24th January 2018
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Company Data
WPP Scangroup
Par Value:                  1/-
Closing Price:           17.55
Total Shares Issued:          378865102.00
Market Capitalization:        6,649,082,540
EPS:             1.12
PE:                 15.670

The largest marketing services company in East Africa.

H1 Revenue 1.998379b vs. 2.570570b -22.259%
H1 Operating and administrative expenses [1.898301b] vs. [2.397632b] -20.826%
H1 Other income 9.693m vs. 17.780m -45.484%
H1 Net interest income 140.198m vs. 237.860m -41.059%
H1 Foreign exchange loss [5.489m] vs. [33.508m] -83.619%
H1 Profit before tax 244.480m vs. 395.070m
Basic and diluted EPS 0.39 vs. 0.66 -40.909%
No interim dividend

Company Commentary

Revenue decreased by 22% over the corresponding prior year period to 2.0b The reduction was in line with budget and was driven by 1 Pan African
client significantly reducing their level of marketing spend across the region plus reduced scope of work with several other clients and
with our core client in Gabon.
A 21% reduction in operating expenses
EPS declines 42% to 0.39
While the Group has seen significant revenue pressure in H1 2017, this was compounded further by the strong comparative period in 2016.
We expect revenues to be stronger in H2
No interim dividend.


Soft H1 Earnings.

FY Billings 16.306447b vs. 16.791084b -2.886%
FY Revenue 4.835073b vs. 5.022408b -3.730%
FY Operating and administrative expenses [4.475205b] vs. [4.669817b] -4.167%
FY Operating profit 359.868m vs. 352.591m +2.064%
FY Net interest income 406.528m vs. 436.098m -6.781%
FY Foreign exchange [Loss/ gain [63.159m] vs. 47.213m -233.775%
FY Profit before tax 725.925m vs. 875.271m -17.063%
FY Profit for the year 460.380m vs. 478.672m -3.821%
Basic and diluted EPS 1.12 vs. 1.12
Total Assets 13.486398b vs. 12.468479b +8.164%
Total Equity 8.803639b vs. 8.604260b +2.317%
Cash & cash equivalents at the end of the year 3.909484b vs. 4.062212b -3.760%
Dividends per share 0.50 vs. 0.50

Directors Note

The Group faced a tough trading environment during 2016 in Kenya, its largest market, however this was offset by good growth in markets
outside of Kenya.
Group revenue declined by 3.7%
Kenya accounted for 60% [2015:66%] of the total.
Gabon Ghana Nigeria and Zambia were particularly pleasing


Fair Value. Its good a good geographical spread and with WPP on the register it looks good value here.

6 Month Earnings through 30th June 2016
H1 Billings 8.075906b vs. 7.374849b +9.506%
H1 Direct costs [5.505336b] vs. [5.058434b] +8.835%
H1 Revenue 2.570570b vs. 2.316415b +10.972%
H1 Operating and administrative expenses [2.397632b] vs. [2.260731b] +6.056%
H1 Other income 17.780m vs. 7.308m +143.295%
H1 Net interest income 237.860m vs. 193.799m +22.735%
H1 Foreign exchange [loss]/ gain [33.508m] vs. 28.621% -217.075%
PBT 395.070m vs. 285.412m +38.421%
Profit for the period 249.698m vs. 185.334m +34.729%
EPS 0.66 vs. 0.43 +53.488%
Cash and cash equivalents at the end of the period 3.838450b vs.
4.247045b -9.621%

Company Commentary

Markets outside of Kenya now account for 40% Group Revenues [2015 -34% 2014 30%]


H1 Revenue +10.972%
juiced by +22.735% increase in Interest Income
Share price is cheap at 15.05

FY Earnings through 2015 versus through 2014
FY Billings 16.791084b vs. 16.886418b -0.565%
FY Direct costs [11.768676b] vs. [11.761256b] +0.063%
FY Revenue 5.022408b vs. 5.125162b -2.005%
FY Interest income net of interest expenses 436.098m vs. 248.253m +75.667%
FY Operating and administrative expenses [4.669817b] vs. [4.479007b] +4.260%
FY Foreign exchange gains [losses] 47.213m vs. [1.115m]
FY Profit for the year 478.672m vs. 625.476m -23.471%
FY Exchange differences on translating foreign operations [203.368m]
vs. [43.416m] +368.417%
FY Total comprehensive income for the year 275.304m vs. 582.060m -52.702%
Basic EPS 1.12 vs. 1.50 -25. 333%
Cash, bank and deposit balances 4.161291b vs. 3.795874b +9.627%
Total equity 8.604260b vs. 8.542631b +0.721%
Cash and cash equivalents at the end of the year 4.062212b vs. 3.763115b +7.948%

Company Commentary
The Group faced tough trading environment in 2015 its largest market.
Kenya now accounts for 66% [2014 70%] of the Group's revenue.
Performance at operations outside of Kenya was strong as we continue to develop these newer markets.
Results in Ghana, Nigeria, South Africa and Uganda were particularly pleasing Faster growth in PR and Digital effective tax rate increased from 31% to 45% due to deferred tax adjustments


Stronger momentum H2 but that is a normal skew.
9.11% of Profit for the Year was from Interest Income.
WPP ScanGroup sits in Pole Position in East Africa.

