For the first time in very many years, Nation Media Group has found itself in the unenviable red territory. The multimedia house recorded a loss in the first six months ending 30th June 2020, ending the solid performance associated with not only one of the most admired companies in Kenya but an entity that has been an icon of good corporate governance.
NMG attributes the Ksh375.2 million net loss for the period to a major drop in advertising and circulation volumes. The earnings were a drastic drop from a net profit of Ksh403.7 million over a similar period last year, though expected based on the declining profitability trend over the past four years.
End of fuzzy math
Finally, NMG has allowed the numbers to speak for themselves after years of clever accounting that padded its earnings even when it wasn’t doing so well: revenues were steadily falling as the company blew hundreds of millions on restructuring and lay-offs but it still made better-than-average profits.
NMG says it has been a difficult period for advertisers across the regions where it has a presence, complicated by the Covid-19 pandemic that brought about restrictions in both movements and on office work. This hampered optimal media consumption especially for newspapers, cutting circulation which is a critical metric in attracting advertisers.
Even then, it has not been lost on media observers that NMG, like most media houses in Kenya, took too long to respond to digital invasion believing their traditional flagship channels would remain relevant in the era of mobile and internet. Now they are being forced to play catch up.
Internal mismanagement – including over-expansion and investing in costly talent – and fraud-related losses have also played a part in messing cashflow for media companies.
Nation Media Group, which restructured its business recently and sent home about 100 employees, posted a pre-tax loss of Ksh328 million, down from a profit before tax of Ksh580.8 million in the first half of 2019.
Turnover over the first six months of this year declined to Ksh3.3 billion from Ksh 4.6 billion the previous year. Total comprehensive loss was Ksh352.7 million from a profit of Ksh416.7 million at the end of the previous period in 2019. The firm’s profitability, as measured by Earnings Per Share (EPS), declined to Ksh1.90 from Ksh2.20.
NMG half-year financial results have set up the media house for an even bigger loss for the full financial year, with the impact of Covid-19 expected to be felt into next year. This consistent poor run has hit NMG’s share price at the NSE, which has this year hit an all-time low, at Ksh9 in August. The stock opened the year at Ksh39.75. In May the company issued a profit warning, citing Covid-19 economic disruptions.
“The measures rolled out by the governments across the region in response to the Covid-19 pandemic precipitated significant decline in the group’s advertising and circulation volumes particularly between April and June,” the board said in a commentary accompanying the results.
“Advertisers faced devastating financial challenges, scaled down operations and held back marketing activities in a fight for survival and several closed down. Additionally, the general restriction on mobility of people across the markets led to a decline in newspapers copy sales.”
Hanging around in the loss-making corner isn’t a pretty sight for a company used to churning out huge profits, and Nation Media Group is feeling the stigma. The company strategically published its financial results on Saturday, a weekend, to reduce the impact of the negative publicity on its brand and share price, just as did its rival Standard Group, which reported a loss of Ksh306.1 million for the half-year ended 30th June 2020 compared to the Ksh19.3 million last year.
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Apart from sacked employees and those whose terms were restructured, the other casualities of the NMG loss are shareholders who will do without a dividend payout. “Considering the Group’s investment plans and the adverse impact of the COVID-19 pandemic, the directors do not recommend payment of an interim dividend,” the board says.
NMG, however, noted that it is recording substantial growth of subscriptions to its digital platforms and sees a huge possibility of this segment contributing to its bottom line. Lately, it has redone its website and rebranded it from .co.ke to nation.africa hoping it can overtake its legacy print and TV media in generating revenues.
Analysts, however, see this as a long shot in a local advertising market yet to wean itself off conventional media and a continent still reading from different scripts when it comes to industry and commerce. There is also stiff competition for advertising spend from foreign-owned digital media companies such as Google, Facebook, Twitter and Instagram as well as local an army of local digital outfits and websites.
New brand identity
A number of media houses in the West, though, have managed to successfully monetize their digital platforms, and could offer some hope and revenue models for Africa.
The NMG board says the Group has accelerated its transformation into digital media anchored on its new digital brand, Nation.Africa, adopted in July 2020. The brand will be officially launched on Friday 4th September at the Serena Hotel against the backdrop of poor NMG half-year financial results.
“This together with strengthening of the Group’s print and broadcast media products are expected to offset the adverse performance above and drive the long term profitability of the business,” it says.