Innscor Africa, which operates franchised fast foods and Spar retail outlets in Zimbabwe and the region, last week said it was reviewing its strategy after taking an earnings knock from declining economic fundamentals and an increasingly competitive environment.
The Zimbabwe-listed company operates bakeries, Chicken Inn, Nando’s and other franchised fast food counters in Zimbabwe and the southern African region.
It has a shareholding in National Foods – in which Tiger Brands also has a significant stake – and is one of the counters that foreign investors are interested in on the Zimbabwe Stock Exchange.
National Foods, of which Innscor controls more than 38 percent, “delivered revenue growth of 11 percent on an increase of volumes sold of 8 percent compared to the previous financial year”, according to Todd Moyo, the chairman of the ZSE-listed National Foods.
It operated at a capacity utilisation of 48 percent, representing potential for increased productivity.
Moyo said the company, which is 37 percent controlled by Tiger Brands, had decided to declare a final dividend of 5.18 US cents (R5.67) a share. This brings the total dividend payment for the year to about 8.18c a share.
John Koumides, the chief executive of Innscor, whose revenue for the year to the end of June surged 54 percent to $1 billion, said at a briefing this week that the company had set its eyes on the Nigerian market, where it would probably seek a partner.
“We have passed through tough times in the past year or two. We are operating in a competitive environment and low disposable incomes,” Koumides said.
Despite the difficult environment, after-tax profits in the group amounted to $78.8 million compared with $48.6m the previous year.
However, despite the rises in the company’s revenue and after-tax profit position, headline earnings a share in the group were 35 percent down at 4.11c.
“These are not a great set of results. We are currently at the final stages of reflection and reviewing where we play… the sector, country and target market,” Koumides said.
Analysts at Business Monitor International (BMI) said in a new economic report on Zimbabwe released on Thursday that annual “inflation in Zimbabwe will remain in negative or very low positive territory”.
David Morgan, the chairman of Innscor, said on Thursday that the group’s “fast foods operations in Zimbabwe recorded customer counts that were 2 percent lower”, while those outside Zimbabwe “reported an increase in customer counts of 4 percent with a similar increase in profitability”.
Morgan added that Innscor was expanding its regional fast foods operations after opening three new counters in Kenya, 15 in Zambia and four in the DRC. Two more franchised counters were added in Swaziland during the period under review.
Although Innscor had terminated its franchise arrangement in Nigeria at the end of last year, the company was keen to return to the West African nation.
“We would like to return to Nigeria… it is now a lot better place. We may look for partners to re-enter the (Nigerian) market,” Koumides told the analysts’ briefing in Harare last week.
Zimbabwe’s economic woes have eaten into profitability prospects for the retail industry, prompting Innscor to close its flagship Spar outlet in the Borrowdale residential suburb in Harare.
However, its retail operations under the Spar franchise have flourished in Zambia, where the group recently opened a new Spar store in Lusaka in June, bringing its store network in the country to 14.
“The Spar Corporate Store retail operations in Zambia continued to post improving results and despite local currency depreciation, US dollar revenue experienced a 3 percent increase over the prior year.
“Gross margins remained firm and cost control was good, combining to produce a 44 percent increase in trading profit,” Morgan said.