- The Group expects to open up new 49 stores in 2HY’2023
- 103 stores are targeted in 2024
- Simbisa boasts US$236.1 million in market cap
Harare- Diversified largest fast-foods outlet in Zimbabwe, Simbisa Brands is targeting to roll in new 49 stores in the second half of the full year ending 30 June 2023, enhancing its broader footprint in the industry that it already dominates. A substantial investment pipeline, with 49 net new counters set to open in 2H FY2023 and a further 103 sites identified for FY2024 is expected to will drive growth and unlock shareholder value. The primary growth markets in the short to medium term for the Group will be the largest economy in East Africa, Kenya and Zimbabwe.
The 49-new-store investment comes after the Group archived a record 24% increase in revenue to ZWLUS$146 million in the half-year ended 31 December 2022 and after adding US$6 million in after-tax profit to US$18 million during the period under review.
Currently, Simbisa boasts 631 stores after adding more 36 in FY2022. 49 new stores target is an increase in investments from 36 for the newly Victoria Falls Stock Exchange listed entity.
Simbisa’s main rivals in Zimbabwe are Chicken Slice and KFC. However, they both have low customer count compared to Simbisa and KFC prices are kindly higher, though it also boasts a loyal customer base. This gives Simbisa a big competitive advantage against its main rival.
Thus, with a market capitalisation of US$236.1 million, according to Africa Financials as of April 13th 2023, Simbisa Brands Limited is the largest fast-food restaurant operator in Zimbabwe and owns, operates and franchises a selection of well-known Quick Service Restaurant brands: Pizza Inn and Chicken Inn, Nandos and Steers.
Since 2019 when the Zimbabwe dollar was reintroduced, Simbisa had been recording profits despite the COVID-19 pandemic in 2020 and the blackouts pandemic in the country in 2022. In half year ended 31 December 2020 during the COVID-19 pandemic, after-tax profit doubled to ZWL850 million from ZWL446 million. In half-year 2021, profit grew to ZWL2 billion from ZWL1.2 billion, a 75% increase.
However, the Group has been facing a toxic taxation regime and hawkish monetary policies. To navigate through these economic uncertainties, the Group turned to its diversified markets where dovish policies promoted business efficacy, especially Zambia. Income tax expenses increased to ZWL783 million in half-year 2022 when the Group was still listed on ZSE from ZWL183 million in 2019 when the Zimbabwe dollar was introduced. This translated to a 328% increase within 3 years, a signal of a volatile economic environment.
During the period under review, income tax increased by 33% in US dollar terms, from US$3.6 million in the half year 2021 to US$4 million. The group had to leverage more on cutting operating and production costs to realise profits.
“The Board hopes that the authorities will continue to implement prudent monetary and fiscal policy measures,” said the Group’s chairperson, Addington Chinake.
“The Board also calls on the Government to address the confusing and largely unfair Income Tax regime for corporates, and engender fiscal and monetary policy consistency to aid in business planning,” added Chinake.
Operating environment analysis
Despite having one of the worst economic fundamentals in SADC, Zimbabwe boasts one of the worst taxation regimes, coupled with political polarisation and reactionary fiscal and monetary policies to resuscitate a weaker currency, which is making the economic environment horrible for businesses to operate. Since the reintroduction of the Zimbabwe dollar in 2019, the currency faced extreme backlash from the market and to fight resistance, the government has employed aggressive economic policies.
Against a 26 billion economy, 24.7% corporate tax, 3% Aids Levy and 14.5% value-added-tax are unrealistic.
There have been significant currency changes in Zimbabwe since 2018. These changes create some uncertainties in the treatment of transactions for taxes due to the absence of clear guidelines and transitional measures. Of significance are the exchange losses recorded on the change of the functional currency in terms of SI33/19.
The latest policy inconsistency was the narrowing of the bank policy rate twice in 2023, from 200% in 2022 to 150% in February 2023 and finally, 140% in March 2023. This is going to encourage speculative borrowing ahead of the 2023 elections, thus, increasing inflationary pressures on the local currency.
With increased ZWL liquidity, a high disparity between the formal and informal market exchange rates is expected, affecting business operations.
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