Longhorn Publishers expects to book revenues of Sh550 million from the government in this second half of its financial year ending June, an outcome it says will improve its financial performance.
The company posted a net loss of Sh193.2 million in the first half to December 2023, widening it from Sh119.6 million a year earlier. The performance came amid lower revenues and higher costs.
“We expect a stronger second half of the year boosted by revenue generated from government contracts amounting to Sh550 million which we expect to deliver in this quarter,” Longhorn said in a statement.
“Various macro-economic headwinds over the past year have had a significant impact on our business. We have seen rising inflation and interest rates and a general economic slowdown across our markets which has resulted in a drop in spending on textbooks.”
The government is the single largest customer for the Nairobi Securities Exchange-listed firm which is among those offering text books and other learning materials in the competency-based curriculum (CBC).
The Sh550 million sales to public schools is part of a total target of Sh815 million that the company reported earlier in its latest annual report.
“The government remains a key customer of the group … Expected government revenues from supplies to public schools in [financial year ending June 2024] is at least Sh815 million,” Longhorn says in the report, adding that it had already recorded sales of Sh128.8 million from State orders.
In the half year to December 2023, Longhorn’s sales declined by 10.41 percent to Sh525.85 million from Sh587 million the year before.
The company said the lower revenue is partly attributed to accounting restatements guided by the International Financial Reporting Standards and which shifted revenue generated in current year to prior years.
The drop in sales was also the outcome of a decline in sales to the government due to a delay in commencement of distribution of textbooks.
The company’s costs went up significantly, contributing to the larger loss in the review period. Cost of sales, for instance, rose to Sh444.1 million from Sh403.5 million.
“Gross margins were adversely impacted by high printing costs which rose by 70 percent over the last 12 months. This was attributable to the currency depreciation and increased cost of doing business,” Longhorn said.
Finance cost also jumped to Sh98.4 million from Sh68.4 million on the impact of rising interest rates, denying it the benefit of reduced borrowings to Sh1.19 billion from Sh1.23 billion.
The company however cut its operating expenses by 25 percent, benefitting from cost rationalisation.
“We are confident that the business will recover this year as we fully implement our lean business model, continue growing our share of CBC books and our digital strategy,” Longhorn said.
By JAMES ANYANZWA