Simbisa Brands revenue increases by 108% to ZWL18,798 million for year ended 30 June 2021

By Published On: October 6th, 2021Categories: Corporate announcement, Earnings

Simbisa Brands Limited ( 2021 Abridged Report


Against the background of trading a full financial year under the Covid-19 pandemic, Simbisa delivered an excellent performance. Key highlights for the period include:
• The Group recorded improved operating profit margin despite the impact of Covid-19 on customer counts, which is testament to the success of efforts to improve operating efficiencies.
• Net new store growth of 32 stores during the year and an increase of 4 stores in the last quarter. The Group continues to reinvest profits into continued growth.
• 43% increase in food delivery volumes year-on-year as a result of the Group’s elevated focus on this customer service channel which ameliorates the impact of the pandemic and aligns the business with evolving customer behaviour. Along the same vein, the Group opened one drive-thru restaurant.
• Sustainable shareholder returns with a dividends growth rate of 472% year-on-year, ahead of the inflation rate of 107%.

Operating Environment

Amongst other challenges, the following matters had a significant impact on our business during the period under review:
i. Covid-19 impact on operations
All our restaurants experienced limited trade in FY21, with the exception of Mauritius, which was under full lock-down for 3 weeks from 9 March 2021 to 31 March 2021 (FY20: 10 weeks from 20 March 2021 to 30 May 2021). In our key markets, lost trading hours were as follows:

FY21 FY20
Zimbabwe   -33% -49%
Kenya   -28% -48%
Other markets (combined) -14% -26%


Further to the direct impact on trading hours, the markets we operate in experienced depressed socio-economic activity. As further explained in the CEO’s report, the Group’s response focused on growing and improving the efficiency of its delivery and drive-thru offerings and extending various value offerings across its operations. Responses on the cost-side resulted in the Group maintaining profit margins. Simbisa is confident that some of the lessons and efficiencies gained over this difficult period will be carried forward into the post-pandemic period.

ii. Foreign Exchange rate disparities in Zimbabwe
Whilst the foreign exchange supply has improved in Zimbabwe, the pricing mechanism and allocation of foreign exchange on the foreign exchange auction remain deficient as evidenced by the significantly divergent, multiple exchange rates in the economy which create opportunities for arbitrage between the different markets and platforms. The Board would like to urge the government to address the deficiencies in the foreign exchange auction and allow for efficient price discovery and distribution of foreign currency in the economy.

iii. Local currency depreciation

Depreciation of emerging market currencies remain a significant risk in all our businesses. In FY21, the most affected currency was the Zambian Kwacha which lost 25% of its value against the USD between 30 June 2020 and 30 June 2021. This impacts our customers’ disposable incomes in real terms and increases cost pressures on raw materials, capital items and services. The Group consistently manages its treasury and working capital positions to manage this risk across its markets. The Board, however, notes the recent significant recovery of the Zambian Kwacha following the August 2021 election and reaffirms its strategic intention to continue investing in that market.

Key financial reporting matters

i) Compliance with International Accounting Standard (“IAS”) 21 “The Effects of Changes in Foreign Currency Rates” requirements
Reference is made to the adverse opinion of the Independent Auditors on the financial statements. One of the reasons for this opinion is the use of an exchange rate other than the exchange rate derived from the Reserve Bank of Zimbabwe weekly Foreign Currency Auction System (“Auction Rate”). The Group translated foreign currency monetary assets and liabilities for Zimbabwean Operations to ZWL using transactions-based (market) exchange rate. The same rate was used in translating the results of foreign operations to ZWL. The auditors believe this treatment to be incongruent with the financial reporting framework, International Financial Reporting Standards (“IFRS”), as they believe the Auction Rate to be a “Spot Rate” compliant with the requirements of IAS21, and therefore IFRS.

The Directors however believe that the Auction Rate is deficient with regards to IAS 21 and cannot be considered as Spot Rate for the following reasons, amongst others:
1. It does not offer immediate delivery of foreign currency transactions occurring on the auction system. It has been made public by the Reserve Bank of Zimbabwe that auction transactions remain unsettled for lengthy periods, exceeding 12 weeks in some cases;
2. The Group’s Zimbabwean Operations do not, by regulation, have access to the foreign currency auction system, which makes the auction rate inaccessible, and therefore fails to meet the accessibility criteria required by IAS 21; and
3. The foreign currency made available through auction system is insufficient to meet all the requirements of those who want access to it.

Furthermore, In April 2021, the International Accounting Standards Board (“IASB”) released an exposure draft on an amendment to IAS 21 (ED/2021/4), ‘Lack of exchangeability’. IAS 21 specifies the exchange rate to use in reporting foreign currency transactions when exchangeability between two currencies is temporarily lacking. The amendment addresses what an entity is required to do when a lack of exchangeability is not temporary. Paragraph 19A of the amendment stipulates that when exchangeability between two currencies is lacking, an entity shall estimate the spot exchange rate at that date. The Directors believe that this amendment speaks to the current Zimbabwean economic environment.

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