The Standard Group is blaming the heated political climate in the country for its poor fortunes this year, warning the prolonged and disruptive election period in the second half of 2017 will see its profits shrink 25%.
In a profit warning notice released on Friday, the media house said heated politics has 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 flows significantly. The profit warning comes just after its CEO Sam Shollei quit after falling out with the board.
“The Board of Directors anticipates that the financial results for the year ended 31st December 2017 will be materially affected by the prevailing adverse market conditions in the second half of the year compared to the same period in the year 2016. The Board of Directors therefore projects that the Group’s earnings for the year ended 31st December 2017 will be at least 25% lower than the level of earnings in the financial year 2016,” the notice signed by acting CEO Orlando Lyomu read in part.
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However, the the listed media house is optimistic that that the business environment will normalise, Lyoumu said, adding rollout of medium term strategic plans will ensure the Group is insulated from sudden changes in the market in terms of revenue generation capacity, going forward.
Last year, Standard Group had swung back from negative territory to register a pre-text profit of Ksh 269.48 million after losing Ksh 395.8 million in 2015, a 25% drop from the previous year’s profit.
This was attributed to falling operating costs and slightly higher revenues. Total operating costs fell to a total 6% to Ksh 4.41 billion in 2016 while revenues were up 7% to stand at Ksh 4.82 billion.
A 25% drop in this year’s profit equals Ksh67.4 million, which in turn translates to a pretax profit of Ksh202.08 million.
The Group’s poor balance sheet is believed to be one of the reasons why the Moi family, the company’s largest single shareholder, parted ways with former CEO Sam Shollei. Insiders says the Group is expected to undertake yet another major staff rationalisation programme having effected similar one in 2015.
Apart from the charged political environment, media houses in the country are also grappling with a squeeze in ad spend by corporates and a government policy shift that saw the process put under a single unit- the Government Advertising Agency (GAA).
Also, competition from digital media platforms has sliced mainstream media earnings. Last year, Radio Africa CEO Patrick Quarcoo, revealed that mainstream media houses had lost Ksh 1.5 billion in the year to June 2016.
Here is the Standard Group profit warning notice:
