Nation Media profits hit by bad government debt

Saturday August 18 2018

NMG chairman Wilfred Kiboro and CEO Stephen Gitagama

Nation Media Group chairman Wilfred Kiboro (left) and CEO Stephen Gitagama during an investors briefing for the 2018 half-year financial results at the Stanley Hotel in Nairobi, August 17, 2018. PHOTO | SALATON NJAU | NMG 

By CONSTANT MUNDA
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Nation Media Group shareholders are set to receive an interim dividend payout of Ksh1.50 ($0.015) per share for the first half of the year, which was adversely affected by the high outstanding government debt that cut into the company’s profit.

The Government Advertising Agency (GAA) owes the Nation Media Group Ksh856 million ($8.5 million) in unpaid advertisement revenue, the company said when releasing its half year financial performance on Friday.

About 85 per cent or Ksh726 million ($7.2 million) of the government debt is overdue.

NMG’s half-year net profit dropped by 35.5 per cent to Ksh529.2 million ($5.25 million) from Ksh819.8 million ($8.13 million) in the same period last year, weighed down by Ksh291.6 million ($2.89 million) provisions for bad debt largely owed by the government.

The debt that the government owes the media industry through GAA has hit Ksh3 billion ($29.7 million), an alarming level that prompted Director of Public Prosecutions Noordin Haji on August 9 to order a probe into why the cash has not been paid.

“We are seeing the level of impunity in the government, where they take services and goods from average wananchi (citizens) and do not pay those debts. It’s criminal and unacceptable … and yet we pay taxes so that the government can run their functions,” said NMG chairman Wilfred Kiboro at an investor briefing in Nairobi, adding that many industries are hard hit by the government’s debt defaults.

Terming the GAA a bad idea that should be abolished, Mr Kiboro said the government has much bigger problems and projects to worry about “and should not be competing with small advertising agencies over a Ksh7 billion ($69.4 million) budget.’’

The NMG chairman also criticised the government’s constant harassment of the media, citing this past week’s arrest and assault on Nation journalists covering the construction of a beach hotel that appears to have blocked public access to the sea.

“As Nation Media Group, we pledge to our consumers, partners and stakeholders that we remain independent, steadfast and true to our values, and we will constantly fight for the common man because that’s the right thing to do and that’s how we will positively influence the society,” said Mr Kiboro.

It will be the first time since 2011 that NMG shareholders will be pocketing less than Ksh2.50 ($0.025) interim dividend.

“If I was certain that we can collect the over Ksh800 million that we are owed today, we would have declared a dividend of Ksh2.50 or more, but we wait and see,” said Mr Kiboro.

He added that discussions with the Treasury and the ICT Ministry have started, but there is nothing on the table yet, raising suspicion that the budgeted advertising revenue could have been diverted elsewhere.

Turnover in the six-month period was Ksh4.92 billion ($48.8 million), a 6.7 per cent drop from Ksh5.27 billion ($56.7 million) in the same period last year.

The print business, which is battling digital disruption, contributed about 80 per cent of the revenue, followed by broadcast at 15 per cent, while the share of digital business was five per cent.

“The first quarter [which saw the shutdown of NTV Kenya for one week] was the most difficult one. We noticed a big improvement in the second quarter,” said NMG chief executive Stephen Gitagama. “For the third and fourth quarters, the signs are good. We expect improvement in our overall performance.”

NMG has invested heavily in digital media platforms, which are tipped to be the group’s next revenue growth frontier with the monetisation of the various new media channels underway.

The NMG digital platforms now have a reach of close to 34 million unique monthly users.

The company is diversifying into the music industry with the launch of new products such as LitMusic, a record label for artists, whose offering will be expanded into events management, music and video production and merchandising, Mr Gitagama said.

The label and Buzz, an e-commerce-enabled experiential platform for movies, events and retailers, will also be replicated in Uganda and Tanzania.

The Group has partnered with a Tanzanian shareholder in compliance with ownership rules that require media companies to be at least 51 per cent locally owned.