Chairman’s Statement
It is my pleasure to present the Group results for the half year ended 31 December 2023, a period which was marked by significant growth and strategic advancements for Simbisa Brands. Despite the existence of continued economic challenges in some of our operating markets, the Group delivered a robust performance, demonstrating the resilience and adaptability of our business model.
Operational Highlights:
- Growth Momentum: We expanded our footprint by opening 37 new stores, bringing our total network to 568 owned and operated restaurants across Zimbabwe, Kenya, and Eswatini (655 stores including franchised markets).
- Financial Performance: Overall, Simbisa achieved a 7% increase in revenue (Zimbabwe +10%, Region +2%), driven primarily by higher average spend per customer. Operating profit grew by 22%, reflecting improved purchasing efficiencies and firmer margins.
- Navigating Challenges in Zimbabwe: Despite a challenging economic landscape in Zimbabwe, Simbisa has continued to successfully navigate the existing challenges such as the persistent foreign currency exchange rate depreciation, power supply interruptions and high cost of doing business. We achieved 10% revenue growth and a remarkable 31% operating profit increase in Zimbabwe despite these headwinds. The increased dollarisation in the economy significantly impacted operating expenses, leading to a 19% increase. However, through proactive measures and innovative cost-saving initiatives, we minimised this impact and ensured continued profitability.
- Kenya Remains Strong Despite Economic and Fiscal Headwinds: The market is currently experiencing a weakening currency and significant fiscal pressures. Despite these operating conditions, the business posted commendable results in local currency, with revenue growing by 16% and operating profit growing by 23%. Due to currency devaluation, in US$ terms revenue was down 5% while operating profit remained flat. Customer counts grew by 5% driven by new stores. There is considerable pressure on the consumer, weighing down the growth of existing stores. Various initiatives, including expanding delivery offers and offering value menu items are in place to drive customer count growth.
- Strategic Restructuring: We completed the acquisition of the Eswatini business, previously a franchised market, and strategically restructured the underperforming markets (Zambia, Ghana, and Mauritius) by transitioning them to franchised operations under highly experienced franchisees. This has allowed Simbisa’s executive team to focus resources on growing and maximizing shareholder returns from core markets.
- Sustainability Leadership: The Group has an active Economic Social and Governance (ESG) policy and remains committed to achieving the sustainability goals set by the Group based on its existing Sustainable Development Goals (SDGs). A key highlight on social matters is the ongoing project to construct the USAP Community School for underprivileged children. The Group spent US$931,634 towards this project. On the environmental front, energy management continues to be a priority. A data-driven approach has been implemented to identify opportunities to reduce energy consumption. Significant savings have been made through strategically adjusting hours of operation and more efficient production planning.
Financial Highlights:
- Revenue was US$147 million (+7%) while number of customers grew by 4%.
- Adjusted Operating Profit (excluding IFRS 16) increased to US$21.4 million, a 22% increase, fuelled primarily by purchasing efficiencies.
- Attributable profit, at US$9.8 million, is 16.9% down year-on-year. The decline was driven by a non-recurring item in the prior year (US$2.1 million gain on bargain purchase) and the impact of the change in accounting estimate on leasehold improvements depreciation, which had a net impact of US$1.3 million in the current period.
- Headline earnings were a marginal 0.6% up year-on-year, and the reconciliation to basic earnings is shown below.
- Cash and Cash Equivalents closed at US$9.5 million.
- Debt position reduced from US$16.1 million to close at US$12.2 million. The Group produced growth in operating profit at a lower gearing ratio.
- Cash Generated from operating activities has improved by US$3.6 million year-on-year, representing a 20,6% growth.
- Other comprehensive income for the current financial year relates to exchange losses on the conversion of subsidiary net assets to the US dollar reporting currency. In the prior year, other comprehensive income also included revaluation surplus on property, plant, and equipment (net of tax) as shown on the abridged financial statements. The Board highlights that this accounting treatment is meant to reflect the value lost/gained in respect of foreign subsidiaries when the net assets are reflected in the Group’s reporting currency, and that it does not reflect real US$ lost within those operations.
- Exchange losses on translation of foreign operations predominantly reflect the impact of the devaluation of the Kenyan Shilling against the US dollar, on conversion of the subsidiary’s net assets. Across the Regional operations, the Group incurred an unrealised loss of US$2.8 million (HY FY23: US$0.7 million). In the prior year, the losses were offset by the revaluation surplus as the PPE revaluation was performed at the beginning of the prior period. The Group will be performing another revaluation of PPE as at 30 June 2024.
Interim dividend
- The Board resolved to declare an interim dividend of 0,62 US cents per share. Furthermore, the Board approved a dividend of US$174,277 to the Simbisa Employee Share Trust. The dividend will be payable in United States dollars on or about 20 March 2024 to shareholders registered in the books of the Company close of business on 15 March 2024. The last day to trade cum-dividend is 12 March 2024, and the ex-dividend date is 13 March 2024.
Governance
The Board of Directors resolved to appoint Mr. Nabil Mankarious as an Independent Non-Executive Director with effect from 23 February 2024.
Mr. Mankarious brings a wealth of experience and expertise in the food and hospitality industry in Europe.
His experience includes overseeing Pizza Express and Clapham House Group’s Gourmet Burger Kitchen in various capacities as Managing Director, Commercial Director and subsequently Chief Executive Officer. Thereafter, Mr. Mankarious delved into co-owning and managing other brands such as Meat Liquor restaurants, La Piccola Deli, and Rocca, an Italian restaurant concept. Thereafter, he co-founded Fulham Shore which owns and operates Franco Manca and the Real Greek restaurants in the United Kingdom, Italy, Greece and Spain.
His background and experience will be a catalyst for Simbisa’s drive to bring innovation and world class standards into its operations and brands.
Looking Ahead:
The Board is confident that Simbisa has good prospects and remains focused on:
- Exceeding customer expectations: Attracting, training, and retaining the best talent is a key focus. We will also leverage on innovative methods to increase the speed of service and convenience. Growing our delivery channel by expanding the delivery option across our network is a continuing target in all the markets we operate in.
- Accelerating organic growth: Expanding our footprint through strategic store openings and driving customer loyalty. The Group has a pipeline of 33 stores for the six months to 30 June 2024.
- Optimising profitability: Management will continue to enhance purchasing efficiencies, improving operating margins, and maximising returns from established markets.
- Delivering shareholder value: There is an emphasis on maintaining disciplined financial management and generating attractive returns for our investors.
On behalf of the Board, I would like to express sincere gratitude to our dedicated management team and committed employees for their continued contribution to Simbisa’s success. We also extend our deep appreciation to our loyal customers and supportive partners for their continued patronage and support.
ABC CHINAKE
Independent Non-Executive Chairman
Harare
29 February 2024
Related Downloads
Simbisa Brands Limited – Unaudited Abridged Financial Results for HYE 31 December 2023
Simbisa Brands Limited – Short Form Financial Announcement for HYE 31 December 2023
