New investments brighten Scangroup's profit outlook

WPP Scangroup chief executive Bharat Thakrar. FILE PHOTO | NMG 

By VICTOR JUMA

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Summary

Bharat Thakrar, the company’s chief executive, said he expects a significant performance improvement in the second half of the year, helped by investments in new products and markets

Media and marketing services firm WPP Scangroup’s

net profit rose by nearly a quarter to Sh196.4 million in the half year ended June, helped by a drop in expenses. The Nairobi Securities Exchange-listed company reported net earnings of Sh157.3 million the year before.

Customer billings dropped 6.8 per cent to Sh6.3 billion but this was offset by lower direct costs and operating expenses, which fell 5.3 per cent and 13.7 per cent to Sh4.5 billion and Sh1.6 billion respectively in the review period.

Bharat Thakrar, the company’s chief executive, said he expects a significant performance improvement in the second half of the year, helped by investments in new products and markets.

“We expect the results of the second half of the year to improve as compared to the first half, plus benefit from the new investments,” Mr Thakrar said, adding that the forecast is based on cost reduction measures and improved cash flows from new business lines.

WPP Scangroup has acquired a 70 per cent stake in rival Kantar TNS.

The deal saw WPP Scangroup get 3,660 shares of Kantar TNS, whose major shareholder Russell BV is set to take up 53.2 million shares, equivalent of a 6.1 per cent stake in the NSE-listed firm in the all-stock transaction.

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Russell is part of the entities controlled by Scangroup’s parent company WPP Plc.

The deal raises the multinational WPP’s effective stake in the Kenyan subsidiary to 56.25 per cent from the previous 50.1 per cent.

“Upon completion of the proposed acquisition, WPP Scangroup expects that it will add a topline of $17.5 million (Sh1.7 billion) to its current annual revenue of $39 million (Sh3.9 billion) on a full year basis,” Scangroup told its shareholders in a circular.

“This projected growth is subject to prevailing market conditions but the company is optimistic about future growth. This would result in additional profits for WPP Scangroup thus enhancing shareholder value.”

Besides, the TNS Kantar acquisition, WPP Scangroup also recently converted part of its Sh498.6 million 2017 loan to First Primus West Africa Limited to a 24.9 per cent equity in the associate.