16-August-2007: Media services firm ScanGroup is set to enter the Nigerian market by end of the year as growth in the industry peaks, raising investor expectations for better performance in future.
The Nigerian initiative is not expected to show any contribution to the bottom line because of set-up costs, but should contribute to the topline due to what the company sees as an untapped market there.
The company has registered a 31 per cent growth in pre-tax profit on the back of 54 per cent growth in billings or turnover for the first half of 2007 compared to a similar half of 2006.
The company has been creating opportunities for future growth with recent acquisitions and plans for expansion in Africa.
ScanGroup plans to roll out its Pan African growth strategy which includes setting up operations in West Africa by opening up a fully fledged agency in Nigeria.
Company CEO Bharat Thakrar believes that West Africa, and Nigeria in particular, will be the next big advertising market after the South and East African.
In May this year, Lowe Scanad Uganda, a wholly owned subsidiary of ScanGroup, acquired certain business and assets of Redsky Uganda, in a deal that was to see the company take over among others, the advertising contract of Uganda Telecom Limited.
At the time Mr Thakrar said the acquisition fitted within plans to consolidate business in the East African region and particularly having a foothold in the telecommunications sector in Uganda. He said that one of the company’s key objectives was to enter the lucrative telecommunication business in East Africa.
ScanGroup has also a controlling interests in FCB Tanzania which handles advertising for Vodafone in Tanzania through its subsidiary, Lowe Scanad Tanzania in addition to a 50 per cent stake in Redsky Ltd in Kenya which handles advertising for Safaricom.
In order to finance further expansion, the group is to create five million new shares which will be used for share swaps in future acquisitions. During an AGM in May this year, shareholders approved the creation of one million new shares to be used in purchasing a further 15 per cent stake of Redsky Kenya.
In July 2006, the company became the first marketing services business to be listed at the Nairobi Stock Exchange.
The billings for the first half of 2007 were Sh2.1 billion compared to Sh1.4 billion for the first half of 2006 while profit before tax stood at Sh117 million from Sh89 million in a similar period of the previous year. After tax profit was Sh79 million compared to Sh62 million in the previous year.
In 2006, the company’s billings were up 29 per cent to Sh3 billion while profit after tax grow by 39 per cent to Sh279 million compared to Sh201 million recorded in 2005.
Clearly, the company must make more money in the second half of 2007 in order to come anywhere close to what it achieved in 2006 given that Sh117 million is not even half of the Sh279 million it made in the whole of 2006.
“As in the past, we expect the second half of the year to be stronger than the first half enabling us to achieve our targets for the year,” said company secretary Ramesh Vora in a press advertisement. “However, on a consolidated basis, there is cautious optimism for a continued good year-end results,” said the company secretary.
For first half of 2007, the earnings per share only improved by six cents to hit 47 cents from 41 cents the previous year given that, after 2006 initial public offer, the total number of shares increased to 159 million compared to 150 million before the company went public.
The price per share was Sh10.45, but it has since been trading up between Sh12 and Sh37 in recent weeks it has hovered around Sh25.
ScanGroup is the holding company for media buying firm, Media Initiative, advertising giant Lowe Scanad, which is in Kenya, Uganda and Tanzania), Thompson Kenya, McCann Kenya, Scanad Public Relations and Draft Worldwide East Africa.
In a market with over 40 listed agencies and a totally different marketing culture it would be interesting to see how ScanGroup settles in the market
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