FTNA reports 3% increase in six months net profit

Date: February 20, 2019

Fontana Limited (FTNA), for the six months ended December 31, 2018 recorded a 7% increase in revenues to total $2.16 billion compared to $2.01 billion for the same period in 2017. Revenue for the 2nd quarter went up by 9% to $1.22 billion (2017: $1.12 billion).

Cost of Sales for the period increased 7%, closing at $1.41 billion, up from $1.32 billion reported the prior year, while for the second quarter there was a 15% increase closing at $769.34 million (2017: $667.25 million).

As such, gross profit for the six months amounted to $747.39 million, an 8% uptick when compared to $694.27 million recorded last year. However, gross profit for the second quarter slightly declined by 1% from $457.50 million to $451.67 million for the corresponding period in 2017.

Administrative expenses climbed by 10% for the period, to total $483.26 million versus $437.95 million in 2017, while selling and promotion closed the six months at $35.56 million (2017: $35.24 million). FTNA stated, “this increase is attributed mainly to expenses for the strengthening of the management team and infrastructure in anticipation of company’s medium- long term growth. New positions were added in Marketing, Brand, Beauty, Inventory and Pharmacy Operations. Our Grand Gala Celebration to mark the 50th Anniversary of the founding of our company increased our staff welfare spend in 2018 by 58% over last year. “

As such operating profit saw a 3% increase to $228.58 million relative to $221.09 million booked a year ago.

Finance Cost for the six months totalled $31.12 million, a increase of 3% when compared to the $30.16 million recorded for the same period last year, while other income amounted to $16.58 million relative to $16.08 million the prior year.

This resulted in profit before taxation totalling $214.03 million compared to $207.01 million recorded last year, a 3% growth year over year. For the second quarter profit before taxation moved from $195.51 million in 2017 to $161.98 million in 2018.

Income taxes for the period was $39.81 million versus $38.08 million for the comparable period in 2017. Net Profit increased by 3% to end the period at $174.22 million relative to $168.92 million recorded the prior financial year. Net profit for the quarter amounted to $131.86 million, a 17% drop compared to $159.54 million booked for the prior quarter of 2017.

Earnings per share (EPS) for the period totalled $0.139 (2017: $0.135). EPS for the second quarter amounted to $0.11 (2017: $0.13). The twelve months trailing earnings per share amounted to $0.20. The number of shares used in our calculations amounted to 1,249,374,825 units. FTNA’s stock price closed the trading period on February 19, 2019, at $ 3.99.

Management indicated, “Fontana Limited continues to contribute to the communities that we serve through various programs and donations. Our “Wishing Tree’ program sees all our locations giving generously to their favorite charities such as Savanna La Mar Hospital Children’s Ward, the Salvation Army’s Children’s Home in Ocho Rios, the EdgeHill School of the Special Education in Montego Bay and several other special education institutions and children’s home across the island. Other outreach activities included donations to the Caribbean Institute for Health Research (CAIHR) Sickle Cell Unit and the Homestead Place of Safety.”
Balance Sheet at a glance:

As at December 31, 2018, total assets amounted to $1.73 billion, up $220.21 million from $1.51 billion as at the previous year. The increase in total assets was as a result of the increase in ‘Deposit on Asset’ and ‘Intangible asset’ which closed the period by $167.46 million (2017: nil) and $165.46 million (2017: nil) respectively. The company mentioned that, “Deposits on assets of our newest and most iconic location- Fontana Waterloo Square has contributed to growth in net assets by 14.6% year over year despite the transfer of properties- Warehouse Building and Manchester Building out of Fontana Limited to a related party as at July 1, 2018.”

Shareholders’ Equity of $911.29 million was reported (2017: $986.09 million) which resulted in a book value per share of $5.23 (2017: $5.84).

Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.

Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.