ZIMBABWE – Zimbabwe’s Quick service restaurant (QSR) group, Simbisa Brands Limited’s profit for the year ended June 30, 2019 jumped by 134% to US$32 million 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.
This led to the fast food giant suffering a net foreign exchange loss of ZW$2.7 million (US$7,400) as it experienced technical challenges regarding compliance with the applicable accounting standards, following the currency change in the country from the United States dollar to the Zimbabwe dollar.
As a result, Simbisa recorded a 5% decline in customer count in Zimbabwe but registered 6% growth in regional operations. Overall group customer count went down 2% to 54.7 million during the year under review.
Despite the challenges in Zimbabwe, the market remained a significant revenue driver contributing 65% of total revenue, reports the Herald.
Zimbabwe market’s revenue increased 79% to US$255.1 million. Same store revenue increased 72% versus the prior year.
Total group revenue came in at US$390.8 million, which represented 91% growth on prior year of US$204.7 million.
Profit before tax jumped 148% to US$49.8 million from US$20.1 million achieved in the prior year. An operating profit of US$64 million was recorded which was 128% above prior year.
At US$32.4 million, profit for the year was 134% above the US$13.8 million achieved in the comparable period.
Kenya led growth in regional businesses as 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% versus prior year on a same store basis. 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% of the Zambian business with top line growth registered. This was despite the closure of 10 counters.
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% 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% 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.