By Andrew Green, Staff Reporter 
Collister
LASCELLES, DEMERCADO & Co. Limited saw its net profits fall last year, but stockbrokers say the company remains a good investment.
"I am positive on Lascelles," said First Global Stockbrokers business development manager, Keith Collister. "The results were slightly disappointing but the stock is fundamentally undervalued and we rate it as a buy."
Net profit attributable to shareholders amounted to $944 million for the year ended September 30, 2003. The company's income statement showed that this was 17.5 per cent less than the profit level for 2002.
"If you are looking for value rather than short-term growth, Lascelles is one of the shares you have to hold," said Mayberry Investments research analyst, Kiesa Ansine. "It would play an essential role in a balanced
portfolio."
AN IMPROVEMENT
For the year ended September 30, shareholder value per unit moved from $10.84 to $19.15, Miss Ansine said. That gain in shareholder value amounted to $1.8 billion, an improvement of 77 per cent.
The value of a company to shareholders can be measured in profits or book value, she said.
Lascelles had operating revenues of $12.1 billion in 2003, up 7 per cent on the year before. But inflation amounted to 12.5 per cent for the 12 months to September.
The company did a good job of holding its operating revenue cost to $7.7 billion, just 0.6 per cent over the level in its 2002 financial year. The result was that gross profit, at $4.4 billion, was up 20.9 per cent. A 24.6 per cent increase in administrative, marketing and selling expenses to $3.3 billion cut the operating profit to $1.1 billion. This operating profit was still 10.9 per cent above the 2002 level.
Associated companies added $1.6 million to Lascelles' income and other income added another $56.2 million. With this income, profit before net finance costs was pushed up to $1.16 billion.
But the profit before net finance costs in 2002 was $1.3 billion, so the 2003 level was 11 per cent lower.
Lascelles financial statements points out that income from the sale of $245 million in Kingston Wharves shares in its 2002 was responsible for the higher income in 2002.
NET PROFIT OF $944 MILLION
After netting out finance costs, taxation and adding minority interests in other subsidiaries, Lascelles ended up with a net profit of $944 million. For each stock unit this amounted to earnings of $9.83, substantially down from the $11.92 in 2002.
But the prospects for 2004 appear more positive.
"Assuming that the Minister of Finance does not put significant new taxes on spirits and Lascelles' rate of export growth continues, then we would expect them to have a better year," Mr. Collister said.
"In an economy that can get as interesting as ours, the contributions of a company that has most of its operations outside Jamaica such as Lascelles, should position them competitively going forward," Miss Ansine said. Its export earnings give it an advantage in an economy with a currency that is sliding.
Additionally the cash provided by its operating activities improved to $1.9 billion for 2003 as against $1.2 billion the year before, Miss Ansine said.
REORGANISATION
Lascelles has reorganised itself into five divisions since May of 2002.
The biggest is that covering liquors, rums, wines and sugar. It is also the most profitable.
The second largest is the general merchandise division which includes the manufacture, wholesale and retail merchandising of provisions, household goods and electronic telephone cards and the manufacture and distribution of pharmaceutical preparations;
The transportation division, which includes aircraft handling, distribution of motor vehicles and spares, and servicing and repairing of motor vehicles, is the third largest. It produced the lowest profit in 2003.
General insurance is the fourth largest division and the investments division is the smallest, but the second most profitable.
