Outdoor advertising Affichage can be more than satisfied with 2004. Affichage currently generates around 10 percent of its total sales abroad and is aiming for a 25 percent share by 2008. If the biggest coup Affichage has planned for 2005 succeeds, it will already exceed its sales target abroad this year: it is preparing to take over the fourth-largest German out-of-home advertiser, Deutsche Eisenbahn-Reklame GmbH (DERG), a wholly-owned subsidiary of Deutsche Bahn (DB). DERG, which generated sales of 163 million euros in 2003 and markets DB's advertising media at 5,700 railroad stations, 19,000 railroad cars and locomotives as well as 7,000 bridges, is to be sold this year. According to reports from Germany, DB has instructed its profitable subsidiary to compile the documents required for the sale. "We expect these documents in March or April," said Affichage CEO Christian Kauter. He is certain that Affichage will submit an independent offer. However, Kauter, who is assuming a purchase price of 80 to 100 million euros, does not rule out the possibility that his company will look for a partner once the bid has been accepted.
In addition to Affichage, other internationally active out-of-home advertisers, such as the French Decaux Group, the American Viacom, the German market leader Ströer, the industry runner-up Freund and Berlin-based Wall AG, also want to bid for DERG. Others, such as Clear Channel, are also expected to bid.
Nevertheless, Kauter believes that Affichage has good prospects. Firstly, because the company has been active in station advertising in Switzerland for around 20 years, which means that "very good synergies" could be achieved. Furthermore, the out-of-home advertiser has a solid
equity ratio of 66 percent, which is why it would probably have no problem obtaining loans for the DERG deal. And thirdly, Affichage has virtually no presence in Germany, holding only a 25 percent stake in a small Stuttgart-based JCDecaux company. Other bidders would face competition law problems if they were awarded the contract. Incidentally, JCDecaux, which holds a 35 percent stake in Wall and a 30 percent stake in Affichage, is also on the board of directors of both companies. At Affichage, he will have to withdraw from the DERG business; it is unclear how he will handle this at Wall.
Even if Affichage does not succeed in making a major entry into Germany, the company's presence in Eastern Europe via Europlakat International (EPI), the joint venture with JCDecaux, is to be expanded in any case. Last year, sales there increased by 10.2 percent to 32.2 million Swiss francs, while the operating result even rose by 23.4 percent to 2.4 million Swiss francs. For 2005, EPI is expecting a further increase in sales of just under 10 percent.
After last year's contract for bus shelters in the Slovenian capital Ljubljana and the city contract for Budapest (Hungary), the focus this year is on Bulgaria and Romania. On the one hand, both markets are highly segmented, which is why EPI wants to buy companies and is negotiating with providers. In addition, a bus shelter contract is up for tender in the Bulgarian capital Sofia. "EPI will participate, we believe we have good chances there," says Kauter. He also mentions Ukraine and Belarus as other potential markets for EPI. "But we haven't put out any feelers yet," says the Affichage CEO. There is enough money available: Only half of the 120 million francs that JCDecaux and Affichage (60 million each) have earmarked for investments has been used up.
The third expansion step into Italy announced last year is also taking shape. Affichage wants to strengthen the difficult poster business in the small Ticino market by venturing beyond the national border into the Insubrica region just outside Milan. This region includes the cities of Como, Lecco and Varese, is closely linked to Ticino and, according to an Affichage analysis, forms a single unit in terms of commuter traffic, exchange of goods and communication.
Together with the population of Ticino, around one million people live there. Out-of-home advertising is largely unused. Negotiations are currently underway with a small company in Como for a takeover, and Affichage is also negotiating contracts with the municipal authorities. The aim is to build up a network in cities and along roads. It may also be possible to move southwards at a later date, says Kauter.
Affichage grew not only abroad, but also in Switzerland last year. Kauter was surprised that Media-Focus reported a gross decrease of 4 percent in poster advertising for 2005, as Affichage sales revenue in the domestic market grew by 2 percent to CHF 268.1 million. The operating result also improved by 3.5 percent to CHF 27.2 million, despite the trend towards higher taxes and commissions, as Kauter emphasized.
The Group as a whole closed the year 2.9 percent up on the previous year with sales revenue of CHF 300.3 million, while the result even increased by 5.1 percent to CHF 20.1 million.
New CI and an initial research sampleAffichage is working on a new Group image for the AGM in May. According to CEO Christian Kauter, the aim is to give the various subsidiaries such as E-Advertising, Paron and Bercher a more uniform appearance so that their affiliation to the Group can be better recognized via the logo. Much of the work had been developed internally, but a small Liechtenstein company had now been brought in to implement it.
A tool will also be available to download from www.affichage.ch in about a week's time, showing how the Swiss Poster Research (SPR) data is collected and weighted and how it can be used. However, sample data from the surveys in Winterthur and Zurich will be included first. According to Kauter, a tool with access to all existing SPR data will be available in 2006, when the city of Geneva will also have been surveyed. (mk)
Powerplay: Affichage wants to buy the Deutsche Bahn subsidiary DERG, which puts up posters at train stations.
Markus Knöpfli