Abbott adverts dial up success

WINNING the pounds 50m BT account is far from a one-off achievement for David Abbott, the chairman and driving force at Abbott Mead Vickers. His agency went from strength to strength in the recession. While the advertising industry has been shrinking, AMV has continued to grow.

In the past two years it has won pounds 125m of new business - more than any other agency. This has propelled it from eight to five in the Register Meal ranking of advertising agencies, according to billings. With the BT account, the largest ever, it should become number three. Normally, an agency would only leapfrog up the rankings like this by buying a rival.

AMV responded to the recession in an unusual way: it consciously decided to fight a declining market by growing market share. It worked. Unlike other agencies, it has not had to shed staff.

In the three years to the end of 1992, a period in which the UK advertising industry cut 25 per cent of its workforce, AMV did not make a single redundancy.

It is one thing to say you are going to tackle a recession by increasing market share, quite another to do it. Michael Baulk, chief executive, attributes AMV's success to the agency's creative reputation - forged by Mr Abbott, a copywriter by trade - and having had 'the confidence to invest in people during a period when most of the industry was cutting costs as a way of managing itself through recession'.

Mr Abbott puts it elegantly and effectively: 'Do you remember the scene in the film Kramer vs Kramer when the Dustin Hoffman character is fired by his agency boss over lunch? After receiving the platitudes du jour, he folds his napkin and says quietly to his boss: 'Shame on you'.

'There are some managers in our industry who should be feeling shame too. With more thoughtful management in the Eighties, many of the redundancies of the Nineties could have been avoided.

'The alternative to thoughtful management is trial and error and, as a scrabble enthusiast, I'm aware that error is only one letter short of terror. I've also observed that where there's been management error, the terror is usually felt by the employees. Few chairmen fall on their swords because they've had to fire 500 people. Perhaps they should.'

AMV was founded in 1978 and went public in 1985. In March 1991 Omnicom, the US marketing and advertising giant, bought a 22.5 per cent stake for pounds 7.5m from WPP which it has since increased to 25 per cent, and it is an open secret that at some point it will buy the rest. It also merged one of its UK arms, BBDO, into AMV.

Mr Baulk is at pains to stress that throughout its life AMV's billings have grown at a fairly stable rate and that the company has not just put on a growth spurt. Its well-known ads include those for Sainsbury, which star personalities such as Sir Denis Healey giving Sainsbury recipes; the Economist magazine poster campaign; the Volvo campaign, emphasising safety; the Apple campaign featuring a tortoise mounting a helmet; and, perhaps best-known of all, the one for Yellow Pages featuring JR Hartley and his book on fly fishing.

A steady trickle of awards and his shock of white hair have earned Mr Abbott the nickname White God. A rival agency boss says this is down to his dominance of the agency. 'If he was not there, I am not quite sure what would happen.'

In hard numbers, creative flair translated into turnover of pounds 168m for 1992, the last financial year reported, compared with pounds 103m in 1988. Recession has taken its toll, however, on pre-tax profits. The agency reported pounds 4.72m in 1992, having peaked at pounds 5.85m in 1989.

According to Lorna Tilbian, an analyst at SG Warburg Securities, it should report pre- tax profits of pounds 5.5m when it reveals 1993's results in March, and pounds 7.75m for 1994. She guesses the BT campaign, which will run from April to April, is worth pounds 750,000 in pre-tax profits a year.

Although the shares are up about 30 per cent this year, she thinks they are still a buy. 'At the beginning of the year we thought it deserved a 30 per cent premium to the market, which was 660p, and having won this (BT account) - which could boost profits by 10 per cent - we think it is worth 725p,' she says.

Mr Baulk adds that winning the prestigious BT campaign should put the agency on a lot more pitch lists.

In anticipation, the share price soared to a new all-time high of 700p last week. There is also talk in the stock market that Omnicom has decided now is the time to buy the agency lock, stock and barrel - although some wise heads say it will wait until the shares are at less of a premium to its own on Wall Street. AMV, as shrewd a communicator as ever, says it never comments on market rumour or speculation.

(Photograph omitted)

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