Nation Media Group (NMG.rw) 2018 Annual Report

We have extracted below the Chairman’s Statement from the 2018 annual report of National Media Group (NMG.rw), listed on the Rwanda Stock Exchange:

“Going forward, NMG will be defined as an organization that is innovative, digital, agile and adaptive; one that embraces the principle of self improvement and passionately living our values always true and timeless. That has been our legacy. We shall never forget our commitment to positively transform society, by continuously creating new value and generating quality, differentiated and engaging content.”

It gives me great pleasure to present to you the Group’s financial performance for the year ended 31st December, 2018.

Dear Stakeholders,

On behalf of the Board of Directors, it gives me great pleasure to present to you the Group’s financial performance for the year ended 31st December, 2018. As the Nation Media Group (NMG) marks its 60th anniversary, it is an opportune time to reflect about the past and our mission and to appreciate our rich heritage and those who have been part of it. I am very honored and privileged to do so today.

Indeed, the story of the Nation as inscribed in our publication, The Birth of a Nation, is synonymous to the story of Kenya and that of the region. However, such celebratory occasions present a great opportunity to reflect on the dream of our Founder His Highness the Aga Khan, a very young man then, had when he ventured into media in 1959 when Kenya was under the yoke of British Colonial rule. The pre-colonial era, particularly the late 50’s and early 60’s, was a key and pivotal moment for Kenya as she was approaching her independence. His Highness the Aga Khan envisioned the establishment of a nationalist platform where indigenous African voices could be heard and authentic nationalist stories told from an African perspective. NMG was founded on the bedrock of a set of core values to espouse independent voices, diversity and freedom of expression. Central to these values and the purpose for our establishment, was a mission to be a trusted partner to emerging African democracies, a champion of the ordinary person in his/her interaction with the government of the day, a voice for the rule of law and respect for human rights, and a strong advocate for free market economies. This mission has remained unchanged over the years.

It was on this backdrop, on March 20, 1960, The Nation was born describing itself as “East Africa’s newest, liveliest Sunday”, the newspaper further stated “Very briefly, we intend to live up to our name and do everything in our power to help the various communities of East Africa to build nations where people of all races can live freely and peacefully under the rule of law. Beyond this, The Nation accepts the desirability of transfer of power to African majorities in the three territories of East Africa within the next few years.” By this first issue The Nation declared support for African majority rule. A lot of you may not know this, The Nation was a Sunday paper and only changed its title to Daily Nation seven months later. It started its origins with a lot of firsts – For start it was produced using the then revolutionary web-offset method of printing, a new technology which provided quality far ahead of that available to other publishing houses. It was during this decade that The Nation became the first newspaper to be distributed nationwide from the presses in Nairobi.

The Nation covered the rise of the East African Community and the political and economic challenges that faced the various nation-states as the region went through the pains of the Cold War period. Politics in East Africa was defined by the leaderships of Mzee Jomo Kenyatta, Uganda’s Milton Obote and Tanzania’s Julius Nyerere. There was also pressure on The Nation on how to cover the rise of pan-Africanism. It was a tricky balance during the 60s when the Cold War politics defined media coverage into either Eastern or Western blocs. Locally, politicians – even at the Cabinet level – affiliated themselves into these blocs and The Nation’s coverage went through these challenges to maintain its independence. The rise of Oginga Odinga’s Kenya Peoples Union and the mass detention of Kenyatta’s opponents in 1969 saw the country plunge into new levels of political intolerance. The Nation called for tolerance and respect for rule of law.

We can now comfortably say that in the last six decades, the Group has been at the forefront of shaping the destiny of the region – in political, social and economic terms. We were there during the political evolution of the region, defined by Kenya’s independence leading to the formation of a Republican state but a period that was bedeviled by the death of multi-party politics, the emergence of a repressive KANU regime and the assassinations of the greats of Pio Gama Pinto, Tom Mboya, J.M. Kariuki among others that started soiling our political atmosphere.

The 1978 death of Mzee Jomo Kenyatta led to the one party state dismembering the Constitution bestowing the Presidency with imperial powers. The abuse of powers during the President’s Moi’s era included the purging of pro-democracy activists like Koigi Wamwere, Dr. Mukaru Nganga, Dr. Willy Mutunga, Raila Odinga, Prof. Maina Kinyatti, George Anyona, Edward Oyugi, journalist Otieno Mak’Onyango, and former Cabinet Minister Kenneth Matiba, among others through detention without trial. During this time the Executive totally disabled the Judiciary and Parliament resulting in a lack of separation of powers and the media was gagged with only the national broadcaster, KBC and KTN TV Station, where political class had interests, allowed to operate. This received great resistance from the political class leading to the second liberation.

