Ask any Londoner to name one of the companies which advertises on the outside of the capital’s infamous ‘black’ taxi cabs and chances are they’ll suggest the Evening Standard or one of the big brand name consumer goods which chooses this medium for reaching its market.
But there’s been a small addition to the ranks in recent times, which won’t mean much to the majority of onlookers. One teleconferencing company has had its name emblazoned onto taxis which trawl the city centre in the hope that some chief executive-type, or an IR officer stuck behind it in the traffic will register the need for its services. That teleconferencing firm in question has even booked air time on London’s easy-listening Jazz FM to reach the same audience in their relaxation time.
Nothing strange in that, you might say. But it is an indication that a service which has become commonplace in the US is finally catching on in the UK. When it’s reached the point where it’s worth a teleconference company’s while (and money) to splurge its name to all and sundry instead of focusing on a targeted population, you can safely assume that it’s taken off.
In the investor relations context, that ain’t necessarily so. Although a large number of US companies have sworn by the art of teleconferencing for a number of years as a means of getting the message out to the investment community, the bulk of UK and European work remains in the internal, customer and supplier communications fields.
Witness the fact that the International Teleconference Company (ITC) in the US reports that IR calls account for around 30 per cent of annual business – while for operators in the UK, such as Darome and ACT Teleconferencing, that figure drops down to around 10 per cent and 2 per cent respectively. Meanwhile, continental European and Asian companies are only just beginning to discover the medium.
Of course, much of this difference can simply be put down to geography. If all your investment audience is London-based, it’s just as easy and more accessible to put on a live presentation for analysts and fund managers within the Square Mile as to run a telephonic one. But if your audience is scattered across the US from New York to San Francisco, teleconferencing as an IR tool provides a neat way of announcing results, dealing with crises or relaying other company news.
Similar advantages apply, of course, to European, Asian and African companies with an international investment following – and that’s where teleconferencing is making its IR mark outside the States.
George Mackintosh, general manager of international business at Darome Teleconferencing in London, points out that continental European business is rapidly expanding, particularly in Germany and Switzerland. South African companies are also getting in on the act with their new found access to the international business community. And Hong Kong’s listed companies are benefiting from a recently opened Darome operation in the colony.
Mackintosh says that one of the biggest barriers to providing teleconference services to new markets can be persuading businesses that it is possible to run a teleconference from their country. Many potential clients believe that the service is dependent on the power of the domestic telephone system. Once this misapprehension has been straightened-out businesses are keen to hear more.
Hugh Morrison, a director at Financial Dynamics in London, recognises these cross-border advantages of teleconferencing and has used it for clients such as Axa, the French insurance group. ‘Teleconferences should be utilised by really big companies talking to international investors and analysts,’ he says. ‘I would recommend it to other clients. However, it is in no way a replacement for face-to-face meetings. We considered using it for EuroDisney during its financial restructuring but felt that the issues were so important that they needed explaining face-to-face.’
These sentiments are echoed by a number of other consultants, who point to the savings in management time and travel costs; the immediacy and consistency of contact; and the level of control which today’s teleconferencing services can offer clients. Not surprisingly, it’s difficult to find a company or consultant who’s willing to admit that the principle reason for using teleconferencing is that it’s cheaper than going out on the road. In common with Morrison, the general feeling seems to be that there’s no substitute for allowing investors to see the ‘whites of the eyes’.
Taylor Rafferty & Associates is an investor relations consultancy which specialises in accessing the US investment community for foreign issuers and, as such, frequently uses teleconferences for its clients. Brian Rafferty makes a clear distinction between ‘maintenance’ and ‘missionary’ investor relations, and says that teleconferencing is an ideal tool for keeping existing followers of a company up-to-date, but is ineffective as a means of contacting those who don’t yet know a company’s story. Richard Taylor, of the firm’s London office adds: ‘It’s a great way of providing comfort to investors who are far away, and on balance we’re using it more and more. But we wouldn’t want to use it for a situation where complicated news has to be explained.’
Most teleconference services now come replete with various optional extras, which make handling an IR conference call a tighter and better controlled process for the issuer. Broadcast faxing notifies participants of the time of announcements and when to expect a call from the operator or when to dial-in. Many issuers also use this service to back-up their audio presentation with charts, graphs or text releases, which the listener can follow as the information is relayed through the handset.
Question and answer sessions after a presentation are now standard, allowing fund managers and analysts to grill the CFO or chairman on the preceding presentation by indicating their desire to ask a question via their touch-tone phones. This is where the issuer can exercise real control, by providing the operator with a preference list of favoured institutions and personnel.
Surveys on the reaction to particular points of a presentation can also be made through the listeners’ key-pads, allowing the IR department to get immediate feedback. Despite a reluctance from some members of the investment community to reveal their blow-away questions in the open, most realise that it’s the one point after an announcement at which they can get real-time access to management so they join in.
For those who can’t find the time to listen in to a conference call from their office, car, hotel or airport lounge, there’s always the option of dialling-in later to hear a digital recording of the announcement. This service helps combat the time zone problem which faces those with a wide geographic spread to their investment base.
