Imperial Chemicals Industries has come a long way from its origins on the cutting edge of the British Empire. Now international rather than imperial, it has also hived off its bio-businesses creating Zeneca, and acquired some of the businesses of another former imperial stalwart, Unilever.
Take a stroll along the Thames from the House of Commons and you come to the ICI headquarters. Here you’ll find the IR team of Vincent Leheny and Barbara Wijngaard, who together with one administrative assistant make up the IR department. They’ve been busy telling investors across the world how the company has been transmuting base chemicals to gold or its equivalent in stock. The current plan is for the $18 bn turnover company to be the ‘world leader in the chemical industry in creating value for customers and shareholders.’
Leheny is group manager for IR, and Wijngaard is UK manager, but ‘either of us talks to any of the IR analysts when they call, wherever they call from.’ The IR department reports to the CFO and is part of the finance group, but CEO Charles Miller Smith visits the IR office ‘almost daily,’ if only to check the Bloomberg terminal to see what’s happening in New York.
Leheny himself was recruited from the States by chairman Sir Ronald Hampel (he of corporate governance committee fame) when he was director of ICI’s US operations, so they have good access, besides senior management’s clear commitment to investor communications.
Old hand
Leheny himself was already an IR veteran in the States, a founder member of Niri, before moving to the UK. He started his career in IR at Celanese Corp back in 1975. That stretched to 1987, when he moved to ICI. Wijngaard joined ICI in 1990 from the City, swapping treasury for IR in 1995.
Their IR careers with ICI have been enlivened by the company’s vigorous and repeated reinvention. One of Leheny’s first jobs on arrival in London was preparing the IR strategy for the union of ICI’s specialty chemicals, biochemicals and pharmaceuticals programs and their subsequent disposal as Zeneca. ‘Just a well-planned, well-organized communications effort,’ he says of what was surely a high tension task.
It involved working with the future Zeneca management group until they appointed their own IR officer. But while waiting, he had to call upon the technical people to explain to the market the linkages between agrochemicals and pharmaceuticals. And of course, ‘We had to explain why we thought the demerger was necessary.’ Although since emulated on both sides of the Atlantic, back in 1992 the move looked ‘heroic’; it could have seemed to the investors more like madness than a bullish initiative.
Last year both Leheny and Wijngaard worked on the acquisitions from Unilever, followed by several major disposals. One-on-ones were the preferred method of selling the transmutation to the investors. But the work is far from over, Leheny explains. ‘Before, we were coatings and bulk chemicals. Now we’ve pretty much got rid of a large part of the bulk chemicals. The nature of the group is quite different and we are going to be valued quite differently, particularly in the US, because we’ll grow and develop differently from what we had in the past – the cyclicality element has changed.’
Grabbing attention
In both major corporate metamorphoses, a major challenge was to seize the attention of the appropriate analysts, or at least to inform existing ones whose original field of expertise was being left behind by the company. Leheny exemplifies this with Zeneca. ‘We had to make sure that we had sufficient communication to attract the pharmaceuticals analysts to get the right valuation on the new company.’
Wijngaard notes the development of analysts in specialty chemicals as opposed to more general followers of chemicals. ‘It already exists in the US but they’re beginning to emerge here because they’re no longer looking at the bulk chemical end; they have to look at a different animal. It becomes a major task for the IR department to make sure that we’re in contact with the right population and that people understand that we’re a different company.’
They also found that lack of familiarity bred contention or at least a dramatic rise in questions as analysts sought to grasp the changes in the companies. The responsibility for education lies heavily on management, who have to remember to elaborate on their answers, not to assume familiarity. Wijngaard detects a learning curve of about six months, ‘before something promptly registers and is accepted.’
Leheny and Wijngaard have had to do some quick learning themselves. Although ICI is an important component of the domestic index, it is increasingly global in its reach. However, Leheny admits, ‘When we step back and look at how we manage the IR communications effort here I think it’s mostly an Anglo-American program.’
Even so, they meet with some of the continentals, particularly Dutch and Swiss investors, and there are holders in France, Germany and Italy. ICI dropped its Tokyo listing with the demerger of Zeneca, finding, like so many others, that it just wasn’t cost-effective.
The two ascribe the heightened US interest to CEO Miller Smith and his efforts to explain the new strategy. ‘Americans believed the story, and liked what they heard,’ Wijngaard comments. It was not as if the company had just landed, since it was one of the first British corporations there. ‘We were bundled up with three other UK companies by JP Morgan round about 1929,’ Leheny says, reporting the later move from an unsponsored ADR into a sponsored program in 1983.
The company has about 20 percent individual investors, who are handled through the corporate secretary’s department. There is a low-cost dealing service and a PEP, the UK’s tax-advantaged investment scheme (just rescued from extinction by an embattled Chancellor of the Exchequer), but the IR efforts remain directed at institutions.
