New Vision’s 8-year Declining Trend Worries Top Shareholder

Vision Group's CEO Robert Kabushenga

All is not well at Vision Group as the company’s profitability continues to take a nosedive, officials said today.

ChimpReports understands NSSF, a major shareholder in the printing company, said the situation at the media body is “not tenable” before asking the Group’s Managing Director Robert Kabushenga on the changes he intends to make on “increasing revenue, improving operating efficiency, debt financing and rethinking your electronic media strategy.”

In a letter dated March 11, 2014, which Chimpreports has seen, NSSF Board Chairman Ivan Kyayonka warned: “We would like to observe this and at the end of a six months period we will review the changes and take a decision on our shareholding.”

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The latest development could send ripples down the spines of New Vision Group shareholders.

The Vision Group is owned by the Ugandan government (53 percent) and by institutional and individual investors (47 percent).

The shares of the Group are traded on the Uganda Securities Exchange (USE).

Realising that not all is well at New Vision, sources say, NSSF board ordered a special review of the printing company’s financial statements and annual reports for the last 8 years.

It is understood that during a recent meeting in Kampala, emotional NSSF board members said fund’s shares in New Vision Group are at a huge risk should the company collapse.

They demanded NSSF Board Chairman, Ivan Kyayonka to swiftly ask Kabushenga on what is being done to salvage the situation.

“At the current price of shs630 per share, the current value of the Fund’s share is shs9.4bn. Taking into account the cost of shares at shs22.49bn in 2008 and dividends so far received amounting to shs2.28bn, the Fund’s investment in the NVYPPC has depreciated by 48%” reads part of a letter authored by Kyayonka on March 11, 2014.

This implies that New Vision’s failure to increase its profitability since 2008; workers have so far lost over shs10bn.

Kabushenga was yet to respond to an email regarding this matter.

Declining trend

 According to the letter that leaked from Kabushenga’s office, Kyayonka said the board of directors of NSSF has considered its equity investment in the NVYPPC and observed that between 2006 and 2013, “all profitability indexes exhibited a declining trend.”

He said gross profit margin, which is calculated by subtracting cost of goods sold (COGS) from total revenue and dividing that number by total revenue, showed Vision Group at 27 percent in 2013 from 34 percent in 2006 thus a 7 percent decline.


Ivan Kyayonka has expressed NSSF worries in a letter to New Vision Group MD


The Fund chairman further showed that the EBIT (earnings before interest and taxes) Margin which was at 13 percent in 2006 has tumbled to 6 percent, reflecting a 7 percent decline.

Finance experts say EBIT Margin is useful when comparing multiple companies, especially within a given industry, and also helps evaluate how a company has grown over time.

In his letter, Kyayonka went ahead to explain that Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Margin had slumped from 18 percent in 2006 to 13 percent in 2013.

EBITDA is an approximate measure of a company’s operating cash flow based on data from the company’s income statement.

This earnings measure is of particular interest in cases where companies have large amounts of fixed assets which are subject to heavy depreciation charges (such as manufacturing companies) or in the case where a company has a large amount of acquired intangible assets on its books and is thus subject to large amortization charges (such as a company that has purchased a brand or a company that has recently made a large acquisition).

The Vision Group has in recent years acquired several radio stations such as Radio West, a state-of-the-art printing press and rolled out a tabloid newspaper, The Sun and Bukedde television stations, in an ambitious expansion drive.

Kyayonka further pointed out that the net margin (net profit divided by net revenues) which was at 8 percent in 2006 had fallen to 5 percent in 2013.

Experts usually rely on this figure to determine how effective a company is at cost control. The higher the net margin is, the more effective the company is at converting revenue into actual profit. NSSF figures show the net margin has gone down by 3 percent.

In his letter, Kyayonka indicated that ROCE (Return on Capital Employed) which is a measure of the returns that a company is realizing from its capital, had taken a nosedive from 28 percent to 8 percent thus a 20 percent decline.

