Business News
Stroer Withstands Advertising Crisis
Thursday 18. June 2009 - Slight drop in sales, by 3 percent, in 2008 - increase in sales of 4 percent as of April 2009 - focus on core markets - Ströer CEO Udo Müller: "Posters are a sales push medium"
The Stroer Group, Germanys market leader for outdoor advertising and the number three in Europe, is successfully holding its own against the advertising crisis. In the 2008 business year, Group sales declined only slightly, by 3 percent, to 493 million compared to the previous year. The operational EBITDA fell from 118 million to 103 million. In combination with the effects of valuations and currency developments, this led to a slightly negative Group result. In autumn 2008, Stroer had already reacted to the advertising crisis with a Group-wide cost cutting programme that effectively raised the operational EBITDA by 4 percent over the first four months of 2009. By the end of April, Group sales had declined slightly, by 5 percent. For the entire year 2009, Stroer expects sales to stabilize, slightly below the previous years level, and the overall result to improve.
The 2008 business year was characterized by the international economic crisis that made national advertising clients act with reluctance over the second half of the year. Group sales declined by 3.5 percent with regard to posters, as the biggest product group. The European giant poster business even dropped by 29.4 percent. For the transport product group, on the other hand, Stroer was able to increase sales by 8.2 percent. The main factors in this development are the good booking situation of mostly regional advertising spaces on buses and trains (transport media) in the domestic market and the Infoscreens (digital out-of-home advertising) in Germany and Poland. The Stroer Group was able to achieve a significant increase in sales in Poland (plus 12 percent in local currency) and in Turkey (plus 22 percent in local currency) while the sales of Stroer Media Germany declined by 4.2 percent. Despite opposite currency effects, the international business activities climbed to a share of nearly 20 percent of overall group sales (16 percent in the previous year). In this context, Stroer Poland achieved the strongest positive development, increasing the operational EBITDA by 21.7 percent.
The advertising crisis notwithstanding, Stroer increased the Groups investments in 2008 by 46 percent, to 62.2 million; about half of the investments in Germany were spent on new city advertising spaces and street furniture. Apart from Hamburg, the biggest investments were made in the Turkish metropolises of Istanbul and Ankara. Stroer also advanced the Groups ongoing media digitalization with the introduction of Infoscreens on Warsaws Metro trains and with the installation of “Outdoor TV” in Turkey. The newly developed programme is the first to create a network of screens on busy thoroughfares and in underground stations, which allows for the synchronization of advertising messages above and under ground. Stroer also plans to promote the further development of moving images in out-of-home advertising with the introduction of “Outdoor TV”.
“In 2008, we fought hard and successfully to stand up to the advertising crisis. In 2009, we will continue on this path, clearly focusing on our core markets. In addition to our cost cutting programme, which will have a positive effect in 2009, we have launched sales campaigns in Germany, Poland and Turkey. Since these markets were consolidated only recently, they still have potential even in the crisis. We want to seize the opportunity to increase the market share of outdoor advertising with regard to overall advertising budgets,” explains Udo Müller, CEO of Stroer AG.
For Udo Müller, the German domestic market still bears the potential of raising the advertising market share of out-of-home advertising from currently 4 percent to the European average of 6 to 7 percent as a medium-term goal. According to Nielsen Media Research, important industries, such as retail (plus 52 percent) and automotive (plus 41.5 percent), have significantly increased their poster advertising spendings between January and April 2009. In both industries, the poster benefited from its status as a sales medium. “The poster is the first wave of attack in sales. As long as people cannot manage to drive with their eyes closed, posters are the only pure offline push medium,” says Udo Müller.
Stroer CFO Alfried Bührdel is satisfied with the current development of the Stroer Group until the end of April 2009. “Given the extremely difficult market situation, we are satisfied with a comparative sales drop of only 5%. With the timely launch of our cost cutting programmes, we were able to increase our EBITDA by 4% (compared to previous year) in the first months of 2009. We are prepared for the advertising markets to remain weak for the rest of the year. This applies to all of the Stroer Groups core markets. So we must continue to focus our work on consistent sales activities and effective cost management.”