Be very quiet. Now aim your ear in the direction of central Europe and listen. That faint, industrious whirring you can hear is emanating from Austria and it’s the sound of the country’s IR machine picking up speed and swelling in size. It may not be shouting about it but Austria has got the investor relations bug.
But this isn’t a sudden thing. ‘I’d say that there are a handful of Austrian companies with IR programs comparable to the top European standards,’ opines Randolf Fochler, at Austrian steel producer, Bohler Uddeholm, and current president of Austria’s IR association, Cira. ‘That’s the uniqueness of Austria – the successful companies are the ones that are best at IR.’
‘Every company in the ATX has an IR team of between two and five people,’ reckons Wolfgang Pinner, of Bank Austria. ‘IR in Austria is certainly up to German standards.’
‘In many ways, the companies that are best at IR,’ offers Georg Male, of Vienna-based agency Lieben Rath Waldenmair, ‘are those that have listed in the last ten to 15 years. For them, it’s like a second skin. But I think standards are improving all round. The IR awareness of top management has grown. They have had to accept it as their responsibility. That’s what investors want to see. Actually, that’s one of my rules. If I go to a company and am asked What should we do?, I say Convince the board!’
The profile of IR isn’t just on the up inside the boardroom. ‘I think IR is really being appreciated by analysts and fund managers,’ argues Fochler. ‘And people are now beginning to see IR as something different from PR and media relations. But we still need to develop a greater passion for it in smaller companies and make the benefits clear to CEOs and CFOs.’
That percolation has begun already, Fochler believes: ‘Managers phone me before their IPOs asking me lots of questions: What will the IPO mean, how must our communications change, who should we bring in? That shows progress. In the past the IRO would be appointed six months after the event. Actually, it’s sometimes the smaller companies who treat IR most seriously, especially if they’re not in the ATX, because they know they have to push extra hard to get attention. Austria has got to market itself to the world. We have to approach analysts. We have to go out there.’
Georg Male complains that Austria is still regarded as an emerging market. ‘Sometimes you even have to explain that Austria is not Australia.’
It means nothing to me
Given Austria’s threadbare equity culture, it is little surprise that interest in IR is burgeoning. In Austria, investor relations means spreading the gospel of share ownership to the retail community as much as telling your own company’s story. As Johann Schmit, a spokesman for the Wiener Borse, Vienna’s stock exchange, points out, ‘There is no capital market tradition in Austria.’
‘Austria is one of Europe’s richest countries,’ notes Fochler, ‘yet just 5 percent of the people own shares. There’s an image problem. People see share-owning as speculative and for the rich.’ And Male agrees,’Austria is savings book-minded and not risk-friendly.’
Little wonder, given the less-than-helpful governmental stance. ‘There is a fee on buying shares,’ agrees Male, ‘but speculation tax has also been an issue. I think that would give the wrong sign if it were introduced.’
‘The equity culture is not as liberal as in the rest of Europe,’ agrees Armin Kohl, IRO at newly-listed technology firm, Beko. ‘And the government’s legislation is not favorable to share ownership. With a socialist government, shareholders are seen as capitalists, vampires.’
Not everyone is so fatalistic. Walter Jostl, IRO at Austria Tabak, goes to great lengths to lure Austria’s private investors. ‘They have a long-term approach,’ he explains. ‘So we organize events, such as site visits for retail investors. Plus, our home page lets people e-mail questions to us. Retail investors have a lack of information so you must keep in close contact.’
‘The Austrian attitude toward share ownership is negative,’ says Pinner. ‘People tend to buy mutual funds. Five years ago, I’d say 90 percent of those funds were invested in bonds. Today, though, they’re heading toward equity.’
But retail investment is slack. And it gets worse. The domestic institutional investment base is not strong but at least it is growing. ‘More companies have their own pension funds now,’ notes Fochler, ‘which means that the share culture is improving.’ And besides, what isn’t available domestically is compensated for by international investors.
‘Austrian investors are not an important part of the Austrian market,’ Pinner concurs. ‘Like many European exchanges the Wiener Borse is dominated by investors from the UK and the US. You have to go abroad and do roadshows.’ Foreign investor reaction to the decision to allow a far right party into Austria’s coalition government remain to be seen.
Helping hand
In the face of such a gargantuan challenge, Cira must be a godsend. But the group, boasting around two-thirds of Austrian listed companies, is more than just a shoulder to cry on. ‘Cira has the additional role of a united pressure group,’ says Fochler.
