In the latter half of 1999 the heads of investor relations at Anglo American, Rio Tinto and Billiton met to discuss how they might coordinate analyst site visits. The visits are expensive for analysts, who usually have to pay their own way. Since they frequently involve mines in some of the world’s more remote areas, they are also time-consuming.
The IR officers of the three major London-listed resource companies agreed that it would make sense to show analysts around the operations of all three companies on one continent in a single visit. Logistics are expected to be the main problem – how to get the crowd from, say, copper mines in northern Chile to coal mines in Colombia, or from gold mines in Mali to aluminum smelters on South Africa’s Indian Ocean coast.
The meeting says something about that relatively new feature on the London Stock Exchange, a resources sector. Three years ago, Rio Tinto, which makes up about 1 percent of the FTSE 100, was all on its own. Now, following Billiton’s London listing in 1997 and Anglo’s in May last year, there are three resource stocks in the FTSE 100 – together making up 3-4 percent of the index.
That makes the sector a significant player, within which UK investors have a certain amount of choice. And it gives all three companies an incentive to educate buy and sell-side analysts about the global intricacies of the resource business. But the three-way meeting is also a striking illustration of change at Anglo, which over the past year or two has taken investor relations on board with a seriousness and an openness that stand in stark contrast to its somewhat arrogant style of the past.
Big gorilla
Anglo was (and still is) the big gorilla of corporate South Africa. Founded some 70 years ago on the gold mines of the Witwatersrand, it has built up a variety of mining and industrial concerns. When South Africa’s economy was closed off from the rest of the world, Anglo spread its tentacles to encompass almost every sector of the economy. Ten years ago it controlled, on one estimate, companies representing more than half the market value of the Johannesburg Stock Exchange.
It was the big fish in a smallish pond. With its move to London last year Anglo suddenly became merely a middling-sized fish in a very large and competitive pond. Its approach to IR has had to change. Indeed, the group’s whole image has undergone a revamp.
Anglo always took financial communications seriously, employing large numbers of people to send out press releases, organize presentations to analysts and media and produce carefully worked annual reports and chairman’s statements. But it was selective about what information it released. The group and its directors were widely perceived as arrogant, telling the market only what they felt it ought to know. It would have been unheard of (and probably unnecessary, given South Africa’s cosy corporate culture) for the chairman to pop in to visit shareholders.
Today, by contrast, chairman Julian Ogilvie Thompson and his executive team do roadshows and conference calls, visit fund managers and host lunches for analysts. Moreover, they are ‘in listening mode’, says Anglo’s London-based senior vice president for IR Nick von Schirnding.
Complex story
Doing IR at Anglo is no simple matter. Though its primary listing is in London, the bulk of Anglo’s assets and its employees, including most senior executives, are in South Africa. So are its shareholders, though there has been a marked shift in the shareholder mix since the London listing in May last year. The group has operations on five continents, in ten different commodity and industry groups. And though it has been greatly streamlined over the past couple of years, Anglo remains complex, with a string of listed subsidiaries and associates.
The IR function in itself takes some explaining. Von Schirnding is one of two IR senior vice presidents. The other is Johannesburg-based Anne Dunn. While von Schirnding reports to Anglo’s London-based finance director, Tony Lea, Dunn reports to Rupert Pardoe, finance director of the South African company. Von Schirnding came to the London head office from Minorco, Anglo’s Luxembourg-based offshore arm before it was merged with the South African company to form Anglo American. He had joined Minorco in the mid-1990s as its first IR manager so had experience in the London market.
Dunn, who now heads up Anglo’s corporate communications department in Johannesburg, was recruited in 1997 as the group’s first full-time IR manager. She came from Billiton where, as IR and financial media relations manager, she had worked on the team which prepared the way for that group’s move to London – a first for corporate South Africa and at the time somewhat controversial. Over at Anglo, she did the same, introducing a more active approach to investor relations and working to ensure the market understood the complex series of transactions by which the huge group tidied itself up and prepared itself to become a UK-listed plc.
Though there were apparently some initial concerns in Johannesburg that the communications and IR arm there would be marginalized when the center shifted to London, it all seems to have settled down. And Dunn has ensured South African investors and analysts were not made to feel they came second. The group has also taken care to retain some of its Johannesburg habits: interim and year-end results are still presented (from London and by video to Johannesburg) to analysts and journalists together, in contrast to London where the two groups are usually separated.
The system of two IR centers works surprisingly well (and is not dissimilar to that of Rio Tinto, which is dual listed in London and Australia). Von Schirnding and Dunn speak on the phone every day, comparing notes, collating feedback and ensuring that the message which goes out is consistent. Von Schirnding takes charge of the shareholders on the London register while Dunn looks after those on the separate, Johannesburg register – a neat division since the free float is divided roughly half and half between the two centers.
Change management
One of the key things Anglo wanted to achieve by moving its domicile and its primary listing to London was to broaden its shareholder base. Since it already had operations worldwide, and aspires to expand globally, it wanted access to a universe of funds broader than the limited pool available from South African investors and global emerging market funds.
