The summer of 2012 is expected to be busy for Poland’s Abbey House, as the company is preparing to list Art&Business Magazine, which is the next step toward achieving the ambitious team’s goal of creating a prominent art market in Poland and simultaneously being a leading player in that country. Established in 2010 and publicly listed last year, Abbey House has impressed market watchers both by the speed of its development as well as by the amount of activity carried out on the tiny Polish art market. In this issue of Skate’s Market Notes, we examine the state of Abbey House on the eve of its listing of Art&Business Magazine.
Abbey’s growth is obvious. Since its inception, the company has doubled its market capitalization, which now stands at $30 million, a figure that is comparable to long-term players artnet and Weng Fine Art. Revenues are also growing tremendously, $8.3 million in 2011 compared to $1.3 million the year before.
This rapid development can be attributed to the company’s dynamic activities directed at three main parts of their business. By working to create strong players from the ground up, all of Abbey’s business units are meant to complement one another and serve the purpose of establishing the Polish art market on both the local and global level, thus positioning Abbey as the key expert when it comes to contemporary Polish art.
First, Abbey House is a contemporary art auction house that serves as a sales platform for established contemporary art as well as artworks owned by Abbey. The latter include paintings that are continuously created by a group of 12 diverse artists that Abbey financially supports and promotes. Carefully selected by artistic experts and approved by Abbey’s board, these artists are recent graduates in search of patronage. Although Abbey is also a young company that has yet to be fully established, the strategy seems to be working. For example, Anna Szprynger, the top artist represented by Abbey who specializes in geometric art priced around $5,000 per work, is currently having a personal exhibition at a major Polish institution—the National Gallery in Sopot. In 2011, Abbey House sold 245 artworks, the most valuable of which fetched PLN 40,000 (approximately $12,000). Although relatively low by global standards, these figures are nevertheless quite significant for the small Polish market.
An art investment fund, the second part of Abbey’s business mix, is also a unique structure for the Polish art market. Abbey Art Fund invests in SPVs that later transfers funds into both public and private firms in the art market, global art funds, collections and particular works of art (e.g., Polish icons such as Wojciech Fangor). The fund always leaves 20% of its assets in cash. As of June 29, 2012 the net asset value of Abbey Art Fund stood at PLN 10,021,000 ($2.9 million). The price per certificate over that period grew to PLN 111.44 from an initial price of PLN 100.00 (August 8, 2011). The Abbey Art Fund is therefore providing its 90 mature investors with returns on alternative assets. Abbey claims the investment potential for Polish art is high as, according to the company’s calculations, repeat sales have brought positive returns over the last several decades.
Art&Business Magazine, acquired in 2010, is the third part of the company’s business mix and is Abbey House’s next big bet. Created in 1989, it is the oldest magazine about art in Poland and has only undergone a slightly rebranding while under Abbey ownership. In 2010, Abbey acquired 60% of the magazine from Rempex Ltd., the oldest Polish auction house. It later acquired an additional 21% stake. Along with the magazine, the company obtained a complete database of all hammer price records from last two decades on the Polish market, a valuable tool that is gradually being commercialized by the team.
During the pre-IPO process in April 2012, Abbey decided to release old Series A shares, thus decreasing its position back to 61% (10 million shares). The sale of 2 million shares went successfully, raising PLN 1.00 ($0.30) per share. For the third quarter of 2012, Abbey has scheduled a flotation of 10 million shares of Art&Business at NewConnect, Warsaw’s alternative stock market. The current market capitalization of the magazine is small at PLN 10 million ($3 million). Revenues are showing rapid growth, however. In 2011, they barely reached PLN 1 million (almost $300,000) and resulted in a loss, but in the first quarter of 2012 Abbey was finally able to reap the rewards of its efforts, with the first three months resulting in revenues of PLN 440,000 ($130,000) and bringing a net profit for the first time since the acquisition.
Given that Abbey’s performance since listing has been declining over the past year, the magazine listing is a somewhat curious decision. In addition to the inherent difficulties in running a profitable magazine business, Abbey could very well confront the Polish art scene itself a possible competitor. With the absence of strong market players, local art society could eventually be scared off by a company that seeks to play all possible roles simultaneously. It appears as though Abbey House is not threatened by these risks, however, as it remains absolutely confident in its preparation for the magazine’s flotation.
In order to enhance its chances of success, Abbey’s team is approaching journalistic activity in a dynamically different way. First, due to the rich expertise of Abbey’s management, the company is closely cooperating with luxury car brands represented in Poland, which gives it access to the country’s most affluent customers—Abbey’s target audience. To widen its audience, the magazine recently began publishing a shorter and lighter version specifically as an insert for local financial and luxury goods magazines. The magazine also appears in gift sets during major fashion events in Warsaw. Thus, the magazine provides three sources of revenue for Abbey: B2B agreements with luxury goods companies, individual subscribers and free distribution. Finally, Abbey has set up a series of videos called Artoholic that feature Polish celebrities discussing their opinions on art. All of these activities show that Abbey is interested in reaching the country’s wealthiest individuals.
Poland is currently seeing rapid growth in its citizens’ wealth. In admitting Poland’s national habit of luxury goods consumerism, Abbey expects the Polish art market to create new top brands represented by contemporary artists. Yet instead of acquiring simply another luxury product, Abbey is proposing an alternative, highly intelligent way of channeling wealth through the collection of the country’s national heritage. To serve this purpose, Abbey also conducts regular educational programs aimed at investors and, perhaps somewhat ironically, at children. As Abbey’s leading educational and entertainment tool, the magazine serves to further the company’s purpose of creating a Polish art market that will occupy its place on the global art scene.
YTD Performance of Abbey House vs. Skate’s Art Stocks Index vs. S&P 500