NMG Profit Warning: Nation Media Group (NMG), Kenya’s largest media house, has put investors and the market on the alert over a possible significant drop in profitability for the year ended 31st December 2023. Issuing the cautionary statement on 26th October 2023, the media house listed a number of reasons for the expected drop in earnings by at least 25%, including higher taxes and the free fall in the value of the Kenya shilling.
“Following review of the Company’s forecast performance for the current trading period, the Board of Directors has determined that the earnings for the financial year ending 31 December 2023 will be lower than the earnings for the previous year by at least twenty five percent,” the company said in its latest filing at the Nairobi Securities Exchange.
Like most sectors of the economy, media business, particularly in Kenya, has been adversely impacted by strong economic disruption. The relentless increases in prices of fuel and other basic commodities, runaway depreciation of the Kenya shilling, rising interest rates and higher taxes have led to depressed consumer spending and increased cost of doing business.
“In particular, the increase in global prices of newsprint coupled with a weakened Kenya shilling against the US Dollar and higher distribution costs have resulted in significant incremental direct costs compared to the previous year,” said the statement issued by NMG company secretary, Ms Angela Namwakira.
Ms Namwakira said unlike most businesses, offsetting these incremental costs by passing them on to consumers through price increases is not tenable for a media house like NMG. She noted, though, that this escalation in costs was however partially mitigated by cost containment initiatives and improved productivity.
Profit drops have become familiar ground for NMG, seen as the barometer of the media industry in the East African region. NMG net profit for 2022 dropped to Ksh315.2 million from Ksh491.8 million in 2021. This will be the third consecutive year of drops in profitability, as revenues shrink and the media space gets complicated for mainstream players.
For the half-year 2023, NMG posted a significant decline in net earnings to just Ksh2.9 million from a net profit of Ksh247.8 million in the first half of 2022. Based on these trends, analysts are beginning to bet that the Aga Khan owned media house may just be angling to have a taste of making a loss.
Restructuring, headlined by staff layoffs early this year, appear not to be offering the much-needed relief at Nation Centre. The company is expected to lay off more employees at the end of the year.
The board says it optimistic that the investments that Nation Media Group has made to accelerate product innovation, diversify revenue streams and transform the organisation into an agile, customer-centric and data-driven media company will deliver long-term shareholder value.
“In addition, the recently completed integration of the newsroom and the ongoing implementation of our content strategy will entrench the company as the leading multi-media company in the region, offering unique and impactful content to our audiences,” it said.