WPP Scangroup reports H1 2015 Earnings here

H1 Billings 7.374849b versus 8.178414b -9.825%
H1 Direct Costs [5.058434b] versus [5.915043b] -14.48%
H1 Revenue 2.316415b versus 2.263371b +2.34%
H1 Interest Income 193.799m versus 111.727m +73.45%
H1 Operating and administrative Expenses [2.260731b] versus [2.100986b] +7.603%
H1 Profit before Tax 285.412m versus 253.853m +12.43%
H1 Profit after Tax 185.334m versus 182.690m +1.44%
H1 EPS 0.43 versus 0.42 +2.38%

Company Commentary

Revenue increased by 2.3% on a constant currency basis the business delivered revenue growth of 6.5% but due to continuing pressures on
the currencies in the countries in which we operate our overall growth rate was reduced to 2.3%
new entities in Nigeria, Uganda and Zambia


Lots of the Profit coming from Interest Income.
Currency impacted earnings by more 400 basis points

Full Year through 31st December 2014 versus through 31st December 2013
Full Year Billings 16.886418b versus 14.144826b +19.382%
Full Year Revenue 5.125162b versus 3.838912b +33.5055%
FY Operating and Administrative Expenses [4.474706b] versus [3.614667b] +23.79%
FY Operating Profit 650.456m versus 224.245m +190.064%
FY Interest Income 248.253m versus 37.665m +559%
FY Share of profit from joint arrangement 0 versus 84.456m
Full Year Gain on revaluation of equity Interest 0 versus 623.866m
Full Year Profit before Tax 912.277m versus 963.093m -5.726%
Full Year Profit after Tax 625.476m versus 831.327m -24.76%
Full Year Earnings Per Share 1.50 versus 2.60 -42.30%
FY Basic and diluted EPS excluding accounting gain 1.50 versus 0.47

Company commentary

Profit after Tax and Total comprehensive income for 2013 were revised
downwards by 3603m and 73.13m respectively.
organic revenue growth was over 10%
reportable revenue growth was 33.5% as a result of acquisitions in late 2013
Organic revenue growth in Kenya was 5% and represents 67% of total billings


27.2% of PBT came from Interest Income.
Headline revenue growth +33.50% speaks to the growth Opportunity
I expect the regional Franchise to gain traction and reduce Kenyas
67% share of total revenues
Its a WPP Co. now and as much their preeminent SSA Vehicle

H1 2014 versus H1 2013
2.263371b versus 1.805381b +25.4% [10% organic balance via
consolidation of Millward Brown]
Operating and Administrative expenses [2.100986b] versus [1.766293b]
H1 Operating Profit 162.385m versus 39.088m
Net Interest Income 111.727m versus 19.546m [Interest earned on the
subscription amount 1.83b received from Cavendish [WPP PLC]
Foreign Exchange [Loss] or Gain [29.903m] versus 7.980m
H1 Profit before Tax 253.853m versus 101.169m +151%
H1 Profit after Tax 182.690m versus 43.624m
H1 EPS 0.42 versus 0.02


The Network Effect is set to kick in further.
Strong rebound numbers.
remains WPPs SSA Vehicle and of course recently acquired EMPL.
Full Year Earnings through 31st December 2013 versus 31st December 2012
FY Billings 14.168001b versus 12.472198b +13.596%
FY Direct Costs [10.317607b] versus [8.549435b] +20.681%
FY Revenue 3.850394b versus 3.922763b
Gain on revaluation of equity interest 605.474m in 2013
FY Operating and Administration Expenses [3.547430b] versus [3.058750b]
FY Profit Before Tax 1.038416b versus 1.069566b
FY Profit After Tax 867.358m versus 752.009m
FY EPS 2.70 versus 2.21 +22.17%
FY Dividend 40 cents a share

Company Commentary
Level of client spend in the first half was subdued due to the General elections
The continued investment in growth disciplines, in particular Digital and PR and further developing our presence and potential in Ghana, Nigeria, South Africa and Tanzania led to a 16% increase in operating costs.
Overall EPS is +26% but the underlying EPS [excluding the revaluation gain] shows a drop of 70% to 0.63.


Its one of the very few SSA Advertising Pure Plays and has crossed the Nadir in earnings.

H1 Earnings through June 2013 versus June 2012
H1 Revenue 1.805381b versus 1.881280b -4.00%
All Entities excluding Scanad Nigeria 160.813m versus 471.566m
Scanad Nigeria Limited [91.357m] versus 0.00
H1 PBT 101.168m versus 578.417m -82.509%
H1 PAT 43.624m versus 406.647m
H1 EPS 0.02 versus 1.13 -98.23%

Company commentary
Revenue from our Kenyan clients declined by 9% [referencing the General elections]
Revenues from territories outside Kenya [excluding Nigeria] saw growth of over 10% [Ghana +49% South Africa +10%]
Digital Revenues +141% confident of a marked improvement in second half of year


A Soft H1 with Nigeria and a slow down in Kenya to blame. In many respects the Key Relevant Information is that @WPP is seeking to move
into a majority.

