Nation Media Group on Friday issued a profit warning citing dwindling advertising revenues due to the COVID19 pandemic as the reason behind the expected drop in profit. A cautionary statement from the company revealed that measures to contain the virus have adversely affected revenues.
The Board of Directors, having reviewed the company’s performance forecast for the current trading period, has determined that the earnings for the financial year ending 31 December 2020, will be lower than the earnings for the previous year by at least twenty five percent.NMG Board Chairman Wilfred Kiboro.
“The outbreak of COVID-19 global pandemic presents an unprecedented risk to the economy in 2020 and possibly beyond, “Kiboro added. “The various response measures rolled out to contain the spread of the novel virus have precipitated a significant decline in the revenues.”
Coronavirus has led companies to cut their marketing and advertising expenditure as they face financial challenges. Moreover, newspaper sales have declined as more people work from home thereby reducing the firm’s revenues.
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Last month, the Group enforced a temporary salary cut of between 5% and 35% for its employees who earn above KSh 50,000. At the same time, the board of directors cut the directors’ fees to shield the media house from the pandemic’s impacts.
Dwindling Advertising Revenues
Marketing and advertising revenues have been on the decline for the past five years as audiences shift from print to digital media. As a result, Nation Media recorded an 18.5% drop in earnings in 2019 while Radio Africa group announced intended redundancies. Coronavirus has only worsened the situation.
Other industries also bear the brunt of the Coronavirus. Last week, EABL issued a profit warning. The closure of entertainment joints has resulted in lower demand for alcohol hence reduced sales for the regional brewer.
We expect more companies to issue profit warnings in 2020 as the economy battles the Coronavirus. Last year, 17 companies listed on the Nairobi bourse issued profit warnings, citing tough economic times.