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Standard Group set for a massive fall in earnings

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The Standard Group has issued a profit warning for full year ending December 2015, meaning its profit is set to fall. The company, Kenya’s second largest but older media house, says its profit will be materially lower than last year due to a number of factors that reduced earnings during the year.

“The Board of Directors anticipates that the financial results for the year ending 31 December 2015 will be materially affected by adverse market conditions experienced during the year compared to the same period in 2014,” CEO Sam Shollei said.

Standard Group reported a pre-tax profit of Ksh300 million in the last financial year. For some time, the company has been struggling to make money, with most of its products – including newspaper and TV – recording drops in earnings.

Specific challenges that adversely affected the listed media company in the first half year included business disruptions that resulted from the analogue to digital migration process which resulted in lower viewership and a decline in TV revenues after it joined NTV and Citizen in switching off its analogue signal to protest government’s forced migration to digital platform.

SEE ALSO: NATION MEDIA HALF-YEAR PROFIT FELL BY KSH130BN

“The migration from analogue to digital TV broadcasting negatively impacted viewership due to low penetration of set top boxes (STBs) at the time of migrations,” Mr Shollei said.


 

He said the need to impair analogue television equipment also significantly contributed to a one-off cost for the year.  Further, a decision to increase bad-debt provisions are also eating into earnings. The company says it has initiated an organisational restructuring process which has also resulted in one-off reorganisation costs that will have to be expensed in 2015.

The company is laying off employees with a target of cutting its workforce by 30% in a costly exercise that forced it to take up a Ksh500m loan. “Taking a longer term view automation of the business processes through investments in media solutions as well as an editorial work flow solution will greatly improve efficiency and visibility across all business lines,” Shollei said.

The Standard Group expects future savings to start accruing in 2016 as the organisation benefits from these investments which will support a lean, efficient and highly-motivated workforce.

The media company has also taken measures to optimise the overheads cost structure by eliminating wastage and implementation of stringent procurement process, as well as undertaking strategic investments in order to mitigate the impact of future disruptions to revenues.

Media companies in Kenya are facing tough times as social media platforms, defamation cases and digital migration eat into their earnings. Early August, the region’s biggest media house, Nation Media Group, reported a drop in half-year profits of Ksh130 million.

NEXT READ: SHOLLEI’S FATE HANGS IN THE BALANCE AS MOI FAMILY SEARCHES FOR NEW CEO

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