The Standard Group earnings for 2017 tumbled, underscoring the financial pain that Kenya’s second largest media house has been undergoing over the past few years. From a profit before taxation of Ksh 269.4 million in 2016, the group’s untaxed earnings dropped drastically to a loss of Ksh 282.1 million. Loss after tax was even lower at Ksh210.8 million, down from a net profit of Ksh198.5 million the previous year.
The Group mainly attributes the fall in profitability to a 17% drop in print advertising revenue occasioned by “business uncertainty during the electioneering period”. According to audited results for the year ended 31 December 2017 filed with the Nairobi Securities Exchange, the group’s turnover declined by 3% to close at Ksh4.7 billion in 2017 compared to Ksh4.8 billion for a similar period the previous year.
The management says the broadcast division, however, continued to post impressive revenue growth, expanding 16% in year under review. The company says the increase in revenue was as a result of product innovation for TV, while radio continued to benefit from a strong brand position and wide reach.
“The Group’s operating costs increased by 12% driven by an increase in direct and overhead costs by 4% and 20% respectively, due to increased cost of election coverage during the period, increase in libel and bad debt provisions, marketing costs incurred during the newspaper redesign process and professional fees,” says company secretary Millicent Ng’etich.
The company also laid off staff across its departments towards end of 2017, which ate into its revenues as well.
The huge loss brings out a closely guarded secret: that the company’s books over the past few years were being manipulated to reflect to cover up the drain on the company’s finances. Mr Sam Shollei, who was CEO between 2013 and August last year, will not escape blame. Analysts are likely to point to the poor performance as one of the key reasons he had to live just a year into his second term as CEO.
Going forward, the Standard Group is optimistic that the media industry will generally recover this year from the harsh political environment witnessed in 2017. “With a stable business environment, new opportunities, and a clear road map, the Board is optimistic that 2018 will record better results,” the statement says.
The board did not recommend dividend payment in the year to allow for continued investment in the broadcast and digital business units.
The Standard Group, which owns KTN and KTN News TV stations, the Standard and Nairobian newspapers and Radio Maisha, had in November last year issued a profit warning, saying that its earning for the year ended 31 December 2017 will be at least 25% lower compared to 2016.
Then, as now, it cited a prolonged and disruptive election period that had a negative impact on the economy both in terms of volumes of businesses transacted and shrinkage of cash in circulation, thereby affecting its revenues and cash significantly.
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It has also emerged that President Uhuru Kenyatta’s family was interested in acquiring the media house but was put off by financial statements that had been “massaged” for about three years as well as a heavy libel burden. “There was a hefty bank loan that had not been declared. The money was used to offset the 2016 staff rationalisation programme and then, there was a long list of litigation cases filed by employees who thought they had been let off wrongly,” one source recently told Business Today.
The release of the financial results coincided with the appointment of a former Nation Media Group Managing Director Dr Githinji Gitahi and a Co-Founder and CEO at Ushahidi Inc Ms Juliana Rotich to the Board of Directors. Former Uchumi Supermarkets CEO Dr Julius Kipng’etich also joined the board last year.