June 25 was a night to remember for the 620 who packed into the London Hilton ballroom for the eighth Investor Relations Magazine UK Awards. The party went on into the small hours. One group of late night revellers with plenty of reason to celebrate was the investor relations team from Cadbury Schweppes, winner of awards for best board communications, best results meetings and analyst briefings – as well as the Grand Prix for best overall investor relations. Among their numbers quaffing the champagne was finance director David Kappler, undeterred by the board meeting he had scheduled for the following morning. Fortunately the board was equally delighted by the recognition given to the company for best IR practice and Kappler was greeted by a round of applause.
According to director of group communications Dora McCabe, this support from the board and senior management forms the backbone of IR at Cadbury and gives it credibility. ‘You can’t divorce the investor relations function from senior management. You can only be as good as your management team,’ she says. Cadbury’s IR and PR teams are combined, with three people from each discipline covering worldwide operations. ‘It’s a relatively small team for such a large multinational company and perhaps that’s what makes it so accessible. We have daily contact with David Kappler who has direct access to the CEO and the board,’ adds McCabe.
The deep involvement of senior management in IR at Cadbury has not passed the investment community by. ‘It’s a good team all-round, both in IR itself and in the effort put in by senior management to ensure people are available to answer questions,’ comments one of the 659 fund managers and analysts questioned for the research that selected the winners. Indeed, access to management was singled out by over 80 percent of the interviewees as the most important feature of a good IR program. Honesty and openness came a close second.
Rising to the challenge
Another company which continues to get its IR right is BP. David Peattie, head of IR at the company, took the award for best IRO and BP also came a close second in six other categories including the Grand Prix.
‘He clearly knows his brief and gives you the facts without any nonsense. Equally there is never any feeling that he is not pulling out the stops to see that you get what you want,’ says one analyst. According to Peattie, the reason he is so well informed is simple: ‘I have access to the CEO and CFO on a daily basis. There’s a really strong network inside the company. If I don’t know the answer to a question I can find it out very quickly.’
The award for best IRO is particularly gratifying for Peattie as he has only been in the job for ten months (although at BP for 19 years). But he is anxious to stress that IR at the company is all about team effort. ‘It’s recognized by senior management as a critical function so we’ve got some of the very best people at the company doing the job and we work very much as a unit.’ Apparently, the investment community couldn’t agree more: ‘David had a tough act to follow, but at the same time the great virtue of BP has been the quality of the individuals within the IR function as well as their ability to operate as a team,’ says one analyst.
Communicating the right message in the right way is also an important element of IR and one that has become increasingly more sophisticated with the widespread use of electronic technology in the function. The importance of this was recognized by the award for best IR web site, going this year to SmithKline Beecham. Its site is praised for ‘giving a very good feel for the company’ and for having a ‘wealth of background which any analyst will find saves him a phone call.’ The company also won accolades at the more conventional end of the financial communications spectrum for the quality and content of its annual report.
Generally, the survey finds analysts and fund managers critical of annual reports, labeling them as ‘some kind of mixture of marketing and corporate brochure’, but SmithKline Beecham’s is thought to be ‘comprehensive, well laid-out and [with] a good balance between numbers and philosophy.’
According to Philip Ward, director of IR, the annual report is still important as an image-enhancing tool, but the scope of the web is much bigger. ‘It gives us the ability to deliver more and more timely information and that’s what investors want,’ he says, adding that the company’s annual report is available in full on its web site. And, Ward says, SmithKline will be developing a number of new features within a year: ‘The web’s got great potential.’
Dealing with disaster
Communication becomes more difficult, and more important, when things go wrong. That’s something Glaxo Wellcome discovered this year when its merger discussions with SmithKline broke down.
‘We made a massive effort to get out to investors all over the world, meeting with them in one-on-one meetings to explain the situation,’ comments Jenny Younger, director of investor relations at Glaxo who, with a relatively new team behind her, has tried to give a facelift to the company’s IR program. ‘We’ve become more proactive, listening to what investors want and need. IR has become much more of a priority,’ she adds.
Evidently the investment community is impressed, rewarding the company with the prize for most progress in investor relations. ‘The program at the time of the proposed merger was fine but when it went wrong they went into overdrive. The mess at the top was awful but the people in the IR office were superb,’ comments one fund manager.
