Chairman’s Statement
Overview
I am pleased to report a strong set of results for the year ended 30 June 2018. The Group has achieved a positive outcome in the context of a challenging operating environment.
This is attributable to our responsive and experienced leadership team combined with our robust business model.
Challenging trading conditions persisted in the year under review. During the financial year, general elections in Zimbabwe and Kenya de-stabilised the socio-political environment in the respective markets. Trading conditions in Zimbabwe were marred by persistent liquidity pressures although financial inclusion and formalization of the retail sector in Zimbabwe, driven by the availability and acceptance of plastic and mobile money, have eased some of the transactional pressures on the Zimbabwean consumer and driven growth in the consumer-facing sector.
Simbisa has managed to defend its market share against intensified competition from new entrants in our major markets. Simbisa remains a significant market player in both Zimbabwe and Kenya with a growing presence in other markets.
Group Performance
During the financial period under review, Simbisa continued to achieve sustained organic growth across our portfolio of brands whilst simultaneously re-assessing underperforming counters and brands in order to focus efforts on markets and counters which will deliver the highest return on investment to shareholders. Simbisa opened 13 new counters in prime site locations and closed 29 counters, to end the period with 413 counters.
As reported at half year, due to continued macro-economic challenges and the rising financial and operational risk of operating in the DRC, the Group disposed of its interest in the business and the former partner now operates the brands under a franchise arrangement in this market. The comparative figures have accordingly been restated to reflect this disposal.
Financial Performance
The Group’s revenue for the financial year under review increased by 33% to US$204.7m (FY2017: US$154.1m) driven mainly by organic growth in Zimbabwe and Kenya.
Operating profit was up 60% to US$28.1m (FY2017: US$17.5m). Profit before tax increased by 113% to US$20.1m (FY2017: US$9.5m). Accordingly, profit attributable to the owners of Simbisa increased by 107% to US$14.2m (FY2017: US$6.8m) and basic earnings per share was up 107% to 2.55 US cents (FY2017: 1.23 US cents).
Cash generated from operations and changes in working capital increased to US$28.3m (FY2017: US$21.1m). Total cash utilised in investing activities of US$11.1m (FY2017: US$10.4m) was incurred, mainly for expansion initiatives in Kenya and Zimbabwe.
The Group’s gearing declined by US$1.5m during the period to close the year with a balance of US$16.8m. A total amount of US$4.0m (FY2017: US$2.3m) was distributed to shareholders as cash dividends in the year under review.
Outlook
Simbisa’s strategic intent is to be the leading QSR and casual dining operator in Sub-Sahara Africa with profitable and sustainable food businesses in all of the markets in which we operate. Our key strategic objectives are to continue to grow the core QSR business in existing and new African markets, to develop and acquire brands in the QSR and casual dining segment and to enhance our service offering through technology development and by leveraging established infrastructure and supply chain investment.
Expanding into the casual dining food segment, which will appeal to a higher-income demographic whilst improving Group margins, will be critical to achieving our strategic intent. Simbisa added several appealing new casual dining brands to its portfolio in the period under review, including RocoMamas and Ocean Basket in Zimbabwe. Simbisa will focus on the roll-out of casual dining brands in our existing markets as well as new markets in the short to medium term and we are continuously exploring opportunities to develop and acquire new brands and value propositions which are aligned with our strategy.
I am optimistic that a stabilisation in the socio-political environment and the impending economic reform in the wake of elections in Kenya and Zimbabwe, will pave the way for continued growth and new opportunities in these two markets, where we are most developed, and that Simbisa will continue to make strides in growing its market share in the other regional markets.
Aim Transaction and Acquisition of Foodfund
Following approval by the shareholders of Simbisa Brands Limited at an Extraordinary General Meeting held on 21 March 2018 of the dual listing of the Company by way of a secondary listing on the AIM segment of the London Stock Exchange (AIM) and the acquisition of 50% of Foodfund, shareholders are advised that the Board has resolved to postpone the secondary listing on the London Stock Exchange (AIM) to a future date.
Shareholders are advised that, the parties to the Sale and Purchase Agreement for Foodfund have agreed that the acquisition as presently structured, be amended, due to the postponement of the proposed secondary listing. A notice to shareholders will be published in due course setting out such changes once all formalities are completed.
Simbisa remains committed to joining AIM, and shareholders will be notified on resumption of the dual listing process in due course.
Appreciation
On behalf of the Board, I would like to thank and commend our executive team, management and all other staff members for achieving a pleasing set of results amid a challenging operating environment and thank our loyal customers and other stakeholders for their continued support.
Dividend
I am pleased to announce that the Directors have declared a final dividend of 0.55 cents per share to be paid on or about 29 October 2018. This brings the total dividend for the year to 1.00 cent per share (FY2017: 0.46 cents per share).
For and on behalf of the Board
ABC Chinake
Chairman
26 September 2018
