WPP ScanGroup, a marketing and communications company, has reported a loss of 47.1 million shillings (US$393,648.14 ) for the half year that ended in June 2022.
- WPP ScanGroup has reported a loss of 47.1 million shillings (US$393,648.14 ) for the half year that ended in June 2022
- This is a significant drop from the 31.4 million shillings (US$262,432.09) profit that the company reported for the same period in 2021
- The poor performance may be attributed to a drop in net revenues of 6.1 per cent year over year
- The company stated that “the bottom-line was pulled by an 11.0 per cent jump in tax charge to Sh56.7million (US$468,045.75),” which contributed to the negative results
This is a significant drop from the 31.4 million shillings (US$262,432.09) profit that the company reported for the same period in 2021.
The poor performance may be attributed to a drop in net revenues of 6.1 per cent year over year, which brought the total to 1 billion shillings (US$8,357,709.90), as well as a nearly doubling of the provision for doubtful debts, which brought the total to 49.3 million shillings (US$412,035.10).
The reduction in marketing expenditures made by essential customers as a reaction to the challenging state of the global economy was cited by management as the cause of the revenue shortfall.
The company stated that “the bottom-line was pulled by an 11.0 per cent jump in tax charge to Sh56.7million (US$468,045.75),” which contributed to the negative results.
The tax rate for the period was calculated to be 589.2 per cent, an increase from the 1H21 rate of 61.9 per cent. Analysts from the SIB Group could not determine the sustainable, effective tax given the marginal profitability of the business.
A favourable movement on the currency exchange line contributed to the increase in profitability at Sh65.5million, which was an improvement from a loss of Sh8.3million in the first half of the year.
This improvement was helped by the depreciation of the KES in comparison with the currency in which Scangroup’s receivables were denominated.
As a result of declined revenues and increased expenses, the amount of cash generated from operations dropped by 91.2 per cent year over year to a negative value of 345.1 million shillings (US$2,884,245.69)
The cash in hand available at the end of the year increased by 0.9% year on year to 3.2 billion (US$26,744,671), which was supported by a surge in cash generated from investing activities of 45.6% year on year to 2.4 billion (US$20,058,503.76)
The operating margin fell to -10.28 per cent in 1H22 from 1.54 per cent in 1H21 due to a rise of 4.4 per cent in operating expenses (OPEX) to Sh1.1 billion as well as a drop of 95.0 per cent year on year in other income; as a result of decreasing revenues, it causes margins to become smaller.
These factors contributed to the decline in operating margin.
The company acknowledges that the increase in costs is attributable to the hike in post-COVID business activity, and it hopes these investments will bear fruit in the year’s second half.
About the Company
WPP Scan group Plc is a transformation firm that offers a whole range of services. The company is engaged in the business of marketing and communication in the sub-Saharan African region.
It employs a model composed of many agencies and disciplines working together in each territory.
Through its subsidiaries, Ogilvy Africa, JWT Scanad, and Squad, it provides services in the areas of brand management and communications, customer engagement and experience, technology, commerce, and consulting. Group M, Mediacom, Mindshare, and Wavemaker are the companies that it partners with to provide its media investment management, which encompasses media, content, and technology (MEC).
Both Ogilvy and H+K Strategies are responsible for the company’s public relations (PR), influence, and government practice, respectively.
Geometry is accountable for the company’s shopper marketing and engagement efforts. Ogilvy Kenya Limited, Ogilvy Africa Limited, Hill & Knowlton East Africa Limited, Scan group Mauritius Holding Limited, Scanad Africa Limited, and J.Walter Thompson Kenya Limited are among its subsidiaries. Other subsidiaries include O&M Africa B.V. and Scanad Africa Limited.