Just a few years ago the term ‘investor relations’ meant about as much to an Icelandic person as fjarfestatengsl (Icelandic for investor relations) means to a non-Icelandic speaker. All that has changed. Recently this ice-covered island has been far from cold in its approach to the IR scene. And its inhabitants, renowned for their fiery approach to life, have been applying that same passion to the improvement of their corporate communications.
In 2002, Icelandic companies were included in the IR Magazine Nordic Awards for the first time. The accompanying research report claimed: ‘IR in Iceland is a relatively new concept, but respondents say it has improved dramatically in the past year or so.’
One reason for this dramatic improvement in IR practices was the requirement for Icelandic companies to report quarterly. This, combined with other communication methods, such as an increase in quarterly conference calls and site and factory visits, has resulted in a huge difference in the information flow from listed companies to the investment community.
‘Listed companies are more aware of the importance of their communication towards investors and relevant stakeholders,’ says Sigurborg Arnarsdóttir, manager of treasury and investor relations at prosthetics and orthotics company Össur. ‘About three years ago it was not common for companies to offer their investors or other stakeholders the chance to meet with the management following interim reports. Now, most companies do.’
As more and more Icelandic companies recognize the importance of good IR, stakeholder communications are becoming more professional and frequent. Despite its location – just touching the Arctic Circle, with its capital, Reykjavik, the northernmost capital city on the globe – Iceland is beginning to make its presence felt in the IR world.
Building a foundation
One landmark in the development of the country’s IR scene was a conference held by the Iceland Stock Exchange (ICEX) in December 2002. The event intended to draw attention to the benefits an IR program can bring to a company. The outcome of this conference, together with dedicated efforts on behalf of ICEX and several listed companies, was the establishment of the Icelandic Investor Relations (IIR) society in April last year.
‘A year and a half before it was founded there was a lot of talk about companies needing to be more careful about their communications to investors,’ says Arnarsdóttir, who is also chairwoman of IIR. ‘Companies were now being nominated for IR awards, and we thought that if we were going to take IR seriously, we needed a platform to discuss it. It was clear we really needed to establish a society.’
Arnarsdóttir says IIR’s objectives are ‘to communicate to listed companies the importance of IR as a positive development, to create a platform for listed companies and relevant stakeholders to conduct an open and professional discussion on IR, and to be active in providing our members with information on IR.’
Since its inception, IIR has been pushing to keep the development of IR in Iceland moving along. Two weeks after its formation, the society and ICEX held a practical course on information disclosure and investor communications. And in November last year IIR held its first conference, an event that it hopes to hold annually.
The conference, held in association with Reykjavik University at the university campus, was attended by speakers from both Iceland and overseas, and covered key IR issues.
Spreading their wings
A mark of how far Icelandic companies have come in the space of a year was evident at last year’s IR Magazine Nordic Awards, with such comments in the research report as: ‘IR in Iceland has improved in every way. There is a greater awareness of market concerns and issues, increased accessibility and responsiveness, and better information.’
Computer systems firm Opin kerfi won the award for best IR by a small-cap Icelandic company, an award which it also won in 2002. Frosti Bergsson, the company’s founder and executive chairman of the board, believes that the higher profile of Icelandic IR is prompting companies to sustain certain standards. ‘The increased attention puts pressure on us to be professional, and it sets some new goals,’ he comments. But he does point out that when IR is in such an embryonic state, it is important not to rush its development. ‘Our IR practices have to be financially sensible,’ he says. ‘We’re not in a hurry; we just take it one step at a time.’
Opin kerfi’s progress toward IR best practice includes plans to translate more of its corporate literature into English. Last year the company’s quarterly brochure was available only in Icelandic but, according to Bergsson, this year it should be in English too. ‘Over 99 percent of our investors are from Iceland, but over half of our revenue this year came from abroad,’ he explains. ‘We have to have more of our communication in English, so we’re moving in that direction.’
Bergsson says that Opin kerfi is keen to explain the company message to a wider audience, and to this end goes on roadshows to Stockholm and Copenhagen. It is clear that this is one Icelandic company that is looking beyond its country’s borders. ‘With globalization, we are becoming more and more a part of a bigger market,’ comments Bergsson. ‘So we are defining ourselves as not only an Icelandic company, but also as a Nordic company. Part of our mission statement is to grow outside Iceland, and investor relations plays a key role in that.’
Tools of the trade
One company that knows all about the importance of good IR when expanding into other countries is Iceland’s largest bank, Kaupthing Bunadarbanki. It’s currently the only company in Iceland to have dual listing – it listed on ICEX in late 2000 and on the Swedish Stock Exchange at the end of 2001.
