A lot of IR is ‘just common sense,’ says Ross Porter, Newell Co’s award-winning IRO. ‘It’s just being out there and being active. Be accessible.’ He pauses for a moment and adds, ‘Here’s a simple one: return phone calls the same day.’
It is a deceptively simple formula that helped garner him enough votes to be named as best IRO for a company under $10 bn market cap in this year’s Investor Relations Magazine US Awards. Newell also took the accolade for best senior management communications, as well as an honorable mention for best management of disclosure policy.
It is an impressive round-up for a relative newcomer, and one that is prepared to break with some of the most awesome rituals of IR practice. Above all, Newell does not hold conference calls. ‘We’re a very acquisitive company and our CEO and CFO are on the road all the time looking at acquisitions. You really can’t pin them down for four days to do quarterly conference calls,’ he claims.
As Bill Shakespeare, IRO for the Globe Theatre, may have said, some are born great IROs, some achieve greatness in IR, and some have greatness in IR thrust upon them. Porter meets all three categories. ‘You learn on the job,’ he says, ‘but it’s really helped that there was a serious commitment to IR at the base level and, secondly, on our disclosure policy. Once we had that sorted out, we could develop excellent relations with the Street.’
Porter began as a CPA for Peat Marwick and then moved into industry with Sunstrand, before joining Newell in 1992. After six months he was made IR manager, and as he says modestly, ‘A lot of things have happened. We put together the disclosure policy and we really stepped things up a bit. Two years later I was promoted to director, which reflected how much more work we’ve undertaken over the years.’
At the end of 1997 he was made VP for IR and financial reporting, presiding over his IR empire of three people, including himself. In fact when asked about crisis management, he suggests his most problematic area was the desperate need to fill the vacancies for IR manager and IR specialist who together with Porter comprise Newell’s IR triumvirate.
Buying brands
Newell’s prominence on the Street is in some ways intriguing since it has a less than stellar corporate brand name on the streets, despite specializing in brand acquisitions. The Newell brand is big in drapery hardware, but analysts and investors do not usually palpitate at the prospect of a well-known curtain rod. Unless, of course, effective investor relations has brought to their attention other household names like Levolor, Rolodex and Calphalon, all of which the company has bought and ‘Newellized.’
Instead of an over-arching corporate brand for marketing and IR, the company is branding a process, ‘Newellization’, for the Street. The process demands a 15 percent annual growth rate, and acquisitions of brands that are close to the niches the company already occupies. ‘Our goal is to be number one or two in each of the markets in which we compete,’ Porter explains. ‘We typically buy underperforming companies that fit strategically and make them solid performers. It’s not rocket science. It’s what you and I would do if we bought a company in a category that we were already in – for instance pruning non-productive product lines and centralizing administrative functions.’
A vital part of the Newellization process for acquisitions is quality of service and on-time delivery for giant customers like Wal-Mart and Home Depot. ‘The common thread is the customer,’ Porter says. ‘The divisions go to market separately, but they don’t have to worry about accounts receivable, credit or bank accounts because it’s all handled centrally.’ As is, of course, the investor relations function.
Natural ratio
The consistently met 15 percent growth target means that ‘naturally we have growth investors and some value investors. So we try to get a good ratio of growth and value – without a lot of momentum,’ he says, admitting wryly that of course you would only discover the momentum players if the 15 percent were to falter. First Chicago Trust Co helps take the strain with stockwatch and transfer facilities.
The stockholders’ breakdown is about 65 percent institutional, including around 10 percent from overseas, and 10 percent insider, including the founding family stake. The remainder are individuals, to whom Newell devotes a lot of attention. ‘It’s a pretty good split, and we’re active on both sides,’ he says. On the individual side, he has focused on the National Association of Investors Corp. The company attends half a dozen regional fairs a year, but Porter notes: ‘We only go if we can present the story in front of the crowd.’
Newell’s various brands make it a relatively easily marketable story, and the company is 29th on the list of NAIC investor club holdings. Porter has noticed increasing sophistication on the retail side, but no signs of the volatility that some are claiming: ‘The people I speak to at these fairs have owned Newell for a long time,’ which also indicates their sophistication, he implies.
The branded products are useful, too, for keeping stockholders happy at the annual meeting. There are usually samples of the product that they can take home. This year it was not curtain rods but a new Rolodex organizer.
