When I joined Enel in September 1999 to develop its investor relations program, the company was about to be denationalized. It listed on the Italian Stock Exchange in November 1999 and it is now the biggest listed utility firm in Europe. We also have American Depositary Receipts traded on the New York Stock Exchange.
From the start Enel really captured the imagination of Italian retail investors. Among our shareholders we now count 3.5 mn private investors, who own around 22 percent of Enel’s stock. Another 11 percent is in the hands of institutional investors, while the Italian government has maintained a 67-68 percent stake.
I have been involved in corporate communications since 1994. From then until 1997 I worked at Assogestioni, the fund managers’ association, on a project related to financial communication, which at the time was considered particularly weak. In the early 1990s Italian companies had no obligation to produce quarterly reports or even to keep investors informed about their fiances. Even large shareholders like insurance companies or pension funds could find it quite difficult to stay abreast of the situation at the companies they were invested in. This was not particularly surprising since there was no tradition of regular communication between companies and their investors.
From bonds to shares
So investor relations is a relatively new concept in Italy, and up until 1992 not many private investors were involved in the stock market. But then they began to switch from government bonds to shares. There were two main reasons. First, the interest rate on treasury bonds had diminished significantly while the stock market’s returns had proved consistently more attractive. Second, the privatization process in Italy evolved very quickly from 1992 onwards and newly privatized issues soon became very popular among retail investors. The process began with Banca Commerciale, followed by Unicredito Italiano, and by the time Telecom Italia went public, the culture of retail investment was already firmly established.
The project I worked on at Assogestioni was to try to encourage companies to produce periodical and, when necessary, extraordinary news flows for the whole investment community. This was based on many requests we had received mostly from institutional investors, and the project had a very positive response from listed companies, which had by then realized the importance of both institutional and retail investors.
Italian companies started to recognize that the only way to attract and maintain investors in the future would be through financial transparency and a constant news flow. Many of the recommendations put forward as a result of this project were eventually incorporated in the Draghi Act of February 1998. After my period at Assogestioni, I spent two years as head of IR at Manuli Rubber Industries, a small-cap company listed on the Milan exchange.
Equal opportunities
When I arrived at Enel, I had very precise ideas about how to develop IR. The model we use is very much an Anglo-Saxon approach. For example, the IR function here works closely with our media relations team, which helps us communicate coherently with both institutional investors and the media, since it is via the media that we keep in touch with most of our investors. Of course I also have a very close working relationship with Fulvio Conti, our chief financial officer, and we are in contact every day of the week.
Even nowadays this is not the case in many companies. Investor relations officers will present explicitly financial information to institutional investors while the information presented to the media may not be the same as, or even in conflict with, that presented to the financial community.
When we are about to issue a press release or want communicate with our institutional investors, we first have to clear it with Consob (the domestic securities and futures watchdog) and the Italian Stock Exchange. We then have to forward the release to at least two press agencies via newswire. Our system ensures that the information is sent out simultaneously to some 800 different institutional investors from around the world.
There are now two people in the investor relations office, and we will soon have a third. Some may consider this a small IR section for a company the size of Enel, but you have to remember that we work very closely with our media relations department, and we are in constant contact with our financial management and strategic planners. [Indeed, in an informal poll of the European financial community, Enel’s investor relations department was commended by UBS Warburg for the frequency and thoroughness of their investor communications – Ed]
Communication online
We have also developed thorough web-based investor relations. All important company information, including quarterly and half-yearly results, are published on our web site shortly after their diffusion via newswire.
In fact, our web site has been recognized as one of Italy’s most impressive in terms of effective investor communication.
Still, there are a number of developments I would like to implement. For instance, we’ll put webcasts of conference calls on our web site by the end of the year, perhaps including a recorded version of the analysts’ question and answer session.
We’re currently preparing for our next conference call on September 13, when we will present our results for the first half of the fiscal year, incorporating our most recent quarterly report. At the moment we are busy preparing numerous tables to explain the evolution of our financial statistics. This will provide institutional investors with the material they need to develop their forecasts. On average, around 70-80 analysts and investors, mainly from Italy and other European countries, listen in to the presentation of our financial results. A recorded version of the conference call will then be made available for investors and other interested parties via direct dial.
Our roadshow begins soon after the conference call. It generally lasts a couple of weeks and takes us to a number of the world’s financial centers including London, Milan, Frankfurt, Amsterdam, Paris, New York and Boston. The aim is to let institutional investors meet our senior management, facilitate their analysis of the company’s financial performance, and allow them to update their expectations.
There will of course be several one-on-one meetings at which buy-side analysts and investors can concentrate questions of specific interest – but these will not involve any undisclosed material. This type of meeting has caused some problems for US listed companies since the introduction of Regulation FD last October. Since Enel is listed in the US as well as in Italy, the company pays close attention to this law. However, Regulation FD is, in substance, very similar to the Draghi Act with respect to what type of information can and cannot be released at a private meeting, so its introduction has not caused us undue difficulty.
Tomorrow [September 7] I am meeting a sell-side analyst in the morning, then I’ll get together with our working group, which includes all the company’s top functionaries, particularly from the finance and strategic planning departments, to prepare for the financial results conference call. Later on, I have a telephone conference scheduled with an analyst who wants to ask about the developments taking place at one of Enel’s subsidiaries, ERGA, the world’s largest renewable energy company. Later in the afternoon I have a buy-side meeting with a German investor. On average, I have three or four meetings a week with buy-side or sell-side investment professionals.
Right now we’re busy updating our shareholder identification record. This will help us to pinpoint where our investors are and to plan the itinerary of the roadshow, which begins in October or November. It’s always an exhausting trip, with all the traveling and staying away from home for so long, but I really enjoy it.