Cira also runs workshops to stimulate companies into adopting new methods; and it was also involved in the upheaval at the Borse. ‘Three to five years ago,’ explains Fochler, ‘the Wiener Borse was clearly below international standards. And it was the listed companies that had to press for change. It was held by the government and the banks and they weren’t really in favor of change or of opening things up. At Cira, we lobbied the government minister and told him that change was needed and that the Borse should be privatized. We wanted the banks and the listed companies to supervise the exchange and we wanted to change the trading system from being so isolated to being international. Now it’s better monitored and held 50/50 between the banks and the companies.’
Despite this good work, things are not all hunky-dory. ‘The key problem is still the lack of liquidity,’ comments Fochler. ‘Austrian companies are very healthy, very profitable but investors look at the companies and think The management’s OK, the equity’s OK but the Borse is very illiquid. So they go to Frankfurt or the Netherlands.’
‘There have been liquidity problems,’ concedes Schmit. ‘But that’s because of our size.’ He points out that the Wiener Borse is one of the smallest in Europe.
And lack of liquidity causes problems. ‘If you compare Austrian companies with German companies in the same areas, there’s a 20-30 percent valuation gap,’ suggests Pinner. ‘That’s partly attributable to the lower liquidity but the problem is not big enough to justify the gap.’
Nonetheless, in an effort to combat the lack of liquidity, the Wiener Borse has recently linked up with Xetra, the Deutsche Borse’s electronic trading system. ‘It has 404 members in 17 countries,’ says Schmit. ‘That’s a big lake to fish in. It will provide easy remote membership which should mean greater liquidity.’ Predictably, though, Austria’s IR community doesn’t see this as a magic wand. ‘I can’t see any immediate increase in liquidity,’ says Male. ‘But at least it’s a door-opener.’
‘You can’t be isolated in a world of such dramatic globalization,’ admits Fochler. ‘So hopefully the Xetra link-up will raise awareness of the Wiener Borse and bring more market participants.’
Too diddy
Austria suffers from a lack of size. ‘Mid-caps in Austria are basically small caps,’ says Fochler. ‘And small caps are micro-caps. That causes a problem with indexing – we tend to get left out. There are no Austrian companies in the EuroStoxx 50 because we don’t have the market cap. And that’s bad because the trend is toward indexing.’
Schmit asserts that such a comparison is skewed. ‘Bank Austria, for example, accounts for 22 percent of the ATX but in Europe it is a mid-cap. So it’s not fair to compare the ATX with the Dax. It’s better to look at the M-Dax.’
There’s nothing wrong with Austrian IR practice, according to Fochler, who says it certainly doesn’t lack sophistication. ‘Companies have absolutely embraced technology in IR. Every ATX company has its own web page, and does conference calls, web casts and annual reports via the internet. But, again, that needs to be applied to smaller companies.’
‘The web is just one part of our IR work,’ says Jostl. ‘We do around two European roadshows a year, and several analyst meetings.’
Equally, IROs enjoy close – and upstream – relationships with management. ‘In our company,’ remarks Fochler, ‘we have what I call the three musketeers – the CEO, the CFO and myself – who do roadshows, press conferences and one-on-ones. That’s the same with all blue chip companies. The big institutions expect to see the CFO and CEO to look them in the eye. At the same time, I can always go and talk to the CEO. Because, if the IRO can’t approach the CEO, he’s lost. He’ll be bypassed by analysts.’
‘I don’t really get the importance that I want,’ comments Kohl, ‘but I still have direct access to the board – I just have a direct line to the president.’
As if Austrian IROs didn’t have it tough enough, they also have to toil under a system of bearer shares. ‘A shareholder is anonymous until he contacts us and asks to go on the mailing list,’ says Fochler. ‘That makes IR a lot more difficult. At Bohler Uddeholm, for example, we have about 9,000 shareholders and we know the identity of around 10 percent of them.’
So is there a desire for registers? ‘A share register would help,’ Fochler continues, ‘but I don’t see it happening in the next five years. We see it in German companies such as DaimlerChrysler. Why? Because of their listings in the US. I don’t see many Austrian companies looking for a listing on the NYSE or Nasdaq. And the other reason is a cultural one. People want to feel comfortable owning shares and they want their investments to remain private.’
‘It is more difficult this way,’ says Pinner. ‘But it makes it more exciting.’