Road warrior
On the institutional side, the 20 or so analysts who keep Porter at the top of their Rolodexes show no signs of withdrawal symptoms from the lack of conference calls. But just in case, Newell offers them ample therapy. Each year, the CEO and CFO address in person around ten investor conferences, and they make two trips a year each to New York and Boston for one-on-ones. ‘We also do Chicago, Los Angeles, Minneapolis, San Francisco, Atlanta, Denver, Philadelphia, Baltimore and Toronto at least once a year, and London twice a year,’ adds the peripatetic Porter, who of course is along for every trip.
The team goes to London for the spring and fall consumer conferences held by Morgan Stanley and Merrill Lynch, taking the opportunity to schedule one-on-ones while there. ‘Every now and again we consider other listings like London, but it’s hard to tell how much benefit we’d get.’ For now, Newell settles for listings on the NYSE and Chicago Stock Exchange.
Along with Newell’s CFO, William Alldredge, Porter attends various trade shows across the States, inviting analysts for tours of the Newell display and offering the opportunity to speak to divisional management. The latter option is also provided several times a year on plant visits.
Some larger conglomerates tax analysts’ taxonomic skills when their diversification spreads them across several different industry sectors. Newell escapes this problem, Porter says, because all its divisions can be classed under the heading of consumer non-durables. ‘Although we have 20 different divisions, in office products, housewares and home furnishings, the common thread is that we sell to the volume purchaser. Analysts sometimes slot us with Rubbermaid, but we really don’t have a peer.’ Newell recently pulled further away from the pack with the acquisition of Rubbermaid’s office products division.
The Ross Report
Analysts’ reactions to the missing conference calls are, according to Porter, almost the opposite of withdrawal symptoms. ‘They’re happy not to have to do another conference call and to have the information at their fingertips,’ he says.
To get that information into their hands, Porter introduced the ‘expanded analyst fax’, which adds around six more pages of detail to the quarterly earnings press release, and tries to anticipate the questions and answers that they would otherwise have had to extract from the end of a telephone. ‘That’s had very good reviews,’ he says. These quarterlies are in turn supplemented by faxes that Porter’s staff named ‘The Ross Report’. These bisect the quarter with updates on recent acquisitions and progress. ‘We keep throwing information at the analysts to keep the Newell name in front of them,’ Porter says of this basic Pattonesque strategy.
In fact, about a quarter of Porter’s fax list now goes out via e-mail instead, and the proportion is inching up slowly, despite regular requests for more recipients to forward their e-mail addresses. However, Porter dismisses any claims to the frontier of investor relations technology. ‘We’re not necessarily cutting edge. We put a very basic web page together that leads to our divisions. We just don’t put a lot of money in those things unless there’s a significant payback. We’re a very cost conscious company.’
No turf wars
That productive parsimony reflects another aspect of Newellization: ‘It’s a lean company with a small corporate staff that has a lot of responsibilities but also a lot of authority.’ The IR department’s responsibilities include publications, annual reports, fact sheets and all other written materials. There is no PR or corporate communications department which Porter says has been very helpful: ‘We don’t have a lot of committees, meetings or turf wars.’
The honed centralization of Newell’s administration also allows rapid access to management and information at every level. The investor relations department reports to the chief financial officer but also talks to the chief executive officer ‘about five or six times a day.’ For the quarterly meetings of the board of directors, Porter assembles a report for the CFO on investor relations, markets, the state of the stock and of the competition and peer companies. The information from the divisions is easy to cull since all accounting is on one centralized computer system.
Comfort range
Having assembled the information, Porter has to decide what can be used and what can’t, which is where the disclosure policy comes in. ‘Typically, we indicate comfort ranges for EPS – except during the quiet period, from the end of the quarter until the earnings release. And we’ll review analysts’ reports but we’ll only comment on the factual information they contain. You just have to look at the facts. If they have a ‘hold’ rating, that’s their opinion and you should respect that,’ he says indulgently.
Ross Porter’s attested popularity with the investment community boils down to a few basic but often overlooked principles of investor relations: make sure there are no surprises, get as much relevant information out as possible, and above all, return the phone calls. It is of course useful to do all this with a successful and growing high visibility company, but the basic formula works all the time.
