Simbisa Brands’ management strategy has shifted towards focusing on high-return investments and growing its footprints amid a growing feeling that the market is nearing maturity in some of its operating markets.
Responding to emailed questions by Business Weekly, financial director Salim Eceolaza said Simbisa’s capital allocation strategy pre-FY2017 was to attain a high rate of store roll-outs in existing markets to establish a strong market presence and grow market share.
“This has been a key focus-area in the past year with much time and effort going into investigating various investment opportunities which will yield high returns and this has culminated in the proposed AIM listing and acquisition opportunity which management has identified.
“Improving operational efficiencies and supply chain management has also been a focus area in FY2017, resulting in the acquisition of a factory for our Rolls and Confectionary and Central Kitchen divisions in Zimbabwe,” said Eceolaza.
“Now that we feel that we are nearing maturity in some of our markets, management’s strategy has shifted to focus on high-return investments and growing our footprint.
Eceolaza said the proposed secondary listing on London AIM and acquisition of an international complimentary business may not have been achieved without establishing Simbisa as an independent, ZSE-listed entity. He said the primary motivations for the unbundling from Innscor were to enhance Simbisa’s ability to pursue strategies that maximise shareholder value, and also to enable Simbisa to undertake M&A activities of entities in complimentary spheres of operation, without competing internally with other Innscor divisions for capital.
“We believe that in the 24 months that Simbisa has operated as a standalone company, all of the above objectives have been achieved and have started to bear fruit. Simbisa’s financial performance for the year ended June 30, 2017 reflects an increase in revenue and profitability which has been achieved though organic growth of our existing brands through increased focus on our brands and our customers as well as enhanced operating efficiencies,” he said.
Eceolaza said the company has plans to introduce new concepts and initiatives to list on the LSE are part of the plans. He said the proposed secondary listing on the London AIM and the acquisition of an international complimentary business are both initiatives which will also enable the company to introduce new brands and concepts into the portfolio.
“In order to remain competitive and continue to grow our market share, we intend to develop or acquire complimentary brands that will enable us to increase our penetration in the casual to fine dining space,” said Eceolaza.
Commenting on the existing brands Eceolaza said Chicken Inn is the largest revenue contributor, and in 2017 Chicken Inn and Pizza Inn brands achieved the highest revenue growth rates. Zimbabwe is the largest contributor by country, contributing 60 percent to group revenue in FY2017.
“Mauritius has gained ground in terms of its contribution to the group’s performance as we transition out of the start-up phase and have reached scale in this market, through additional store roll-outs in the year. Kenya and Zimbabwe continue to perform well in terms of growth in revenue.”
Simbisa Brands’ profit for the year ended June 30, 2017 rose 26 percent to $6,355 million on growth in the group’s largest markets — Zimbabwe and Kenya. Overall revenue was 8 percent stronger to $158 million compared to $146 million achieved in the prior year due to strong performance in key markets despite some economic challenges.