Tom Kaser at ITC suggests that, with so many teleconference companies now providing similar services, the ones which offer flexibility to their client will win through. Kaser singles out an investor relations call ITC recently set up for a client to announce the attempted purchase of a large US company. The call was initially reserved as a press conference for 300 participants but, minutes before the call, analysts were granted access and over 900 ended up listening in.
So in what situations can a teleconference prove particularly useful for the investor relations fraternity? Aside from the more run-of-the-mill interim and year-end results presentations by teleconference, many companies turn to the medium when it’s just downright impractical for management to go out on the road.
Gary Sharpe, director of investor relations at Hawaiian Electric Industries (HEI), recalls that when Hurricane Iniki struck the Pacific state on September 11, 1992 the company needed to talk to its investors fast. At that time one of the subsidiaries of the diversified holding company was a property casualty insurance company, and with initial damage estimated at around $50 mn there was understandable concern among institutional investors.
With the help of its IR consultants on the mainland, Christensen & Associates, the company staged a series of teleconferences over a 5-6 month period to explain the developing situation. Initially there was a great deal of confusion over which island had been badly hit and what that meant in terms of property damage, so HEI kept the investment community informed as well as it could as new damage reports came in. HEI eventually estimated that claims would exceed $300 mn. Sharpe says that, although it wasn’t good news being given out, the teleconferences helped reassure investors about the severity of the actual situation and it contributed to stabilising the stock price in New York.
Due to the six hour time difference between Honolulu and the east coast, faxes were sent out to key institutional investors at 2 am Hawaii time to advise that a conference call would take place three hours later. ‘We dragged ourselves into the office at five in the morning in order to talk to New York before it got too late in the day so that there would be plenty of time to respond to news while the market was open,’ says Sharpe. He reports that the calls were recorded so that those who couldn’t listen in had the chance of playing it back later. ‘The teleconference proved to be a great tool and one we consider using all the time. It provided immediacy, access to senior management, and the ability to get the story out right using our most persuasive speakers.’
Hanson plc went one step beyond the simple teleconference route when it announced the spin-off of US Industries back in February. It combined a Darome audioconference with a live presentation in London and a video link-up to New York. ‘We were making a major announcement and wanted to treat investors on both sides of the Atlantic equally,’ says a Hanson spokesperson. ‘The magnitude of the announcement and personnel involved warranted a special event.’
After a presentation explaining the demerger of some US interests there was a question and answer session with enquiries taken in turn from the floor in London, the video-linked audience in New York, and the 200 or so listeners on the telephones spread across the UK, continental Europe and the US.
This was the first time Hanson had used the transatlantic video link-up in conjunction with a teleconference and, by all accounts, it went down well, despite a short technical hitch towards the end of the Q&A session in which those gathered in New York lost the picture, so to speak.
Does this mean then that the traditional audioconference over the telephone is about to be phased out and live video conferences become the order of the day? Possibly, but not until it becomes standard to have a live video link-up on all analysts and fund managers desk-tops. As the Hanson spokesperson points out, the disadvantage with video link-ups at the moment for IR work is that people have to leave their desks and go to a central location to see the screen, whereas everyone has a telephone.
Companies like PictureTel are forging the way ahead in the videoconference market. Carla Raffo, European director of marketing at PictureTel, says that its recently-launched desktop system allows dial-up videoconferencing to be added to a personal computer with an image in the corner of the screen. But although the systems are being used in the financial sector by Chase Manhattan and Citibank for internal communications, it will be some time before it becomes standard to the extent that it is worth considering for an IR presentation.
One alternative is to film the chairman or CFO and then put the recorded presentation out on a business network for the investment community to access and watch at their leisure. This may lack the interactive ability of conference calls, but at least it provides the opportunity to see the ‘whites of the eyes’.
Aside from providing video conference station-to-station facilities, MediaLink is developing its investor relations service along these lines by recording a video version of results for clients and then putting it out on systems such as the Dow Jones Business Network. Rebecca Iveson, director of IR services at MediaLink, says that the service has proved particularly popular with clients who have ADR listings or significant operations in the US. But US clients have found it useful as an investor relations tool, too. MediaLink says an IR message put out on the Dow Jones Business Network for a US fast food chain, which had suffered in the wake of a food poisoning problem at one of its restaurants, helped stabilise the stock.
One thing’s for certain, there will be a myriad of opportunities in the next few years for IR applications in the audio and video world as the technology progresses. Most providers in the industry insist that the growth of the Internet as a communications network is unlikely to affect the expansion of their own investor relations business – although it may be linked in to provide further information to recipients of an IR message.
David Lipsky of Americo describes the Internet as a relatively poor communications device, not ideal for IR purposes because of difficulties – so far at least – with real-time interaction. Nor is it a targeted means of communicating information. When price sensitive-news has to be disseminated to the global market on a real-time basis with the option of interaction with management, there still doesn’t appear to be anything to beat the ease of a teleconference.
