Simbisa on major expansion drive

 Simbisa on major expansion drive

Simbisa on major expansion drive.

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FAST food concern, Simbisa brands, says it is embarking on an aggressive expansion drive across its markets, notwithstanding the impact of Covid 19 on business operations.

The company which is listed in Zimbabwe and operates a plethora of outlets in African markets that include Kenya,DRC,Zambia , Mauritius,Ghana and Namibia  envisage to open 38 outlets in the second half of this year.

The Group in its six months financial results for the period ending December 2020, released this week said it has put in place strategies to hedge against currency vulnerabilities in the Region which includes locally procuring capital expenditure, stock and expenses where possible and structuring borrowings in local-currency in all operating markets to minimise  exposure to US-Dollar obligations and  hedge against forex movements.

It said  continued new store expansion is a key strategy for profitable markets to convert profits into tangible assets.

“Simbisa will continue to focus on growth through expanding our QSR and casual dining footprint and growing market share in existing markets. In pursuit of this objective, there are 38 counter openings in the pipeline for 2H FY2021,” said the company.

“The expansion of the Rocomama’s brand in Zimbabwe, Zambia and Ghana as well as the launch of the Spur brand in Zimbabwe and the Ocean Basket brand in Kenya are included in the 2H FY2021 pipeline. The Group remains vigilant to brand development and business opportunities in both existing and new African markets.”

The Group said it strategically focusing on recovering lost customer counts through promotions and affordable value options for customers where spending power is under pressure and to focus on driving growth in sales generated through delivery channels.

The company said  aggressive cost management strategies have been put in place across the markets to align the cost structure with the lower revenue base and ensure margins remain firm so that Group can remain profitable and continue to deliver value to Shareholders.

“A key focus area remains on growing and improving the delivery business which is being realised through the continued development and refinement of the Dial-a-Delivery mobile application in order to enhance the user experience and with the target of growing application-related customers and orders. In Zimbabwe, the number of delivery zones has been increased in order to shorten delivery distances and to improve on delivery times and coverage. Through its subsidiary Kutuma Kenya Limited, Simbisa Brands is developing a Customer Data Platform to collate, analyse and interpret the data and information available through the mobile application, to improve the delivery businesses’ performance and the customers’ experience,” Simbisa said.

As part of the strategy to leverage technology to improve efficiencies and drive growth in the business, Simbisa is upgrading its ERP system. The scoping and design phase has been completed and the implementation of the upgrade is in progress. The upgrade is expected to unlock significant value through increased automation of work processes and improved system efficiencies and employee effectiveness.

Reflecting on the last year’s operations,the Group said its  largest franchised business, the DRC, was impacted by lost trading hours due to trade restrictions and curfews, particularly in the months of July and December, and through civil unrest in the months of August and September. No new counters were opened in the period under review and 4 new counters are in the pipeline to be opened in Kinshasa in second half of  FY2021.

“Although top-line performance remained depressed compared to the prior year period, the impact on operating profits was moderated through successful cost containment measures implemented in the period under review,” Simbisa said.

In Zimbabwe though consumer spending power remains under pressure in the market, as a result of depressed economic conditions and the social implications of the Covid-19 pandemic, Simbisa Zimbabwe achieved real growth in average spend during the period under review. Average spend increased by 56% in inflation-adjusted Zimbabwe Dollar terms.

The Group expanded its footprint in Zimbabwe with the opening of 6 new counters between 30 June 2020 and 31 December 2020. As at 31 December 2020 there were 227 operational counters in Zimbabwe.

Operations in KENYA were also impacted by restrictive trading conditions which prevailed in the six-month period under review, with Simbisa Kenya trading on 33% less counter trading hours compared to the prior year period.

Through aggressive marketing campaigns, value offerings and new store openings, the decline in customer counts was a more moderate 23% year on year and the impact on revenue was partly offset by an 18% increase in average spend, a result of increased deliveries with a higher basket value.

The delivery business, Kutuma Kenya Limited, performed well in the period under review and is growing rapidly, with the business registering a 48% increase in revenue during the period under review. The strategy to unbundle the delivery business with the view of growing delivery sales in the market and enhancing efficiencies has already started to pay-off with delivery sales in Kenya increasing 31% year on year, versus the legacy in-house delivery service.

Expansion of Simbisa’s footprint in Kenya remains a priority and in the six months to 31 December 2020, 10 new counters were opened in the market to close the period with 162 counters.

The business is on track to achieve the pipeline target of 16 new store openings by end of the 2021 financial year.

Simbisa Zambia continued to grow through the opening of 2 new counters in the six month period under review. The Rocomama’s restaurant, which was opened in July 2019, continues to perform exceptionally well and further restaurant openings are in the pipeline, with a second outlet set to open in second half of the 2021 financial year.

Also as part of the growth strategy for this market is expansion into the Northern part of Zambia to compliment the footprint in Lusaka. The introduction of a bread and confectionaries factory in the third quarter of  2021 is expected to improve revenue for the Bakers Inn brand by 30%. The period closed with 31 counters operating in this market.

The group launched Rocomama’s in Ghana with the inaugural restaurant opening in November 2020 with the restaurant’s performance to date has well exceeded expectations.

A new Pizza Inn outlet was also launched in this market in December 2020 and the full contribution from both restaurants will reflect in 2022 financial year

Simbisa Namibia’s revenues were negatively impacted by the loss of trading hours and lockdown restrictions that were reimposed during the period; revenue was down 17% versus prior year with customer counts falling 22% year on year. Management’s success in rebasing costs resulted in a 51% improvement in the restaurant operating profit versus prior year. As previously mentioned, our intention is to franchise the Namibia operations. As such there were no new counters opened in the during the period  and none in the pipeline for second half of 2021.

Revenue in that market remained flat on prior year and through significant efforts put into cost containment, operating profit improved significantly, growing 355% year on year.

The group said  Mauritius business has initiated the first phase in the three-phased recovery plan, as presented in the FY2020 results release. 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.

During the period, 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.

During the period under review group revenue grew to $8 billion from $3,9 billion buoyed by an increase in delivery sales contribution which has emerged through a change in customer buying habits during the pandemic and supported by an increased focus on the delivery business.

Despite headwinds precipitated by Covid 19, group profit for the period increased to $850 million from $446,4 million.

On the OUTLOOK Simbisa said despite economic headwinds and challenging trading conditions, the Group has remained resilient and continues to pursue a growth strategy hinged on improved deliveries, technology development, continued growth in footprint and brand development.

“ The turnaround strategies implemented in Zambia and Mauritius have been greatly successful and these markets are now entering into a growth phase, with Namibia being our only critical care market where the focus in the short term will be converting this into a franchised market.With the gradual easing of trading restrictions in our operating markets, we expect an improvement in trading hours and with that a recovery in lost customer counts which will boost top line growth in the short to medium term. Considerable effort has been put into managing our cost base which has seen a considerable improvement in Group operating margins. Thus, a recovery in revenue will translate to growth in profitability and improved Shareholder returns and value delivery.”

Fidelity Hamilton Mhlanga

Fidelity Hamilton Mhlanga has been writing finance and business news over the past 5 years. He earned a BSC in Media and Society Studies and Masters of Development Studies from Midlands State University, in Zimbabwe. He follows mining, insurance, banking and energy stories. He is passionate about development and growth.

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