Investor Information

I feel privileged to comment on the Group’s performance for 2007, which by any measure was a very successful year for us.
The Group had an impressive growth both in revenue and profits, which increased by Kshs.1.3 billion (21%) to Kshs.7.7 billion, while profit before tax grew by 39.2% to Kshs.1.6 billion.
The improved performance was largely attributable to an excellent performance by staff, revenue growth from market share both in advertising and circulation, and the continued good rating of the radio and television division. This combined very well with significant savings on input costs arising from a strong Kenya shilling against other major currencies and strict cost management.
During the year under review, investment in capital expenditure was aligned towards achieving efficiency in our print operations as well as the distribution of our products. A total of Kshs.446.7 million was invested in capital expenditure with a large proportion going to the upgrade of the printing plant, where a new inline magazine stitcher and a Computer to Plate system (CTP) linking the pre-press area and the press were installed.
The Computer to Plate (CTP) line was commissioned in Quarter Two of 2007. These initiatives are expected to improve the production efficiency of the printing plant.
An additional tower to increase colour capacity was installed at a cost of Ksh103 million. It was aimed primarily at enhancing the quality of our products and meeting the rising demand for full colour advertising by the business community.
The pre-press area was also upgraded with the commissioning of a new version of the advertising and editorial systems.

Nation Newspapers Division (NND)
The division’s good results is attributable to an outstanding contribution by staff, a good business environment due to the strong recovery of the economy, improved advertising revenue in the run-up to the December 2007 General election and a strong Kenya Shilling against the US dollar. A favourable US dollar price per tonne of newsprint had a favourably impact on direct costs. A strong circulation performance was driven by the increased political activity in the run-up to the General Election.
The distribution and circulation departments were merged to maximise efficiency and to concentrate on market development and growth. Overall, we have seen circulation and availability of our products greatly improve.
On product development, the division introduced a new easy-to-read leisure daily newspaper, the Daily Metro in Quarter Three of 2007. This publication targets the youth and the young at heart. The Business Daily, which was introduced in early 2007 continued to perform well with notable growth in circulation. The daily is slowly becoming a serious and authoritative business publication.

Nation Marketing and Publishing Limited (NMP)
The division, which is responsible for the distribution of non-NMG publications performed reasonably well despite the discontinuation of the Nation Business Directory. Publication of the Directory was stopped in 2007 in order to allow the division concentrate on its core business of magazine distribution. The change has resulted in lower contribution compared with the previous year. However, improved performance from efficiency is expected in coming years.

Nation Broadcasting Division (NBD)
The division continued with its now established trend of growth in ratings both in radio listenership and television viewership. This growth was equally reflected in the revenue earning capacity of the division with advertising revenue growing by 31.8% over the previous year.
The growth in revenue together with cost cutting efforts resulted in an impressive contribution to the overall operating results of the Group.
After the strengthening of the radio management, EASYFM has now claimed a leading position among FM stations in Kenya and continues to attract critical listenership, which is expected to yield good results in coming years.

Nation Carriers Division (NCD)
The division was restructured in 2006 to enable it concentrate on its core activity of newspaper delivery and courier services. The restructuring has led to improved revenues and contribution over the previous year.

Monitor Publications Limited (MPL) - Uganda
MPL continued with its impressive performance that saw its revenue grow by 18% over the previous year.
Both the Daily Monitor and the Sunday Monitor have registered a growth in both advertising and circulation market share.
Kfm radio also continued to enjoy good listernership ratings leading to an impressive growth in operating profit over the previous year.

Mwananchi Communications Limited (MCL) – Tanzania
The hedging undertaken in the last Quarter of 2006, in which a Kenya shilling-denominated loan from the Group to MCL was transferred to the Tanzanian shilling and the company allowed to borrow locally, mitigated the currency risk exposure we had undertaken. This together with a change in the management of the company in 2007 saw its fortunes change significantly. This trend has been maintained in 2008.

East African Magazines Limited (EAM)
EAM continued with its good performance in the year with a revenue growth of 50% over 2006. Its overall performance remains in line with the business plan. The division’s products also continued their dominance of the magazine market as their circulation continued to improve.

We are, however, reviewing the option of optimising our presence in this segment of the market and shall issue updates as our plans concretise. NTV - Uganda (ntvu)
As reported in the last financial year, NTV (U) had a false start when it was shut down for three months. It was reopened in April and has since bounced back very strongly to finish the year ahead of budget.
During the year, the station has managed to establish itself and has attracted a respectable viewership in and around Kampala. There are plans to expand its broadcast to other areas of the country.

Business Development
In line with current trends worldwide, management is of the view that future developments lie in digital technology. We, therefore, decided to establish a fully fledged division to address the digital media business. It is anticipated that with this venture, the Group will soon fully exploit opportunities in the digital business in line with emerging trends.

Appreciation
I would like to sincerely thank our management and staff for an excellent performance and our readers, viewers, listeners and other business partners for the support they continue to extend to us. Let me reassure them of the Group’s continued commitment to providing an excellent service.
In conclusion, I would also like to express my sincere appreciation to the Board of Directors for their continued support and guidance.

L W Gitahi
Group Chief Executive Officer