The Nation gallantly continued to push for freeing of airwaves to ensure that more people obtained access to information as a means to expand the socio-economic and democratic space. This we managed to do after 13 years, an action that is now credited for the development of a free and vibrant electronic and digital media.

Environmental degradation through corruption resulted in forests being invaded through logging to destroy the water towers. The Group, in its commitment in creating value for society, participated in raising funds for the fencing off 440km Aberdares Mountain over a period of 10 years to save the water towers for Nairobi. This also contributed in reducing the human-wildlife conflict. Other notable environmental issues taken up by Nation included saving Karura Forest which had been allocated by the Government. NMG took a firm stand against this move to the displeasure of Government, mobilised like-minded civil society organisations including Prof. Wangari Maathai, who later in 2004 received the Nobel Peace Prize for her environmental conservation efforts. Saving Uhuru Park was another hot issue covered by the Group which resulted in ordinary women who camped, went on hunger strike and even stripped naked (which in African culture is considered a curse) to protest the Government’s move. Our stance on the issue and intense coverage saved Uhuru Park. Every time we look out of our windows at Nation Centre, we are proud of the little contribution we made with other like-minded people to save the park.

As corruption started rearing its ugly head and crippling the economy, we were the first media house to report openly various scandals such as the Goldenberg, Anglo Leasing among others. NMG has continued to aggressively champion matters on exposure of corruption, transparency and accountability. This we have done without fear or favour calling to account those in authority and leadership, including the private sector. We have recently uncovered a number of corruption scandals, from NYS, the NCPB Maize Scandal, Kenya Power, Kenya Pipeline, Dams Scandal, leading to arrests, recovery of corruption proceeds and placing anti-corruption crusade at the centre of our country’s agenda. The current campaign against corruption undertaken by the media in Kenya, is a true testament to the critical role the media can play in fostering transformation.

It is in the fifth decade that the Nation began implementation of its Board commitment to pursue other opportunities beyond its current area of operation and turned its attention to Uganda and Tanzania. The Group acquired the Kampala tabloid, The Monitor and launched a radio station Monitor FM 93.3. In Tanzania, President Mkapa inquired if NMG would bring its quality journalism to Tanzania and after lengthy negotiations led to acquisition of Mwananchi Communications Ltd. It is this expansion and the belief that conditions were ripe for a revival of the East African links that the group began to think of itself, the words that became an in-house mantra and are now permanently affixed on NMG’s logo, as “the Media of Africa for Africa”.

The role of the mass media then and continues to be is to educate, inform and entertain the people. The media is as to all of us as our other daily needs. The media influence the way people look at the world and make them change their views. Media acts as a recorder and a watchdog to protect public interest against suppression, exploitation and oppression of the weak, poor governance, corruption and malpractices by the mighty and powerful people in government and other institutions by reporting courageously and creating public awareness and galvanizing people against such malpractices.

This is what NMG has been trying to do in the last six decades. But it has not been easy. The Group has gone through many challenges including discrimination, hostile governments and regulators who were uncomfortable and distrustful of our mission and our good intentions for this nation. Just to mention one such obstacle it took thirteen years for the government to issue us with our first radio license and even then a company we had legally acquired which had TV licenses throughout the country had the licenses immediately revoked and it took 10 long years to get the licences restored through a Court judgement. But despite these many challenges including denial of government advertising although our circulation numbers were at least three to four times those of our nearest competitor we weathered the storms, seized the opportunities available to record remarkable achievements and build a strong brand to emerge as the largest independent media house in East and Central Africa.

But even as we take stock of our many achievements we must also think about the future and broaden the conversation to conceptualize NMG in the next 60 years and beyond in the changing digital world where technological innovations, digital disruptions will revolutionize the way we do things, and the global rearrangement of economic trading blocks, political units and national boundaries of today will be less important in the converged technologically advanced globalized world. Going forward, NMG will be defined as an organization that is innovative, digital, agile and adaptive; one that embraces the principle of self-improvement and passionately living our values always true and timeless. That has been our legacy.

