Quick service restaurant (QSR) provider, Simbisa Brands Limited, is upbeat of maintaining growth trajectory in the future after profit for the half year to December 31, 2020 almost doubled despite the negative effects of Covid-19 in most economies it operates.
Figures from the group show that profit for the period jumped 90 percent to $850 million compared to same period in the prior year. Chairman Addington Chinake, indicated the group is well placed for a good performance going forward despite the uncertainties caused by Covid-19 pandemic. The growth will be anchored on among others, its diversified store network and fast growing delivery channels that work well during lockdown periods.
“We therefore believe that we are well-positioned to navigate the challenges ahead successfully, due inter alia to our geographically diversified store network, strength of our take-away channel and fast-growing delivery and drive-thru channels.
“We continue to make progress towards long-term growth and explore new possibilities for operational optimisation as we gear up to ease into a post-Covid-19 world, with a pipeline of 38 new stores for the remaining six months of the financial year,” said Mr Chinake in a statement accompanying the group financials.
He added: “Despite the uncertain times that lie ahead and the risk of a third wave of the pandemic, we are confident that the action plans the business has put in place will allow us to cope with the impact of the pandemic in the short-term and set the business up to take advantage of long-term growth opportunities.”
During the half year period, revenue increased by 101 percent to $8 billion with Zimbabwe recording a growth of 44 percent mainly driven by a 56 percent increase in average spend.
In the Region, whilst revenue fell by 14 percent in USD terms, driven by a 19 percent decline in customer counts offset by a 6 percent increase in average spend, translation into Zimbabwean dollars reflects a 500 percent growth.
Operating profit increased by 75 percent while profit attributable to shareholders and headline earnings increased by 91 percent to $844 million and 150 cents respectively.
Mr Chinake indicated that the group recognised a net monetary gain of $148 million and recorded foreign currency exchange and other gains of $530 million mainly comprised of foreign exchange gains on the net foreign currency position in Zimbabwe.
Cash generated from operations was strong at $2 billion.
Total capital expenditure for the period was $644 million with Zimbabwe accounting for $250 million while the remainder went to the region.
The group implemented cost saving measures while its delivery sales increased during the period which helped offset the impact of lost customer count due restrictive trading conditions.
In Zimbabwe, business remained resilient although counter trading hours were still 19 percent down on prior year due to the curfew upheld throughout the period and with restrictions being tightened from mid-December.
Most severely affected are the casual dining, sit-in restaurants and transit sites due to inter-regional travel restrictions.
Although consumer spending power remains under pressure in the market as a result of depressed economic conditions and the social implications of the Covid-19 pandemic, Simbisa Zimbabwe achieved real growth in average spend in 1H FY2021 versus the prior year comparable period.
On regional operations customer counts fell 19 percent from prior year while average spend increased 644 percent in local currency inflation-adjusted terms and 6 percent in USD terms, despite currency devaluation against the USD across regional operating markets.
Revenue generated by regional operations fell 14 percent year on-year in USD-terms but increased by 500 percent in inflation-adjusted local currency terms to $2,98 billion. Regional EBITDA margins improved significantly on the back of improved operating efficiencies and implementing aggressive cost management strategies.
Mr Chinake said growing the Simbisa brand footprint was a key focus area in the Kenya, Zambia and Ghana operating markets whilst the priority is to turnaround the existing business in the other regional markets.
The latter strategy involves a re-structuring exercise which has been initiated in Mauritius and has already proved to be successful, with the full impact expected to reflect from FY2022.
Additionally, the unbundling of the delivery business in Kenya into Kutuma Kenya Limited has also delivered very promising results, with delivery revenue contribution to Simbisa Brands Kenya growing to an average 20 percent from 14 percent in 1H FY2020.
According to the group, the Zambian business faced challenges from significant exchange rate weakness and inflationary pressures in that economy in the review period, putting pressure on consumer disposable incomes, increasing the cost of imported raw materials and impacting key costs for the business.
In Mauritius, the business has initiated the first phase in the three-phased recovery plan. The first phase entails restructuring the format of the counters from a table service to a counter service QSR model which requires less rental area and reduced staff. The second phase will be growing footprint through the roll-out of new counters under the re-modelled business format and the third phase development into new, high-density regions.
The group launched Rocomama’s in Ghana with the inaugural restaurant opening in November 2020. The restaurant’s performance to date has well exceeded expectations.
In Namibia, revenues were negatively impacted by the loss of trading hours and lockdown restrictions that were reimposed in 2Q FY2021 resulting in a 17 percent decline while customer counts went down 22 percent year on year.