Simbisa Brands expands regionally, navigates challenges in Zim

Simbisa Brands, the Quick Service Restaurant (QSR) group, reports a positive contribution from its recent acquisition — the Eswatini market — despite regional currency fluctuations.

During the first to December 2023 (H124), Simbisa completed the acquisition of the previously franchised Eswatini business.

This move aimed to safeguard brand presence and customer value in the region following the previous franchisee’s exit.

The Eswatini market, operating 17 counters under the Chicken Inn, Pizza Inn, and Galito’s brands, generates cash and contributes positively to group profitability.

Meanwhile, Zimbabwe’s business environment presented significant challenges in H124. Persistent foreign currency devaluation, power supply interruptions, and a high cost of doing business pressured performance.

Additionally, exchange rate volatility and inflation impacted consumer spending due to a rise in living costs. Notably, the central bank’s report of 80 percent of transactions occurring in USD contributed to a 19 percent increase in Simbisa’s operating expenses.

Financial performance and growth strategy

Despite these challenges, Simbisa achieved a 7 percent revenue increase in H124, reaching US$146,75 million compared to US$136,63 million in the same period last year.

This growth was driven by a 2 percent year-on-year rise in customer count and a 5 percent increase in average customer spending.

Notably, the Zimbabwe market’s contribution to group revenue increased from 67,65 percent to 72,57 percent.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) grew by 22 percent to US$24,67 million (from US$20,20 million), reflecting improved purchasing efficiencies and stronger margins (EBITDA margin at 16,81 percent).

However, Simbisa incurred unrealised losses due to the devaluation of the Kenyan Shilling against the US dollar when converting their Kenyan subsidiary’s net assets.

Market analysts credit Simbisa’s strategic restructuring for allowing them to focus on core markets and maximise shareholder returns.

This strategy involves expanding their footprint through strategic store openings and driving customer loyalty. In H124, Simbisa opened 37 new stores, bringing the total to 655.

They have a pipeline of 33 additional stores planned for the second half of the year, primarily focused on Zimbabwe.

Further customer acquisition is expected through continued investment in delivery services, including brand applications and app-exclusive promotions.

Looking forward

While some anticipate stabilizing measures from the monetary authorities to ease pressure on margins, potential drawbacks remain.

Deflated agricultural output due to the ongoing El Niño-induced drought and softening metal prices are expected to decrease disposable income among lower-income consumers, potentially impacting Simbisa’s revenue growth.-ebusinessweekly