During the period under review, Ecocash continued nationwide expansion within the mobile money susies intosed da number or merchant acceping coasts payments in a deserate move to increase forex revenue. The Group also re-launched the EcoCash Express Debit Card, which is linked to customers' EcoCash USD accounts, allowing them to swipe, withdraw cash, or transact at any MasterCard terminal or ATM.
1Q24 for Delta was encompassed by rapid devaluation of the local currency and a notable uplift in inflation. Policy interventions by authorities however resulted in more stable exchange rates, tight local currency liquidity and increased use of foreign currency for domestic transactions in 2Q24. Consumer spend was buoyed by stable USD pricing, improvements in wages and salaries and election-related financing.
The period under review was characterized by surging inflation, exchange rate volatility and power shortages. The tight monetary policy stance adopted by the authorities gave rise to rapid informalisation and increased USD transactional flow, especially in the informal market. Meanwhile, the formal market suffered from subdued aggregate demand owing to pricing issues. Consumer spending in the Zambian market was under pressure because of imported price increases from South Africa. Malawi also experienced severe exchange rate depreciation.
During the period under review, the global economy remained under pressure due to supply chain disruptions, persistent high inflation rates and tightening monetary policies. Decelerated GDP growth continued to impact the consumer sector, with consumer spending levels remaining subdued. Despite the economic headwinds in the form of power outages, rampant inflation, economic policy uncertainty and exchange rate instability, the Zimbabwe market experienced a good 2022/23 summer cropping season and increased gold production by small-scale miners. This coupled with a net expansion of 18 new counters contributed to a 24.2% increase in customer count, 53% increase in deliveries and a 7.9% growth in average spend. Regional operations, however, remained under pressure from high inflation levels and supply chain disruptions, resulting in a marginal increase of 2.5% in customer count. Notwithstanding, real average spend rose 1.7% on the back of phased nominal price increases necessitated to keep up with inflation. The Group also conducted an exercise to re-organise regional business (excluding Kenya) to create a streamlined portfolio operating only the most successful core brands in each market, resulting in the closure of 28 counters. However, Simbisa remained focused on organic growth and opened 69 new counters across all markets during the period, increasing the total store count by a net of 7% to 646 at the close of FY23. Expansion of the Group’s store footprint and the continued development of its digital channels drove a 17.6% increase in customer count overall. Resultantly, revenue for the Group grew 23% from US$233.94mn to US$286.98mn in FY23, with Zimbabwe contributing 67.65% to this total (FY22: 61.92%). Inflationary escalation in costs outpaced revenue growth, hence EBITDA only increased 8.6% y/y from US$41.10mn to US$44.63mn in the period under review, softening EBITDA margin from 17.57% to 15.55%. Zimbabwean operations contributed 60.14% to the Group’s EBITDA, a jump from 52.57% in the prior year. However, due to high depreciation and amortization costs of US$16.07mn, the Group closed the year with a PAT of US$19.40mn, up 1.77% from US$19.06mn registered last year. Profit attributable to shareholders increased by 0.16% whilst headline earnings declined 7.67%. The Group’s cash and liquidity position remains strong; the business closed the year with cash and cash equivalents of US$14.79mn. Total borrowings ended the year at US$16.73mn. The Group declared a final dividend of 0.433 USc per share, bringing the full year dividend to 1.313 USc per share at a dividend yield of 3.7%.
In the latest sitting of the Monetary Policy Committee, they noted that the negative impact of emerging global risks could pose significant risks to the current stability in the domestic economy. This included subdued global growth emanating from geo-economic fragmentation and the effects of tight monetary policy, high interest rates, credit squeeze and low international commodity prices.
It is expected that there will be little additional monetary policy tightening globally as many countries are nearing the peak of their tightening cycles. We however expect that central banks will maintain high interest rates into 2024 to ensure disinflation holds, with most economies reaching target inflation by 2026 on average. The World Meteorological Organization has warned of El Nino conditions for the remnant of 2023, which could point to production downside for drought-prone countries in Sub-Saharan Africa like Zimbabwe and significantly impact yields. This is a huge risk as the local agricultural sector remains a key driver of national GDP. In the short to medium term, we anticipate continued use of the US$ in the local market as the local currency has depreciated significantly YTD. We believe the ZSE remains undervalued, providing for buying opportunities whilst we forecast increased liquidity on the VFEX in light of increasingly dollarized premiums to institutional investors.
