Restructuring focuses Simbisa on key areas

Research and stockbroking firm IH Securities says Simbisa Brand’s strategic restructuring has allowed the group to focus resources on growing and maximising shareholder returns from core markets.

The company stated that, as part of its reorganization efforts, it trimmed its brand portfolio to concentrate solely on the top-performing core brands and markets in the area for the interim term ending on March 8, 2024. A number of poorly performing stores had to close as part of the restructuring, and the three smallest markets had to become franchises. The IH Securities research said, "This organic store growth is expected to drive customer count across the group's markets." It further stated that Simbisa is still taking advantage of the delivery sector by launching brand applications and running app-only promos to raise brand awareness and boost sales.

During an analyst presentation, Group CEO Mr. Basil Dionisio stated that the strategic intent of the decision is to free up time and funds for Simbisa's executive management to concentrate on growing and optimizing the largest contributing brands in Zimbabwe and Kenya as well as expanding and improving the operations in Eswatini. "While focusing on fewer markets and brands, the group remains committed to growing its footprint," he said. During the period under review, capital expenditure was US$19,32 million, and the group opened 37 new stores, bringing the total number of stores to 655. The group has expressed a commitment to accelerating organic growth by growing its footprint through strategic store openings and fostering customer loyalty.

The company added 37 new locations during the review period, increasing the total number of restaurants in the network to 568 owned and controlled and 87 franchised. For the six months ending June 30, 2024, Simbisa has 33 outlets scheduled, 27 of which are located in Zimbabwe. IH Securities stated, "This organic store growth is expected to drive customer count across the group's markets." In order to increase brand awareness and boost sales, Simbisa has launched brand-specific delivery applications in addition to the general Dial-a-Delivery application. These moves are part of the company's ongoing strategy to take advantage of delivery industry potential.

Conversely, IH stated that lower agricultural output as a result of the protracted drought brought on by El Nino and declining metal prices are predicted to cause bottom-of-the-pyramid liquidity to decline. It stated that this might reduce customer spending, which would put pressure on the company's earnings. Therefore, we predict that in the fiscal year (FY) 2024, revenue will increase by 7% to US$306,68 million. As long as power outages continue, IH added, "we also expect the EBITDA margin to soften to 16 percent in FY24 and then recover to 17 percent going forward as power availability improves and the group optimizes its backup solutions."

According to the company, net income is expected to end FY24 at US$29,1 million. Since 62% of the group's revenue was generated in US dollars during that time, the company anticipates revenue to be resilient despite fluctuations in the value of the US dollar. According to Mr. Dioniso, Simbisa is still dedicated to providing consumers with the best ordering and eating experience possible by making ongoing investments in technology advancements, brand and product development, and brand building.