Restructuring focuses Simbisa on key areas

Research and stockbroking firm IH Securities says Simbisa Brand’s strategic restructuring has allowed the group to focus resources on growing and maximising shareholder returns from core markets.

In the interim period to March 8, 2024, the group said that as part of reorganisation efforts, it streamlined the brand portfolio to focus entirely on the best-performing core brands and markets in the region.

The restructuring entailed the closure of several underperforming outlets and the conversion of the three smallest markets to a franchise structure.

“This organic store growth is expected to drive customer count across the group’s markets,” reads the IH Securities report.

It added that Simbisa continues to leverage opportunities in the delivery market with the introduction of brand applications coupled with app-exclusive promotions to improve brand visibility and drive sales volumes.

Group chief executive Mr Basil Dionisio said the decision’s strategic intent is to allow Simbisa’s executive management to focus time and financial resources on growing and optimising the largest contributing brands in Zimbabwe and Kenya and to grow and enhance the operations in Eswatini.

“While focusing on fewer markets and brands, the group remains committed to growing its footprint,” he said during an analyst presentation.

During the period under review, capital expenditure was US$19,32 million, and the group opened 37 new stores, bringing the total store count to 655.

The group has indicated a commitment to accelerating organic growth by expanding its footprint through strategic store openings and driving customer loyalty.

During the period under review, the group opened 37 new stores, bringing the total network to 568 owned and operated restaurants and 87 franchised stores.

Simbisa has a pipeline of 33 stores for the six months to June 30, 2024, 27 of which are in Zimbabwe.

“This organic store growth is expected to drive customer count across the group’s markets,” IH Securities said.

Simbisa continues to leverage opportunities in the delivery market with the introduction of brand-specific delivery applications over and above the existing blanket Dial-a-Delivery application, coupled with app-exclusive promotions to improve brand visibility and drive sales volumes.

On the flip side, IH said the deflated agricultural output on the back of the ongoing El Nino-induced drought as well as softening metal prices are expected to depress bottom-of-the-pyramid liquidity.

It said this may weaken consumer spending, exerting pressure on the group’s revenue.

“We therefore forecast that revenue will grow 7 percent to US$306,68 million in the financial year (FY) 2024.

“We also expect the EBITDA margin to soften to 16 percent in FY24 as power outages persist, then recover to 17 percent going forward as power availability improves and the group optimises its backup solutions,” IH said.

The firm said net income is forecast to close FY24 at US$29,1 million, and during the period, 62 percent of the group’s revenue was in US$, so it expects revenue to remain resilient in the face of currency instability against the greenback.

Mr Dioniso said Simbisa remains committed to offering customers a class-leading ordering and dining experience through continuous investments in brand and product development and technological improvements.

-herald