A few months ago, it wasn’t very clear whether Sammy Shollei would last as Standard Group CEO. The tide appeared set against the man brought in four years ago to stop the media house from sliding and set it on a growth path, but instead the group’s financial haemorrhage worsened after he took over.
But the board surprised media watchers and gave Shollei three more years at the helm, hoping that after learning the group in his first term, he understands how to steer it from its current financial turmoil and waning brand value.
Recently, Mr Shollei granted BusinessToday an interview and talked about the troubles the Standard Group faces and the opportunities that it is looking at to recover. The next first year of his second term beginning January 1, 2017, will be very critical, being an election year. Elections bring about exciting times for media as it increases consumption of information as well as advertisements.
But that, according to Mr Shollei, is the least of his excitements. He says he has identified weaknesses in Standard’s operations – such as living beyond its means – and has been working to fix them, one step at a time. “When I came in,” he says, “I found a business that was undermanaged. The company was used to only two senior people, the deputy chairman and Group MD.”
Something surprising was the fact that its core businesses of newspapers and broadcast had no line managers and so he had to put in place the right structure, which meant some people had to be outgoing and others incoming. The business had almost stalled, growing only 5% per year for seven years.
The newspaper division was, and remains, the stronger segment, but still a distant second to its rival Nation, while KTN had dropped to one-third of NTV in terms of performance. “But things have transformed. Radio used to earn Ksh1.5 million a month now it brings in Ksh35 million and it is number two countrywide. From just Ksh30 million now the TV segment rakes in in over Ksh100 million a year,” he said.
Standard online is the leading in Kenya and its weekly tabloid newspaper the Nairobian is the fastest growing newspaper. Mr Shollei says he’s working to enable the newspaper and its newest baby, KTN News, to attract more advertising.
Challenging media environment
Mr Shollei has extensive experience in the media industry across East Africa, with a rich mix of financial and commercial skills, as well as a deep understanding of the Standard Group and its markets. He has worked with Nation Media Group, where he managed its operations in Tanzania and at the head office in Nairobi.
He acknowledges challenges in the media market, which recently led to Nation Media Group, market leader in Kenya in terms of revenues, to shut down one TV and three radio stations. “In September 2013,” Shollei said, “the government introduced VAT on newspapers. Before that newspapers were seen as commodities serving a public good to help in information dissemination and promotion of democracy. But the VAT was a major setback as it pushed up the price of newspapers from Ksh50 to Ksh60.”
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This meant that many readers who bought two newspapers – mostly Nation and Standard – could not afford the luxury with an extra Ksh20 to spend daily, translating to Ksh600 a month. Shollei says this increase in cost caused a 20% drop in newspaper circulation.
Then there’s the centralisation of public advertising under the Government Advertising Agency (GAA), headed by Dennis Chebitwey, which has reduced ad spend in print media. And even for the fewer ads coming in from GAA, payment has not been forthcoming which all media houses combined being owed close to Ksh1 billion. “The government is also not spending on projects with bigger trickle down economic effect,” said Shollei.
The year 2015 was a tough one for media, with digital migration hitting all the players after they resisted to move and had their signals switched off by the Communications Authority of Kenya for nearly three weeks during which TV broadcasters lost millions of shillings. NMG attributed its 2015 Ksh130 million drop in profitability to this hitch. “For six months, we had no revenue from TV and we wrote off the analogue equipment. So the loss was a corrective loss,” said Mr Shollei.
With management changes, diversification and increasing efficiency through a new ERP system, Mr Shollei says Standard Group is headed back to sunny days and promises to report a profit this financial year. Cash generation has grown to 25% of turnover, he said, while fundamentals are solid. “EBITDA is strong and solvency ratios are great. We can actually pay all our loans in one year as most of our cash is working capital. If GAA paid us and we decided to pay up, we would pay half of our debts.”
Shollei said Standard will walk the diversification path to remain relevant in a changing environment, balancing traditional and broadcast media with digital media. He said the group is now 50% broadcast, with KTN, KTN News and Radio Maisha. “Broadcast is profitable in the long term and that’s why we are looking at more sustainable diversification strategy with more focus on broadcast,” he says. “We take Nation’s closure of TV and radio stations as an opportunity. And we are working on commercialising of our digital platforms.
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