Nation Media Group(NMG), the biggest media house East and Central Africa is struggling, an analysis by financial advisory firm AIB Capital shows.
According to the breakdown of its financial results released on Tuesday, NMG results for the year 2018 registered a 16 per cent decline in profit before tax, from KShs. 2 billion to KShs. 1.6 billion.
“NMG Profit Before Tax performance in 2018 was significantly below our previous expectations, Financial Year 2018 was a challenging year for NMG, expenses squeezed margins as the Profit Before Tax margin fell to a new low of 16.8 per cent in Financial Year 2018 from a margin of 18.4 per cent,” AIB Capital said.
The management also slashed dividends to be paid to investors by half, from KShs. 7 to Kshs. 3.5.
The financial advisory firm AIB has asked investors to sell their shares, after it had asked them to hold for future sale, since the media house’s earning have dropped beyond what the firm had anticipated.
“We have downgraded NMG now to sell from hold due to the firming up of earnings decline beyond our previous expectations,” AIB Capital said.
Further, the organisation’s expected advertising revenue have also continued to fall as the traditional media model that NMG relies on has come under attack from new players.
“The advertising revenue slippage is likely to continue as the traditional media model that NMG relies on comes under attack from new players. In the Financial Year 2018 the underperformance of advertising was further accelerated by suspension of key accounts and the momentary shutdown of their Kenyan Television during the year,” noted AIB
NMG profit was also lowered by increased printing cost and inflationary pressures in 2018 that squeezed its earning lower.
Earning Per Share also fell by 23 per cent to Kshs. 6.90 in 2018 driven by a structural decline in its turnover as digital advertising continue to eat into the media house’s market share.
To cut on its operational costs the media house has been having an annual mass lay offs of staff across all departments from print to TV to advertising to circulation and marketing.
Media houses around the world have been adopting to the changing technologies by shifting their focus on digital revenue instead of relying on traditional advertising on the hardcopy paper.
New York Times for example has been making a killing from its digital through growing subscription numbers and getting customers to pay for their digital products. In their results released in February 2019, their digital advertising revenue surpassed print advertising for the first time ever.
The company also employed 120 new employees in 2019 , bringing the total number of journalists at NYT to 1,600, the largest count in its history.
Some of the products that the NYT charges include news, crosswords and food apps. None of Kenya’s media house charges for its digital content through having paywalls like the media houses in the West. All great performing media houses like Financial Times, The Telegraph, The Times, Washington Post, New Yorker etc charge readers for their digital content.
However, news organisation that are only digital have been struggling. Last month, BuzzFeed laid off around 220 employees, Verixon Media Group cut around 800 positions, Refinery29 too and Vide Media cut is underway among others.
Job security in media houses is not assured and as such, a number of journalists are fleeing the newsrooms to join Public Relations, non-governmental organisations and other communication agencies.
However, media houses are not the only ones going through hard economic times. Fashion retailer, Mr Price posted a loss of KShs.91 million in its Kenyan operation at the end of last year largely attributable to start-up costs. Others businesses that have been struggling are fashion retailer Deacons,ARM Cement, Investment firm TransCentury, Nestle Kenya among others.