Scangroup posts Sh506m loss on lower sales, forex hit

Marketing and communications firm WPP Scangroup slid into a net loss of Sh506.7 million in the year ended December 2024, reversing a net profit of Sh130.1 million a year earlier on the impact of lower revenue and foreign exchange loss.

The company booked a foreign exchange loss of Sh248.7 million in the review period compared to a gain of Sh288.4 million the year before.

Scangroup's revenue also declined to Sh2.4 billion from Sh3.1 billion, partly due to the exit from several markets and the loss of two key clients.

The performance will see shareholders miss dividends for the fourth year, with management banking on strategies around leveraging artificial intelligence (AI) and more partnerships in pursuit of a turnaround.

“We had an unrealized forex hit of a quarter of a billion shillings that had a huge impact on the loss that we are currently declaring," said WPP Scangroup CEO, Patricia Ithau.

“We also had to take some more prudent and conservative view on recoverable taxes that had further impact on the bottom-line numbers and there were two significant creative businesses that we lost which had an impact on our top line."

The huge forex loss was attributed to the strengthening of the Kenyan shilling witnessed last year, gaining from a point of exchanging at 160 units against the US Dollar to 129 units where it has stabilized since June 2024.

Since the company does business across 39 countries thus often trading in dollars and other currencies, strengthening the shilling meant that it lost value on the dollars it was holding, thus its dollar transactions took a hit.

In 2023, the company had made a Sh288.4 million foreign exchange gain as the shilling fell to lows of over 160 units against the dollar.

The company also blames the anti-tax protests witnessed between June and August last year for triggering cold feet among companies, which held back advertising budgets and adopted a wait-and-see approach.

“The financial year was marked by a significant decline in mainstream media advertising spend in Kenya, mirroring a broader global shift toward digital platforms,” the company said.

The company, however, notes that while more companies are shifting to advertise on digital platforms, spending patterns have been low and thus the spending on digital adverts cannot offset losses from lost traditional advertising revenues.

“Even though digital spend has grown it is still not yet in this market able to close some of the gaps in terms of the drop that we’ve seen in traditional media. That trend is expected to continue,” Ms Ithau said.

The decline in revenues was slightly mitigated by a fall in operating and administrative expenses to Sh2.45 billion from Sh2.68 billion.

The drop in operating and administrative costs is attributed to staff layoffs at the company which saw 102 workers exit besides a divestiture in two subsidiaries in South Africa and Nigeria.

The company’s fortunes have been falling over the past several years when its revenues have declined due to lower spending on traditional advertising channels and increased competition from global technology giants that dominate digital advertising.

The company says it does not plan any further layoffs or divestitures from any of its businesses going forward, and now banks on leveraging artificial intelligence and other new strategies to grow revenues.

Among new products the company believes will help it scale out of the lost territory is OBrio, a platform to help its clients assess the impact marketing campaigns have in the market, and WPP Open, an AI product created to ease marketing processes.