Scangroup records lower net earnings on reduced income

Scangroup's Bharat Thakrar. PHOTO | FILE  

By MUGAMBI MUTEGI

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Summary

• Marketing firm says its profits were impacted by a tough trading environment.
• The currency devaluation in Nigeria impacted Scangroup’s bottom-line as it posted a foreign exchange loss of Sh63.2 million.
• Scangroup’s profit before tax declined 17 per cent but net profit only dropped by 3.8 per cent due to a lower tax rate last year.

Marketing services company WPP Scangroup

has recorded a 3.8 per cent drop in full-year net profit to Sh460.4 million on lower revenues.

The firm, which is listed on the Nairobi bourse, saw its revenues for the year to December dip by a similar margin to Sh4.8 billion.

Scangroup says its earnings were impacted by a “tough trading environment” in Kenya, which accounts for 60 per cent of its business, but boosted by improved earnings in other markets.

“Results in Gabon, Ghana, Nigeria and Zambia were particularly pleasing. In terms of disciplines, public relations was where we saw the greatest growth,” the firm said in a statement Friday.

The currency devaluation in Nigeria impacted Scangroup’s bottom-line as it posted a foreign exchange loss of Sh63.2 million compared to a gain of Sh47.2 million the previous year.

Net interest income also dipped by Sh29.6 million to close the year under review at Sh406.52 million mainly due to capping of interest rates in Kenya last September, the firm said.

Scangroup however benefitted from cost-cutting measures it has undertaken “in line with its revenue position”, with operating and administrative expenses reducing 4.2 per cent to close the year at Sh4.5 billion.

Scangroup’s profit before tax declined 17 per cent but net profit only dropped by 3.8 per cent due to a lower tax rate last year.

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More paid to taxman

In 2015, the firm paid a higher corporate tax of Sh396.6 million as its effective rate increased from 31 per cent to 45 per cent due to deferred tax adjustments, further eating into its profitability.

Last year, the Scangroup paid Sh265.4 million in corporate tax.

“Based on the 2017 year-to-date performance, the board of directors is confident that there will be an improvement in operating profit for the full-year following initiatives taken in quarter four of 2016 and quarter one of 2017,” the firm stated.