AMS: Swimming against the tide
By : Justyna Wrobel
Tomasz Kawka, the 32-year-old president of outdoor advertising firm Art Marketing Syndicate (AMS), has steered his company through some testing times recently.
As the world of advertising has fallen into the doldrums, AMS has steadily built up its core outdoor ad business and diversified. Now it's reaping the profits.
Set up 11 years ago amid the post-communist euphoria, AMS has since gone on to lead the outdoor ad sector and is one of the few media companies listed on the Warsaw Stock Exchange WSE along with the Agora media group and Interia (the first Polish portal to be publicly traded).
The company first started expanding in the late 1990s. In 1997, it took over Adpol, a broker of cityboards and a year later Akcent, a specialist in smallformat outdoor advertising at gas stations. In 1999, AMS merged with another outdoor ad company, Mercurius International.
More developments happened early last year when AMS set up Aktis Media to deal with sports marketing. Later in 2000 it also purchased a 40% stake in new-media ad company FI Polska and took over Adlite, which was responsible for selling ad space on citylights. It then bought Info Digital Media (IDM), which owns advertising TV screens in train stations.
"AMS diversifies its products," said Andrzej Kasperek, an analyst at COK Banku Handlowego. "That's good and says a great deal about the company."
These days, AMS is the No. 1 outdoor advertising company in Poland. At the end of the third quarter of 2000, the company controlled 61% of the market in terms of the number of citylights. The No. 2 company in this sector, Clear Channel Communications, held 17% of the market. In terms of billboards, AMS had a 33% market share and the No. 2 companies in this sector, Stroer and Europlakat, held 14% each.
Financial figures for 2000, presented last week, were positive. "We closed last year with very good results," Kawka said.
AMS' revenue last year was zl. 189.6 million ($43 million), up 63.8% from 1999. Net profit closed at zl. 16.08 million ($3.65 million), up 63.7% from the previous year.
"Compared to what is going on in advertising (the market has slowed down after several years of dynamic growth), these results are the exception," Kasperek said.
In 2000, the ad market hit a slump when total real ad spending remained the same or dropped by a few percent compared to previous years. Most analysts admit AMS is still an unknown quantity when it comes to investor interest.
"It (AMS) has a low capitalization and low liquidity," said Pawel Borys of Erste Securities Polska. The company's capitalization is close to zl. 200 million ($50 million). In general, he said, outdoor advertising is a sector with potential for growth because it's still underdeveloped. "(On the other hand) it's also a bit risky because ad spending is very sensitive to fluctuations in the economy," he added.
For Benita Mikolajewicz at ING Barings Securities, the long-term outlook for outdoor advertisers isn't promising. This year, for example, tobacco companies are prohibited from using outdoor sites to advertise.
But Kawka said the company had anticipated the ban some time ago. "One and a half years ago, we created a three-year strategy that would reconcile negative and positive trends on the market," he said.
The strategy, according to Kawka, lies in diversifying AMS' products such as large formats of outdoor advertising and "street furniture," such as citylights. Large format outdoor ads include 18- or 32-square-meter backlights and 100-square-meter boards.
"The large format of outdoor advertising is the most spectacular way to provide information (about a product)," Kawka said. "It delivers high quality to the advertising message."
According to Kawka, 49% of investments planned for 2001 will be assigned to street furniture and 43% to large formats, while only 8% will go to billboards.
"Billboards lost popularity because they were used for all kinds of marketing campaigns and it didn't work," Kawka said. "In fact, they should have been used to promote products, and not for image campaigns."
AMS began trading on the WSE in 1998. Financial investor BB Investment holds a 36.67% stake in the company, Bank Gospodarki Zywnosciowej (BGZ) owns another 8.3% and Outdoor Capital Establishment (OCE) 6.1%. According to analysts, about 40% of AMS' shares are in free float.