ROCE is calculated as profit before interest and tax divided by the difference between total assets and current liabilities. The resulting ratio represents the efficiency with which capital is being utilized to generate revenue.

The last profitability index used by NSSF to determine whether its shares are secure was ROE (Return on Equity), a measure of how well a company used reinvested earnings to generate additional earnings.

This is used as a general indication of the company’s efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. Investors usually look for companies with returns on equity that are high and growing.

After this assessment, Kyayonka observed that “declining ROE suggests that NVPPCL revenue is not growing in line with investments in assets.”

 He added: “An analysis of the business units indicated that while print media was profitable, the electronic media had consistently made losses since 2009.”


However, Kyayonka said the current ratio of 3.61 and the Acid Test Ratio of 12.12 in 2013 showed that NVPPCL had sufficient liquidity to meet its current obligations.


NSSF expressed surprise that the media organisation has no debt in its books, yet it has been expanding aggressively “most likely using shareholder capital.”

“In 2012 Interest Cover was 43 times which indicates that it can absorb debt due to finance activities. By holding no debt, NVPPC is not leveraging on proper debts which curtails its ability to pay shareholders dividends.”

Investment ratios

Kyayonka further said given the current price of shs630, the stock is trading at a trailing price/earnings (P/E) ratio of 13.7 and a dividend yield of 5.56 percent, adding, “Unfortunately, the fund purchased the shares in 2008 and exercised the rights issue at the price of shs1, 100. The price share has consistently fallen since then.”

He also hinted on the Fund’s analysis of performance results for the half-year periods of 2013 and 2014 which revealed that EPS (Earnings per Share) had declined by 43 percent from shs30 in 2013 to shs17.3 in 2014.

EPS means total earnings divided by the number of shares outstanding.

Kyayonka gladly noted that revenues increased by 4 percent from 39.7b in 2013 to 41.3 bn. However, he quickly added that operating profit declined by 41 percent from shs3.2bn in 2013 to 1.9bn in 2014.

Observers say the Fund could use its clout to pile pressure on vision Group to avoid poorly planned expansion activities that could lead to the media group’s collapse.

“We are taking this action so that NSSF customers do not lose their money being held in shares in New Vision Group in case the worst happens. However, we are optimistic that there is room to make the necessary changes to boost revenues, restore investors’ confidence and salvage the situation,” said a source who preferred anonymity given the sensitivity of the matter.

New Vision empire boats of several media outlets as indicated below.

 New Vision newspaper – Published in English

Bukedde newspaper – Published in Luganda

Orumuri newspaper – Published in Runyankole/RukigA

Etop newspaper – Published in Ateso

Rupiny newspaper – Published in Luo

Premiership magazine – Soccer magazine covering English, African and Ugandan soccer news – Published monthly in English.

City Beat magazine – Entertainment magazine aimed at the affluent 19 to 35 demographic age group – Published monthly in English

Bride & Groom magazine – Bridal magazine – Published quarterly in English

Secondary Schools Directory – Published annually in English

Vision Printing Limited – Most newspapers in Uganda, Rwanda and Southern Sudan are printed by Vision Printing

Vision Voice FM 94.8 Now X-FM – Based in Kampala. Broadcasts in English

Radio Bekedde FM 100.5 – Based in Kampala. Broadcasts in Luganda

Radio West FM 100.2 – Based in Mbarara.

Radio Rupiny FM 95.7 – Based in Gulu. Broadcasts in Luo

Radio Etop FM 99.4 – Based in Soroti. Broadcasts in Ateso

 Urban Television – Launched in October 2009. Transmits in English

Bukedde Television (BTV) – Launched in October 2009. transmits in Luganda

West Television (West TV) – Operating in the Western parts of Uganda alongside Radio West. transmits in Runyankole/Rukiga, Runyoro/Rutoro and English.


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