Longhorn Publishers has posted the worst performance since listing on the Nairobi bourse 11 years ago, weighed down by a drop in textbook sales and increased printing and debt-servicing expenses.
The publisher, which had issued a profit warning, said on Friday its full-year to June 2023 net loss had widened nearly seven times from Sh84.5 million to Sh571.33 million. The 2022 loss is a restatement from a net profit of Sh39.9 million.
This marks the worst loss since listing by introduction on the Nairobi Securities Exchange in May 2012. The latest loss is worse than the Sh225.9 million loss it posted in 2020 when the lengthy closure of schools due to the Covid-19 pandemic hurt book sales.
“Various macroeconomic headwinds over the past year have had a significant impact on our business. We have seen rising inflation, an increase in interest rates, currency depreciation and a general economic slowdown across our markets which has resulted in a drop in spending on textbooks,” said the publisher.
Book piracy
Longhorn said the reduced spending power of customers has also fueled an upsurge of book piracy and the secondhand textbooks market as consumers moved to cheaper unregulated alternatives, further hurting its revenues.
Longhorn had delayed releasing the full-year results, attributing this to consultations regarding the interpretation and application of an accounting standard it warned was likely to have a “material impact” on the financial statements.
The publisher saw its revenue dip by 27.3 percent to Sh1.07 billion, primarily attributed to delays in government procurement processes and restatements made in prior years.
Operating expenses rose by 49.5 percent to Sh637.8 million in the period the publisher said printing costs rose by 70 percent, shrinking its gross margins from 32 percent in the prior year to 18 percent.
“The increase in operating expenses was mainly attributable to one-off costs including goodwill impairment, restructuring cost and pre-publication costs write-offs from old curriculum that are not expected to recur,” said Longhorn.
The review period saw finance costs increase by 37 percent to Sh182.18 million on account of increased borrowings to fund curriculum development across the region and interest rate increases witnessed during the year.
Longhorn said its approved products continue to increase as it invests in the new education curriculum and expects economic benefits to be realised in the years to come once the development is completed by 2026.
“We are confident that the business will recover in the coming year as we fully implement our lean business model and digital strategy,” said the publisher.
Longhorn operates in nine markets— Kenya, Uganda, Tanzania, Rwanda, Zambia, Malawi, the Democratic Republic of Congo, Cameroon and Ghana— but recently said it is reviewing its business model across the markets including “exiting markets with low economic prospects.”