But will the same level of activity be sustained now the crisis has gone away? Younger is confident it will. ‘The whole structure of the investor relations program has changed. I report directly to the finance director which means a shift in the way we do things.’
Having the right structures in place is something that Bass apparently knows a lot about, winning this year’s award for best corporate governance. According to director of communications Aodh O’Dochartaigh, the most important element of good governance is consistency. ‘You have to have a clear policy statement and stick to the party line. Good behavior over time is your insurance policy when things go wrong,’ he says.
But good governance is not just a box-ticking exercise for correct behavior. Bass also aims to be proactive in seeking the investment community’s views. ‘We start seeing the institutions after the full year results in December, giving them a strategic update. Then in October and November we do a survey among them to get a feel for what we’re doing right, what we’ve got wrong,’ says O’Dochartaigh. ‘The idea is that we can try and rectify the problem for the following year’s results.’ Bass also surveys analysts and the media in January and February to gauge their sense of Bass’s strategy and management’s performance. ‘Best practice behavior doesn’t mean just keeping to the rules, it means doing better than them. So you need to know what your key audiences think,’ says O’Dochartaigh.
For smaller companies, without a dedicated investor relations function, dealing with IR can interfere with the actual day-to-day running of the business. ‘We’re trying to work for a living so although it’s important to keep people up-to-date, we’ve got to strike a balance in terms of how much time we spend communicating with the City,’ comments Headlam’s chief executive Ian Kirkham. He’s clearly getting the balance right, though: the flooring company won the award for best smaller company IR. ‘They’ve never neglected the importance of explaining what they are doing no matter how busy,’ says one fund manager. ‘They’ve always been good presenters and take lots of questions which they handle with confidence,’ asserts another.
Investor relations at Headlam is handled exclusively by Kirkham and finance director Stephen Wilson who have been working together for the last seven years. ‘The fact that we’ve been such a settled team has helped a lot. We’ve got to know our investors well and built up a good rapport. Some we speak to quarterly, others annually or even every 18 months. It depends on what they want. We let them dictate the pace,’ comments Kirkham. It helps that Headlam has a good story to sell, its market cap having risen from £4 mn to over £250 mn in just seven years. Kirkham has also enlisted the aid of Gavin Anderson & Co which, he says, has helped bring about massive changes. ‘They’ve educated us in how to get the best out of our investors in terms of giving more detailed presentations and taking investors on site visits and actually showing them our technology.’
Further afield
Investor relations in continental Europe has not always lived up to the levels set in the UK and US but in recent times standards have improved enormously. This year France Telecom was awarded the prize for best continental European company IR. The UK investment community was particularly impressed with the handling of its IPO: ‘There were several presentations around the UK which gave a chance to meet a lot of the management team and really get to grips with the company,’ comments one fund manager. ‘A very high profile job: lots of input, data and background. They anticipated our questions and gave us everything you could have asked for,’ says an analyst.
Christophe Domart, one of the three-strong IR team at France Telecom, points to the quality of management and their availability and accessibility to investors. But he says there is still a lot of room for improvement.
‘Our information content is very good but we need to develop the ways we offer information, like our web site and conference calls,’ says Domart. ‘On a night like this you meet people like Cadbury who are so good at what they do. We can’t yet begin to compete – but that’s the level we’re aiming at.’
Nobu Shimizu, London-based IRO for Sony, is also modest about his company’s IR acumen despite picking up the award for best Asia-Pacific company IR. Sony was runner-up in the same category last year and also picked up the winner’s medal in 1996. According to Shimizu, Sony has a long way to go in improving its performance and has a duty to lead the way for other Japanese companies particularly in terms of disclosure.
But reactions from the UK investment community belie Shimizu’s modesty. One analyst describes Sony as ‘the most helpful company you could imagine,’ while another says: ‘They act as though they’re on your doorstep instead of thousands of miles away.’
The massive turnout for this year’s awards ceremony – the largest ever investor relations event in Europe – suggests a growing acceptance of the need for good communications among UK plcs. However, according to Fred Stone, managing director of Technimetrics Europe and deputy chairman of the UK’s Investor Relations Society, for some the recognition isn’t coming fast enough.
‘Some heads of IR are regarded as quality information sources with whom the buy and sell-side feel confident. But in other situations, the IRO is still treated as a conduit for arranging meetings or getting information from the board,’ says Stone. ‘IR professionals need to be given more autonomy in dealing with the investment community in order to gain more acceptance there.’