We shall never forget our commitment to positively transform society, by continuously creating new value and generating quality, differentiated and engaging content. Our relevance will depend on understanding the new age consumers, through deployment of data and meeting them at their point of need. At the centre of our existence is independent and quality journalism. We live in challenging times with serious existential threats to media freedom across the world, squeezing the very space credited for the advancement of social, economic, and political progress. We no longer break news; social media has taken over that role. Citizen journalism is a reality. The youth, who constitute the bulk of population in East Africa, literally play in the digital space, which is both a challenge and an opportunity. It is incumbent upon us to develop diverse and relevant content that we can serve on the platform where they are. Granted, an impression may emerge of a dim future for the traditional media industry. However, it is precisely for this reason that the position of media is getting stronger than ever before. Gerard Loughran reminds us in the The Birth of a Nation publication that: The fact is [media] are denounced constantly, often unfairly, most particularly by governments. The day the challenges stop is the day the Nation should start worrying. Our relevance continues to be enforced through quality journalism. Our compass is truth, independence, fairness, balance and accuracy.

Economic and Political Environment

Although 2018 witnessed a marginal rebound of the East African economies, this has not translated into tangible benefits to companies and ordinary citizens. For example, in Kenya, 15 publicly traded firms issued profit warnings, while several others reported reduced earnings as a result of the tough economic environment. The regional economies continued to be vulnerable to both external and internal shocks. The countries continued to confront challenges such as poor management of public resources, shortfalls in  domestic revenues, limited access to credit, adverse impacts of climate change affecting agricultural production, rising public debt and political uncertainty.

Financial Performance

Despite the difficult operating environment in the region, the Group posted a decent profit after tax of Shs 1.1 billion which was 14.7 per cent below the previous year. The decline in profit was due to the lower revenues, which dropped by 9.1 per cent – Shs 9.7 billion against Shs 10.6 billion realized in 2017.

Dividends

Considering the business performance over the last few years, and the need to preserve cash for investment in future digital revenue streams as well as diversifying our product offering, the Directors recommend to the shareholders for approval of a final dividend Shs 3.50 per share (140 per cent) per share, which, together with the interim dividend of Shs 1.50 per share (60 per cent) paid on 30th September 2018, makes a total of Shs 5.00 per share (200 per cent) per share for the year ended 31st December 2018 (2017: Shs 10.00 per share). The dividend will be paid less withholding tax where applicable on or about 31st July 2019, to shareholders registered on the register of members at the close of business on 14 June 2019. The register of members will be closed from 17 to 21 June 2019, both dates inclusive.

Share Price and Market Capitalization

The NMG share price declined from an average of Shs 116. 0 at the end of the previous year to close at an average of Shs 68.5. This was due to the subdued Nairobi Securities Exchange (NSE) market across the board that was characterized by difficult operating environment leading to reduced earnings and foreign capital flight. The Group’s market capitalization was Shs 12.9 billion as at 31st December 2018.

Business Environment

The operating environment in East Africa continues to be challenging with unpredictable and sometime hostile regulatory legislations. The restrictions on media freedom across the region remains an ongoing and very worrying issue. In Kenya, the media experienced the closure of four television stations, including the Group’s NTV. A number of instances of threats, intimidation, attacks and detention of journalists, by authorities took place across the region.

In Tanzania, the freelance journalist Azory Gwanda, who worked for Mwananchi Communications Limited, has been missing for more than one year. Further, at least four Tanzanian newspapers have been shut down by the government in the past two years. In this context, regulatory and reputation management remain a priority and we continue to proactively engage both industry and the government to safeguard media freedom, independence and uphold the public’s right to information.

Additionally in Tanzania, we have taken proactive steps to comply with the Media Services Act that restricts foreign ownership in a print media enterprise to 49 per cent and have identified a suitable shareholder who is in the process of acquiring 51 per cent of the shareholding in Mwananchi Communications Limited, subject to obtaining regulatory approvals to conclude the transaction.

Sustainability Agenda

The Group’s commitment to sustainability is unequivocal. We can grow profitably through a shared value approach, contributing to society by making smarter and more resource efficient solutions, for more people in the communities we operate in. Over the years, we have managed to create a positive impact on different fronts of sustainability, but we also recognize that we still need to make some strides to achieve our sustainability goals. Our objective is to entrench the Group as a strategic and sustainable partner of choice.

Our focus is to improve literacy levels in the communities that we operate in. This will ensure that NMG plays a crucial role in achieving the 4th United Nations (UN) Sustainable Development Goal, of ensuring inclusive and quality education for all and to promote lifelong learning.

