Sim­bisa’s prof­itabil­ity prospects im­prove

The Star Early Edition - - BUSINESS NEWS - Tawanda Karombo

PROF­ITABIL­ITY prospects for Zim­babwe’s Sim­bisa Brands – which holds fran­chise li­cences for Steers, Nando’s, Chicken Inn and Pizza Inn – have been boosted by a re­duced re­liance on im­ports and ex­pan­sion op­por­tu­ni­ties.

Sim­bisa was un­bun­dled from Innscor Africa and listed sep­a­rately on the Zim­babwe Stock Ex­change. The com­pany runs quick-serve res­tau­rants in Zim­babwe, Zam­bia, Kenya, Ghana and other re­gional mar­kets.

“De­pre­ci­a­tion of re­gional cur­ren­cies im­pacts the re­ported re­sults. De­mand for Sim­bisa prod­ucts is cor­re­lated with the state of lo­cal economies; there­fore, de­te­ri­o­ra­tion of macro-eco­nomic en­vi­ron­ments presents down­side risk,” Anthea Alexan­der, an an­a­lyst at Ex­otix, said.

“Zim­babwe, in par­tic­u­lar, has a very un­cer­tain out­look, and eco­nomic de­vel­op­ments will have a big im­pact on per­for­mance,” Ex­otix said in a re­search note.

How­ever, the com­pany’s two big­gest mar­kets, Zim­babwe and Kenya, were “per­form­ing well, ac­cord­ing to man­age­ment”, and brand loy­alty and economies of scale “have cush­ioned Sim­bisa against dif­fi­cult trad­ing con­di­tions” in th­ese mar­kets.

Sim­bisa has faced in­creas­ing com­pe­ti­tion in Zim­babwe fol­low­ing the en­try of KFC and other play­ers.

Chal­leng­ing macro con­di­tions, high op­er­at­ing costs and weak man­age­ment in Zam­bia and Ghana have cul­mi­nated in net losses in those mar­kets.

“Zam­bia and Ghana re­main the prob­lem mar­kets. We ex­pect man­age­ment will have to make some tough de­ci­sions re­gard­ing its in­vest­ments in th­ese mar­kets if it is un­able to turn around per­for­mance over the short-to-medium term.”

For the year to the end of June, an­a­lysts have fore­cast rev­enue of $157 mil­lion (R2.06 bil­lion) and earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion (Ebitda) of $19.2m. This is ex­pected to yield rev­enue growth of 7 per­cent year in the year and Ebitda growth of 34 per­cent.

Ba­sic earn­ings per share for the in­terim pe­riod to De­cem­ber 2016 rose 2 per­cent to 0.86 cents.

The com­pany said it ex­pected to add be­tween 20 and 25 new coun­ters over the next three to four years, mostly in Zim­babwe and Kenya, and was also in­ves­ti­gat­ing op­por­tu­ni­ties to in­tro­duce new con­cepts and prod­ucts in ex­ist­ing mar­kets.

“Ex­pan­sion tar­gets are not set in stone, as they will de­pend on op­por­tu­ni­ties in each in­di­vid­ual mar­ket,” Ex­otix said.

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