Simbisa in 134pc profit growth

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Quick service restaurant group Simbisa Brands defied economic headwinds to record a 134 percent jump in profit to $32 million for the year ended June 30,
2019 despite a decline in total customer count.

Zimbabwe, which is its largest market has been going through inflationary pressures, foreign currency challenges which led to erosion of consumer spending as
prices of goods and services skyrocketed.

As a result, Simbisa recorded a 5 percent decline in customer count in Zimbabwe but registered 6 percent growth in regional operations. Overall group
customer count went down 2 percent to 54,7 million during the year under review.

Despite the challenges in Zimbabwe, the market remained a significant revenue driver contributing 65 percent of total revenue, although it was a decline from
70 percent a result of a deliberate move to grow regional businesses.

Zimbabwe market’s revenue increased 79 percent to $255,1 million. Same store revenue increased 72 percent versus the prior year.

Total group revenue came in at $390,8 million, which represented 91 percent growth on prior year.

Profit before tax jumped 148 percent to $49,8 million from $20,1 million achieved in the prior year. An operating profit of $64 million was recorded which
was 128 percent above prior year.

At $32,4 million, profit for the year was 134 percent above the $13,8 million achieved in the comparable period.

Basic earnings per share grew 127 percent to 5,77 cents. Net gearing ratio came in at 31 percent from 20 percent in the previous year.

On regional operations, revenue jumped 12 percent year-on-year in USD terms and 118 percent from prior year in RTGS$ terms to $135,9 million as operating
margins improved to 8,1 percent from 7,3 percent in the prior year.

Kenya led growth in regional businesses where 18 new counters were opened between June 30, 2018 and June 30, 2019 including the new Grill Shack brand which
was opened in January 2019 and is performing above expectations.

Customer counts in Kenya grew 4 percent versus prior year on a same store basis and 8 percent versus prior year when including the new stores opened in the
period under review, with the full financial impact projected to come through from the first half of FY2020.

The market has been identified as a key growth market in regional business due to a growing middle-class population, high and improving consumer income
levels and stability in the trading environment.

Simbisa indicated there were great improvements in the Zambian business following the restructure in which the group acquired the minority interest to own
100 percent of the Zambian business with topline growth registered. This was despite the closure of 10 counters.

Gross Profit and Operating Margins also improved in the year under review but the market was negatively impacted by unfavourable exchange rate movements.

All regional operations inclusive of Ghana, DRC and Namibia registered growth in operating profit and firming operating margins during the period under
review with the exception of Mauritius where increased competition and stock cost control issues have brought margins under pressure.

In Ghana, changes to the VAT Policy enacted in August 2018 impacted the business through an effective 5 percent increase in cost prices and import duties as
well as putting pressure on consumer spend.

The market also experienced exchange rate weakness during the period under review which resulted in revenue in Ghana falling 7 percent in US dollar terms.
The loss in revenue was however countered by cost containment measures which resulted in an increase in operating profit in US Dollar terms.

The business also continues to operate in DRC under a franchise arrangement and is doing well as operations have been expanded into Kinshasa through the
opening of 4 new counters in the first half of FY2019.

Despite the challenges, the group remains upbeat of defending margins going forward.

“The Board is confident that Simbisa is in a good position to navigate the evolving environments in the markets in which we operate.

“We expect Zimbabwe to be particularly challenging in the short to medium term and we are conscious of country debt-induced pressures in the Kenya and Zambia
economies.

“We remain optimistic of improvements to conditions in the medium-term and providing sustainable growth and returns to our shareholders,” said chairman
Addington Chinake in a statement accompanying the financials.–herald.c.zw

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