The Group attracted younger readers through its Newspapers in Education (NiE) initiative that was implemented in 257 schools (nearly double the growth from 152 in the previous year) and impacted 72,820 pupils across 31 counties in Kenya. The NiE initiative fostered the development and launch of JuniorSpot, a Monday Daily Nation education pullout that presents educative, informative and entertaining material for school children. To achieve its objective of boosting literacy levels across the country, NMG partnered with Geminia Insurance, Fresha Milk and World Vision.

In Uganda, the Group partnered with the National Social Security Fund and other stakeholders in Uganda to raise more than Shs 8.1 million for three years to improve the learning conditions in public schools. In the past two years the initiative has raised Shs 5.3 million which was utilized to renovate Mbuya Church of Uganda Primary School and St. Paul Primary School that will impact 1,000 children around Kinawataka in Mbeya and the surrounding areas.

In Tanzania, we partnered with other like-minded institutions for the second edition of the Tulia Marathon. This marathon is geared towards providing and promoting care, protection and opportunities for women maternal health and the girl child education, impacting more than 1 million people.

Editorial Policy and Guidelines

Building a strong reputation helps an entity create and protect value by establishing a reservoir of goodwill to draw upon for its sustainability. The reputation of the Nation and its brands is our most valuable asset. It is in this respect that towards the end of 2018, the Group commissioned a national Corporate Reputation Survey to evaluate perceptions of relevant stakeholders on the Group’s reputation; benchmark our corporate reputation against other large organizations including media; and identify continued strategic areas of focus.

I am proud to inform you that the survey placed the Group ahead of the biggest organizations in the Region and with the level of public trust we enjoy well above all these other big brands. This is a testament of the strength of our brand, and which is linked to the quality of our journalism. People believe us because of our commitment to professional excellence. They know that we are rigorous in our reporting and are quick and willing to make amends when we get things wrong. Nation will remain true to high standards of editorial integrity and independence.

Board Changes

Prof. Olive Mugenda and Mr. Thomas Mshindi retired from the board during the year while Mr. James Montgomery will not be seeking re-election at the coming AGM. We thank them for their invaluable contribution and leadership to the Group and wish them well in their future endeavors.

Our People

The future of NMG will only be guaranteed by continued focus on rebooting our culture to embed values that will complement our digital journey. This means recruiting highly skilled young talent that understands the needs of the new generation who form the bulk of our customers, retaining the best that we have, while creating an enabling environment for their success.

Looking Ahead

The rapidly changing media landscape challenges our relevance to deliver to the needs of our consumers. In this world of changing consumer habits, complex information, big data, artificial intelligence and the fourth industrial revolution, journalism continues to have a place like never before. But it is not just journalism, it is about quality journalism. In this ongoing struggle, now, more than ever, presents a great opportunity to relive our vision and purpose of transforming society by delivering quality, differentiated and relevant content in a sustainable manner.

The board is encouraged to see more signs of diversification of content beyond news and the new revenue streams delivering value to the Group. We are satisfied that management has the resolve and the drive to continue redefining the Group as a modern content company. In this regard, the focus will be on implementation of the digital strategy, underpinning the growth with future investments to grow our content business and create new value.

On behalf of the Board, I wish to reassure our shareholders that we remain steadfast, as witnessed for the last 60 years, to surmount any challenge and seize opportunities that will safeguard the sustainability of NMG as the leading, independent and most trusted media house in this region. In this context the Group will celebrate the 60 years anniversary under the theme True & Timeless which captures our rich heritage and commitment to a sustainable future, as we recommit our mission of being a true, trusted & independent champion of society.

We shall remain resolutely committed to the unity, economic development and prosperity of the people Kenya and of East African Region, advocating for and rendering a strong voice to the African Rennaissance, as the Media of Africa for Africa.

I take this opportunity to thank our Founder His Highness the Aga Khan for his unwavering support and guidance for the past six decades, my fellow directors for their support, guidance and good counsel, and the management and staff of NMG for their splendid work. Lastly allow me also to most sincerely thank our shareholders, business partners, customers and other stakeholders for their support and believing in us and our mission and standing by us all these years in good times and challenging times, with courage, dedication and determination. I take this opportunity to invite them join us in celebrating our 60th anniversary.

Asanteni sana.

Dr. Wilfred D. Kiboro
Chairman