FY Earnings Through 31st Dec 2012 versus 12 Months through December 2011
FY Billings 13.056890b versus 11.763664b +10.99%
Direct Costs [8.825055b] versus [8.166404b] +8.06537%
Revenue 4.231835b versus 3.597260b +17.6405%
Admin and Operating Expenses [3.291430b] versus [2.530104b] +30.09%
Interest and Investment Income 166.133m versus 139.916m
FY PBT 1.095060b versus 1.280100b -14.455%
FY PAT 752.008m versus 911.116m -17.462%
FY EPS 2.21 versus 2.55 -13.333%
Final Dividend of 60cents a share

Company Commentary
Operating Profit for the Year impacted by A The Start Up of new Operations namely Millward Brown Nigeria [April 2012] and Scanad Nigeria [August 2012]
B The Full Year Impact of Ghana Operations The Net Effect is is a Loss of Kes 99.8m
Operating Margins have declined due to Investments in Additional Resources
Investment Income in 2011 included a gain on sale of Infrastructure Bonds 46.1m


Scangroup have expanded into West Africa and expanded Their Geographical Footprint.
This Expansion has crimped The Earnings however it will accelerate Earnings in the Medium Term.
ScanGroup's Biggest Shareholder is WPP and is their preferred SSA Vehicle.
I think whilst the PE is now quite rich, WPP will be on the Prowl
ready to add to their Position on any Drawdown.

Swot Analysis H1 2012 versus H1 2011
Billings 5.937662b versus 5.605946b +5.917%
Revenues 2.022494b versus 1.527124b +32.438%
Investment Income 102.447m versus 71.476m
Profit Before Tax 578.417m versus 520.951m +11.030979%
Profit After Tax 406.647m versus 374.546m +8.5706%
Minority Interest 82.226m versus 69.583m +18.169%
Earnings Per Share 1.13 versus 1.07 +5.6074% [versus 2.55 FY which
confirms a typical H2 Skew]

Company Commentary

In our Business Billings do not necessarily have a Correlation with Revenues since more than 50% of Revenues are from Fees and are not
pegged to the level of Client Spend on Advertising.


I think ScanGroup will grow at this sort of Trajectory for the next 24 Months. In particular, I think the Next Growth Burst comes from the
SSA Expansion and that Expansion will require some Up Front Spend.
Have a Look at Mindspeak where Bharat set out his regional Road Map.

Swot Analysis FY 2011 versus FY 2010
Billings 11.763664b versus 11.363839b +3.518%
Revenues 3.597260b versus 2.345554b +53.365%
Operating Expenses 2.517262b versus 1.685377b +49.358%
Investment Income and Exchange Gain 0.200102b versus 0.178219b
Profit Before Taxation 1.280100b versus 0.838396b +52.6844%
Profit After Tax 0.911116b versus 0.640585b +42.231%
EPS 2.55 versus 2.11 +20.853%
2011 Results reflect the FY Numbers of Ogilvy Subsidiaries acquired in
October 2010
Final Dividend of 0.70 a share


Scangroup is a WPP.L look alike in that it is a Consolidator. WPP are the largest shareholder on the Register. ScanGroup has delivered a
solid Set of Results. Advertising Spend in SSA remains a Rising Tide and ScanGroup are in Pole Position to surf that rising Tide.

Swot Analysis FY 2010 versus FY 2009
Billings 11.363839b versus 5.920012b
Direct Costs [9.018285b] versus [4.295983b]
Revenue 2.345554b versus 1.624029b +44.28%
PBT 838.396m versus 544.1m +54.088%
PAT 640.585m versus 401.148m +59.687%
EPS 2.55 versus 1.81 +40.88%
Cash and Equivalents at end of Year 2.178652b versus 0.676768b
Dividend 0.70 cents a Share
1 FOR 5 Bonus


Very Solid Results. ScanGroup has a Lock on the Market and I think Advertising Spend will continue to expand at above Historic Trend
Levels. The Shares are well held [Sorrell WPP have 27.5%] and the Float is actually thin. I think a PE of 20.392 is a Fair price but
given the thinness of the Float and the Fact that Scangroup remains the only listed Proxy with which to play the Sector unless You include
Nation and Standard I think the PE will range between 20 25 from here, especially given the Bonus Sweetener, which might create a
near term squeeze. Share Price is 100.692% through today, 16th April.
Average Price Over the last 5 Weeks
Average Price Over the last 5 Months
No. Of Shares Traded Over the last 5 Weeks
No. Of Shares Traded Over the last 5 Months
Market Capitalization Over the last 5 Weeks
Market Capitalization Over the last 5 Months
Data Source: Nairobi Stock Exchange
Trading Day: 23 Jan 2018
  Un-audited Group Results for the Six Months Period Ended 30th June 2017.

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