Icy conditions and steep descents may be the defining features of Nordic ski resorts but they can also be found in its equity landscape. Liquidity has frozen up and some share prices have skidded down at a rate that would frighten Alberto Tomba.
Nokia, of course, remains the darling of the Nordic stock markets. It provides an IR benchmark for other companies to aim for and many say its IR strength has been a key motivating factor behind the general improvement in IR across the region. Several other Nordic blue chips are now highly regarded for their IR, too – companies like Stora Enso and SCA – but even below this top tier Nokia has had an influence.
‘Nokia’s had a big impact in the telecoms sector,’ says Göran Reignel of IR firm Kreab, which has offices across the Nordic region but also in London, New York, Brussels and Beijing. ‘But its influence has also spread to smaller companies that have an association with it – as suppliers, for instance.’
Hearteningly, recent bearishness seems not to have inhibited growth of the region’s investor relations industry. Ask IR professionals here how they regard the maturity and sophistication of Nordic IR and they give a report that is both positive and realistic. ‘There have been great developments in the last ten years, but there’s still a lot to do before we reach the standards of the US,’ says Inga Lundberg, chairman of the Swedish Investor Relations Association. ‘The big multinationals have very developed investor relations departments, but mid caps and small caps are still only beginning to focus on IR.’
Nevertheless, the practice is now percolating down to more and more companies; and the standard has risen, too. ‘The quality varies but overall it is fairly developed,’ says Jacob Nyberg, managing director of Stockholm IR consultancy Taurus Kommunikation. ‘From a transparency and technological point of view, the standard is high.’
Mention ‘quality IR’ and ‘Finland’ in the same breath and people immediately say Nokia. ‘The standard of IR at domestic companies is often compared to that of Nokia, which is a bit unfair,’ says Ahti Martikainen, vice president of corporate communications and investor relations at Alma Media Corp in Helsinki. That isn’t to say Nokia’s gleaming IR trophies are scorned in Finland; quite the opposite. Nokia has been an example to all Finnish companies, and, as the research for this magazine’s annual Nordic Awards shows, Finland punches well above its weight in those awards – even without Nokia.
Taru Narvanmaa is chairman of Firs, the Finnish Investor Relations Society: ‘We did a study to see how investor relations is organized in Finnish companies and we saw there was a wide variety,’ she says. ‘Some leave it to corporate communications, some might have a separate IR department, and others have the finance department look after IR. But I think they compare very well with other European companies.’
Norwegian and Danish companies, deemed less IR-savvy than their Swedish and Finnish counterparts, still have a fair standard of IR and a willingness to improve. ‘Companies are working hard to get up to speed,’ says Steen Juul Jensen, divisional director of corporate communications and IR at Danish pharmaceuticals firm Lundbeck.
As a result, IR is now achieving proper recognition from senior management. ‘It has taken the last ten years for it to be recognized as a proper career,’ says Steffan Heegaard, vice president of IR at Danish insurer Topdanmark, and a finalist in the category of best IRO at a Danish Company in last year’s Investor Relations Magazine Nordic Awards. ‘Before that it might have been seen just something you did before moving to a proper job. IR has become an important element in the strategic work of a company. Companies have realized that the ultimate criterion for a company’s success is the share price.’
Meanwhile, further west, Iceland’s companies are starting to put their heads above the IR parapet. This magazine’s 2002 IR awards research into Nordic companies’ investor relations rewarded Ossur and Opin kerfi for their new-found IR prowess; and commentators continue to note significant progress.
Could do better
Along with the back-slapping, however, comes an acceptance that Nordic IR still has some way to go to match up to the UK or the US. ‘It is very diverse,’ says Jan Erik Gjerland, head of IR at Den norske Bank in Norway, adding that not all Norwegian companies have an individual – let alone a department – dedicated to IR. The burgeoning interest in good corporate communication does mean more resources being set aside for IR. But more could be done. ‘A lot of companies still spend a lot on printed brochures and reports but are not particularly willing to spend money on strategic work,’ says Lundberg. ‘Other companies recognize the need to be proactive.’
Perhaps no organizations appreciate the need for proactivity better than the stock exchanges. One of their major preoccupations is liquidity, which varies enormously across the region. Stockholm’s is high by any standards (with a turnover velocity of 130 percent compared to 80 percent in London). Denmark, on the other hand, is far less liquid, notes Topdanmark’s Heegaard. ‘And below the top 20 companies, liquidity is a problem.’
One impact of the lack of brisk business is that public listings are now increasingly less appealing. Alma Media’s Martikainen says there are ten or 15 fewer companies listed in Helsinki than there were two years ago. In Sweden, too, companies are being put off coming to market, perhaps by bearish prices as much as anything. ‘There are no IPOs being done,’ says Taurus Kommunikation’s Nyberg. ‘It’s been over six months since the last one. There were five last year but 30 the year before. And there’s no evidence that companies are going anywhere else for a listing.’ Instead, he says, there are more and more trade sales as companies that would previously have opted for an IPO seek to raise finance by other means.
Market merger
Liquidity plus slow IPO flow make a single Nordic exchange a tempting prospect. If all the exchanges were to link up as one they would be the fifth largest equity market in Europe and represent a bigger pull to international investors. The good news is that the Norex alliance aims to achieve just this; and it’s already gone a long way towards it. The bad news is that, so far, it only links the Norwegian, Swedish, Danish and Icelandic exchanges. Finland has not joined.
