WPP Scangroup posts KSh506M loss for 2023 as revenue dips 14% and forex losses surge. Restructuring underway to drive recovery.
WPP Scangroup Posts KSh506M Loss as Revenue and Forex Pressures Mount
NAIROBI, Kenya – July 2024 — WPP Scangroup Plc, a leading marketing and communications firm listed on the Nairobi Securities Exchange (NSE), reported a net loss of KSh506 million ($3.85 million) for the year ended December 31, 2023. This marked a sharp reversal from the KSh30 million ($228,000) profit the company posted in 2022, as it grappled with reduced client spending and a turbulent currency market.
The results, released on Friday in a regulatory filing, reflect growing pressures across Kenya’s advertising sector as companies slash marketing budgets in response to economic headwinds.
Revenue Shrinks, Margins Squeezed
WPP Scangroup’s gross revenue fell by 14% to KSh5.48 billion ($41.7 million), down from KSh6.39 billion ($48.6 million) in 2022. More critically, net sales—defined as revenue after deducting pass-through costs—dropped by 11% to KSh2.47 billion ($18.8 million).
The company attributed the decline to “a reduction in client spending and delayed execution of projects,” citing corporate caution amid Kenya’s slow GDP growth, inflation, and high interest rates.
“Our top-line performance was weakened by economic uncertainties and reduced client budgets across several key markets,” the company said in its statement.
Currency Volatility Delivers Heavy Blow
One of the most significant challenges for WPP Scangroup in 2023 came from the foreign exchange market. The company incurred a KSh375 million ($2.85 million) forex loss, compared to KSh92 million ($700,000) in gains the previous year.
The Kenyan shilling lost over 20% of its value against the U.S. dollar in 2023, making dollar-denominated expenses—such as software, consultancy, and advertising rights—much more expensive.
“The adverse movement in foreign exchange rates, particularly the depreciation of the Kenyan shilling, heavily impacted our earnings,” the statement read.
Cost Discipline Helps—but Not Enough
Despite the headwinds, WPP Scangroup’s management implemented strict cost controls. Operating costs were reduced by 3% to KSh3.02 billion ($23 million), driven by workforce optimization and better expense management across subsidiaries.
However, finance costs surged by 34% to KSh93 million ($707,000) due to higher borrowing expenses.
The savings achieved were ultimately insufficient to offset revenue losses and foreign exchange challenges.
Shareholders Left Empty-Handed Again
For the fifth consecutive year, the board of WPP Scangroup opted not to declare a dividend, citing the need to preserve capital during a period of financial strain.
“Our focus in 2024 will be on balance sheet strength and improving cash flows,” said Chairman Richard Omwela, adding that capital preservation remains the priority in navigating market volatility.
Strategic Focus on Recovery and Digital Shift
Despite the tough year, CEO Patricia Ithau expressed cautious optimism for 2024. She pointed to early signs of recovery in client spending and outlined a multi-pronged strategy to reposition the company.
Key pillars of the recovery plan include:
- Accelerating digital transformation, including programmatic advertising and data-driven solutions
- Investing selectively in top talent to support high-growth verticals
- Expanding service offerings to resilient sectors such as financial services, telecoms, and fast-moving consumer goods (FMCGs)
- Ongoing restructuring to enhance agility and client responsiveness
“We are focused on building a leaner, more client-centric business that can withstand external shocks and deliver long-term value,” Ithau said.
Outlook: A Reset Year
WPP Scangroup’s 2023 performance underscores the broader challenges facing Kenya’s marketing and communication industry. The combination of economic uncertainty, forex volatility, and subdued corporate spending has pressured margins across the sector.
With strategic restructuring and a sharper focus on digital services and sectoral diversification, WPP Scangroup aims to recover lost ground in 2024.
