Simbisa reports strong earnings despite challenges . . . 20 new stores opened during the period

08 Mar, 2019 - 00:03 0 Views

eBusiness Weekly

Enacy Mapakame
Quick service restaurant (QSR) group, Simbisa Brands Limited’s profit for the half year to December 31, 2018 jumped 99 percent to $16,2 million despite a challenging operating environment in its biggest market — Zimbabwe.

Zimbabwe presented a series of challenges during the period under review, emanating from the obtaining foreign currency shortages, inflationary pressures as well as the 2 percent transaction tax that was introduced in October 2018, which increased the cost of doing business.

Operating profit before depreciation, impairment and amortization (EBITDA) rose 82 percent to $27,4 million while operating profit margin was up 4 percent to close at 19 percent.

Profit before tax increased 111 percent to $23,6 million. Basic earnings per share doubled to 2,92 cents. Simbisa declared a 1 cent per share dividend.

Revenue for the period under review advanced 44 percent to $143,2 million. Existing stores contributed 40 percent of the revenue growth with the remaining growth coming from 20 new stores opened in the period.

Total number of counters was 413 by close of the period.

Group chairman Addington Chinake acknowledged the challenging environment especially in Zimbabwe and Kenya, but the group remained pro-active in offsetting the effects of the challenges.

“In the six months under review, we continued to face challenging trading environment in most of our markets.

“Despite this, the group is on a growth trajectory in our existing stores and from new store openings in our key markets, Zimbabwe and Kenya,” he said.

The group spend $8,9 million in expansion initiatives in Kenya and Zimbabwe, an increase from the $3,3 million spend in the prior year comparable period.

In Zimbabwe, revenue rose 55 percent year on year across existing stores with a further contribution from 8 new counters opened during the period under review to $108,65 million, up 60 percent on prior year.

Operating profit margins rose to 22,6 percent from 17,7 percent in the comparable prior year period resulting in a 105 percent year on year increase in operating profit to $2453 million.

Revenue generated from regional operations increased 10 percent to $34,6 million.

The group will continue its focus on streamlining business.

Mixed bag in the region

In Kenya, the group increased same store customers and average spend by 4 percent and 10 percent respectively versus the prior comparable period. The opening of additional 7 counters during the period contributed a further 2 percent to revenue growth and closed the period with 130 counters.

Operations in Zambia improved but at a slower pace than anticipated. Resultantly, the group resolved to restructure the market using the phased approach to accelerate performance progress.

In July the group purchased an additional 49 percent interest in its Zambian subsidiary and now owns 100 percent of the business.

Revenue growth across existing counters increased 13 percent year on year in local currency terms. However, during the period under review, the average exchange rate of the Zambian Kwacha against the US Dollar depreciated 18 percent compared to prior comparable period resulting in a 4 percent year on year decline in same store revenue in USD terms.

 

Exchange rate instability in Ghana also presented challenges in that market with the Ghanaian Cedi depreciating by 8 percent against the US Dollar compared to the same period in the prior year.

As a result, revenue in USD terms dropped 6 percent. No new counters were opened in this market to close the period with 20 counters.

In other markets, the Mauritius operations registered moderate growth while Namibia achieved doubled digit growth.

The Democratic Republic of Congo (DRC) business performed well under a master franchise management with operations expanded into Kinshasa through the opening of four new counters.

Simbisa anticipates the challenging operating environment to persist in the near future, but management remains upbeat of maintaining a growth trajectory through pro-active measures that will ensure growth and deliver value to all stakeholders.

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