Simbisa’s $22 Million Expansion Plan Jeopardized by Low Liquidity

by Victor Adetimilehin

Fast-food giant Simbisa Brands Limited is facing a significant financial hurdle that threatens its ambitious plan to open 92 new outlets at a cost of over $22 million. The company’s liquidity has been seriously compromised due to increased borrowings and growing trade payables, putting its expansion drive in jeopardy.


During the fiscal year ending June 30, 2023, Simbisa’s borrowings outside of accounts payable rose by $7.88 million compared to the previous year. In addition, the company’s trade and other payables, which represent its debts to vendors for inventory-related goods, increased by $7.38 million during the same period. As a result, Simbisa finds itself with just 65 cents for every dollar of short-term debt.


Simbisa’s chairman, Addington Bexley Chinake, emphasized the company’s growth prospects and investments in talented leaders to lead its flagship brands. However, the liquidity challenge poses a significant obstacle to its expansion plans. While the company has experienced a net growth of 7% in the total number of stores, ending the year with 646 stores, it acknowledges the impact of soaring inflation, volatile exchange rates, uncertain economic policies, and energy deficiencies during the period under review.


To address these challenges, Simbisa has made strategic decisions to streamline its brand portfolio, focusing on core brands and closing underperforming outlets. This exercise will continue into the 2024 financial year, with the closure of nine more non-core brand outlets.


Simbisa’s CEO, Basil Dionisio, stressed the company’s commitment to diversifying revenue streams and enhancing customer satisfaction by growing its market share in the casual dining sector and increasing revenue from deliveries. The planned opening of 92 new outlets in the 2024 financial year is expected to drive growth and unlock shareholder value.


While the company reported a nearly 71% reduction in foreign exchange and other gains during the period under review, keeping profit after tax subdued at $19.4 million, it remains optimistic about growth opportunities, primarily in Kenya and Zimbabwe. Despite the financial challenges, Simbisa is determined to adapt and overcome, with a strategic focus on delivering value and satisfaction to its customers while pursuing growth opportunities in existing and potential new markets.


In the midst of these financial challenges, Simbisa is hopeful that with careful financial management and strategic decisions, it can overcome the current hurdles and continue its growth trajectory. The company recognizes the importance of adapting to changing market conditions and remains committed to delivering value and satisfaction to its customers.


Source: [Newsday Zimbabwe]





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