Business

Fontana share price increases 400% in less than a year

BY DURRANT PATE
Observer business writer

Wednesday, October 30, 2019

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Pharmacy chain, Fontana Limited is reporting a 400 per cent increase in share price since its initial public offer (IPO) less than a year ago.

The company, which operates six pharmacies across the island, launched its IPO in December last year at $1.88 per share but has seen its share price grow to close at $7.28 in trading on Monday.

In its just-released 2019 annual report, Fontana credits the growth in share price to the continued strong confidence in the company, “which is already bringing attractive returns to our shareholders. “

Fontana's five stores in Kingston, Mandeville, Montego Bay, Ocho Rios and Savanna-La-Mar, for the period July 1, 2018 to June 30, 2019, combined to deliver healthy revenue growth of 8.3 per cent, with revenue increasing from $3.4 billion to $3.7 billion.

Net profits increased from $247.3 million to $306.6 million, or from $0.22 to $0.26 per share — a 24 per cent increase.

Fontana Chairman, Kevin Obrien Chang is anticipating similar organic growth at these stores in the coming fiscal year. He expressed confidence in the expected growth from the new Waterloo Square branch, St Andrew.

The 35,000 sq ft store includes an escalator and elevator, and 140 plus parking spaces, making it Jamaica's largest, most convenient pharmacy. “We expect this to be our flagship store in terms of both customer impact and revenue,” O'Brien Chang said.

REVENUE GROWTH

The growth in revenue, is mainly driven by marketing and sourcing initiatives, he said. This stems from Fontana's strategic focus to build greater awareness of its brand and product offering, and to ensure the provision of a wide variety of quality products at competitive prices.

Growth has also been driven by excellent customer service and a focus on maintaining a warm and welcoming environment in all Fontana stores.

The Fairview, Montego Bay and Barbican, Kingston branches continue to account for the bulk of sales, with a combined contribution of 62.8 per cent to total revenue.

Growth in the number of customers as well as the average customer spend continue to follow the increasing trend seen in previous years. Cost of goods sold as a percentage of sales increased from 62 per cent last financial year to 64 per cent this financial year, given the growth in sales.

This is reflected primarily in the growth in beauty products, which have lower margins. Despite this, gross profit for the year under review was $1.32 billion, reflecting an increase of 3 per cent over the prior year.

Administrative, selling and promotion, and other expenses grew by 8 per cent over the previous year to $1.08 billion. The main contributing factors for this increase were staff costs as well as lease expenses for the two locations that were transferred to a related party prior to the IPO.

The increase in staff costs were attributed mainly to the strengthening of the management team and the build out of infrastructure in anticipation of the company's medium- to long-term growth. New positions were added in marketing, brand, beauty, inventory and pharmacy operations.


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