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