Chairman’s Statement
Introduction
The year ended 30 June 2017 represents our first full year of operation as Simbisa Brands Limited (Simbisa) following our unbundling from Innscor Africa Limited (Innscor) on 1 October 2015. I am pleased to present a strong performance by the Group for the year. In order to give stakeholders a balanced assessment of the performance of the Group, the report of the Directors’ includes pro-forma financial information for the same operating period last year. The pro-forma information includes results for the three months ended 30 September 2015, as reported by Innscor, and results for the subsequent nine months ended 30 June 2016, as reported by Simbisa following the unbundling from Innscor.
Highlights for our first full year operating as Simbisa are set out below:
- Strong organic growth in our largest markets, Zimbabwe and Kenya notwithstanding trading challenges particularly in Zimbabwe.
- Acquisition of a factory for our Rolls & Confectionery and Central Kitchen divisions in Zimbabwe which supply our local restaurants with key inputs.
- Conclusion of a restructuring exercise in Zambia to achieve scale, manage costs and extend our portfolio of brands and restaurants with a higher average spend per customer.
- Continued store roll-out project in Mauritius in order to achieve scale.
- The Group established a presence in Namibia for ongoing expansion.
Financial performance
The Group’s revenue for the year increased by 8% to $158.9m (2016: $146.6m) driven mainly by organic growth in Zimbabwe and Kenya and 6 months revenue contribution from the additional stores rolled out in Mauritius.
Operating profit was also up 23% to $18.3m (2016: $14.9m). Profit before tax increased by 4% to $10.0m (2016: $9.7m). Accordingly, profit attributable to the owners of Simbisa increased 36% to $6.8m (2016: $5.0m) and basic earnings per share was higher at 3.21 US cents (2016: 0.91 US cents).
Cash generated from operations after changes in working capital increased to $20.1m (2016: $19.0m). The Group invested $10.6m mainly in expansion activities in Kenya, Zimbabwe and Mauritius, which has reduced the $16.3m spent in the previous period. A large part of the reduction in capital expenditure is the result of the successful rationalisation strategy which takes priority in order to achieve higher return on investment and the objective to scale up in key markets. This approach has allowed the Group to allocate more financial and human resources toward achieving operational efficiencies in existing stores with strong and stable trading performance.
Net cash outflow for the year ended 30 June was $3.8m for the year under review. The Group’s total borrowings remained relatively flat with a marginal reduction of $0.5m. The Group spent $1.5m on clearing outstanding amounts payable to non-controlling interests arising from transactions concluded in previous years. An amount of $1.9m was distributed to shareholders as cash dividends while $0.5m was paid to non-controlling interests.
Review of operations
Zimbabwe
We are excited by the growth achieved in Zimbabwe over the course of the year despite the prevailing economic challenges in the country. The Group’s store count increased by a net of 4 stores in Zimbabwe during the year taking our store count to 194 across the market. Included in the new stores are 2 (two) new drive-thru’s opened in Harare, taking the total number of drive-thru’s to 4 (four) countrywide.
Revenue increased by 9% to $100.4m (2016: $92m) driven by higher customer counts with significant growth coming from our newer stores. We are impressed by the organic growth in our business which reflects management’s effort over the last year to improve customer service and provide value offerings to the Zimbabwean consumer. The market contributed $15.5m to operating profit during the period.
The region
Our regional operations in Kenya, Zambia, Ghana, DRC and Mauritius contributed $58.4m (2016: $54.5m) to Group revenue. Growth was in line at 7%. Our Mauritian roll-out had not reached scale for most of the period under review with 2 stores closed and 4 counters shut in DRC as part of the Group’s restructuring exercise. Kenya performed well but faced macro-economic challenges in line with rising inflation and economic pressures in East Africa. This region contributed $7.8m to Group operating profit in the year under review.
Sustainability
The Group adopted sustainability reporting as a strategy to recognise the impacts and risks arising from business activities, both positive and negative, on the various stakeholder groups with which we engage. Sustainability issues are a key aspect of the way the business is governed and practiced in line with our values. By creating visibility and engaging with our stakeholders, the business ensures that we integrate sustainability in our practices and the markets in which we operate.
Outlook
The Group intends to build on the strong performance recorded in the year under review. We will continue with our current disciplined approach to store expansion in order to raise overall shareholder return on equity. The Group remains alert and ready to explore potential acquisitions which are aligned with its strategic intent of becoming the largest Pan-African QSR Operator. In addition, we expect to invest in strengthening management resources in key markets and in strengthening human resources in our business units.
In Zimbabwe, we expect trading conditions to remain challenging in the short term. We will pursue further organic growth on the back of improved transactional convenience in the market and strong market position.
In the region, we expect to face continued strong competition in Kenya and anticipate that we will continue to face challenging trading conditions in both Kenya and DRC. Achieving internal efficiencies will be critical in these markets. Zambia has a new stable political outlook and we are confident that the trading environment in this market will improve in FY2017 with a return to positive trading. Transforming our Mauritius operations to begin returns through strategic marketing and investment in people and systems will be a key priority.
Appreciation
On behalf of the Board, I would like to thank our customers, management, staff and business partners for their continued support.
Dividend
I am pleased to announce that the Directors have declared a final dividend of 0.25 cents per share to be paid on or about 3 November 2017. This brings the total dividend for the year to 0.46 cents per share.
For and on behalf of the Board
ABC Chinake
Non-Executive Chairman
20 September 2017
