Vision Group seeks sh10b for new mega investment projects
Nov 25, 2007
Vision Group recently held its annual general meeting where impressive results were reported and plans for Rights Issues were announced. <b>Paul Busharizi asked Robert Kabushenga</b>, the chief executive officer (CEO), what this all means.
Vision Group recently held its annual general meeting where impressive results were reported and plans for Rights Issues were announced. Paul Busharizi asked Robert Kabushenga, the chief executive officer (CEO), what this all means.
QUESTION: You have been at the helm for about a year. How would you assess the company’s performance during this period?
ANSWER: The transition in my view has gone very well because at the time of our appointment, there was a lot of public outcry about the appointments, which actually affected the public confidence as reflected in the share price, which dropped to about sh390.
Then subsequently the editor-in-chief resigned and the chairman died. It is not easy for a company to go through those rapid changes and still maintain stability.
We maintained our focus and professionalism as a company and I think that is visible in our product which has only changed for the better. By and large, I am confident that the transition has been well managed.
QUESTION: Analysts say one of the reasons the New Vision share price has remained undervalued is cautiousness in going multi-media. Would this be a fair comment?
ANSWER: Yes because there was no clear quantum leap in terms of value creation.
We were seen mainly as a print media house. We were not being seen to be taking bold steps forward.
Now because of our very good reputation in the industry, the decision to go multi-media means the public expects us to deliver with the same level of excellence in electronic media as well. The expectation is high that what we have done with the newspaper can be replicated in the electronic media. And people have long felt that we should have been leading this process, a leading enterprise in electronic media.
QUESTION: What is the progress on the TV and the radio?
ANSWER: The TV is on but we are still at a technical stage because we are learning how to handle TV.
We started that modestly by doing rebroadcasts of CNBC Africa and SABC International.We think for now that offering of channels not available in these region is sufficient, while we work out the best way to make an investment in TV and make it a proper local offering.
Within one year – November next year, we should have our own TV station whose programming is largely Ugandan and reflecting the character of our position as the leading media house.
Radio will go on air at the beginning of December. After that, we consider diversification.
QUESTION: You recently reported another set of good financial results. What’s driving these consistent gains?
ANSWER: A number of factors. First, a very powerful product and that means that the public is interested in our products, five different newspapers and magazines and our website, which have done very well.
We also have a very aggressive sales team, which means that we dominate the print media advertising revenue. But there has also been a lot of focus on cost-control and internal financial discipline. But we also believe in the New Vision.
We have the most professional team in the country in every field, in the sense that the professionals we have either journalists, finance or sales, engineer people.
They are some of the best minds we have in the country, which means our HR element is quite strong and can deliver a good performance.
Sometimes you might have all those factors in mind and don’t have the people to carry through all those things including innovation.
QUESTION: You are offering your shareholders more shares in your company under the Rights Issues. What do you need the money for?
ANSWER: First of all, it’s important for people to understand that it’s the best way for us to raise money. We need the money to guarantee the long-term viability, profitability and survival of this company.
That money will allow us to make an investment in increasing our printing capacity in our newspapers, to bring our printing capacity into the 21st century.
We will be looking at a massive investment in that area and also make our electronic media widely available to our audiences.
Our newspapers are available to people around the country.
So we need to make an investment in delivering our signal to those audiences that rely on New Vision countrywide.
In any case, our business partners expect us to do so as a matter of urgency.
That is why we need that money. It’s a lot of money.We need to raise it through a combination of methods and that is one of them.
The most reliable one in the sense that you get equity and all you are dedicated to doing is returning value to the people who entrusted you with their money.
QUESTION: How much money are you looking for?
ANSWER: I can only say our expectations are somewhere in excess of sh10b.
Some of the investments we want to make require big expenditure initially. You can’t do it any other way. Like the TV, it’s high capital investment.
You can’t do it piecemeal because the pace at which change is happening in the industry, you have to move very quickly. Otherwise you might not be able to respond to other needs and competitive pressures.
QUESTION: How long will it take to set up once you have got the money?
ANSWER: A reasonable timeframe from the moment the bank gives us a statement of accounts and says your money is in the bank. We are looking at a timeframe of 18 months to total completion.
There procurement procedures, identification of what you want to do then purchasing.
Let me say from the day you make the decision to proceed, you give yourself a minimum of 18 months to complete; after the Rights Issue and the money is there and now you can make the decision.
QUESTION: Is the Government going to allow a dilution of its interest in the Vision Group?
ANSWER: It will be a decision of the Government. We can’t make the decision for them. What it means is that the Government has a choice to either take up its rights or to cede those rights and also cede a percentage holding. That has to be determined by law under the PERD Statute.
A whole series of procedures is required. We will treat them like any other shareholding.
But New Vision is one of those companies where the Government has to retain majority shareholding.
QUESTION: The Vision Group – the business, makes the New Vision and all other offerings happen. Will this business discipline continue?
ANSWER: That is the advantage of being owned by the Government that people don’t see. Because you are owned by the Government, it is possible for you to persuade the Government that there is need to pursue investment options as a way of sustaining the institution in the long-term.
This is a funny way to put it but the Government doesn’t have an immediate need to cash on a return of an enterprise. It is just happy to collect its taxes.
A private operator is always looking for an immediate return on the investment that they have put in. So they are looking out to maximise the newspaper returns immediately. They have short-term horizons.
QUESTION: The company has consistently managed high returns on investments. Won’t the new investments dent this reputation?
