NMG half-year profit up 17.5pc to Sh1.6bn

From left: Kenya Tourism Board head Muriithi Ndegwa, Nation Media Group CEO Linus Gitahi, businessman Chris Kirubi and NMG Chair Wilfred Kiboro during the Group’s investors briefing. SALATON NJAU/NATION 

In Summary

• Mr Kiboro said NMG’s geographical and product diversification helped the company to defy slow business in Kenya around the electioneering period, when economic activity came to a near stand-still.

Increased revenue and lower operating expenses lifted Nation Media Group’s six-month profit before tax by 17.5 per cent to Sh1.62 billion, defying economic slowdown caused by the March General Election.

Group turnover for east and central Africa’s largest media house jumped 10 per cent to Sh6.4 billion on the back of increased circulation and advertising revenue from print, digital and broadcast products across the region.

The group chairman, Mr Wilfred Kiboro, announced an interim dividend of Sh2.50 per share, which represents a 20 per cent increase in the total payout factoring in last year’s bonus issue of one share for every five.

Mr Kiboro said NMG’s geographical and product diversification helped the company to defy slow business in Kenya around the electioneering period, when economic activity came to a near stand-still.

“Our regional diversification helped us to overcome business challenges in the first quarter as a result of Kenya’s General Election,” said Mr Kiboro.

Advertising revenue

Another key driver of profit growth was a drop in direct expenses, mainly due to stable newsprint prices and favourable exchange rates.

The Nation Newspapers Division’s advertising revenue increased by 14 per cent, while circulation income was up six per cent.

NMG’s share price has risen nearly 18 per cent over the past six months to Sh315, recording the highest gain among companies listed in the commercial segment of the Nairobi Securities Exchange.

The company’s Kiswahili television station QTV, which was launched last year, recorded a 363 per cent growth in operating results. Business Daily posted a 109 per cent rise in operating profit, with earnings of other brands like NTV Kenya also growing by double digits.

Uganda’s Monitor Publications suffered disruption in May following a two-week closure by the government, which negatively impacted on its revenue and operating profit.

Chief executive Linus Gitahi noted that Monitor had resumed normal operations shortly after the closure, adding that NMG will continue to search for investment opportunities in the region to fuel its growth.

Strong cash flow

“Our strong cash flow puts us in a good position to continue looking for new investment opportunities which we can fund internally,” said Mr Gitahi.

The company had reserves of Sh4.2 billion as of June, representing a nine per cent rise over the Sh3.9 billion it had in the same period last year.

NMG has in the past five years launched a number of products including newspapers, radio and TV stations which have gained significant market share.

The company is set to launch a Nairobi newspaper to cater for specific needs of the city’s residents following the introduction of the weekly sports paper, Sporton! earlier in the year.

Other new products include money transfer service NationHela, KFM radio station in Rwanda and the acquisition of Dembe FM in Uganda.

The management is cautiously optimistic that the first-half momentum will be maintained in the rest of the year.

Analysts at Kestrel Capital noted that NMG’s net profit margin improved by two percentage points to 17.6 per cent in the first half, also boosted by interest income on its multi-billion-shilling cash reserves.

“Net profit margin improved as a result of effective cost management measures derived from consolidation of the group’s operations and synergies,” Kestrel Capital said in an analysis report.

Mr Kiboro however warned that the looming switch from analogue to digital broadcasting will have a negative impact on the broadcasting sector if the government does not step in to make cost of digital set-top boxes affordable.

“Majority of households cannot afford to spend the average of Sh5,000 on set-top-boxes that are needed to receive digital signals by the deadline of December 13,” Mr Kiboro said.

“The government and media players need to work together to find ways of making the gadgets more affordable,” he added, suggesting that subsidies could help to ensure that Kenya makes a successful transition to digital broadcasting