Simbisa in expansion drive

Simbisa in expansion drive
Published: 06 July 2017
SIMBISA Brands, the Africa-focused fast foods business, is focusing on Zimbabwe and Kenya in its expansion drive, according to the London-based research firm, Exotix Capital, which recently held discussions with the company's top management.

In a report released last week, Exotix said Simbisa's management had indicated that the expansion would be cautiously executed, with focus on consolidating opportunities in existing markets.

"Our recent conversations with management suggest a more cautious, and focused expansion strategy. While opportunities in new markets will still be considered, maximising returns in existing markets is the priority," Exotix said.

"Expansion targets are not set in stone, as they will depend on opportunities in each individual market, however we expect 20 to 25 counters will be added each year, with most of this growth occurring in Kenya and Zimbabwe," the report said.

Simbisa is a quick service restaurant business spun off the Zimbabwe Stock Exchange (ZSE) listed Innscor Africa in November 2015.

The firm has a presence in Zimbabwe, Democratic Republic of Congo, Kenya, Zambia and Ghana, among other countries.

Zimbabwe and Kenya boast of the largest number of Simbisa outlets, reported at 193 and 124, respectively, when the company announced its half-year results to December 2016 in March.

Simbisa operates franchises in a basket of brands, including Chicken Inn, Pizza Inn, Bakers Inn and Creamy Inn, and was separately listed on the ZSE on unbundling.

The report said brand loyalty and deployment of economies of scale had helped Simbisa counter the difficult trading conditions in some of its markets including Zimbabwe, where it has regained market share.

"We expect management will have to make some tough decisions regarding its investments in these markets," said Exotix.

Simbisa reported a 4,7 percent increase in after-tax profit to $4,7 million in the half year to December 31, 2017, on the back of increased sales.

Group revenue increased by three percent to $79,1 million during the period, from $77 million in the previous year.

Operating profit rose by three percent from $10,2 million in the same period the previous year to $10,4 million during the half year to December 31, 2016.

Earnings per share improved from 0,84 cents to 0,86 cents per share.

Cash generated from the group's operations amounted to $9,9 million, from $10,4 million recorded during the same period the previous year.

The group invested $4,3 million for the expansion of its operations in Kenya, Zimbabwe and Mauritius.

The Zimbabwe operations' revenue for the six months to December 31, 2016 declined by one percent to $48,9 million, from $49,5 million in the comparable period the previous year, despite a seven percent increase in customer counts on the back of a drop in average spend.

Exotix said in Zimbabwe, Simbisa had adapted to the difficult operating environment, and was making inroads in expanding its market share.

"Simbisa is embracing the difficult environment using it as an opportunity to strengthen its position in the market. Smaller competitors are struggling in the current crisis, presenting opportunities for Simbisa to grow its market share and snap up sites in select locations. Spending power is clearly under pressure and consumer spend is on the decline," the report added.

- fingaz
Tags: Simbisa,


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