Partisan cheering for award nominees and sponsors spontaneously broke out at the Royal Albert Hall about halfway through the eleventh annual Investor Relations Magazine UK Awards. The spirit of celebration had been there all evening; it just took a while for the cheerleaders to emerge from their stunned amazement at the laser, music and booming pyrotechnics show that opened the ceremony. By any measure, this year’s UK Awards were the biggest, best and certainly loudest ever.
In typically brash New York fashion, an American beat the wow factor of the fireworks by about half an hour. Richard Grasso, chairman and CEO of the New York Stock Exchange, appeared live from New York on the giant screen to address the crowd of nearly 1,100 after Melissa Stimpson rang the Big Board’s closing bell from the Royal Albert stage. As group head of IR for Vodafone, she won that privilege along with the award for best IR by a UK company in the US market. Had the bell ever been rung from another country? ‘We did it from Palo Alto once,’ responded the NYSE’s Dorothy Carey, conceding that this was indeed a first for the NYSE to have an international – and trans-oceanic – bell ringer.
Grasso congratulated Vodafone and all in the audience ‘who practice transparency and quality of communication to shareholders.’ He went on to say that the first UK company listed in New York over 50 years ago; today the market cap of all UK-domiciled NYSE stocks is around 8 percent of the NYSE’s nearly $18 trillion total. ‘You’re all making our markets stronger, more transparent and, most importantly, more user-friendly for consumers, both retail and institutional.’
Vodafone took home three awards, though none from the main awards survey of the UK’s professional investment community conducted by Fulcrum Research. Best financial media relations was voted for by City journalists and editors while a survey of private investors by World Investor Link identified the wireless telecoms company as the winner of best communications to the retail shareholder.
What’s the secret to Vodafone’s success? ‘It’s certainly the can-do approach of everyone in the IR department,’ Stimpson declares. ‘Nothing is too much of a problem; no-one views it as just a nine-to-five job.’ She adds that the IR team has grown from two to five staffers in the past year and has taken on more US IR activities, including midwest and west coast stops. Last year Vodafone won best IR during a takeover for its Mannesmann deal, and Stimpson says that the IR momentum built up during that period has carried on. ‘Once you’ve done that, you can do anything. It has held us in good stead for anything we’ll do in the future.’
British take over
The New York contingent, which also included Robert Fagenson of dinner sponsor Van der Moolen Specialists USA, may have launched the evening, but the night definitely belonged to the British. Indeed Fagenson’s New York twang was almost the last sincere American voice heard all evening with compere Clive Anderson taking to the stage with his irreverant sense of humor.
The big surprise of the night was that BP, which stole the show with six awards in 2000, was absent from the winners’ circle. The oil giant was highly commended in six categories this year but was bumped from its third successive Grand Prix for best overall IR by Hanson. Carol Ann Walsh, Hanson’s IR manager, was also honored as best IRO for a large-cap company, and Hanson had a third win for best annual report by a large-cap company. With a much smaller IR team than BP, Hanson clearly works very hard on shareholder communications, as evidenced by the fact that Walsh was too busy preparing interim results to comment for this article.
In this year’s inaugural sector awards, Shell claimed the prize for the oil industry as well as second place in the Grand Prix. As expressed by one sell-side analyst who voted for the oil company, ‘Shell put forward a clear and simple recovery plan which was well implemented and comprehensively explained to investors.’
It looks as if Shell’s business turnaround is integral to its turnaround in the UK awards. The company had a tough time with the investment community in 1998, but according to Mike Harrop, UK IR manager, they ‘learned a lot of lessons from that.’ He says there’s more management focus on investors now: ‘And that’s amplified by employee stock options and stock ownership, which lead to a greater interest within Shell about stock price, the market and performance.’
For the last three years Shell has been focused on an explicit theme of capital discipline, cost improvement, portfolio management and personal accountability, says Harrop. ‘That is embedded throughout the organization and has been a very important driver of the creation of shareholder value,’ he goes on, alluding to Shell’s win for best communication of shareholder value creation by a large-cap company.
As for improvements in IR, Harrop says focusing around these consistent messages is the first and most important. ‘We also have a greater involvement of senior management in our IR, for example doing more one-on-ones than we used to.’ He won’t speculate about Shell’s future IR success, saying only, ‘We can never rest on our laurels. It’s important to continually work at managing your reputation in the markets.’
