WPP Scangroup PLC
WPP Scangroup PLC
Responses to questions raised by shareholders at the Annual General Meeting on 27 May 2022
Question | Account | Shareholder Name | Question | Board and management response |
Number | Number | |||
1 | 15344792 | SHAH,SHITUL MANSUKH | What is the Board doing to stop the sliding share price which | The Board and new management of the company are working hard to improve |
is at an all time low currently below 3/- per share? | performance and profitability of the Group. We hope that this will start to show results | |||
soon and that the share price will increase as a result. The Group has a depth of talent | ||||
With the decline of share valuation to its lowest Levels. Does | ||||
2 | 20915315 | KARANJA,EVANS MUGAMBI | and expertise across the markets that it operates in that is unrivalled. We have had a | |
SCAN consider repurchasing some shares to improve its | few significant wins of business this year giving confidence to our ability to take the | |||
general outlook in the market. | ||||
business back to growth and profitability. | ||||
When does the Board project that the group will be back to | Having said this, we also are cognisant of the Global macro economic headwinds due to | |||
European war and the federal rate hikes due to inflationary pressure in USA and Europe | ||||
profitability? We have been treated to optimism in the | ||||
and slower rebound in China, resulting in the GDP of Global Markets GDP being more | ||||
3 | 17720406 | TOLE MWAKIO PETER | annual reports, but these turn out to be giving false hopes. | |
subdued. | ||||
Those of us who bought shares at KES50 a share, have lost a | ||||
lot in this investment. | This impacts our local Kenyan Macro environment, and we are seeing economic growth | |||
rates being revised, indicating that the market is tough. This creates risk aversion for | ||||
investment into frontier and emerging markets and subdues growth. | ||||
These macro economic factors have had and will continue to impact the NSE index and | ||||
4 | 20915315 | KARANJA,EVANS MUGAMBI | Is Scangroup on its deathbed? | trading volumes on the bourse. We have a large constituency of foreign investors and |
these global factors have impacted their sentiments yielding a bearish view, this | ||||
reflected in the overall decline in the stock prices at the Nairobi Stock Exchange. | ||||
What is the Board's intention as regards the Company's cash | Future distribution of cash to shareholders by means of dividends will depend on the | |||
5 | 20415215 | A/C KE 002335 | balance in terms of how much it intends to pay out as | level of distributable reserves. In the interim the Board continues to assess possible |
dividends (and when) vs. how much it intends to retain? | investment opportunities in the region but taking a cautious approach to risk bearing in | |||
mind current business conditions. | ||||
6 | 20415215 | A/C KE 002335 | For the portion of the cash the company intends to retain and | |
invest, please describe the strategy. | ||||
Operating & Administrative expenses have been quite high | Operating and administrative expenses are high in relation to income. These costs | |||
nevertheless reduced in 2021 by KES 240m or 9% while Gross Profit increased by 5% | ||||
quite high for the last two years, I think; in fact, it's so high to | ||||
7 | 2358204 | NJOROGE,JUSTUS MURIITHI | the extent that it totally wipes out gross profit! What's being | compared to the prior year. Disclosures of expenses in the audited accounts are as |
done to address that? And lastly, why haven't details of the | required by International Financial and Reporting Standards. | |||
same been provided in the notes section of the annual | ||||
report? | ||||
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WPP Scangroup PLC
We are looking to enhance our Digital and technology solutions, riding the curve of the | ||||
new future in this space. We also are looking at greater collaboration across the WPP | ||||
network, aggregating a larger skill set which allows more global and regional clients | ||||
What growth strategies does SCAN plan for the future, | choose us for their growth agenda. Finally we are going to use data more to support all | |||
8 | 20915315 | KARANJA,EVANS MUGAMBI | our solutions, thus making decisions more real time, more targeted reducing waste and | |
considering the challenges faced by advertising | ||||
ensuring more effective use of client marketing spend. This presents a compelling value | ||||
proposition for clients to buy into. We will be making announcements in the short term | ||||
on progress we have made in this area. | ||||
9 | 3484564 | NDEMI MARY GORETI WAMBUI | What the dividend per share this financial year? | The Company is not planning to declare a dividend for 2021 in view of the financial |
results for the year and also due to the lack of distributable reserves. | ||||
10 | 254118 | KANGETHE,MONICA WANGUI | How do I get my dividends for the past years? | Questions relating to individuals' personal circumstances such as unclaimed dividends |
11 | 3425983 | MIGAYI,GLORIA ATIENO | I have not been receiving statements and dividend payouts. | will be responded to individually. |
Following the transfer from the Share Premium Account to | Despite the transfer from the Merger Reserve to distributable reserves during 2021, the | |||
12 | 20415215 | A/C KE 002335 | Merger Reserve, what is the Company's capacity, from an | Company has an accumulated deficit of KSH 262m the end of 2021 and is therefore not |
accounting perspective, to pay dividends today? | currently able to pay a dividend. | |||
The Company will take all actions reasonably possible to re-instate distributable | ||||
13 | 20415215 | A/C KE 002335 | What is the dividend policy going-forward? | reserves to allow dividends to be paid to shareholders to the maximum extent prudently |
possible. | ||||
14 | 3183653 | ARITHI,PAUL KIMATHI | How does WPP Scangroup work? | WPP Scangroup is a marketing, brand building and communication group that provides |
communication solutions to its clients. | ||||
There is no KSH 4.7bn write off. During the year a transfer of KSH 4.7bn was made from | ||||
the company's Share Premium account to a Merger Reserve as permitted by Section 388 | ||||
of the Companies Act. This transfer relates to the share premium arising on the | ||||
acquisition of shares in Ogilvy, H+K and other companies in 2013. | ||||
An appropriation of KSH 3.3bn was subsequently made from the consolidated P&L | ||||
reserves to the Merger Reserve representing an amount that was not recognized as | ||||
goodwill but was adjusted directly against reserves in 2013 when the company acquired | ||||
