George Bush declared the current economic malaise a ‘hangover’ following the ‘economic binges’ of the 1990s. You’d never know from observing the over 1,000 IROs, CFOs, advisors and their colleagues at the twelfth annual Investor Relations Magazine UK Awards on July 17. They shrugged off the market meltdown and optimistically looked to the future during a glittering celebration at Grosvenor House on London’s Park Lane.
The theme was 1930s Hollywood musicals, with feathered showgirls adorning grand staircases and recalling the Busby Berkeley extravaganzas that inspired the world after the crash of 1929 and during the subsequent years of depression.
The flashback was no coincidence. The glamour of the show was meant to evoke dreams of better times and, at least for one night, make up for the current down market – the worst in three decades.
Indeed, during bad times good governance and transparency become even more important. Perhaps it was the current atmosphere of incredulity that prompted more sell-side analysts, buy-side analysts and fund managers to vote for those companies they thought had done a better job of maintaining shareholder confidence. Some 761 financial professionals were interviewed by London-based Fulcrum Research, surpassing last year’s total of 641.
Certainly the irreverent humor of MC Angus Deayton, a TV star mired in his own scandal-ridden down market, helped cheer up investor relations officers present, whether they won prizes or not.
In fact the first laughs erupted when it was revealed that Enron and WorldCom had both won IR awards in the past – WorldCom for best conferencing in the US in 1998 and Enron for best annual report in 2000. Fingers crossed, the audience prayed that none of this year’s winners would become similarly embarrassing examples.
BP’s return
As Fergus MacLeod, vice president of IR at BP, said when he took the stage to accept one of BP’s seven awards, ‘Whoever thinks IR is a thankless job hasn’t been to an IR Magazine Awards celebration.’ Just three months after arriving at the oil company, MacLeod was accepting the Grand Prix for best overall IR from the UK Investor Relations Society’s chairman, Richard Bowler. Last year’s winner, Hanson, slipped to second place behind BP, which has won the Grand Prix in three of the past four years.
BP made a triumphant return after its absence in 2001, when it was nominated in many categories but the winner in none. This year it was number one for results meetings and analysts briefings; communication of shareholder value; investor-targeted advertising campaign; disclosure practice; CSR practice; and oil and gas IR.
IR manager Peter Hall explains BP’s failure last year: ‘After the acquisition of Arco, the market didn’t like how we reported the volumes of the combined entity, saying it was confusing. We had a conference call with analysts where that became evident. They didn’t forgive us for some time.’
The lesson, according to Hall: ‘We need to make things clearer and simpler.’ The strategy worked, but despite BP’s reclaimed success, the high ambitions of this IR team are reflected in Hall’s reading of the 2002 awards: ‘We need to have a look at why we haven’t won in some of the other categories.’ He expresses his concern about what BP may have done wrong with its annual report and web site, important communications tools ‘to which we dedicate lots of time and effort – and we weren’t even nominated for them.’
Later, all eyes were on Hanson, National Express Group and Unilever, which won best FTSE 100 annual report, best non-FTSE 100 annual report and best IR web site, respectively. Carol Ann Walsh, group corporate and IR manager at international building materials firm Hanson, reveals the secret: ‘A good annual report needs to be clear and comprehensive and friendly to use for all audiences.’ Similarly, Nicola Marsden, director of group communications at National Express, explains, ‘We try to keep to the basics about the business, explaining simply and clearly what it is about.’
Howard Green, senior VP of IR at Unilever, the consumer products giant, adds, ‘Our web site contains the heart of the company’s message. It’s the point where everybody can go to see what the business is doing. The internet provides equal and timely information for different audiences and it’s very cost-effective.’ Unilever also won the award for best use of the internet for IR.
Gold standard
Among non-FTSE 100 companies, the best at communicating shareholder value was precious metals specialist Johnson Matthey. The £2 bn company will next year be competing against the big boys, having recently joined the FTSE 100. However, Ian Godwin, group corporate communications manager, doesn’t think the move will change his IR program. ‘We always need further improvement but a good IR program depends on the degree of commitment and the accessibility of the company’s people,’ he says.
Coincidentally, both Hammerson, winner of the Grand Prix for best IR by a FTSE 250 company, and Development Securities, winner for best smaller company IR, are property development firms. Hammerson’s IR director, Chris Smith, also received the award for best IRO from a non-FTSE 100 company.
Simon Melliss, group financial director at Hammerson for eleven years, vows there haven’t been any dramatic changes in IR during his watch: ‘We have always listened to what investors want, as well as providing them with good disclosure, clear accounts, simple analyst presentations and a friendly web site.’ Melliss believes the new recognition has more to do with the business environment. ‘Investors now appreciate real estate shares as a good investment and that is indirectly reflected on the IR side,’ he says.
According to Melliss, medium-sized and small companies have to make a major effort to catch analysts’ and investors’ attention as they are less visible than larger companies. The advantage of a business like Hammerson, with a £1.5 bn market cap, is that sell-side and buy-side analysts can often meet directly with management instead of always dealing with IR people.
Development Securities’ joint managing director, Michael Marx, agrees with Melliss: ‘Smaller companies expose their managers more to shareholders and potential investors.’ With a £111 mn market cap, Marx knows that winning an award for IR shouldn’t make him ‘complacent’. One of the priorities on the company’s agenda is to pay more attention to private shareholders, who currently make up 15 percent of its shareholder base. ‘We need more contact with shareholders, and more visits to our development sites in London, especially to areas of regeneration,’ Marx says. ‘That would enable them to appreciate how we create value for them.’