Tasting bubbly
While BP failed to taste the winners’ champagne, Shell wasn’t the only oil company to quaff the bubbly; Enterprise Oil won the Grand Prix for best IR by a FTSE 250 company. It may seem strange for a commodity-based business to be a consistent star at the Investor Relations Awards. But while ‘commodity prices are clearly an important driver of earnings,’ Shell’s Harrop points out, ‘what people are interested in is that extra bit that raises you through the cycles.’
‘One of our mantras is thinking through the cycle,’ confirms Peter Reilly, Enterprise’s head of IR. ‘Our performance is extremely geared to the oil price cycle, and the sector is always either really in favor or really out of favor with investors. What IR can do is say we’ve actually got a good business here and here’s what management is doing to run the company for the long term.’
Enterprise has also risen above the crests and troughs of the market by diversifying its ownership. About five years ago, five or six institutions owned about half the company. Now it’s dozens. ‘We’ve made a point to increase the spread of our share ownership, because investors come in and out depending on their investment style.’
Enterprise is definitely looking to the future, with Reilly’s assistant taking part in the company’s graduate program. ‘If we believe our graduates are going to be the managers of the future, they should get a good grounding as early as possible. In the IR department they get exposed to everything in the company. It’s a powerful investment in the person.’
Print publications and the web are key aspects of Enterprise’s IR program, so no wonder it came third in the best annual report category and was commended for its web site in the comments about its Grand Prix. ‘We spend a lot of time and effort on our web site, as opposed to huge amounts of money,’ Reilly says. ‘We’re always thinking about what to add in.’ The team checks other sites for ‘ideas as well as faux pas.’ While offering share price graphs for Enterprise and its competitors, for example, the site puts great emphasis on fast click-throughs to make sure ‘people can quickly get what they want.’
‘We can’t claim to be cutting edge,’ Reilly demurs, ‘we’re just prepared to think about new ways to access investors. We’re open to ideas and look around a lot to see what other companies are up to.’
With a market cap of around £3 bn, Enterprise has been knocking at the door of the FTSE 100. And on the Royal Albert stage Reilly vowed to be ‘fighting with the big boys’ next year.
Job hunting
One winning IRO took to the stage joking that for the very same reason behind her win – best IR during a takeover – she was job hunting and had CVs on her table to give out. Jacqueline Sinclair Brown, head of external affairs for Blue Circle Industries, also accepted the award for best crisis management on the back of the same sequence of events: a successful defense against Lafarge’s hostile bid in 2000 and this year’s acquisition of Blue Circle by the French company to create the world’s largest cement company.
Echoing Vodafone’s Stimpson, Sinclair Brown reflects on M&A investor relations: ‘If you’ve been through a hostile bid, frankly you can do anything. You can’t get any better experience than that. It’s difficult to communicate against the background of a hostile bid, both internally and externally, then to explain an agreed merger with the same company.’
At the ceremony Sinclair Brown thanked Blue Circle’s team of advisors – though with Brunswick reportedly earning over £2 mn for the Lafarge defense, you would think they had already been thanked enough. Still, ‘They earn every penny,’ Sinclair Brown says, regretting that the same line-up won’t be fielded again – Slaughter and May, Cazenove and ABN-Amro included. ‘You go to hell and back in a hostile; you begin to complement each other very well.’
Another large-cap company in flux caught respondents’ attention when it came to best board communications and best analyst meetings and results briefings. GKN won these accolades, and according to IR head Sue Scholes, they’re the result of ‘a lot of activity we needed to talk to people about.’ She means GKN spinning off its support services business to create a dual-listed joint venture with Australia’s Brambles Industries. Scholes is moving to the new company to head up IR, with David Rood taking over her duties at GKN. She comments on the tremendous amount of preparation for the announcement of the deal. ‘You have to get a little paranoid – What have we forgotten about? What else can we do?’
