Strong growth in revenue boosts NMG half-year profit to Sh892m

The Nation Media Group has returned double digit revenue growth in the first half of the year, riding on renewed optimism in Kenya's economy that has caused an uptick in advertising spend across all sectors.

That helped the company - which publisheswww.nation.co.ke- increase its after-tax profits by 53 per cent, to Sh558 million, compared to Sh364 million in the same period last year.

Nearly all the group’s platforms reported double digit sales growth, pushing the revenues up by 53 per cent from Sh2.8 billion in the first half of last year to Sh4.7 billion this year.

The group closed the first half of the year with a 95 per cent improvement in cash flow to Sh2.5 billion from Sh1.3 billion in a similar period last year.

Linus Gitahi, the group’s chief executive, said the strong cash flow position makes it possible for the Nation Media Group to scout for new business opportunities across the continent as it pursues its goal of becoming the "Media of Africa for Africa"

“We have a good war chest to really invest in opportunities across Africa,” Mr Gitahi said.

The Nation Newspaper Division’s performance, which last year reported a slight drop in revenues as businesses cut their marketing budgets to deal with the ripple effects of the global economic recession and high direct costs, reported a 36 per cent rise in operating profit, helped by a 20 per cent increase in revenues in the first six months of the year.

The Nation Broadcasting Divisions’ results, which were also adversely affected by last year’s economic slowdown and market fragmentation, reversed its course to post strong growth in revenues.

Easy FM, NMG’s premier radio station grew to become the number one English FM station in Kenya while Qfm, the Kiswahili station that was launched in 2008, is now ranked as the country’s third most popular Kiswahili station.

Revenues at Monitor Publication in Uganda grew by 5 per cent on a 3 per cent reduction in distribution costs with Mr Gitahi pointing to a sharper investment focus to position The Monitor as Uganda’s largest daily newspaper.

NTV Uganda, which now covers 80 per cent of the country, increased its revenue by 60 per cent, while operating profit jumped up by 150 per cent.

In Tanzania, the group’s flagship product Mwananchi Publications grew its advertising revenue by 29 per cent to rev up operating profit by 128 per cent.

“Our investment in the new printing press has paid off as Mwananchi recorded a profit for the first time,” said Mr Gitahi, reiterating that the company’s plans to list its shares in Tanzania, Uganda and Rwanda were still on course.

Mr Gitahi said NMG would this year conclude plans to cross-list at the Uganda Securities Exchange, the Dar-es-Salaam Stock Exchange and Rwanda’s over-the counter market.

The move, however, remains subject to approval by shareholders and the relevant regulatory authorities in each of the respective countries.

NMG retained its dividend payout at last year’s level of Sh1.5 per share despite the issue of bonus shares that has seen the company increase its payout to investors.

The company’s earnings per share (EPS), widely considered the single most important aspect in determining a share's price and value, grew by 40 per cent from Sh2.6 last year to Sh3.6 this year.

EPS is considered to be an indicator of the amount of money each shareholder would be entitled to in the event of the company's liquidation.

Economic Rebound

Since January, Kenyan firms have been battling for brand visibility in the marketplace aiming to recover lost ground after two years of muted economic growth.

The businesses spent Sh20 billion on advertising in the six months to June — nearly as much as the annual spend for 2008 — signalling a rising optimism in the economy and the jostling for brand visibility in a market where consumers are regaining lost purchasing power.

Total advertising spend on radio, television and print media – excluding rate card discounts – closed at Sh20.4 billion in 2008, according to data from Synovate, making the 2010 half year spend only Sh400 million short of the annual spend two years ago.

This growth in advertising spend is being linked to rising optimism among businesses that investments in brand visibility will yield good returns as the pace of growth intensifies.