Companies

Scangroup shaved 157 jobs last year in cost cutting measure

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WPP Scangroup staff at a past meetin. PHOTO | COURTESY | SCANGROUP

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Summary

  • The company’s workforce dropped to 556 in the year ended December from 713 a year earlier, according to disclosures in its latest annual report.
  • The staff count excludes employees working at Kantar Africa, a subsidiary which Scangroup sold in June last year.
  • The marketing services firm did not say how much it spent on retrenchment costs but its “other staff costs” rose to Sh321.2 million from Sh85.1 million.

WPP Scangroup #ticker:SCAN cut 157 jobs last year as part of efforts to cut costs as the Covid-19 pandemic saw a significant reduction in revenue.

The company’s workforce dropped to 556 in the year ended December from 713 a year earlier, according to disclosures in its latest annual report.

The staff count excludes employees working at Kantar Africa, a subsidiary which Scangroup sold in June last year.

The marketing services firm did not say how much it spent on retrenchment costs but its “other staff costs” rose to Sh321.2 million from Sh85.1 million.

The layoffs contributed to the increased overall costs in the review period.

“Operating and administrative expenses of the group increased by Sh720 million, or 26 percent, mainly as a result of accounts receivables and loan provisions and severance costs resulting from a cost reduction plan. These one-off charges amounted to Sh774 million,” Scangroup says in the report.

The company’s employees on permanent contracts dropped to 228 from 307 while those on short-term contracts shrunk to 328 from 406.

Scangroup was among the companies whose revenue and earnings were affected by the health and economic crisis which has featured government-mandated restrictions and reduced spending by households and businesses.

Its sales declined 22 percent to Sh2.2 billion as billings –representing the value of marketing spend by its clients— fell by 31.6 percent to Sh6.3 billion.

The company charges some of its customers a fixed retainer and others a percentage of the value of their marketing activities including advertisements.

Many businesses cut their marketing budgets last year to reduce costs and also due to expectations that most households were prioritising spending on essentials amid job losses, pay cuts and general economic uncertainty.

Scangroup says employee compensation is one of its biggest expenses and that it will continue to find ways of enhancing efficiencies in its operations.

“Efforts to find further cost efficiencies is an ongoing effort and remains priority in 2021 and 2022 as well,” the company said.

“Given the talent-driven nature of our business, we will continue to cut out inefficiencies where possible while adding capacity/capability where needed and be home to top talent in Africa.”

Scangroup reported a net profit of Sh469.2 million in the year ended December 2020, an 8.6 percent rise from Sh431.9 million the year before.

The performance was largely derived from a Sh2.2 billion net gain from the disposal of the subsidiary Kantar Africa.

Excluding that transaction, Scangroup would have reported negative earnings as indicated by a Sh1.7 billion loss from continuing operations.

The company did not declare a dividend.

It had made a record payout of Sh8 per share in