Firs’ Narvanmaa says this is partly because Finland is now in the Eurozone, while the others still have their domestic currencies. Significantly, Helsinki’s exchange has established a link with Frankfurt rather than with any of its more immediate neighbours. But Martikainen suggests a cultural divide and national pride are more at issue than currencies: ‘If you knew the relationship between the Swedish and the Finnish people, you would know why they won’t merge,’ he says. ‘It involves 200 years of history.’
So for now Norex can only provide access to about 80 percent of the Nordic market. Each of the four bourses remains a separate entity but, says Gustaf Frisk of Norex, ‘We are trying to make access as simple as possible for members.’ That means a member of, say, the Stockholm bourse merely has to register with the others to have membership status with them as well. And, having done so, they’ll find the same technical system, the same rule book and the same index calculation methodology.
The goal is to achieve the liquidity advantages a fully merged market would have, so companies are not particularly encouraged to cross-list. ‘They can choose where to list,’ says Frisk, ‘but what we are aiming for is a single point of liquidity. And the more people able to trade a given stock, the greater the liquidity in that stock can be – at least potentially.’
Of course the main factor inhibiting liquidity just now is the absence of investors in most of the world’s equity markets. (One should pause to note here that Iceland’s market has hardly suffered at all from the global equity downturn.) So, frustrated by illiquid stock markets, companies are now on a mission to attract investment wherever they can find it, and for Nordic companies that means beyond local institutions.
Foreigner-friendly
Swedish institutional investors increasingly concentrate on larger investments,’ says Nyberg. ‘They don’t have time to cover mid-cap and small-cap companies. That presents a long-term challenge for investor relations.’
Finnish companies are also struggling to be noticed. Martikainen says, ‘The Helsinki exchange lacks interest from international investors’ – notwithstanding its Frankfurt link. ‘The biggest Finnish companies are listed in London, New York or Paris, so the challenge is to find these international investors. Our market capitalization is so small, few London analysts follow us. And the liquidity in the national exchange is so poor it’s hard to get fund managers to invest.’
‘It depends which sector the company is in,’ says Sira’s Lundberg. ‘My experience is from insurance and steel. If it’s a good company that communicates well, it will get attention. But you have to work for it. You have to go to London, New York and Frankfurt. You have to be very proactive.’
According to Heegaard, Danish companies have a particularly steep uphill struggle. ‘Their difficulty is that a lot are smaller companies – a problem because size and liquidity are important for brokers when they’re choosing which companies to analyze.’
But Heegaard still thinks wooing foreign investors is a priority. He even says the foreign investor is a better investor. An influx of international investors increases liquidity, and not just because of the numbers. ‘The average foreign investor trades twice as much as a Danish one,’ he says.
Dan norske Bank’s Jan Erik Gjerland suggests companies have a responsibility to increase interest in their markets. ‘We are outside the EU and on the outskirts of Europe. We have to make an effort to promote the country and the region.’
Retail therapy
The Nordic region is sparsely populated, with just 23 mn people and only 9mn in the largest country, Sweden. But the region does boast an unusually high level of retail investment, admittedly skewed by Sweden, which enjoys the highest rate of private shareownership in Europe. The Swedish Association for Share Ownership promotes retail investment and protects investors’ rights, and has a direct effect on the domestic IR scene, being very active at annual meetings.
The proportion of private shareholding in Finland is lower, with around a fifth of the population owning shares. But it too witnessed a surge during the telecom boom. ‘Between 1997 and 2000 the number of Finnish people owning shares almost doubled,’ says Martikainen. ‘But a lot of people lost money. And in the last five years people have begun to invest in shares indirectly through funds due to certain tax breaks.’
The growth in private shareownership has affected Finnish IR. ‘It has meant an IRO having to spend more time on private investors than before,’ says Martikainen. ‘We tend to produce three different levels of material: one for international investors; another for domestic and semi-professional investors; and another for press and investors who aren’t used to financial statements.’
The Finnish Foundation for Share Promotion also looks out for retail investors. ‘For example, even though English is the language of IR, the Foundation emphasizes that web sites should also be in Finnish so private investors don’t miss information,’ says Narvanmaa.
Denmark doesn’t have that shareholder culture yet. According to Heegaard, ‘It’s not traditional that you do it yourself – only through your pension fund.’ Anyway, Denmark has always been more of a bond market. ‘It was one of the top five in Europe,’ says Jensen. ‘But its stock market has been underdeveloped. The people are very educated when it comes to bonds and are familiar with extremely complex bond structures but they’re not as sure about stocks.’
Growing private shareownership and international investor involvement have pushed IROs toward new technology. ‘This has been one of the key developments in the region’s IR over the last three years,’ says Martikainen. And Nyberg agrees: ‘A few years ago a private investor would get an annual report and quarterly newsletters,’ he says. ‘Now the information is online so it is more efficient in terms of cost and time. The use of the web is very sophisticated.’
Heegaard says technology has radically reshaped Topdanmark’s IR, allowing it to reach out to foreign and retail investors. ‘Our investor relations activity is based on webcasting and telephone conferencing, as well as lots of traveling,’ he says.
For all the cultural and economic differences among the Nordic countries, their national IR societies cooperate well. ‘There are issues we need to discuss together, such as how to increase demand in our domestic markets,’ says Lundberg, who has been Sira’s chairman for the last two years. They can do this at the region’s annual conference, to be held this year in Copenhagen on May 22.
It seems Nordic companies are determined to improve the standard of their investor relations – particularly the proactive, look at us variety . And they’re not going to let size, geography or stagnant domestic markets stop them getting their story out.
