Simbisa to expand as lockdowns ease

A BOLD decision by governments to end lockdowns could bolster revenues at the Pan-African fast food chain Simbisa Brands, researchers at IH Securities have said.

They said even as demand remain subdued in some of Simbisa’s African markets, the group would leverage on its diversified operations to drive revenue.

“We forecast revenue will increase by 424,75% in FY21 (financial year) to $16,29 billion, up from the $3,10 billion recorded in FY20,” IH said, projecting an increase in earnings before interest, tax, depreciation and amortisation.

“Given that Simbisa’s business is highly sensitive to lockdown restrictions, the group’s performance faces exposure to a potential COVID-19 resurgence; naturally timing and severity can’t be predicted in all the group’s territories.

“We expect customer counts to remain subdued in the short term on the back of the recently introduced COVID-19 measures in Kenya, which restrict restaurants to takeaways only. This comes after two months of a hard COVID-19 lockdown in Simbisa’s major market, Zimbabwe,” IH said.

The group’s financial year ends on June 30.

The group, that operates several top-end fast-food brands including Chicken Inn and Nandos, has penetrated some of Africa’s high-spending destinations such as Ghana and Mauritius.

But it spent most of last year grounded as governments imposed strict restrictions to travel to contain the COVID-19 pandemic, which has claimed millions of lives globally.

But even as the pandemic grounded travel, Simbisa’s inflation adjusted revenues increased by 101% to $8 billion during the half year ended December 31, 2020 compared to $3,9 billion during the same period prior year.

“The business continues to pursue its key strategic objectives of growing the core quick-service restaurant (QSR) business in existing and new African markets, developing and acquiring other brands in the QSR and casual dining segment, and enhancing its service offering through technology development. Consequently, the group is expected to continue reaping off the benefits of economies of scale as average overhead costs decline due to the current expansion strategy being undertaken by the business,” IH noted.

Simbisa Brands is pursuing multi-pronged strategies to restructure its Mauritius operations including growing its footprint, according to chief executive officer Basil Dionisio.

Along with the cost cuts, an aggressive expansion drive will be launched targeting previously untapped high density markets during 2021.

Some outlets will be permanently closed, Dionisio said in a commentary to the group’s financial results for the half year ended December 31, 2020.

From its Zimbabwean roots, the Zimbabwe Stock Exchange-listed firm recently expanded across Africa with its footprint now in Ghana, Namibia, Mauritius, Kenya, Zambia and Zimbabwe.

“The Mauritius business has initiated the first phase in the three-phased recovery plan, as presented in the FY2020 (financial year) results release,” Dionisio said.

“The first phase entails restructuring the format of the counters from a table service to a counter service QSR model which requires less rental area and reduced staff.

“In 2Q (second quarter) FY2021, the first complex was converted which entailed the closure of one Creamy Inn counter, the restructuring of a Pizza Inn counter into a QSR format and the restructuring and relocation of a Galito’s counter. We have already seen the exercise start to bear fruit, with growth in revenue and significant cost savings being realised between 1Q and 2Q FY2021.

“The second phase of the recovery plan will be to grow our footprint through the rollout of new counters under the re-modelled business format and the third phase development into new, high-density regions.

“Difficult operating conditions, temporary store closures during the restructuring exercise and the permanent closure of one counter led to a 10% year-on-year decline in customer count,” he said.-newsday.c.zw