Fontana’s Performance Not So “Fonta-stic” in 2024

• For the year ending June 2024, Fontana’s earnings fell by 10%, despite robust topline growth as expenses climbed.
• Revenues rose 10% owing to the contribution from the company’s seventh retail store, which opened Portmore, accounting for much of this increase. For the year revenues totaled $8.13Bn, Fontana’s highest annual revenue to date. With the new location customer count and transaction size improved, and there was growth across all product lines and segments.
• Notwithstanding the topline growth, expansion efforts can be costly, as evidenced by the 23.3% increase in operating costs following the opening of Fontana’s Waterloo store in 2020. This year mirrored that trend, with operating expenses rising by 25.5% to reach $2.36Bn in 2024. The increase was largely driven by costs related to the new Portmore store, including salaries and staff training, as well as expenses for the company’s 55th-anniversary celebration. With the increase in costs, operating profit declined by 6.6%.
• Furthermore, the taxation charge increased significantly to $40.05 million due to the company entering the second phase of its tax benefits in January 2024, which offers a 50% tax remission compared to the 100% remission received in the first phase.
• Fontana’s stock price has decreased by 24.1% since the start of the calendar year. The stock closed Thursday’s trading session at $7.60 trading at a P/E of 16.2x, below the Junior Market Distribution Sector Average of 19.0x.
• The back-to-school and holiday seasons have traditionally been strong periods for the company’s finances, and we anticipate similar trends for 2025. However, with the economy showing signs of slowing and projected to contract, the company may encounter challenges that could impact its performance.

(Source: JSE & NCBCM Research)