precautionary measure, LFSL recognised an additional $61 million in expected credit loss.

Hall Tracey said measures have been in place to assist customers through insurance claims, payment moratoriums and restructuring.

She noted that the impact of COVID -19 was less evident on LFSL, as the parent company yielded an eight per cent increase in total income and a 17 per cent increase in net profit, closing the year with $227.8 million.

Total cash (cash and bank balances and short-term deposits) increased 100 per cent to close at $722.9 million.

Forty per cent of this growth occurred within the last quarter, accelerating from the third quarter.

Hall Tracey outlined that the company increased focus on collections, and reduced lending at the onset of COVID-19, resulting in loans and advances decreasing by three per cent, from $1.9 billion to $1.8 billion.

Adoption of IFRS 16 for leases over US$5,000 per annum with tenures over 12 months also resulted in an increase in assets of $190.5 million for right of-use assets, a lease liability of $217.5 million and $23 million for interest expenses and foreign exchange adjustment included in expenses.

Altogether, total assets increased by 1.7 per cent, whereas total liabilities increased by five per cent and total assets is 1.6 times total liabilities.

 

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