‘It is helpful in terms of IR to have dual listing,’ says Jónas Sigurgeirsson, investor relations manager at Kaupthing. ‘My colleagues in Sweden have been doing IR for much longer, so I work closely with them.’ He notes that one IR tool which has proved to be very useful, especially when dealing with overseas markets, is webcasting. ‘Webcasting is quite a recent development in Icelandic IR, but it is being used more and more,’ he explains. Kaupthing carried out its first webcast at the beginning of 2002 and now webcasts its quarterly figures.
Arnarsdóttir agrees that web technology is increasingly important for investor relations. ‘Two years ago, very few companies had an IR section on their site, and those that did had just a small section with basic information only,’ she notes. ‘Now, companies are putting more effort into their IR web pages, especially those companies which have foreign investors, or are seeking foreign investors.
As the investment community develops quickly here in Iceland, companies must put effort into all possible communication channels, including web pages, annual reports and roadshows.’
For the IR scene to fully develop, however, there will need to be effort not just on behalf of companies. The investment community must play its part too, ensuring that communication is not all one way. As Sigurdur Nordal, head of investor relations at Islandsbanki, comments, ‘Quite frankly we would like to see investors being more active. Traditionally they’re not used to having this IR communication channel so, in the long run, we’d like to have more of a dialogue with them.’
Areas of growth
Of course, this ‘IR communication channel’ is still a relatively new concept for Icelandic companies, with most not even having a specified IR person. Sigurgeirsson, being a full-time IRO, admits he is ‘somewhat of a rarity.’ Even Össur – which won the award for best IR by a large- or mid-cap Icelandic company at the IR Magazine Nordic Awards in 2002 and 2003 – does not have a single IR incumbent. Instead, Arnarsdóttir divides her time between treasury and IR responsibilities, and has the assistance of the CEO and CFO with IR duties.
‘It is not common for listed companies in Iceland to have an IR department,’ Arnarsdóttir comments. ‘Most companies do not even have an IRO – the CEO and CFO are in charge of investor relations. And some Icelandic companies are so small that they would never need a special IR person. But on the whole it’s changing, and most companies are putting more effort into IR and opening up roles for IR people.’
Helga Björk Eir?ksdóttir, head of public relations and marketing at ICEX, agrees. ‘In the near future, while it might not be the case that every company employs a person just to do IR, I’m sure all the big companies will have a person who specifically takes control of the IR function,’ she says.
Iceland’s recent IR improvements have been aided by the country’s strong economic performance over the past few years, which contrasts with the other countries in the Nordic region. ICEX rose by around 15 percent in 2002, and market conditions have improved dramatically – with IR practices improving to match.
But – fittingly for one for the most volcanic regions in the world – the Icelandic economy is renowned for being very unstable, something that Iceland’s Prime Minister David Oddsson outlined at an investment conference in 2002. ‘In Iceland we have experienced periods of major growth in the past,’ he commented. ‘But our problem has always been that they have inevitably been followed by downswings because the economy was incapable of handling such a level of growth, [so it] overheated.’
However, recently it has looked as if the economy has become more stable. ‘It has been shown that the Icelandic economy was capable of absorbing such growth, and the old vicious circle of overheating and contractions, which so soften cost us dear, was broken at last,’ says Oddsson.
This is a view that Nordal is happy to agree with. ‘The economy has changed quite a lot in the last ten years,’ he explains. ‘Structural changes in the economy have made the fluctuations much less than they were previously. In general, the economy is in good shape, and we should see considerable economic growth in the coming years.’
Laying foundations
With the recent economic growth going hand in hand with investor relations developments, the hope is that both will continue to thrive. For IR, it seems that the basic structure has been successfully laid in place. Now what is needed is for companies to build on this foundation by learning and applying best practices.
‘Look at how far the Icelandic investment scene has come – both in a technical and regulatory sense,’ says Eir?ksdóttir. ‘It is comparable with established markets. The question now is, how quickly can we adapt new technologies and new thinking into investor relations?’
But despite the efforts of many companies to adapt and progress in this area, not everyone is as receptive to new practices. Eir?ksdóttir says she sees a huge difference in attitudes towards IR at ICEX-listed firms. ‘We have companies that are quite passive, and don’t really think about shareholder needs,’ she says. ‘Then we have companies that go abroad, expand their operations, emphasize disclosure and are really active – companies that really focus on their investors.’
Arnarsdóttir suggests that one of the reasons why some companies aren’t interested in focusing on their investors is the size of the local investment community. ‘Iceland’s a small market so companies sometimes think that people know all about them,’ she explains. ‘As a result, some companies send information to the stock market but don’t feel the need to give it to their investors.’
Despite the reluctance of some to embrace investor relations, recent developments indicate that Iceland will continue to quickly progress in IR practices over the next few years. Companies keen to attract foreign investors, or those looking to list overseas, will have to follow the rigorous demands of different markets and compete with companies that have more IR experience. By learning from other countries, particularly those in the Nordic region, Iceland stands in good stead to come out of the cold and breathe new life into the development of investor relations.
