SIM | Simbisa Brands - 1H24 Earnings Update; Organic growth from corporate re-organisation

    The period under review was characterised by a challenging economic landscape globally, reflecting the adverse effects of heightened geopolitical tensions, concerns about financial sector stability, weakening global growth and increased food insecurity due to climate-related shocks and global supply chain disruptions. In Zimbabwe, persistent foreign currency exchange rate depreciation, power supply interruptions and high cost of doing business exerted pressure on business performance. Moreover, exchange rate disparities and devaluation, increasing inflation levels and a general sentiment of uncertainty hampered planning ability, putting further pressure on consumer cost of living and spending habits. However, a 9% y/y increase in average spend and the rollout of 20 new counters saw Zimbabwean market revenue growing 10% y/y. Revenue growth was also compounded by a 24% y/y increase in the total number of delivery orders fulfilled through the Group’s delivery applications. Regardless, the increased dollarisation in the economy significantly impacted operating expenses, leading to a 19% y/y increase. Regionally, the Group continued its strategic restructuring efforts, completing the acquisition of the Eswatini business, previously a franchised market, and transitioning the underperforming markets (Zambia, Ghana, and Mauritius) to franchised operations. Kenya continues to experience a weakening currency and significant fiscal pressures. Inflationary pressures across the region still presented rising living costs, eroding purchasing power and squeezing household budgets, particularly for low-income earners. Overall, regional revenue only rose by 2% y/y. Despite the operating challenges faced, the Group performed well in the period under review with revenue increasing 7% to US$146.75mn in 1H24 versus US$136.63mn in 1H23, driven by a 2% y/y increase in customer counts and a 5% increase in real average spend. Zimbabwe contributed 72.57% of the Group’s revenue, versus 67.65% in FY23. EBITDA grew by 22% to US$24.67mn from US$20.20mn in 1H23, reflecting improved purchasing efficiencies and firmer margins, with EBITDA margin at 16.81% (1H23: 14.78%). The Group incurred unrealised losses reflecting the impact of the devaluation of the Kenyan Shilling against the US$, on conversion of the subsidiary’s net assets. Owing to this and a decline in interest income from US$2.87mn in 1H23 to US$206,247 in the period under review, Simbisa closed the period with a PAT of US$9.59mn, a 15% decline from US$11.30mn in 1H23. Profit attributable to shareholders softened by 16% whilst headline earnings, which isolate core operational profitability, registered a marginal 0.6% increase. Cash and cash equivalents closed at US$9.5mn whereas the debt position reduced from US$16.1mn to close at US$12.2mn. OCF/EBITDA went from 86.90% in 1H23 to 85.77% in 1H24. The Board resolved to declare an interim dividend of 0.62 USc per share.


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