Higher Costs & Lower Finance Income Dampen LAB’s Q1 Performance

• The LAB reported a net profit of $66.22Mn for its first quarter ending January 31, 2022, which represents a 1.2% or $0.8Mn decrease relative to the prior period, despite it recording double-digit revenue growth of 24.5% or $87.22Mn. 
• The revenue growth was attributable to increases in the company’s core business, media placement (up $93.20Mn or 62.2%) and advertising agency (up $3.60Mn or 6.4%). Production was down $9.60Mn or 6.4%. 
• This led to its gross profit increasing by $27.60Mn or 24.0% year over year. However, its gross profit margin was relatively unchanged at 32.2%. 
• In spite of the increase in revenues and gross profit, there was a drop in net profit largely owing to a rise in indirect costs and fall in finance income. Administrative, Selling and Distribution expenses increased by 41.8% or $22.23Mn due to higher staff costs, repairs and maintenance of production equipment and depreciation and amortization costs. Further, the company experienced a reduction in its finance income of $6.10Mn and reported a loss of $1.30Mn from its subsidiary, Scope Caribbean. 
• The company is expected to see stronger demand for its digital advertising services as the economy fully reopens, which should support growth in its profitability, if complemented with effective cost containment measures. 
• LAB’s stock price has decreased by 12.2% since the start of the calendar year. The stock closed Thursday’s trading session at $3.37 and currently trades at a P/E of 21.1x which is below the Junior Market Others average of 22.3x.

(Source: Company Financials)