ANSWER: Our return on investment is about 41% now. I think that the opportunity for return on investment that New Vision provides has not been fully-exploited.
What we are dealing with is from the newspaper side. Our investment in the short-term in the electronic media will mean that the returns will not be immediate.
It could be. We may be surprised but I wouldn’t count on it.
QUESTION: You have been at the helm for about a year. How would you assess the company’s performance during this period?
ANSWER: The transition in my view has gone very well because at the time of our appointment, there was a lot of public outcry about the appointments, which actually affected the public confidence as reflected in the share price, which dropped to about sh390.
Then subsequently the editor-in-chief resigned and the chairman died. It is not easy for a company to go through those rapid changes and still maintain stability.
We maintained our focus and professionalism as a company and I think that is visible in our product which has only changed for the better. By and large, I am confident that the transition has been well managed.
QUESTION: Analysts say one of the reasons the New Vision share price has remained undervalued is cautiousness in going multi-media. Would this be a fair comment?
ANSWER: Yes because there was no clear quantum leap in terms of value creation.
We were seen mainly as a print media house. We were not being seen to be taking bold steps forward.
Now because of our very good reputation in the industry, the decision to go multi-media means the public expects us to deliver with the same level of excellence in electronic media as well. The expectation is high that what we have done with the newspaper can be replicated in the electronic media. And people have long felt that we should have been leading this process, a leading enterprise in electronic media.
QUESTION: What is the progress on the TV and the radio?
ANSWER: The TV is on but we are still at a technical stage because we are learning how to handle TV.
We started that modestly by doing rebroadcasts of CNBC Africa and SABC International.We think for now that offering of channels not available in these region is sufficient, while we work out the best way to make an investment in TV and make it a proper local offering.
Within one year – November next year, we should have our own TV station whose programming is largely Ugandan and reflecting the character of our position as the leading media house.
Radio will go on air at the beginning of December. After that, we consider diversification.
QUESTION: You recently reported another set of good financial results. What’s driving these consistent gains?
ANSWER: A number of factors. First, a very powerful product and that means that the public is interested in our products, five different newspapers and magazines and our website, which have done very well.
We also have a very aggressive sales team, which means that we dominate the print media advertising revenue. But there has also been a lot of focus on cost-control and internal financial discipline. But we also believe in the New Vision.
We have the most professional team in the country in every field, in the sense that the professionals we have either journalists, finance or sales, engineer people.
They are some of the best minds we have in the country, which means our HR element is quite strong and can deliver a good performance.
Sometimes you might have all those factors in mind and don’t have the people to carry through all those things including innovation.
QUESTION: You are offering your shareholders more shares in your company under the Rights Issues. What do you need the money for?
ANSWER: First of all, it’s important for people to understand that it’s the best way for us to raise money. We need the money to guarantee the long-term viability, profitability and survival of this company.
That money will allow us to make an investment in increasing our printing capacity in our newspapers, to bring our printing capacity into the 21st century.
We will be looking at a massive investment in that area and also make our electronic media widely available to our audiences.
Our newspapers are available to people around the country.
So we need to make an investment in delivering our signal to those audiences that rely on New Vision countrywide.
In any case, our business partners expect us to do so as a matter of urgency.
That is why we need that money. It’s a lot of money.We need to raise it through a combination of methods and that is one of them.
The most reliable one in the sense that you get equity and all you are dedicated to doing is returning value to the people who entrusted you with their money.
QUESTION: How much money are you looking for?
ANSWER: I can only say our expectations are somewhere in excess of sh10b.
Some of the investments we want to make require big expenditure initially. You can’t do it any other way. Like the TV, it’s high capital investment.
You can’t do it piecemeal because the pace at which change is happening in the industry, you have to move very quickly. Otherwise you might not be able to respond to other needs and competitive pressures.
QUESTION: How long will it take to set up once you have got the money?
ANSWER: A reasonable timeframe from the moment the bank gives us a statement of accounts and says your money is in the bank. We are looking at a timeframe of 18 months to total completion.
There procurement procedures, identification of what you want to do then purchasing.
Let me say from the day you make the decision to proceed, you give yourself a minimum of 18 months to complete; after the Rights Issue and the money is there and now you can make the decision.
QUESTION: Is the Government going to allow a dilution of its interest in the Vision Group?
ANSWER: It will be a decision of the Government. We can’t make the decision for them. What it means is that the Government has a choice to either take up its rights or to cede those rights and also cede a percentage holding. That has to be determined by law under the PERD Statute.
A whole series of procedures is required. We will treat them like any other shareholding.
But New Vision is one of those companies where the Government has to retain majority shareholding.
QUESTION: The Vision Group – the business, makes the New Vision and all other offerings happen. Will this business discipline continue?
ANSWER: That is the advantage of being owned by the Government that people don’t see. Because you are owned by the Government, it is possible for you to persuade the Government that there is need to pursue investment options as a way of sustaining the institution in the long-term.
This is a funny way to put it but the Government doesn’t have an immediate need to cash on a return of an enterprise. It is just happy to collect its taxes.
A private operator is always looking for an immediate return on the investment that they have put in. So they are looking out to maximise the newspaper returns immediately. They have short-term horizons.
QUESTION: The company has consistently managed high returns on investments. Won’t the new investments dent this reputation?
ANSWER: Our return on investment is about 41% now. I think that the opportunity for return on investment that New Vision provides has not been fully-exploited.
What we are dealing with is from the newspaper side. Our investment in the short-term in the electronic media will mean that the returns will not be immediate.
It could be. We may be surprised but I wouldn’t count on it.