After spending 20 years in the City advising smaller companies on doing deals and raising finance, Tim Baldwin took the plunge and set about building his own business. Just 18 months on, the chief executive of AIM listed Ram Investment Group (LON:RAM) now oversees two specialist digital-out-of-home advertising businesses and has his sights set on turning a profit by the end of 2010. Already have an account?
Baldwin began building the group in May 2009 when he agreed a deal to buy half the shares in a business called TrainFX from stricken AIM outfit, Vision Media Group (he went on to snap up the balance of the stock in September 2010). Under its previous parent, TrainFX had developed the technology and systems for installing information screens into train carriages, providing operators with a way of communicating and advertising services to passengers. A contract with First Great Western was subsequently signed, installations are underway and the first systems are now in use. Baldwin followed the TrainFX deal with a tactical and highly serendipitous move in November 2009 to buy the operating parts of another distressed AIM company, Avanti Screenmedia Group. Not only did that give him access to Avanti’s technology and out-of-home advertising network focused on shopping malls, it also strengthened the group’s offering to advertisers and content providers.
Both businesses – TrainFX and RAM Vision – were brought together under Baldwin’s AIM listed cash shell, RAM Investment Group and in the six months to June 30, delivered revenues of £0.6m and pre-tax losses of £1.4m. His focus is now on driving what were predominantly research and development businesses into profitable enterprises – and the industry statistics are firmly in his favour.
According to the latest figures from the Outdoor Advertising Association, outdoor revenues rose by 12.4% to £212.2m in the three months to September 2010. Among those ramping up their outdoor spend were retailers Marks & Spencer Group (LON:MKS) and H&M, car makers Vauxhall and Renault, food giants Kellogg’s and Cadburys, finance groups Royal Bank Of Scotland Group Plc (LON:RBS) and Nationwide and technology groups Samsung, and RIM. Overall the biggest outdoor advertiser was
Unlock the rest of this article with a 14 day trial
Login here
Hi,
I thought this interview raised some very interesting points. RAM are a tiny company (market cap £5.3m) but they look like they have a lot of potential. Steddieddie has a great thread here for anyone interested in more detail but the following jumped out at me from this interview:
- It was good to hear management raise the point that "You had a captive audience for around 40 minutes compared with the likes of the Underground, which is about three and half minutes". That must be a great selling point.
- This never occurred to me and again sounds like it is a strong selling point and offers RAM Vision a distinct advantage over their rivals ( the much much larger Clear Channel and JCDecaux) "all the advertising agencies are recognising that their direct copy through the big brands doesn’t need to be reformatted to get out onto our estate – and that’s the key. If the likes of Guinness are spending £10m on an advert the last thing they want to do is reformat their copy to go onto a Digital 6 sheet [a portrait style advertising board], they want that copy to go directly onto a landscape screen, which is how it was meant to be delivered"
- Also the fact that the outdoor marketing has been quite resiliant during the last few years. "that when the overall advertising market was down roughly 20% in the recession, the digital out-of-home market was actually flat, so it didn’t decrease".
- that there is less money to buy new rolling stock is working in TrainFX's favour as the companies have to upgrade existing stock to comply with the EU regulations.
- Their target market do seem to like what TrainFX can offer: "of the last five tenders that went out in this particular space TrainFX won four of them." So an 80% success rate. I certainly wouldn't be so daft as to think that that 80% rate could continue but with a "pipeline of potential orders of £78m", if they can even get 30% of those, it will give revenue of £23m. The margins tend to be 35% so that gives a profit of over £8m (and note, the market cap is £5.3m!). Definitely worth noting though that these are one-off sales, not on-going recurring payments or anything like that. In November 2009, they won a contract to fit out 150 Great Western carriages and they make the point that "the assumption is that you’ll do the rest of their fleet because the idea is that it is a straight pollination from one carriage to another." i.e. it is very reasonable to think that Great Western will want all their carriages to have the same communication system so they may have done the hard work in getting their foot in the door initially with the 150 carriage contract.
"The company, in the final quarter of this year, should have gone into profitability and we’re looking at a profitable business going forward into 2011"
I've put my money where my mouth is anyhow.....
