Chairman’s Statement
The financial year ended 30 June 2024 was characterised by consistent navigation of challenges while seizing opportunities as the Group sought to reinforce its’ market position. Despite facing significant economic pressures, particularly in Kenya, Simbisa Brands has continued to push forward with many strategic investments which focus on enhancing customer experiences, operational efficiency, sustainability and growth.
The Group opened 73 counters during the year (closed 9 counters), to close the reporting period with 601 company-operated counters (714 counters including franchised markets).
Zimbabwe
In Zimbabwe, the second half of the year was particularly challenging due to a variety of regulatory and tax changes, which have increased pressure on consumer disposable incomes. The introduction of a new currency (Zimbabwe Gold) on 05 April 2024, initially provided a degree of stability in the last quarter of the reporting period. The teething and transition problems experienced by the banking sector arising from the currency transition, negatively impacted volumes in the last quarter. The Group’s operations and trading volumes remain sensitive to any fluctuation between the exchange rates in the multi currency basket.
The El Niño-induced drought experienced in 2024 has significantly affected the prices of essential raw materials, such as soya and maize, which are crucial to our supply chain. Potato shortages affected the Group in Q3 FY24, resulting in higher costs. To manage these pressures, we have maintained strong relationships with our suppliers, facilitating long-term contracts to stabilise costs. This proactive approach has been crucial in managing the adverse effects of these external economic shocks.
Kenya
In Kenya, the economic and political environment has been particularly challenging as this market experienced severe business disruption due to currency devaluation, flooding and extended anti-tax riots.
The Kenyan shilling has since stabilised and strengthened since March 2024, due to tighter monetary policies and easing global pressures on this market. However, this stabilisation followed a period of significant depreciation, which had already exerted considerable strain on consumer purchasing power and increased our operational costs.
SUSTAINABILITY AND COMMUNITY ENGAGEMENT
Sustainability remains a cornerstone of our business strategy. This year, we assisted in the building of and completion and inaugurated the United Students Achievers Programme (USAP) Community School Campus in Marondera which opened in August 2024, reflecting our commitment to community development. The project, which cost in excess of USD 2.2 million of which Simbisa contributed USD 1 million – demonstrates our dedication to creating a lasting positive impact in the communities where we operate.
GOVERNANCE
In line with its commitment to strengthening governance and enhancing the depth of its leadership, Simbisa Brands appointed Mr. Nabil Mankarious as an Independent Non-Executive Director, effective 23 February 2024. Mr. Mankarious brings a wealth of experience in the food and hospitality industry, having co-founded and managed various renowned brands in the United Kingdom and beyond. His extensive experience in managing world-class brands will be invaluable in supporting Simbisa’s mission to elevate its’ operational standards and drive growth.
His appointment will be tabled for ratification at the Company’s 9th Annual General Meeting on 22 November 2024.
All the Board Committees were fully functional, met regularly and discharged their fiduciary duties in the reporting period.
Financial Highlights
The financial performance for the year includes several once-off items impacting comparability with the previous year.
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- In last year’s results, once-off items totaling USD 4.9 million were included, comprising a USD 2.1 million gain on bargain purchase relating to our acquisitions of InnBucks Microbank and Oven Art, and USD 2.8 million in income from Treasury investments.
- In the current year, we recognized a USD 3.2 million incremental depreciation on leasehold improvements, following a change in the rate of depreciation from 5% to 10%. This adjustment was driven by the need to align accounting estimates with the Group’s store revamp cycle. Despite the challenges, our focus on cost management and operational efficiency has enabled us to navigate these difficulties effectively, continuing to deliver value to our shareholders:
- The Group achieved a 6% increase in revenue despite facing significant challenges during the period.
- Operating profit before impairment, depreciation, and amortization declined by USD 1.9 million (-4%). Included in this decline is the impact of the once-off non-recurring income from Treasury investments of USD 2.8 million in the prior year.
- As reported in our H1 report, the net impact of the disposal of subsidiaries was USD 0.08 million. This is the net of a USD 5.9 million profit on disposal, partially offset by a USD 5.39 million loan impairment provision and USD 0.43 million foreign currency translation reserve (FCTR) losses recycled to the profit and loss. The Group retains rights to repayment of shareholder loans in these businesses. The loans are carried at a net amount after impairment of USD 7.6 million.
- The Group generated the same level of cash from operations despite the decline in Headline Earnings. This resulted in a 112% conversion rate of operating profit to cash, underscoring the Group’s robust cash generation strategies.
- There was a notable shift from a loss to a gain in the translation of foreign subsidiaries compared to the prior year. This improvement was driven by the strengthening of the Kenyan Shilling and the disposal of subsidiaries in Zambia, Mauritius and Ghana, which had previously contributed substantial currency translation losses.
- Despite the decline in Headline Earnings, total comprehensive income increased by 6%, demonstrating the Group’s strong ability to preserve shareholder equity.
Final Dividend
The Board has resolved to declare a final dividend of 0.392 US cents per share. Additionally, the Board approved a dividend of USD 110,188 to the Simbisa Employee Share Trust (Private) Limited. The dividend will be payable in United States dollars on or about 07 November 2024 to shareholders registered in the Company’s books as of the close of business on 18 October 2024. The last day to trade cum-dividend is 15 October 2024, and the ex-dividend date is 16 October 2024. The total dividend for the year is 1.012 US cents per share, inclusive of an interim dividend of 0.62 US cents per share.
Outlook
As we look to the future, our strategic priorities include not only expanding our store network but also the modernisation and revamping of existing outlets to enhance customer experience. We are targeting to open 36 new stores in FY25 and revamp 36 stores at a total cost of USD 17.8 million. 6 shops will be closed or rationalised. In addition, a restructure of some of the Group’s property investments will occur in the financial year ending 30 June 2025.
The Group will focus on increasing its’ customer numbers and product range. Investigations of potential strategic raw material sourcing within the Common Market for Eastern and Southern Africa (COMESA) market are being explored, which will optimise the supply chain and mitigate some of the external economic pressures we face. The upgrade of a Group wide Enterprise Resource Planning system (ERP) has been successful and resulted in better real-time financial reporting.
In line with our goal to become more customer-focused, we have introduced a customer feedback platform for tracking and analysing customer feedback in all our markets.
I extend my deepest gratitude to our Executive and Management team and all our employees for their dedication and hard work. We remain committed to executing our growth strategy, strengthening our market leadership, and driving sustainable growth.
A.B.C Chinake
Independent Non-Executive Chairman
30 September 2024
