Sign of success

When Egyptian protestors destroyed the outdoor sign of an American multinational company in protest against president Hosni Mubarak’s 30-year rule in Tahrir Square several months ago, Sami Al Mufleh sensed trouble. “Outdoor adverting will be hurt 100 percent,” says the CEO of Hills Advertising.

“Usually the first thing you stop when there is a crisis is advertising. Who will they be advertising to, the protestors? The first thing [protestors] do is damage the advertising signs,” he sighs.

Billboards and advertising budgets aren’t the only problem for Egypt’s outdoor advertising industry post Mubarak. “No authorities are granting you licenses for outdoor advertising today, you cannot be guaranteed [that signs] will be licensed or not. Somebody can come and take it out, and say ‘this street is for you’ and then tomorrow someone else can take it out,” he adds.

It’s a good job then that Egypt - and Bahrain where the firm has a small market share - remains an isolated market for the boss of Hills Advertising, the Dubai-based outdoor advertising firm that leases bridge banners, billboards and banner advertising around buildings in countries from as far as Italy and France, the UAE and Jordan.

A good job too that revenues from outdoor advertising are also starting to show some signs of recovery. Global revenues from outdoor advertising are forecast to increase 7.9 percent to $26.3bn in 2011, according to Magna Global. And Al Mufleh is after a slice of the pie. He aims to grow his multimillion dollar firm significantly over the next few years through several acquisitions of outdoor advertising and printing firms across the Gulf and aggressively tendering for government contracts. In 2011, Al Mufleh aims to make $10.88m in profit.

“We want to offer a one-stop shop service,” he says. “For 2011 I am very optimistic… Jordan has had the most stable outdoor advertising [in the region] and every year we are increasing our revenues and market share there. 75 percent of budgets are spent in Saudi Arabia.

“The best place to spend is still the UAE,” he continues. “Regional offices are based here and most of the multinationals want to show off their regional offices by spending more money here. If I have the regional office of Nokia here, I would love to see my Nokia advertising here rather than Qatar and Bahrain.”

Research supports Al Mufleh’s claims that advertising revenues are increasing following the dramatic declines amid the downturn. Revenues from advertising across the Pan Arab world increased 21 percent to $607.2m during the first half of 2010 compared to the same period the previous year, according to the Pan Arab Research Centre (Parc).

In Jordan and Saudi Arabia, revenues were up 9 percent in 2010 compared to 2009, said Parc. The recent decision by the Jordanian government to repeal the one percent culture tax imposed on advertising revenues could also have a positive impact on the industry.

When Al Mufleh established Hills Advertising in 2003, at the height of Dubai’s five-year real estate boom, real estate developers would pay upwards of $160,000 (around $27 per sq m in government fees and $30 per sq m on application and construction costs) for a banner advert on a building.

Today, it is financial institutions rather than real estate companies that are Hills Advertising’s biggest clients. The Middle East’s largest bank by assets, Emirates NBD, is spending around $2.31m this year to have its banner adverts plastered across bridges around Dubai. The lender is followed by the electronics firm Samsung, which is spending approximately $1.22m with Hills in 2011.

“Real estate companies dropped to zero,” says Al Mufleh. “Shopping malls are now spending. Actually we went back to normal - normal advertisers who really want value for money,” he adds.

Today, drivers along Dubai’s Sheikh Zayed Road are more likely to see Snickers, Standard Chartered and Dubai Shopping Festival advertising than Dubai Holding and Emaar - some of Hills biggest clients during the boom years.

Flush with cash several years ago  Hills Advertising signed several multimillion dollar deals in Dubai and in Al Mufleh’s home country of Jordan. In 2007, the firm signed a $15m investment deal to buy all of the outdoor advertising space in the Jordanian port city of Aqaba for a period of ten years. That was followed on the back of a deal which saw Hills sign a three-year deal for all of the outdoor advertising rights for every bridge in the emirate for three years.

Al Mufleh claims he was sensible with his cash flow during the boom years and refers to the global financial crisis as “opportunistic” for his firm. During the downturn Hills signed a six-year deal worth $13.6m for the billboard rights to all of the bridges in Dubai. “If a client has X amount of money I can give him many locations around the city in order to give him value for his money,” he says.

But the UAE isn’t the only market Al Mufleh hopes to increase his business, he wants to grow in every market Hills’ has a presence. Qatar’s recent success with the World Cup 2022 could mean plenty of growth for outdoor advertising in the Gulf state. Although Al Mufleh declines to estimate the impact it could have on the industry he is already in talks with one Qatari company for an acquisition worth around $2.5m. “Qatar is booming. We will join forces with a local company in Qatar - we are already in talks. After they won the rights to the World Cup 2022 we started to discuss [opportunities] with them. In Qatar we will do two things; we’ll not only do advertising rights but we’ll also do some printing facilities too.”

In total Al Mufleh plans to spend around $15-20m on acquisitions - this will include a North Algerian ‘street furniture’ firm and a 50 percent stake in a company in Jeddah, Saudi Arabia which will take on the Hills Advertising name and offer Hills several locations along highways. They will be funded through private equity or self financed, says Al Mufleh.

He is also hopes to find opportunities in Abu Dhabi and possibly Dubai. “There are four players in Dubai today [but] there were 35 players before the real estate collapse. Newcomers left and now it’s back to four players,” he says.

“We are looking to expand where there is an opportunity, and if there is an opportunity in the UAE we will take it. It took us five years to gain 60 percent of the market but in the next five years we are aiming to dominate and own a minimum 75 percent market share.”

It all sounds a bit too good to be true. What about the impact of the political unrest in Bahrain and Egypt? “We’ve only been hit in Egypt.”

What about Bahrain? “The Grand Prix advertising budgets have been hit directly because all multinationals related to this event have been delayed. Nobody can calculate [the direct impact] it has had until now but all of our campaigns related to outdoor have been stopped….You could say something like $5.4m has been stopped in outdoor spending related to F1 in this region.” He adds though that the cancellation of Bahrain’s Grand Prix in March is likely to impact positively on Abu Dhabi’s F1 race in November.

“They [advertising revenues] will be increased because it’s a safer place,” he explains. “Abu Dhabi was well organised but people believe in Bahrain because it is more established but this time Abu Dhabi was well organised, if they get good organisers I think it will be a success especially for big international advertisers,” he adds.

With or out without an influx of Formula One related business, one thing is certain: Al Mufleh is indeed back on the fast track of growth.