The change in the mix of shareholders has already been achieved to a certain extent. No more than 10-12 percent of the shareholders in the old Anglo American Corporation were non-South African investors. Now, by contrast, about half of the free-float of 52.5 percent (diamond group De Beers and the founding Oppenheimer family hold the rest) is held in the UK, and some US and continental European investors have come in to the stock too. Much of the UK buying, though, has come from the tracker funds which had to invest in the stock once Anglo was included in the Footsie in June. It now ranks 20th on the index, of which it makes up about 1.3 percent.
‘The real challenge for us is to get a significant number of active funds on board, and indeed overweight in Anglo relative to its peers,’ says Von Schirnding. ‘We are making progress but we need to make much more.’ The group is seeking new, non-South African shareholders quite aggressively. Lea, Von Schirnding and other directors have two to three meetings a week with potential investors, in addition to the day-to-day work of looking after existing shareholders and taking calls from analysts. An important change, though, is that now many funds approach Anglo – previously it had to go out and look for them.
Still, Anglo is not an entirely easy one to sell, though the run on commodity stocks has made mining a lot sexier lately. Anglo was extensively restructured ahead of its London listing. The group took out minority shareholders and delisted several subsidiaries, and it merged its offshore operations held in Luxembourg-based Minorco with the African holdings in Anglo American.
Enormous complexity
Even so, it remains enormously complex and quite diverse, especially compared to the more focused and streamlined Rio and Billiton. Anglo has seven operating divisions – coal, base metals, industrial minerals, ferrous metals, forest products, industries and financial services. It also has the listed subsidiaries AngloGold and Anglo American Platinum Corporation, respectively the world’s largest producers of gold and platinum. Then there is diamond giant De Beers, of which Anglo holds about a third and which, in turn, holds 35 percent of Anglo. And although the operating divisions are wholly owned, within them are several listed entities, on more than one bourse, such as Highveld Steel (SA) and Mantos Blancos (a 75 percent-held copper mine listed in Chile).
AngloGold and Amplats operate independently of Anglo, and run their own IR operations. AngloGold, for example, which is listed in Johannesburg, New York and most recently on the Australian Stock Exchange, is addressing the rather different constituency of funds seeking exposure to gold. It has built its own, high profile image, most spectacularly when it brought a live lion on to the NYSE floor when it listed there last year. Its IR is led by Johannesburg-based James Duncan, and there is also a New York office.
For Anglo American itself, one of the IR challenges has been to correlate information sent out by subsidiaries, ensuring that their releases go out to Anglo’s own constituency. It has required a bit of education within the broader group, not to mention a fair bit of coordination of dates and times. It also means analysts and fund managers get a huge volume of e-mail – though some say there still is not enough information coming out of Anglo and its subsidiaries. The coordinating of information policy does not apply to De Beers, though, which is entirely independent, and in any event is an associate company of Anglo.
If complexity is one factor making Anglo a challenge to explain, the nature of its operations is another. The London market is on a steep learning curve when it comes to resources but, with the three major companies listed on the LSE, it needs to learn fast. Valuing resources stocks demands technical expertise – which is one reason why Anglo does its IR work in-house, rather than outsourcing.
One of the educational tools it is using is the commodity-focused seminar. Anglo’s forest products division (international paper and pulp group Mondi) held a seminar in London in June, with the division’s chairman Tony Trahar and his operating managers all present. The group has also had base metals seminars in both London and Johannesburg.
See us sparkle
Just prior to the listing Anglo invited key London analysts out to South Africa to see its gold and diamond mines. The visit included a full-day seminar for UK and South African analysts presided over by Ogilvie Thompson and his entire executive team. The experience was good for management too, giving it a taste of questioning from a London perspective. Von Schirnding and Dunn continue to work on putting executives together with analysts and investors on a regular basis. Anglo’s managers, they say, have responded to the challenge. The two IR officers try to keep track of, and attend, all these meetings, and to collate and respond to issues raised. Given the group’s size, and the direct relationships some of the management team have with analysts, keeping track is not always easy. If Anglo’s IR were to be rated, it would probably warrant a ‘most improved’ certificate. But there is still much to be done.
‘They had to put on a bit of perfume and dress themselves up for London,’ comments one Johannesburg stockmarket analyst who is a long-time Anglo watcher. ‘But facepaint is not enough – they need to make themselves really attractive, and the only way to do that is transparency.’ There is no question Anglo’s IR is much better, says the analyst. But the group still has work to do before it can match the high standard set by Rio Tinto and, after some initial IR teething troubles in London, by Billiton.
Anglo’s investor relations people are well aware of the criticisms which still exist. ‘No doubt it is still a complex group for any but Anglo afficionados to follow. Our job at the end of the day is to try to help investors, and potential investors, to understand it,’ says Von Schirnding. ‘And there are moves afoot in a number of directions to streamline and simplify the group further.’
