Marketing services firm WPP Scangroup has made preparations to write off up to Sh4.7 billion investments in its subsidiaries. The manouvre has seen the share premium account –representing the value of shares acquired by shareholders above their nominal price— drop to Sh4.4 billion in the review period from Sh9.1 billion in 2020.
Share premium cannot be distributed to shareholders and its use is restricted mainly to issuing of bonus shares.
Marketing and communications firm, WPP Scangroup is set to write off up to Sh4.7 billion investments in its subsidiaries. A write-off primarily refers to a business accounting expense reported to account for unreceived payments or losses on assets.
Scangroup company has now transferred the amount from its share premium account to its merger reserve account from which it can absorb the impairments without hurting its earnings.
“The company wishes to inform its shareholders and the public that it has altered its share capital structure by transferring an amount of Sh4.7 billion from its share premium account to a merger reserve account,” Scangroup said in a statement accompanying its results for the year ended December.
Scangroup core capabilities include Brand Stewardship and Communications, Customer Engagement & Experience, Technology, Commerce & Advisory; Media Investment Management (Media, Content & Technology) as well as PR, Influence & Government Practice.
The company operates through subsidiaries like Ogilvy Africa, JWT Scanad, Squad, Group M, Mediacom, Mindshare, Wavemaker (MEC) in countries mainly like Uganda, Zambia, Gabon, Ghana, Kenya, Nigeria, Rwanda, South Africa and Tanzania.
The company states: “The alteration does not affect the statement of profit or loss of the group and company and does not reduce assets of the company or the group.”
The manouvre has seen the share premium account –representing the value of shares acquired by shareholders above their nominal price— drop to Sh4.4 billion in the review period from Sh9.1 billion in 2020.
Share premium cannot be distributed to shareholders and its use is restricted mainly to issuing of bonus shares, the company wrote.
It can however be transferred to the merger reserve which a company is allowed to create after fulfilling certain conditions in the Companies Act, 2015.
Scangroup has been reviewing its sprawling investments including interests in multiple subsidiaries in Kenya and other African markets, bracing itself for potential write-off of part of their values.
The reappraisal came after the firm’s founder and former chief executive Bharat Thakrar fell out with representatives of the majority shareholder WPP Plc, leading to his departure from the company in March last year.
According to the company website, WPP-Scangroup saw its beginning as a private limited liability company in January 1999, trading as Media Initiative East Africa Limited.
In October 2005, the company changed its name to Scangroup Limited. Scangroup then listed on the Nairobi Securities Exchange in August 2006 and is currently the only marketing services company listed on the exchange. In late 2013, Scangroup became a subsidiary of WPP and subsequently renamed itself to WPP-Scangroup PLC in June 2015.