IH Securities projects Simbisa’s investments to boost margins.
IH Securities says Simbisa Brands investments of the last two years’ worth US$58.18 million on which it opened 134 new stores, will improve margins.
The group, in FY25, is targeting 36 new store openings and revamping of 36 stores at a total cost of US$17.8 million.
“The group has indicated that it will be slowing down store builds going forward and pivoting towards a more customer-centric approach.
“Focus for management will be on leveraging analysis from customer feedback to ensure consistent product quality and drive innovative product development,” IH Securities said.
It said there is also upside for growth in the deliveries segment, which is expected to boost both average spend and customer count.
However, Simbisa is also implementing strategic raw material sourcing to alleviate cost pressures and improve margins.
“But the lingering impacts of the El Nino-induced drought on consumer disposable incomes and input sourcing still pose downside risk to the business for FY25.
“Moreover, currency risk is still a major issue in both Zimbabwe and Kenya, the group’s largest markets,” reads the IH report.
In terms of its financials for the year to June 30, 2024, in Kenya, the first half was characterised by currency devaluation and inflationary pressures, while tightening of monetary policy in the second half resulted in extended anti-tax riots, which in addition to severe flooding disrupted business operations.
The group completed a strategic restructuring exercise that entailed the acquisition of the Eswatini business and the transition of Zambia, Ghana and Mauritius into franchised operations.
“There was continued focus on delivery channels by utilising application-exclusive offers to drive delivery volumes.
The group’s revenue from continuing operations increased by 5.94 percent from US$270,40 million in FY23 to US$286.45 million in FY24, with Zimbabwe contributing 71.83 percent to the total.
Zimbabwean operations only contributed 59,90 percent to the group’s EBITDA, reflecting the severe cost pressures in the market.
Simbisa changed the depreciation rate on leasehold improvements from 5 percent to 10 percent during the period, resulting in US$3.2 million in incremental depreciation. IH said on the flipside, the restructuring exercise and strengthening of the Kenyan shilling overturned currency translation losses to gains.
The group closed the period with a profit after tax of US$15,99 million, down 25.76 percent from the prior year’s US$21,54 million.-ebsinessweekl
