Scangroup halts expansion plans

April 16, 2009
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, NAIROBI, Kenya, Apr 16 – Marketing services company Scangroup has said it will put its Pan African expansion plans on hold due to the uncertainty in the economic environment in many parts of the world.

Scangroup Chief Executive Officer Bharat Thakrar told an investor briefing on Thursday that they would adopt a ‘wait and see’ attitude before they do the acquisitions in the Ghanaian and Mozambique markets, which they had planned to go into this year.

“We are putting that decision on hold at the moment but we will see how the situation develops. If we feel that the second half (of the year) things are looking good, then we will try and complete the transactions,” he said adding that the advertising industries in Ghana and Mozambique were booming.

He said they would hold on to the money they planned to invest in these markets and hoped to get better deals when they are ready to enter these markets.

Mr Thakrar however said that for their clients who still operate in these regional markets, the company would set up the infrastructure, such as a ‘one-man band’ to service them.

While pointing out that East Africa contributes 100 percent of their revenues, in which advertising and media accounts for 86 percent, the CEO added that they still needed to diversify into other regions and into other services.

Last year saw shareholders approve the allotment and issue of more than 60 million ordinary shares or a 27.5 percent stake to a WPP group of companies, which is the world’s largest communications services group.

This was part of their expansion programme into new areas of marketing, which in 2007 resulted in a new joint venture agreement with the WPP group to set up Millward Brown East Africa Limited.

The firm has entered into another deal with Hill & Knowlton for the establishment of a new public relations company in East Africa. The company which will be known as Hill &Knowlton East Africa Limited will begin operations next month.

“Our offering for PR was not very good but Hill and Knowlton will help us on this front.  All our PR business and staff will move into the joint venture and it will cover East Africa,” he disclosed.

The CEO said that they would also put in place a robust back office system that would among other things assist in the management of the company’s cash flow and support their growth on the continent.

This comes at a time when their results showed that their cash flow had declined from Sh165 million in 2007 to Sh4 million last year. This was because the company funds most of its clients’ advertising and also because about Sh190 million is being held as withholding Value Added Tax.

During the briefing, Scangroup announced a 29 percent increase in profit after tax to Sh315 million.

The company’s board recommended a dividend payout of Sh0.75 cents for each share held and which is subject for approval by shareholders during their next Annual General Meeting slated for May 29.

The company’s net revenues grew to Sh1.44 billion up from Sh1.15 billion recorded in 2007 on the back of a 21 percent growth in billings, which topped Sh5.79 billion.

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