Lasco Financial cuts jobs to bend profit curve
An organisational restructuring carried out by Lasco Financial Services Limited over the months of April to June has resulted in 15 posts being made redundant across LasFin and its subsidiary Lasco Microfinance, the company has said.
The brunt of the cost cutting appeared to be focused around the microfinance business, based on disclosures in the company’s first-quarter earnings report.
“Subsequent to year end, we have made several fundamental changes in the business model, including organisational restructuring to revive growth and profitability in this segment,” it said in relation to Lasco Microfinance.
The microfinance operation has been struggling since the pandemic, when job cuts robbed its clients of income to service their debt, causing the company to book impairments of $650 million on loans. The rise in impairment also dragged parent company Lasco Financial into losses.
Since then, LasFin has tried various means to get the business on on track, including shifting lending away from Lasco Microfinance’s traditional client base of microbusinesses and consumers to small and medium-sized enterprises.
The company appears to have had some amount of success, going by LasFin’s reporting of improved distributions in the loan portfolio over the financial year ended March 2023, and again for the first quarter of FY 2024.
Pre-COVID, the company’s loan receivables were above $1.8 billion, but it ended up shedding more than half of the portfolio during the crisis, falling as low as $813 million at year ending 2022. However, by March 2023, the portfolio had regained some of that value, closing the year above $900 million.
“Our loans business is reviving its growth in disbursements post-COVID and is expected to deliver a positive contribution this year,” LasFin Managing Director Jacinth Hall-Tracey said of the first -quarter results, adding that the quarter was a turning point for the business as it implemented several organisational changes to drive more efficiencies.
“This resulted in the redundancies of some 15 positions between both companies (Lasco Financial and Lasco Microfinance) as we make efforts to consolidate resources and maximise value,” she said.
Accordingly, consolidated expenses for the quarter climbed by $75 million to $506.5 million, year on year, due to the one-off costs.
The company said it spent an extra $58.8 million on administration costs during the quarter to support the deployment of new services and recorded higher expenses linked to the redundancy packages. Selling and promotions also jumped by $15.7 million during the quarter to support new services tooled out by the business.
“Based on the plans in place for the new financial year, these key actions were needed in the first quarter to ensure we strengthen our foundation for a competitive year ahead,” Hall-Tracey said.
The increased payout caused LasFin’s quarterly profit to plummet to $18.8 million, which is less than a quarter of the $82.7 million recorded for the comparative period of 2022. Core revenue was flat at $539 million.
LasFin also earns from remittance, cambio, and payment services, all of which Hall-Tracey said positively contributed to the year’s results.
“With lowered fixed costs, we anticipate stronger results for the rest of year,” she said.