Kenya tax riots disrupt Simbisa Brands' business o...

Kenya tax riots disrupt Simbisa Brands' business operations

By Nyashadzashe Ndoro

Victoria Falls Stock Exchange (VFEX) listed quick-service restaurant operator Simbisa Brands faced significant disruptions in Kenya due to widespread tax riots, which happened in June this year.

This is contained in the company's earnings update for the full year ended 30 June 2024. Simbisa noted that the unrest, sparked by monetary policy tightening and inflationary pressures, impacted operations in the fiscal year's second half.

Rights watchdog, Kenya National Commission on Human Rights (KNCHR), revealed that at least 39 people were killed and hundreds more injured in anti-government demonstrations in Kenya. Kenyan police fired live bullets at protesters.

Initially, Kenya's market showed stability, but currency devaluation and inflation concerns resurfaced. Violent protests and severe flooding further hindered business, affecting customer counts and revenue.

"In Kenya, the first half was characterised by currency devaluation and inflationary pressures. Tightening of monetary policy in the second half resulted in extended anti-tax riots, which in addition to severe flooding disrupted business operations," the company noted.

Simbisa adapted by focusing on customer-centric strategies, expanding delivery channels through innovative, app-exclusive offers and optimising store operations. Plans for financial year 2025 include opening 36 new stores, revamping 36 existing ones and leveraging customer feedback analysis.

The company's revenue increased by 5.94% to US$286.45 million, largely driven by Zimbabwe's significant 71.83% contribution.

Customer counts rose by 2% year-on-year, with average real spend up 4%. Zimbabwe's economic instability, El Niño induced drought and regulatory shifts impacted operations.

To mitigate these challenges, Simbisa implemented strategic initiatives. The company expanded its footprint with 73 new locations, restructured its portfolio and enhanced delivery services through app-exclusive offers.

Looking ahead to the financial year 2025, Simbisa forecasts continued growth.

The company plans 36 new store openings and revamps, totaling US$17.8 million, prioritising customer-centric approaches. Revenue is expected to grow 8% to US$308.4 million.

The Group expects earnings before interest, taxes, depreciation and amortisation (EBITDA) margin to remain relatively flat at 14.8%.

"We expect EBITDA margin to remain relatively flat at 14.8% owing to inflationary pressures, before inching up thereafter as new stores mature and begin to contribute more to the topline at relatively constant costs. We also expect the Group's implementation of strategic raw material sourcing to alleviate cost pressures and contribute to improving margins in the medium term. We anticipate net income to close FY25 at US$16.53 million," the company noted.

The Group has footprints in Zimbabwe, Kenya, Zambia, Ghana, Mauritius, Namibia, DRC, Eswatini and Malawi.