November 14, 2022

Fontana Limited (FTNA)

Financials for the three months ended September 30, 2022: –

Fontana Limited (FTNA) for the three months ended September 30, 2022, recorded an 26% increase in revenues to total $1.64 billion compared to $1.31 billion for the same period in 2021.

Cost of Sales for the period increased 22% to closed at $1.05 billion, up from $865.25 million reported the prior comparable period.

As such, gross profit for the three months amounted to $558.79 million, a 33% uptick when compared to $441.3 million recorded last three months. Fontana noted, “Our gross profit margin was 35.8% compared to 33.8% last year, as we continue to recover from the pandemic-related challenges and benefit from improved international freight rates. We also saw a shift in the sales mix, with better growth from higher margin items such as stationery, during our best back-to-school sales season since the start of the pandemic.”

Fontana’s administrative expenses rose by 28% for the period, to total $424.1 million versus $330.6 million in 2021, while selling and promotion closed the three months at $40.18 million (2021: $12.61 million). Management explained “Staff costs were the main driver, as our operating hours returned to their pre-pandemic norms – which required additional man-hours. In addition, we increased our staffing with the opening of our new warehouse facility. In preparation for our new state-of-the-art Point of Sales system, we encouraged customers to redeem their loyalty points through increased advertising and promotions. Despite this, our operating profit increased by 26.9% to $124.5 million this quarter.”

As such, operating profit experienced a 27% increase to $124.51 million relative to $98.1 million booked in 2021.

Other income for the three months amounted to $17.3 million (2021: $14.79 million).

Finance cost totalled $54.23 million, an increase of 5% when compared to the $51.77 million recorded for the same period last year. FTNA stated, “This was impacted primarily by the loan interest associated with the bond issued in December 2021.”

This resulted in profit before taxation totalling $87.58 million compared to $61.13 million recorded in Q1 2021, a 43% year over year increase.

The company incurred no taxation charge for the period (2021: nil).

Net profit for the three month period increased 43% to $87.58 million compared to $61.13 million booked for 2021 period.

Earnings per share (EPS) for the period totalled $0.07 (2021: $0.05). The trailing twelve months (TTM) EPS amounts to 0.51. The number of shares used in our calculations amounted to 1,249,374,825 units.  FTNA’s stock price closed the trading period on November 11, 2022, at $8.99 with a corresponding P/E of 17.63 times.

Balance Sheet at a glance:

As at September 30, 2022, total assets amounted to $4.71 billion, up $794.66 million from $3.92  billion as at the previous year. The increase in total assets was as a result of the increase in ‘Cash and Cash Equivalents’ and ‘Inventories’ which closed the period with $1.35 billion (2021: $833.11 million) and $1.34 billion (2021: $944.56 million), respectively.

Shareholders’ Equity of $2.25 billion was reported (2021: $1.87 billion) which resulted in a book value per share of $1.80 (2021: $1.49).

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