Though Australia is familiar with dual-listed companies like Rio Tinto, BHP Billiton only finalized about a month ahead of Brambles Industries plc and the UK market had to be educated about the unusual listing structure the companies share. Meanwhile, Scholes had to keep up communications for GKN’s remaining businesses. ‘It’s always easy to communicate good news, but we’ve had to keep people updated about what’s happening with the automotive markets, and bad news isn’t so easy. Still, you have to keep talking.’
GKN’s deal with Brambles was heralded by a major presentation in April with a whole new group of support services analysts as well as GKN’s usual audience. With the announcement at 7am and the presentation to follow at 9.30, the IR team had to make sure the right people would be there without leaking the news in advance. They used e-mail heavily and had badges ready for everyone at the meeting – a detail the analysts were impressed by.
Winning streak
The oil and gas sector’s winning streak kept up with Hunting’s Grand Prix for best small-cap investor relations, as well as the award for best small-cap annual report. As with Shell and GKN, Hunting seems to have caught the investment community’s attention with a new message rather than new means of conveying it. ‘I’m not sure we’ve done IR any differently in the last twelve months,’ says Dennis Clark, financial director, ‘but our strategy has been to become much more focused, and that’s the new message we’ve been communicating.’
From a small conglomerate spanning aviation, defense and oil, Hunting has pared back to focus on oil and gas services with a market cap of £250 mn. ‘As a small company, we don’t have an IR department or an IR manager,’ Clark says, admitting IR may take on a greater role in the future: ‘It’s early days for us yet, but I’m very conscious that we need to have analysts and fund managers who really understand the business we’re in. We need that support in both good times and bad.’
Shaftesbury, a real estate company, won best communication of shareholder value creation by a small-cap company with a similarly small team and small budget.
‘We’re not very sophisticated,’ insists finance director Brian Bickell. ‘We use no consultants or outside advice, but we’re in a fortunate position in that 90 percent of our shares are held by major UK institutions and our property portfolio is all within a 20-minute walk from our office. We’ve always had a close relationship with fund managers and analysts, and we encourage them to come see us and our properties.’
With a market cap of £415 mn and as a recent entrant to the FTSE 250, Shaftesbury has a simple strategy to communicate because it invests in just one thing: a small area of west-end London centered around Carnaby Street. ‘That focus, coupled with the fact that investors can literally see all the assets, makes IR a dawdle – easy as falling off a log,’ says Bickell, adding on a more earnest note, ‘We take the attitude that shareholders own the business and we’re just the hired hands.’
Property, oil and gas, cement… notice a theme emerging here? Old economy stocks were definitely flavor of the day on July 9 at the Investor Relations Magazine UK Awards 2001. Still, for best investor relations by a loss-making company, the tech sector came back to the fore with a software company – as SurfControl’s head of IR, senior vice president of corporate communications Tom Moriarty, is quick to point out: ‘We are always careful to distinguish ourselves from dot-coms.’
The investment climate has indeed changed since our last survey in 2000, ‘when companies only had to show evidence of revenue growth and the City’s attitude toward loss-making companies was more favorable,’ Moriarty confirms. ‘Investors are now placing much more emphasis on a company’s ability to generate profits.’ SurfControl isn’t planning on winning the same award next year as it recently announced it would turn cash positive in Q4 – well ahead of market expectations.
‘Our IR strategy is about communicating effectively the business we’re in and the company’s growth strategy going forward,’ concludes Moriarty, adding that ‘prioritizing IR among senior management’ is also a key element. As our 2001 awards show, that’s a winning strategy whether for a £100 mn software company or an oil company with a market cap over £50 bn.
Methodology
Investor Relations magazine commissioned London’s Fulcrum Research to conduct the UK awards survey for the third year. They interviewed over 640 fund managers, buy-side analysts and sell-side analysts to identify the winners and discover their views on IR. New for 2001, many awards went to both large caps (FTSE 100) and smaller-caps (non-FTSE 100). Another innovation was to canvass City editors and journalists for best financial media relations; and World Investor Link for the first time surveyed UK private investors for best IR to the retail shareholder. Erdos & Morgan identified the winner of best IR by a UK company in the US in a survey of over 1,500 US investment professionals, conducted as part of our US Awards research.
The full UK Research Report 2001, including a look at the investment community’s changing perspectives on IR and verbatim comments on all the winners and highly commended companies, is available for £199 (special subscribers’ price) at www.irawards.com.
