eBusiness Weekly
Enacy Mapakame
Quick service restaurant (QSR) group, Simbisa Brands Limited, reported revenue for FY20 first quarter ending September 30, 2019 surged 455 percent against prior year comparable period.
Simbisa attributed the growth to a 676 percent year-on-year jump in average consumer spend although customer counts fell 28 percent.
Basic earnings per share grew 294 percent on prior year comparable period.
Group chief executive Basil Dionisio, indicated average spend in Zimbabwe increased 480 percent year-on-year but as salaries significantly lag inflation, erosion of customer spending power resulted in a 40 percent year-on-year decline in customer counts during the quarter under review compared to same period in the prior year.
Revenue from the Zimbabwe operations grew 249 percent year-on-year while the regional operations achieved 9 percent year-on-year growth in USD revenue. This was driven by a 6 percent increase in customer counts and a 3 percent increase in USD average spend in the quarter under review.
“On conversion to Zimbabwe dollars, this translated to a 1003 percent year-on-year increase in regional turnover in Q1 FY2020 versus Q1 FY2019,” said Mr Dionisio in a trading update.
To offset further effects of the obtaining challenging economic environment in Zimbabwe, the group implemented some initiatives to maintain its market share.
Some of the strategies included the introduction of a range of value meals, increasing promotional and marketing activity and maintaining an optimal pricing strategy to maximise value to its customers whilst taking careful measures to preserve margins.
The group also opened six counters in Zimbabwe and the Rocomamas brand was successfully launched in Zambia with the inaugural store opening on July 19, July 2019.
However, the acute power outages being experienced across the country also had an adverse impact on the business as this shortened trading hours in the period under review versus the prior year period and contributed significantly to the operating cost structure.
By close of the period, Simbisa had 464 counters in operations and is anticipating to open 21 new counters over the next six months, 10 counters in Zimbabwe and 11 counters in the region as the group seeks to expand its footprint across all markets.
While the Zimbabwe market is volatile, management remains upbeat on the back of careful and proactive management strategies as well as the growing contribution from the regional business, which leaves the group on course to meet expectations for the half year ended 31 December 2019.
The group has also put in place measures to ensure adequate working capital for the upcoming festive season and going into the third quarter.
For regional operations, Mr Dionisio said: “Exchange rate movements against the US dollar remain the greatest risk in the regional business. In this regard, increasing sovereign debt levels in Kenya and Zambia pose a downside risk on inflation and exchange rates in these markets.
“While Ghana’s macroeconomic outlook for FY2020 is favourable, the primary exchange rate risk emanates from policy relaxation in the run-up to the 2020 elections.
“The group remains aware of these risks and continues to take proactive measures to hedge against the impact of adverse exchange rate movements, mainly through localising the cost base in each market.”
