A shareholder dispute in Nigeria has hit the earnings of Scangroup, which has terminated its partnership agreement with a South African communications firm.
The Nairobi Securities Exchange-listed firm said its net profits dropped 89.2 per cent to Sh43.6 million in the six months to June, partly due to the troubled Nigerian operations.
Its start-up Nigerian subsidiary was last year hit by a lawsuit from the country’s Prima Garnet Communications, which sued it and Ogilvy Africa for breach of contract and colluding to lock out smaller competitors.
The court action has halted the operations of the Nigerian unit, causing Scangroup to incur a Sh91.3 million operating loss that contributed to the first half profit fall.
Scangroup has also terminated its partnership with South Africa’s marketing firm McCann for undisclosed reasons. The two firms have been offering public relations services to each other’s clients in their home markets but this arrangement has now ended.
Following the breakup of their business alliance, the former partners have signalled their intention to seek alternative associates or start PR operations from scratch to keep serving their clients in external markets
“It has been a long and fruitful journey, and I would like to thank McCann for a great partnership that has lasted for a decade,” Bharat Thakrar, Scangroup’s CEO said in a statement. McCann Worldgroup Africa executive chairman Fraser Lamb said the parting of ways was amicable and the company was keen on maintaining its presence in Kenya.
He, however, did not specify whether McCann will opt for a new associate or if it will start its own operations.
“McCann has renewed its interest in the Kenyan market and the continent as a whole and will initiate business going forward,” Mr Lamb said in a statement.
The former partners will now be major rivals in the local PR business where Scangroup is a major player through its subsidiaries Ogilvy and Hill & Knowlton.
Scangroup has relied on the partnership with McCann to support its strategy of offering PR and advertising services to multinationals with operations in multiple African markets.
The NSE-listed firm, however, draws most of its earnings from the advertising business, with PR accounting for seven per cent of its annual revenues.