The Swiss leader in outdoor advertising (OOH) is growing in digital. Its autonomy allows it to remain focused, according to Markus Ehrle, CEO.
The growth outlook for Out of Home (OOH) media remains promising. In particular for the Swiss market leader: APG SGA, of which NZZ is now a reference shareholder with 25%. APG SGA, also present in Serbia (less than 5% of sales), recorded a turnover of 325.6 million francs in 2023 and employs 550 people. Its market value is around 580 million francs. The stock is up about 6% this year. Interview with its CEO, Markus Ehrle.
Will the acquisition of a 25% stake by the NZZ group in APG SGA at a price of 220 francs per share result in a multi-channel strategy like TX Group, under the Goldbach roof, with Neo and Clear Channel?
This is not planned, because such a cross-media approach leads to complexity and dilution. This type of cross-selling is not the most effective in our opinion. On this subject, look at what happened in the financial sector with bancassurance. It didn’t really work, with a few exceptions.
This did not work at Publigroupe, Admeira and, now, only insufficiently, in all likelihood, at Goldbach (TX Group) where Tamedia and 20 Minutes will work again with their own commercial force from 2025.
“Our portfolio of offers could be further expanded in the partner market, in particular with the Glatt shopping center, as well as with Jungfraubahnen Management AG “Top of Europe” and Zermatt Bergbahnen.”
A complete takeover of APG SGA by NZZ is therefore not planned…
You have to ask NZZ for this. In fact, APG SGA today has a more balanced shareholding with NZZ, JCDecaux (a share of 16.4%) and the Frère Group, i.e. Compagnie Nationale à Portefeuille through Pargesa Asset Management (13.9%) . This is positive for APG SGA, which remains autonomous, strengthens its Swiss DNA and can thus fully concentrate on the core of its business: outdoor advertising.
However, JCDecaux did not rule out the complete acquisition of APG SGA by another company…
Last February, our two long-standing main shareholders, JCDecaux and Pargesa Asset Management SA, informed us that they had reached an agreement for a potential coordinated sale of their positions in APG SGA. In this context, the board of directors of APG SGA decided to begin a process aimed at finding a potential buyer for the entire company and respecting the interests of the various stakeholders. This process may or may not lead to a transaction involving APG SGA and/or a sale of shares held by the two main shareholders.
If a buyer had acquired more than 33 1/3% of APG SGA shares, an offer should have been made to all shareholders at the same price, which could then have led to a complete takeover of the company. Such a possibility would have been the takeover by a private equity firm, based on the scheme of greater efficiency, lower costs, stimulation of growth, an increase in operating profit before depreciation, interest and taxes (Ebitda) and a higher valuation multiple.
However, APG SGA is already achieving a lot in terms of costs, efficiency and growth. Another advantage is that we operate a portfolio with 7,000 contracts and partnerships as well as a distribution between advertising spaces in the private and public domain, which are balanced.
What is APG SGA’s share of the Swiss market today?
It exceeds 60%. The acquisition of Clear Channel Switzerland by TX Group means that there are now two major competitors covering all outdoor advertising services and products (analog and digital) on the Swiss market. Other biggest competitors are La Poste through Livesystems, which is only active in digital outdoor advertising (DOOH), and ESH Médias (Hersant group).
What is the current situation of the Swiss outdoor advertising market?
After the hole caused by Covid-19, there was a return to normal as far as we are concerned. And this despite a consumer climate which remains gloomy. However, it is necessary to distinguish between customer segments. The retail, telecoms and automotive sectors, in particular, are rather gloomy. Unlike industries such as leisure, food and finance.
On the other hand, our portfolio of offers could be further expanded on the partner market, in particular with the Glatt shopping center, which has the highest turnover in Switzerland in its sector, as well as with Jungfraubahnen Management AG “Top of Europe” and Zermatt Bergbahnen.
Without forgetting the concession once again granted by the city of Zurich (VBZ) for premium illuminated posters, on Place de la Gare, since last August. In addition, we are awaiting the decision of the city of Geneva regarding the award of its analogue advertising space, which APG SGA could win again after many years.
Operating cash flow stood at more than 30 million francs in 2023. It was also up in the first half of 2024. Is this sustainable and does this suggest free cash flow or cash flow? -annual available flow of at least 20 million in a normal environment?
It is possible, but the geopolitical and economic situation remains volatile. This is why nothing is guaranteed, without losing sight of the aspirations of certain circles to want to eliminate display advertising. But I am optimistic in this regard.
One thing is certain: our earning power and our financial situation remain robust. APG SGA has no financial debts. We will continue to innovate and strengthen our competitive position.
With the ability to continue paying an attractive dividend?
A shareholder-friendly policy should continue in this area.
Are you, like Goldbach, aiming for an operating margin (Ebit) of 12% to 14% in outdoor advertising?
We do not provide “guidance” in this regard, but we consider the objectives announced by our competitor to be very ambitious, even if the accounting standards are not entirely comparable.
A PwC study estimates advertising revenue in your sector on the Swiss market at more than 500 million francs in 2026. The growth potential is not exhausted…
For our part, we are counting on annual growth of 2% to 3%. Through digital outdoor advertising, the systematic development of the digital service portfolio and the targeted expansion of data and advertising technology solutions. APG SGA will, moreover, maintain its rigor in terms of prices, productivity, costs and capital.
Outdoor advertising and digital communication are growth media, while TV/video and the press are declining in terms of advertising revenue. OOH and DOOH are proving essential in the face of media fragmentation.
Isn’t the growth of digital occurring at the expense of analog outdoor displays?
No, there is only one-off cannibalization. Digital is growing, through screens, data and programmatic (editor’s note: automation of communication campaigns), while the traditional display proves stable. Programmatic, in particular, makes it possible to gain new budgets from the online and/or TV market, thanks to precision, speed and flexibility.
