Fontana aims to raise over $400 million from IPO
Fontana has outlets in five locations and is set to open a flagship store next year at the intersection of West Kings House and Waterloo Roads.
One of Jamaica’s leading pharmacy chain, Fontana Limited, is seeking to raise a little over $468 million via an initial public offering of its shares on the Jamaica Stock Exchange (JSE) Junior Market, amid plans to increase outlets locally.
In June, Fontana announced plans to open a 35,000 square foot store, its largest location - at the intersection of West Kings House and Waterloo Roads in Kingston next year.
The company is now looking to expand to Portmore, St Catherine, add another location in Montego Bay and bolster its online shopping platform.
“The company is actively seeking yet another location to serve the growing demand from customers in Portmore, St. Catherine, which has the potential for strong future revenue growth. The directors are also monitoring opportunities for expansion in the Montego Bay area”, Fontana said in its prospectus posted to the JSE late last week.
The IPO will allow Fontana to raise funds for working capital, take advantage of opportunities for improvement and expansion of the business.
Fontana has offered 249,874,965 ordinary shares at a price of $1.88 per share for the general public. The invitation, which is being arranged by Scotia Investments Limited, opens on Thursday, December 13 at 9:00 am and run until Thursday, December 20.
If all of the Invitation shares are sold, the invitation will raise $468,077,925 million, of which $234,040,086 will be due to the Fontana and $234,037,839 will be due to the selling shareholder, Burbank Holdings that is controlled by Chairman Emeritus Shinque (Bobby) Chang.
With over 65,000 square feet of combined store space at its locations in Barbican, Kingston, Fairview, Montego Bay, Mandeville, Savanna-la-mar and Ocho Rios - Fontana is run by the second generation of the Chang family and their spouses and is supported by over 300 members of staff.
Speaking to the announcement of its IPO, Ray Therrien, Chief Operating Officer Fontana Limited said the decision to offer shares to the public is driven not only by financial considerations but also by a desire to give back to Fontana employees and the persons across Jamaica who have supported the company over 50 years.
“Although we are parting with a piece of the company, we view the IPO as something which will provide ample benefits both for Fontana and our investors in the medium to long-term,” Therrien said, noting that Fontana has always taken a long-term view of its development.
An artist's impression of the Fontana outlet that is set to open next year at the intersection of West Kings House and Waterloo Roads.
Fontana’s core business is the sale of pharmaceutical products through licensed pharmacies. It has diversified its product offering to include a vast range of beauty and cosmetic items, housewares, home décor, toys, baby items, electronics, school and souvenir products.
The company's revenues have grown significantly over the five financial years, however its revenue growth in financial year 2018 was negatively impacted by months of roadworks near to the Kingston store at Barbican Square which temporarily reduced client access to the location, and by the State of Emergency in St James that forced the Fairview branch to shorten its opening hours and decreased traffic overall.
The Montego Bay and Barbican Square locations together represented 62 per cent of total revenues in financial year 2018, down from 63 per cent in the prior year. Accordingly, revenue grew at a lower rate than costs of sales and administrative and other expenses, and operating profit fell seven per cent to $346 million in financial year 2018, from $372 million in financial year 2017.
Net profit for financial year 2018 decreased five per cent over 2017, moving from $262 million in 2017 to $247 million in 2018 as a result of the aforementioned challenges.
Despite the temporary slowdown in revenue growth, gross profit margins remained strong at 37 per cent in financial year 2018, compared to 33 per cent in 2014, the company said.
Fontana’s management expects total sales to rebound in the next financial year given the completion of the roadworks that affected the Barbican store in Kingston, and the opening of the Waterloo Square branch, which will add 28,000 square feet of retail space that will increase the company’s overall retail footprint by over 40 per cent and bolster sales.
“In doing so the company’s intention is to lead the retail market with innovative concepts, marketing and ease of shopping,” Fontana said, adding that the Waterloo Square store will enable the company to negotiate more favourable terms and rebates with key pharmaceutical partners on the local purchasing side.
Therrien added: “After careful consideration of the pros and cons of seeking to list on the Junior Market Fontana is pleased to be able to come to market at this time and is happy to be working with Scotia Investments.”