From the repair shop to the bourse

Further growth and expansion opportunities lie ahead of it on a fragmented parts market that awaits consolidation. With its debut, Fota, which has subsidiaries in three countries, joins the elite of Poland's financial world.

Fota has listed 30 percent of its shares on the WSE and plans to raise about zł.100 million from the IPO. "We decided to enter the WSE to consolidate the market and build the Fota capital group," the president of the company, Bogdan Fota, explained. Half of the funds from the bourse debut are to be spent on acquisitions both in Poland and abroad. This month the company hopes to complete takeover negotiations with Kraków-based spare-parts distributor Behamot, of which Fota wants to acquire 67 percent. Fota remained enigmatic as to the details of further acquisitions, but didn't rule out takeovers in the CEE region.

Driving force

The remaining half of the IPO funds will strengthen the group's turnover capital because, as the president underlined, keeping up 30-percent annual growth requires a lot of capital.

Fota has indeed grown impressively during recent years. Its revenue is expected to reach zł.426 million this year - a 30-percent increase from last years' figures. In 2005, it grew by 17 percent year-on-year. Next year Fota predicts 25-percent growth, with revenues reaching zł.634 million and net profit expected to be at the level of zł.21 million (this year it should be around zł.13 million). "We do not need money [from the bourse] to grow organically - we can grow by 25 or 30 percent with bank loans," Fota said.

This certainly seems light-years away from the workshop that Fota established back in 1973, which specialized in the repair of Ford automobiles. After the introduction of the free-market economy in Poland, the Fotas took their business to another level. A year later they established the Fota Trading Company, an importer and distributor of spare parts for cars. The old repair shop, on the other hand, was transformed into a Ford dealership. Since 2002 the company has also been a BMW dealer.

Setting the pace

In 2000 the company became the first player on the auto-parts market to introduce online sales - presenting its offer, accommodating purchase and allowing an order to be tracked. In 2001 the company built and opened a distribution center near ŁódŸ on a 20,000-sqm plot. In the same year, the Lider Serwis (operating under the name Leader Service [LS] today) network of car-service shops was launched.

Alfred Franke, the president of Motofocus.pl, which offers analysis of the auto-parts market, thinks that Fota's strategy of consolidating the market is the right step to take. In Western Europe the bulk of the market is usually in the hands of four or five players, while in Poland more than 10 companies have around 50 percent of the market altogether. Fota, the market leader, had just eight percent of the market in 2005 and Franke expects it to hold about a 10th of it this year. "The market is very fragmented - that leaves a lot of opportunities for larger companies," Franke sums up. Fota's president wants to make use of these opportunities. "We want to have a quarter of the spare parts market within the next three to four years," he told the WBJ.

Road trip

The company is also looking beyond Poland. It has three foreign subsidiaries - in the Czech Republic, Hungary and in Ukraine - and it plans to open Leader Service repair shops in those countries as well.

Exports currently amount to around nine percent of the company's revenues. The EU and Ukraine are the main export markets for Fota, but the company intends to expand further. "We are currently in talks with potential partners from other European states," Fota disclosed, adding that he means non-EU countries, as he does not really consider the common market as an export market.

How realistic are Fota's plans on the automotive-parts market? Franke claims that the market will grow rapidly in the coming years. "The number of cars will be growing, the technical awareness of drivers will improve and the introduction of more sophisticated and thus expensive automotive parts will also increase the value of the market," Franke claims. He underlines that there are 12.9 million cars in Poland. "In order to reach the level of Spain, with which we often compare ourselves, the number would have to grow to 18 million," he says.

"That leaves a lot of growth potential for the spare-parts producers and distributors. Investing in auto-parts distribution will certainly be a very profitable investment," Franke concludes.

CEO:   Bogdan Fota

Strengths:

-Growth prospects for spare-parts market

-Money from the bourse to complement organic growth

Weaknesses:

-Fragmented market, tough competition

-Results dependent on car sales