‘In the UK we spend a larger proportion of time talking to the brokers’ analysts compared with the US where institutional analysts are just as frequent callers,’ says Leheny. ‘In the UK the latter seem somewhat inhibited although we’ve been trying to encourage them to call us directly.’
Dealing with the two markets demands other different approaches, too. ‘The London market is a core holder for the most part while the American market is a mixed story,’ he adds. ‘You get core holder ownership out there but you also get more turnover activity, people who come in and trade out within a year or two. Even so we’ve felt we have had a strong consistent ownership there.’
Of course, Leheny’s American connections help. ‘I’ve had many dealings with most of the institutions in the US. For an international company your core US target market is the East coast, Chicago and Minneapolis and perhaps Los Angeles, San Francisco and Portland. But that’s not to say that you don’t go to places like Milwaukee, Atlanta or Houston. There are investors in those cities that you must at least see once a year or every year-and-a-half.’
The meetings and telephone calls keep them aware of who is interested in the stock and the major buyers and sellers, but they do have a monitoring service working on initial deals. In contrast, for the UK they rely much more on the brokers, in a way that would be unheard of in the US. ‘They don’t just go by the data, they also have a feel for the market from working in it daily, and that makes them more valuable to us than having a support reporting system.’
Techno preferences
Similarly, the use of technology is different. The web site is less important to UK investors, ‘because they have Reuters,’ than to analysts in the US. However, although ‘the American market likes faxes, the internet is very important to some of the Americans when we put our press releases out at 7.30 am London time. We find that when they know our results are coming up the sell-side brokers and institutions are in their offices at six in the morning, pulling it out of the web site, reading the faxes. Many of them must have terminals at home.’
Teleconferences, blast-faxing and an up-to-date web site aren’t enough, Leheny says, to keep the US financial community happy. ‘For a transatlantic investor relations program we like to get out and meet our investors, to actually sit with them in the same room because some of the questions and answers that you get in America will be totally different than you get over here,’ he says. Hence, the intensive multi-meeting schedule of roadshows in the US at least twice a year. ‘It’s what’s expected if you’re going to have a presence in the US,’ he says, criticizing European companies who think an annual Stateside meeting is enough.
After his battles of almost a quarter century on the IR front, Leheny has strong opinions about what’s needed for the job. ‘If you can get financial people who can communicate, you’ve got a good combination for financial communications.’ That does not preclude close work with corporate communications: ‘In fact our office is next door, and we have a very good relationship with the press office.’
But the media relations and IR functions do remain distinct. Happily, for Leheny and Wijngaard that means avoiding much of the noise created by the press on various issues. For example, with ICI chairman Ronald Hampel heading up the UK’s recent corporate governance committee, the UK media are particularly eager to catch the company out on any slip-ups. In March, the press was running negative stories on ICI’s share option schemes for directors and senior management – claiming they were exhorbitant. However, the IR department remains largely unaffected by such stories, says Wijngaard. ‘To date, in this department, we’ve not really had any strong reactions from investors – it’s only been an issue for the press.’
Still Leheny uses the 1997 annual report as an example of where the two departments work closely together. ‘The year’s results have been very difficult numbers to explain. We’ve got on-going businesses, businesses to be sold that we’ve made deals on, and exceptionals.’ That, he concludes, was much easier to explain from a financial perspective than it would have been for someone from public affairs who lacked an understanding of finance.
Somehow, you feel that neither Leheny or Wijngaard would be able to settle down quietly if ICI ever finally settled its shape and left them without the corporate alchemy to explain.
Analyst notes
Jeremy Chantry
Credit Lyonnais ‘
Most companies do not have ICI’s resource base. Over the last year it’s been busier than ever in its history because of the restructuring. The news flow has been fairly intense, and sometimes it has not been easy, because they can’t say as much as they’d like about the disposals because of disclosure rules.’
Peter Clark
SBC Warburg Dillon Read
‘There’s always someone on the other side of the phone and if they don’t have the answer, they will go back to the divisions and find out. Their accessibility and rapid response stand out.’
Apart from consistent news flow, Clark praises them for the thorough and regular presentations on all the group’s divisions and for the access to divisional management.
Colin Isaac
Deutsche Bank
Isaac also sees ICI as ‘very efficient, with a steady flow of news. The larger shareholders are happy with the way the CEO and CFO have visited them, despite being initially skeptical in the UK.’
Andy Cash
Paine Webber
Cash recognizes the benefits of ICI’s Transatlantic IR. ‘They routinely come to New York, get out in the field, and they take pains to expose their management to investors.’
Asked about how well ICI has explained its reinvention, he says indulgently: ‘They can’t really. All they can do is give general guidance, and they’ve done a good job laying out the strategic program.’
Nick Spencer
Sanford Bernstein
New York-based, Spencer covered ICI during its most intensive reorganization. ‘Communications with the US were very good, much better than many European companies, in terms of, for example, exposure to senior management.
