The growth of the German equity culture in the mid 1990s and new standards for corporate governance and blue-chip listings in the US have necessitated far more open communications with shareholders. The German corporate world has risen to the task with aplomb – and here we detail the strategies and philosophies behind a number of successful German IR programs.
E.ON
E.ON, a German utility group, has seen a lot of change, including the merger with Ruhrgas in 2002. This has required excellent communications to investors and close teamwork on the part of the five-strong IR team. IR team leader Kiran Bhojani puts the success of the group’s IR effort down to the support of management. The new CEO is in charge of IR, and is very proactive in this role. The CFO also gives the IR department a lot of support, believing that strategic business decisions should always have shareholder value firmly in sight. The senior management members see their role as a two-pronged one: guiding managers to reach their targets, and communicating with shareholders and analysts.
Like fellow utility RWE, E.ON knows its long-term shareholders very well, so there is a constant dialogue. The group’s August 14 statement, which gave detailed strategy and financial projections, is testament to the company’s commitment to transparency.
BMW
The BMW Group IR program has gained increasing approval from the investment community over recent years. The department of six people has a two-tier structure: one belongs to corporate communications (production, strategy, breaking news and so on), the other to corporate finance (accounting issues, treasury, controlling and so on). This specialization ensures the team members are very well informed in their respective areas, though ultimately the team presents as one knowledgeable voice to the outside world.
‘The fact that this system works so well can be directly credited to very good internal communications within the company and good feedback from management,’ says Christian Feilmeier, co-head of the IR team.
Torsten Schüssler, the other co-head of IR, describes the second main feature of the IR effort: ‘The explanation of the group brand and product strategy is a core topic in the IR program.’ The company takes the attitude that it is the products and brand that are critical to the group’s success, so it takes every opportunity to include these issues in investment presentations.
The company has a long-term focus, which Feilmeier believes adds to the group’s credibility. So although it produces quarterly results to international accounting standards and monthly sales, the company refrains from publishing short-term targets. BMW Group has stepped up its level of transparency over the last few years, helped by an improved web site. Investor access to board level has traditionally been low, so the IR team intends to improve in this area going forward in response to investor demand.
Deutsche Bank
Being one of the largest international finance companies in the world requires a well-resourced and professional IR department. Deutsche Bank has this in the form of a ten-member team, split between Frankfurt and New York, headed by Dr Wolfram Schmitt. Schmitt describes his central rule for IR as instilling investors with ‘confidence and trust in the bank’ and providing ‘consistency of information’. In this respect, much of what the team communicates is strategy. Schmitt is particularly interested in ‘engaging in an informal exchange of ideas with long-term investors over the company’s direction and opportunities for strategic decisions, and conveying these ideas to the board, particularly the CEO and CFO.’ Over the last few years the team has standardized the production of its information, particularly quarterly results, to ensure consistency of information and usefulness to investors.
The enormous demand for access to management and IR personnel has necessitated careful targeting of roadshows and meetings around the world. Going forward, Schmitt would like the bank to be more systematic and proactive in presenting itself to the investment community. Retail investors benefit from a state-of-the-art web site that was relaunched three years ago; shortly after each quarterly release Schmitt offers investors a one-hour Q&A session via the web site. More recently the IR team has been focusing on maintaining an ongoing dialogue with bond investors, a traditionally neglected investor group in terms of IR in Europe.
Infineon
One area in which semi-conductor company Infineon’s IR effort stands out is its web site. Listed in 2000, Infineon has maintained excellent relations with its shareholders and has been praised for its consistency and frankness of communications during the severe industry downturn during 2001 and 2002.
Its focus over the last year has been to intensify its contact with the investment community – by maintaining its fast response time to investor queries, increasing the number of roadshows and providing greater management exposure. The IR department carefully controls all communications from the group, ensuring that there has been a consistent message since Infineon’s inception, which adds to its credibility.
The group has a good transparency record for reporting, providing quarterly sales and Ebit figures for each business unit. This reporting is particularly useful as the business units vary considerably in terms of their performance volatility. All results are archived on Infineon’s recently revamped web site.
In terms of the shareholder base, Infineon plans to intensify its focus on the US market going forward, while continuing to keep its eye on the ball in Europe. An IR office was set up in San Jose in California’s Silicon Valley earlier this year.
SAP
The small and mid-cap sectors have their fair share of IR success stories, too, and SAP has been a shining example among them for a number of years. The SAP program is truly global; the eight-member IR team headed by Stefan Gruber is divided between Germany and New York. And SAP’s ADRs are among the most actively traded German ADRs on the NYSE. Gruber says the team ‘is very well informed about the company, has a strong network within the company and good access to senior management.’
The IR program is strongly focused on regular investor meetings, and the company hosts a number of large conferences each year, some of which involve customers of SAP.For example, at its annual Sapphire conferences, customers can learn about new products while investors can hear from the customers about SAP software and how it works for them. Senior management members take part in the big investor conferences and are keen to interact with investors.
All shareholders benefit from the group’s award-winning web site. SAP has provided live webcasting of its conference calls since 1998 and keeps an extensive archive on the web.In addition, retail shareholders receive in the post an overview of the results and operations each quarter.
RWE
Another company that has focused on its bond investors is RWE. The catalyst for this was the launch of a major debt issuance program in 2001. Ingo Alphéus, head of the seven-strong IR team, describes RWE’s overall IR strategy as firstly to ‘treat equity and fixed income investors equally’ and secondly to ‘treat equity and bond holders as customers.’ This implies marketing the RWE story to all investors and not just being information brokers. It also means being proactive – rather than waiting for questions, the team goes out to its ‘customers’ and talks to them, invites them to company sites and gives them access to management. This openness has been particularly important over recent years as RWE, along with the rest of the utilities sector, has undergone a lot of change.
So it’s not surprising that Alphéus is keen to engage his team and management in a rigorous schedule of 35-40 roadshows, 400 one-on-ones and ten to 15 investor conferences a year. This exposure is systematically targeted at the top 50 or so investors in Europe and the US, although the company is constantly widening its scope to the periphery of the institutional market. Retail shareholders account for around 13 percent of the shareholder base, so they are not specifically targeted.
With a stable, long-term investor base, it is particularly important that the financials and strategic messages are completely credible, transparent and consistent. RWE’s annual reports and financial breakdowns are highly regarded on this score and, in terms of targets, Alphéus describes the group’s philosophy as being to ‘under-promise but over-deliver.’