About the overseas investment of Ksh 4.7 billion that you are | the balance of shares in Ogilvy and H+K companies not already owned. The transfer does | |||
not impact the Group's profitability nor does it reduce its assets. Further details can be | ||||
15 | 7024614 | MOMANYI,REINPETER ONDEYO | planning to write off. We need accountability on this. Who | found in the Group's audited accounts. As reported in the 2020 Annual report, |
was responsible and you cleared the former CEO on any | ||||
following the completion of the investigation into the former CEO and CFO, the auditors | ||||
financial wrong doing? | ||||
of the Company extended the scope of their audit work as a result of the reduced | ||||
reliance they were able to place on the normal internal controls of the Company. The | ||||
investigation did not identify items of a material nature that required adjustment to the | ||||
net results of the Company or the Group for the year ended 31 December 2020 or to the | ||||
balance sheets at that date. Further the former CEO and CFO resigned in the course of | ||||
the investigation. | ||||
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WPP Scangroup PLC | ||||
1. Note 13 of the FY21 annual report with the segment | ||||
breakdown showed that Kenya's operations have been | ||||
historically unprofitable. The directors outlined eloquently, in | ||||
16 | 20863420 | FULTON SHIUNDU | their strategic goals and key outlook, about the exciting | |
growth opportunities but little was mentioned about a | ||||
strategy to improve profitability in Kenya. My questions are | ||||
specifically: | ||||
a. What accounts for the significant operating loss in the | To some extent the more senior talent in the Group resides in Kenya accounting for | |||
16 (i) | Kenyan entity despite 2x revenue over sales from other | higher costs in that market in relation to revenue. Additionally some of the larger costs | ||
geographies - Kenya is 2x larger but 4x lower profitability? | provisions have been make in Kenya. | |||
b. Can management provide specific issues in Kenya that | ||||
16 (ii) | drive this significant underperformance and the key strategies | Kenya is a highly competitive market a corresponding negative impact on profitability. | ||
and expected timelines to improve these results? | ||||
c. Can the board confirm what metrics they use to monitor | ||||
performance of the operating business geographically | The Board and management strive to deliver operating profits in all markets that the | |||
between Kenya vs Rest of Africa - do they monitor segment | ||||
16 (iii) | Group operates in. Performance is measured based on operating profit excluding non- | |||
operating profit before interest income or after? If the latter, | ||||
operating income. | ||||
is it fair to incorporate non-operating income to review | ||||
operating performance? | ||||
2. Working capital management has been challenging, given | ||||
that the accounts mention that typical revenue is invoiced and | ||||
17 | is payable after 30-60 days. However, looking at the accounts, | |||
the receivables accounts have been significant and increasing | ||||
beyond 160 days outstanding. | ||||
a. Please provide context on what is driving lengthening and | While every effort is made to ensure clients pay on agreed contractual payment terms, a | |||
17 (i) | number of clients fail to adhere to agreed terms. Additionally credit terms agreed at a | |||
consistent difficulties in collections? | ||||
global level on certain multinational clients have lengthened. | ||||
17 (ii) | b. Are you able to provide breakdown on ageing receivables | The Group does not disclose this information. | ||
between the public and private sector clients? | ||||
c. VAT recoverable has continued to increase, could | The net VAT receivable position has increased as the Group has a number of zero rated | |||
or VAT exempt clients. The Group's auditors performed recoverability tests and were | ||||
management please provide colour on the existing issues | satisfied the VAT recoverable asset was fairly stated in the balance sheet at the year | |||
17 (iii) | driving significant recoverable from the tax authority. How did | end. | ||
the auditors get comfortable on the levels of provisions | ||||
applied to these assets, and the likelihood of recoverability? | ||||
d. Payable days were increased significantly in FY21, possibly | The Group endeavours to adhere to payment terms agreed with suppliers. At the same | |||
to mitigate against the increase in receivables. Can | time the Group will generally aim to match client payment terms with those agreed | |||
with suppliers to avoid a negative impact on cash flows. | ||||
17 (iv) | management comment on the risk and pressure such a | |||
strategy exerts on suppliers and how you get comfortable in | ||||
managing this risk? | ||||
18 | 3. Capital allocation is a critical component for managing | |||
shareholder returns. | ||||
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WPP Scangroup PLC
a. Can management talk through how they think about capital | The Board and management will carefully assess investment opportunities taking into | |||
account perceived risk and the opportunity cost of foregoing interest on bank deposits | ||||
18 (i) | allocation decisions and the balance between investing in the | which are currently around 8.5% in Kenya. | ||
business and typical returns on this investment expected | ||||
relative to the approach on capital return to shareholders? | ||||
b. Given the reliance on interest income in mitigating the | The declaration of dividends is to a large extent determined by the company's results | |||
18 (ii) | losses in the Kenya operations (as evident in note 13), would | and the availability of distributable reserves out of which a dividend can be declared. | ||
it be fair to assume dividend policy is impacted by the need to | The Board restructured the share capital of the company during 2021 in order to boost | |||
keep significant cash balances in the business? | distributable reserves to the maximum extent possible. | |||
c. Given the current share price relative to conservative | The Board will continue to assess how best to utilise the Group's cash resources to | |||
deliver the greatest return to shareholders. | ||||
valuation on an asset perspective, is there consideration to | ||||
18 (iii) | consider strategies such as share buy-backs to buy back | |||
shares are these extremely low valuations and boost | ||||
shareholder returns? | ||||
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WPP-Scangroup Ltd. published this content on 27 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 May 2022 12:47:28 UTC.