Marx insists he doesn’t look at what his peers do to learn his job, nor does he belong to an IR organization. To do good IR you just need ‘common sense,’ he says: ‘We do what we think is proper and apparently our judgment is correct.’ Certainly his eight years of IR have been key to developing this ‘sense’, while he advises that the guidance of an external financial PR advisor ‘is essential for a smaller company.’
A lifetime dedication
Behind a good corporate IR program there is always one person or a group of people that make a difference. Then there are those who have made great contributions to IR in general. Hence the inaugural award for lifetime achievement in IR. The winner was selected by the editors of Investor Relations magazine in consultation with senior members of the IR community.
The inaugural award went to Mike Cooling, ‘the eminence grise of the IR Society, to which he has delivered an unstinting contribution,’ in the words of Janet Dignan, managing director of Cross-Border Publishing. Cooling has dedicated 40 years of his life to the communications profession, mainly at Reuters, where he rose through IR to head the group’s corporate communications. He was also chairman of the UK Investor Relations Society from 1994 to 1997. Visibly thrilled, Cooling accepted the recognition by noting that despite the market meltdown, ‘IR is alive, well and kicking.’
Though too young for a lifetime achievement award, Andy Wrathall and Andy Mann from BAE Systems nonetheless garnered high praise as best IROs at a FTSE 100 company. Indeed, Wrathall has been in the top two in this category for two of the past three years. Mann, for his part, has been working on the communications side for around 13 years but only lately began focusing on IR. He stipulates that Wrathall is his ‘mentor’, adding, ‘My key responsibility is to ensure that I buy time for Andy Wrathall.’
One sell-side analyst surveyed said of Wrathall, ‘He is approachable and helpful. He is always prepared and spends time discussing issues despite organizational constraints. He makes a real effort to be useful.’ Apart from those qualities, Mann believes a good IRO needs to have a good financial understanding plus knowledge of the company’s history. Plus they should be approachable, available, good at networking and a good listener. ‘You have to delight your customers,’ he summarizes.
Victims of their own success
Success doesn’t always have good consequences, however. Just ask the IR team at Innogy Holdings, which won the award for best M&A communications for the takeover by German utility RWE. Investor relations takes on great significance in such a situation, with both sell-side and buy-side analysts expecting to be notified promptly and in full detail of the developing situation during a bid. But having satisfied all those demands, the four members of the IR team – Ralph Leicester, Kate Avenell, Wai-wee Choy and IR director Steve Cronin – are now looking for new jobs.
If there are two prizes no-one aspires to, they are best IR by a loss-making company and best crisis management, collected by British Sky Broadcasting Group and Invensys, respectively. Indeed, BskyB’s IR team, though otherwise engaged in the City, sent the message that they hoped not to be eligible for the same award next year. Invensys, for its part, was recognized for good handling of the change in its management board, as well as making ‘a good recovery from near bankruptcy’. Said one of the fund managers surveyed, ‘The IR team there communicated the crisis very well.’
To the audience’s amusement, Railtrack was also a winner for good communications during tough times. It won the award for financial media relations. Unique among the awards, this was voted for by City editors, and as one of them expressed it, ‘I would nominate Railtrack because, despite being a terrible investment, the company communicates the message very well.’
‘It has been a fascinating year, one we don’t want to repeat in spite of it being such a character-building experience,’ says Sue Clark, Railtrack’s director of corporate affairs. She says one of the most difficult moments was the week after October 5, 2001, following the announcement that the company was going into administration. ‘That was a Friday, and throughout the weekend news and rumors were leaking from all parts. We needed to make sense of it all and to articulate our story.’ A similar struggle ensued after March 21, when the government announced a settlement offer for shareholders that was 10 percent below the accepted price. The key to success in such situations is ‘to define objectives and to stick to them without letting anything distract you,’ cautions Clark.
In investor relations, as in any discipline, there is always room for improvement, and companies that demonstrate positive change are crowned with laurels. This year, the award for most progress in IR at a FTSE 100 company went to the British Land Company, while Big Yellow Group took the prize for non-FTSE 100 companies. As one sell-side analyst remarked, ‘British Land continued to step up investor contact, particularly outside of London. Moreover, it dramatically improved access to key executives in a company once seen as a one-man act.’ Another analyst added, ‘The company was constantly criticized prior to 2001 for poor disclosure – that criticism has now evaporated.’ The property company also received awards for best board communications and best IR in its sector.
Amanda Rushton, head of IR at British Land since April 2001, confirms that the company now has now a very proactive IR approach. IROs and senior management are always very available to answer questions, to attend meetings with major shareholders, and ‘are always very honest, always telling the truth even if it may not be what investors want to hear.’
Branching out
Retail investors may have soured on direct investing since the heady days of the late 1990s, but they’re still a priority for many companies concerned about fair and full disclosure. To identify the best, WILink sent a questionnaire to over 1,400 active individual investors who selected J Sainsbury. Jennifer van der Eem, IR manager, admits, ‘Communication with private investors is harder because you don’t know who they are.’
The awards also looked beyond the UK, identifying the companies from various regions that have the best IR programs for UK investors. Representing US companies, Colgate-Palmolive won for the third year in a row, while Sony was another repeat winner for the Asia-Pacific region. Making its UK awards debut was SAP, which won best continental European company IR in the UK.
With 29 awards bestowed on their worthy recipients – on top of the sector prizes given out earlier in the day – many in the audience made their way to the dance floor, where it was again confirmed that IROs are indeed alive and kicking.
Click here for a webcast of the awards and a complete list of winning and highly commended companies.
