Fontana confident in consumers
THE PHARMACY chain Fontana Limited bagged $341 million in record profit from its second quarter, which ended in the busy Christmas season.
It resulted in a 5.0 per cent growth in profit, in line with the growth in consumer confidence in the period.
Revenue soared in the December second quarter to $2.35 billion, or 10.2 per cent higher than the previous year’s $2.13 billion.
This surge in revenue was attributed to increased customer spend, which reflected the “stronger consumer confidence and increased purchasing power”, according to a joint statement from Chairman Kevin Chang and CEO Anne Chang which prefaced the results. In fact, transaction count and average spend per customer both grew by some 11 per cent and 1.5 per cent, respectively.
Gross profit hit $953.5 million, or 14 per cent higher than a year ago. Operating expenses, however, surged by 21 per cent to $592.2 million, primarily due to the costs associated with opening a new store in Portmore and compliance efforts with the new Data Protection Act 2022. Additionally, increased staff costs, security guard expenses, and insurance rates added to the operating costs.
Despite these challenges, operating profit increased by 4.0 per cent to $361.3 million.
Consumer confidence grew in the December quarter to 174.7 points, or 5.0 per cent higher than a year earlier at 165.5 points, according to Market Research Services Limited, the firm that conducts the confidence surveys on behalf of the Jamaica Chamber of Commerce.
Fontana’s outlook remains positive based on its growth “momentum”, supported in part by its new location in Portmore, St Catherine. The Portmore store opened in November 2023. It became the group’s seventh store in its chain and was opened in time for Christmas.
Overall, the group’s inventory levels grew slightly to $1.38 billion at December 2023, from $1.29 billion a year earlier.
Concurrently, January 2024 marks the end of the company’s first five years on the junior market of the Jamaica Stock Exchange (JSE).
“As we approach the next six months, we will continue to be diligent, positioning ourselves to capitalise on all opportunities as we return to paying corporate income taxes,” according to the joint statement.
Fontana will start getting taxed at half the going rate, or about 12.5 per cent on its net profit for the next five years. Under JSE rules, companies that are listed on the junior market receive 10 years of tax concessions, with the first five years at full tax remission and the subsequent five years at half the taxable rate.
On an annual basis, the company generated $655 million in profit to June 2023, which equated to a return on capital of 25 per cent on the $2.7 billion in its books.