Sim­bisa aims to take big­ger bite out of Africa’s fast-food mar­ket

African Independent - - BUSINESS - BARNABAS THONDHLANA

AFRICA-fo­cused fast-foods busi­ness Sim­bisa Brands has set its sights on ex­pand­ing into new African mar­kets as it strength­ens its foot­print as a home-grown con­ti­nen­tal giant set to chal­lenge in­ter­na­tional brands like McDon­ald’s.

To date, Sim­bisa Brands has a pres­ence in 20 African coun­tries, among them Zim­babwe, Demo­cratic Repub­lic of Congo, Kenya, Zam­bia and Ghana. It also has fran­chised op­er­a­tions in Namibia, Swazi­land, Malawi, Botswana and Le­sotho.

Sim­bisa is a quick ser­vice restau­rant busi­ness spun off the Zim­babwe Stock Ex­change (ZSE) listed Innscor Africa in Novem­ber 2015. In all, Sim­bisa Brands op­er­ates 440 restau­rants on the con­ti­nent. The group op­er­ates fran­chises in a bas­ket of brands, in­clud­ing Chicken Inn, Pizza Inn, Bak­ers Inn and Creamy Inn, and was sep­a­rately listed on the ZSE.

Chair­man Ad­ding­ton Chi­nake was bullish about the group’s op­er­a­tions in the last 12 months.

“The com­bined rev­enue for the re­gional op­er­a­tions (Kenya, Zam­bia, Ghana, DRC and Mau­ri­tius) in­creased by 10% to $30.2 mil­lion (2015: $27.4m) driven by a grat­i­fy­ing per­for­mance from our largest mar­ket, Kenya, and the con­tri­bu­tion of our ex­pan­sion ac­tiv­i­ties in Mau­ri­tius,” Chi­nake said.

He said oper­at­ing profit from the re­gional op­er­a­tions seg­ment in­creased by 15% from $1.8m in the com­pa­ra­ble pe­riod in the prior year to $2m de­spite mixed re­sults across the mar­kets.

Chi­nake said while the group ex­pe­ri­enced gains in Kenya, the oper­at­ing losses ex­pe­ri­enced in the set-up phase of the Mau­ri­tius op­er­a­tion off-set the gains.

Ac­cord­ing to Lon­don-based re­search firm Ex­otix Cap­i­tal which re­cently held dis­cus­sions with the com­pany’s top man­age­ment, the group’s ex­pan­sion would be cau­tiously ex­e­cuted, with a fo­cus on con­sol­i­dat­ing op­por­tu­ni­ties in ex­ist­ing mar­kets. “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,” Ex­otic Cap­i­tal said.

Zim­babwe and Kenya boast 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.

The Ex­otic 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% in­crease in af­ter-tax profit to $4.7m in the half year to De­cem­ber 31, 2017, on the back of in­creased sales. Group rev­enue in­creased by three per­cent to $79.1m dur­ing the pe­riod, from $77m in the pre­vi­ous year. Oper­at­ing profit rose by 3% from $10.2m in the same pe­riod the pre­vi­ous year to $10.4m dur­ing the half year to De­cem­ber 31, 2016. Cash gen­er­ated from the group’s op­er­a­tions amounted to $9.9m, from $10.4m recorded dur­ing the same pe­riod the pre­vi­ous year.

The group in­vested $4.3m 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 1% to $48.9m, from $49.5m in the com­pa­ra­ble pe­riod the pre­vi­ous year, de­spite a 7% 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.

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