By Stephen Chandisareva
HARARE – The major currency devaluation in key markets, particularly the Zimbabwean Dollar and Kenyan Shilling, had a significant impact on Simbisa Brands Limited’s USD income contribution.
Despite the substantial devaluation of approximately 1013% for the Zimbabwean Dollar and around 28% for the Kenyan Shilling from December 2022 to December 2023, the company managed to increase its actual USD income contribution from 55% to 62%.
This increase in USD income contribution helped to mitigate the negative effects of the currency devaluation on the company’s financial performance.
From December 2022 to December 2023, Simbisa Brands Limited experienced growth in its total number of counters. The company closed the period with 568 company-operated counters, which represents an increase from the total of 493 counters as of December 2022.
This growth was driven by the opening of 58 new counters through organic growth and the acquisition of 17 counters in Eswatini, bringing the total count to 568 by the end of December 2023.
The acquisition of Eswatini by Simbisa Brands Limited was driven by the previous franchisee’s decision to exit the business. The company saw this as an opportunity to safeguard its brand presence in Eswatini and ensure continued value for its customers in the market. The acquisition included 17 counters operating under the Chicken Inn, Pizza Inn, and Galito’s brands. Eswatini’s market was described as cash generative and a positive contributor to the group’s profitability.
The acquisition of Eswatini has had a positive impact on the company’s operations by expanding its footprint in the market and strengthening its brand presence. It has also contributed to the group’s overall profitability. Additionally, the acquisition has allowed Simbisa Brands Limited to have more control over its operations in Eswatini, enabling the company to implement its strategies and standards more effectively in the market.
Simbisa Brands Limited has demonstrated a relatively stable financial performance based on the financials. The company experienced revenue growth of 7%, driven by an increase in trading income and the expansion of its operations through the acquisition of new counters. Despite facing challenges such as a decrease in profit after tax and increased interest expenses, Simbisa Brands managed to maintain a healthy gross profit margin of 57% and an operating profit margin of 17%.
The company’s key performance indicators, such as a market capitalization of US$196.48 million, an EV/EBITDA multiple of 3.9x, and a PE ratio of 10.0x, indicate a reasonable valuation in the market. Simbisa Brands also generated a return on equity (ROE) of 26%, reflecting its ability to generate profits from shareholders’ equity.
In terms of financial health, Simbisa Brands appears to be in a stable position, with a dividend yield of 4% and an interim dividend payout to shareholders. The company’s cash flow statement shows a positive cash balance and cash from operations, indicating its ability to generate cash internally to support its activities.
However, the company may face challenges related to managing operating expenses, currency fluctuations, and profitability in the future. It will be essential for Simbisa Brands to continue monitoring and optimising its cost structure, implementing effective risk management strategies, and focusing on sustainable revenue growth to ensure its long-term financial health and stability.