Simbisa sees solid growth, despite strong headwinds

28 Sep, 2022 - 00:09 0 Views
Simbisa sees solid growth, despite strong headwinds Simbisa, which also operates the Chicken Inn restaurants brand, said customer counts grew by 28,6 percent in the year to June 2022 compared to the same period the prior year.

The Herald

Enacy Mapakame-Business Reporter

Quick service restaurants (QSR) group, Simbisa Brands Limited registered solid performance after both top and bottom lines recorded growth for the full year to June 30, 2022, exceeding pre-Covid-19 outbreak levels.

This was achieved despite economic headwinds and the Covid-19 restrictions experienced during the period under review, high inflation, exchange rate weakness and overall subdued consumer demand.

“Against the myriad of operating challenges, Simbisa achieved strong financial results with top and bottom line growth recorded year-on-year and exceeding performance levels achieved in pre-Covid-19 financial periods,” said group chief executive officer Basil Dionisio in an update for the year under review.

According to the group, customer counts grew 28,6 percent versus the prior year, driven by continued investment in new store rollouts and successful marketing and promotional initiatives in the review period.

Real average spend grew by 10,3 percent year-on-year.

Group revenue grew 76 percent to $72,9 billion amid a challenging operating landscape.

For the Zimbabwe market, revenue grew 48 by percent and 214 percent in the Region. In the Region, (excluding the impact of the Zimbabwe dollar exchange rate depreciation), revenue increased by 38 percent in US dollars terms, from a 30 percent increase in customer counts.

During the period, inflationary pressures and exchange rate weakness triggered a series of sharp price increases in essential raw material and cost line items, putting significant pressure on gross profit and operating margins in the period.

However, effective cost management policies initiated to counter the effects of inflation allowed the business to realise cost efficiencies.

Said Mr Dionisio: “The group initiated a pricing strategy in the financial year under review that resulted in menu price increments executed in a minimal and phased approach to mitigate the impact on our customers.

“The strategy aimed to increase prices only as much as necessary to hedge against the effects of inflationary pressures whilst remaining alert to the price elasticity of demand. This approach ensured that the business remained competitive in a price-sensitive environment, where consumer disposable incomes are already under pressure.”

Profit before tax jumped 156 percent to $13,9 billion. At $9,5 billion, profit for the year was 71 percent ahead of the comparable year.

The Zimbabwe market continued to be impacted by Covid-19 trading restrictions, albeit with conditions improving in the second half of the financial year. The operation continues to generate all its foreign currency from the sale of its products in the local market in line with the multi-currency framework prevailing and therefore does not have access to the Reserve Bank of Zimbabwe foreign currency auction system.

Counter trading hours were 28 percent below normal in the financial year under review, with seating restrictions and curfews being upheld throughout the period.

However, the business continued to navigate operating challenges emanating from policy uncertainty, currency volatility and inflationary pressures, with June 2022 annual inflation rates recorded at 257 percent resulting in depressed consumer spending behaviour.

Despite these challenges, customer counts grew 28 percent year-on-year whilst average-spend grew 15,7 percent to deliver a 48,1 percent increase in inflation-adjusted Zimbabwe revenue in financial year 2022 from the prior year.

Simbisa said revenue growth was driven by new store openings, with 27 counters opened in the financial year under review to close with 261 counters in operation.

According to Mr Dionisio, the market also achieved same-store revenue growth in existing outlets through promotional activity, value offerings and increased sales through delivery channels, with total deliveries growing by 55,5 percent year-on-year.

The pricing strategy and strict cost control measures implemented in the financial year under review resulted in margins remaining firm.

In Kenya, trading restrictions eased considerably in the period under review, with Simbisa Kenya resuming normal operating hours in the second half. However, the market experienced significant inflationary pressures in the year, with annual inflation accelerating to 7,9 percent in June 2022, its highest level recorded since August 2017.

New store growth, improved trading hours and promotions resulted in a 32,8 percent increase in customers, reaching a record after growing significantly to surpass pre-Covid-19 trading periods (13 percent versus customer counts recorded in financial year 2019).

Real average-spend increased 4,9 percent during the year under review on the back of a supportive pricing strategy and increased delivery contributions. Resultantly, revenue grew 44,3 percent versus the prior year in local currency terms and 39,2 percent in US dollar terms, a commendable achievement in the face of adverse trading conditions.

In Zambia, both revenue and operating profit recorded a five-year record high, surpassing levels achieved even in the pre-Covid-19 operating environment. 

The business drove top-line growth through aggressive marketing and brand-specific promotional activities to counter competition and declining consumer spending.

Customer counts in Ghana and Mauritius increased 27 percent and 22 percent respectively while franchised markets DRC achieved top line growth of 47 percent driven by a 30 percent increase in customer counts as well as 12 percent increase in average spend.

Despite the challenges experienced during the year, Simbisa remains upbeat of its future performance and continues on the recovery path following easing of Covid-19 trading restrictions.

“With the easing of trading restrictions in our operating markets, trading capacity has scaled up, and with that, customer counts have shown a recovery. 

“This highlights the robustness and resilience of Simbisa’s operating model, which stands the Group on solid ground to ride the wave of recovery into FY2023 and beyond as we leave the worst of the impact from the Covid-19 pandemic behind us,” said Mr Dionisio.

Share This:

Sponsored Links