A fledgling public company still majority-owned by the French state, Autoroutes du Sud de la France (ASF) is a newcomer to the world of IR. But the two-person IR team at the highway construction and management company is already on the fast track to success. Sol?ne Allain, who heads up the team, and Elisa Pascal-Gemen run ASF’s one-year old IR department and report directly to CFO Jean-Jacques Bancel.
Since its successful IPO on Euronext in March 2002, ASF has hit few bumps in the road and has seen its share price climb to an all-time high of nearly E43.19 ($55.8) in 2005. Much of ASF’s success is undoubtedly due to its 30-year history and solid business model, but Allain and Pascal-Gemen, as well as Bancel and CEO Jacques Tavernier, have played a crucial role in attracting – and keeping – investors.
Founded in 1957 as the state-owned company Autoroute de la Vallée du Rhone, ASF now operates 3,124 kilometers of toll-based highways in the south of France. ASF holds the concession on these routes, some until 2026 and others until 2032. Last year the company recorded revenues of E2.2 bn – most of which came from tolls collected on its highways, but also from related activities such as the management of truck stops, rest stops and parking lots – and counted over 8,200 employees. Despite this impressive pedigree, few French people had ever heard of ASF until it went public.
‘We had to spend a lot of time explaining the basics to investors in the beginning, because our model was slightly complicated in that we used to be owned by the state and we operate on a concession basis,’ says Bancel, who single-handedly ran investor relations from early 2002 until Allain and Pascal-Gemen took over in September 2003. ‘I spent a year and a half teaching and educating potential investors,’ he adds, explaining that the concession model means ASF essentially rents, for a fixed period of time, the road infrastructure it builds and maintains for the French government.
Part of Bancel’s core task when he arrived as director of financial communications in January 2002 was not only to explain ASF to investors, but also to explain investors to ASF. ‘The firm had no experience with public markets, and I came from Banque CCF, so I was well placed to help it understand the IPO process,’ recalls Bancel, who became CFO in July 2003. Due to his early involvement with the investment community, Bancel decided together with top management to place the fledgling IR department directly under his control, instead of having Allain and Pascal-Gemen report to the communications department.
From the bottom up
What set ASF apart from many companies contemplating an IPO was its insistence on generating a solid base of retail shareholders. Just 26.4 percent of ASF’s shares are in free float, but a considerable 7 percent of the company’s total capital is in the hands of retail investors.
‘It was very important for us to attract individual investors,’ explains Bancel. ‘This was in response to all the people who complain that freeway tolls are too high. I said to them, If you think it’s so expensive, why not become shareholders of ASF and get a piece of those revenues back as dividends each time you pass through the toll booth?’ Retail shareholders are also more likely to be buy-and-hold investors, which gives the stock stability over the long term, he adds.
To attract retail investors during the IPO, ASF launched a major advertising campaign on television, radio and in print, and also signed up most major banks to act as distributors of shares. That campaign hasn’t slowed since Pascal-Gemen took the helm. She quickly introduced a range of initiatives aimed at communicating with smaller shareholders, including setting up a toll-free number for investor inquiries and starting an investors’ club for people with more than 60 shares.
Pascal-Gemen also organizes trips for club members to construction sites and rest stops, and plans regular face-to-face shareholder meetings in cities around France. ‘We don’t want our retail shareholders to think we just lay down strips of asphalt,’ she points out. In fact, a large part of ASF’s business is the construction and maintenance of themed rest stops aimed at tourists. These include restaurants, shops and gas stations.
Much of Pascal-Gemen’s job involves responding to questions from shareholders who aren’t always well informed about the company. ‘Some people receive the shareholder letter and, even before they read it, they call up and ask all sorts of questions about why the stock price fluctuates, how to join the club, and so on,’ she says.
Others will ask if they’re entitled to discounts on road tolls while others still call the toll-free number every day just to get the share price. It takes patience to deal with this type of question, but Pascal-Gemen is adamant it’s worth the hassle. ‘We’d like more retail shareholders in the future – we really respect them,’ she explains.
Heavy hitters
Naturally, ASF is also focused on attracting and retaining institutional investors, which together hold nearly 20 percent of the firm. Should the French state further privatize ASF in the future – an option officially shelved in late 2003 and yet to be taken up again by regulators – institutional investors will surely grab the chance to snap up more of the company. When that happens, ASF’s IR team wants to be ready to welcome them with open arms.
Allain is at the beck and call of the 20 sell-side analysts and handful of buy-side analysts who follow the company. ‘Analysts call me every day,’ she says. ‘They ask about fluctuations in the share price and I try to explain why it’s moving in a certain direction to the best of my knowledge.’
Allain also organizes roadshows and investor conferences in Europe and the US, where many of ASF’s institutional investors are based. Twice a year ASF puts on a presentation for local analysts in Paris to report half-yearly results, followed by a one-week roadshow across Europe. For quarterly results, ASF skips the presentation and just sends out a release and holds a conference call.
Organizing special events is another way Allain stays in touch with investors. In September she invited 25 analysts to visit the construction of ASF’s A89 highway. Flying over the site in a helicopter, analysts bombarded her and Bancel with questions about the firm’s future. ‘We answered questions before, during and after the ride,’ recalls Allain. Many investors are concerned that ASF faces a limited future in France, where few new highways are planned.
‘Now that investors understand the basics of our business, they want to know more details about our plans for the future,’ notes Bancel, who accompanies Allain on most roadshows and presentations. ‘We’ve recently entered a new phase of communication focused on the future.’
ASF’s large shareholders are made up mostly of UK and US pension funds, mutual fund companies and insurance firms. One reason the French company has so many US and UK investors is that the concession model is well known in anglophone countries, according to Allain. ‘They already know what we are about,’ she says. Even so, either Bancel or Tavernier comes along on roadshows so investors can ask them questions directly.
Telling the story
Because ASF’s share price has remained buoyant since the IPO, the IR team’s job hasn’t involved any crisis management or rumor quelling. ‘Our industry isn’t one that’s full of news,’ says Bancel. ‘One of our challenges is communicating anything at all, because we aren’t bringing out a new technology every day or entering into a new merger or agreement.’ To engage analysts in the company, therefore, the IR team takes a proactive approach.
‘We make it our policy to communicate quickly whenever there is news so there are no surprises,’ says Allain. Of course, even in the slow-moving highway construction industry, there are rumors. For ASF’s IR team, the main rumor circulating off and on for the last two years is that Vinci Concessions will try to acquire ASF if another privatization goes ahead. Vinci has already said it plans to increase its stake to 25 percent in the coming months through a pre-negotiated share swap. ‘Many analysts want to know whether Vinci will take a further 5 percent, but we don’t have the answer to that so we tell them to go talk to Vinci,’ adds Allain.
One of management’s top peeves is that ASF is not part of the French large-cap CAC 40 index. ‘We are adamant that we belong on the CAC 40 due to our performance and our size, but our low liquidity keeps us out,’ explains Allain. By obtaining a listing on the CAC 40, ASF believes it could eventually be listed in other countries, attracting a larger international institutional investor base – a key goal going forward. ‘Being on the CAC 40 would mean more work for the IR department, but we wouldn’t mind putting in the extra hours,’ says Allain. Obviously, ASF has an IR department with an eye on the road ahead
What the analysts say
Gerard Moore, Deutsche Bank
‘ASF’s IR people are very good at reaching out to analysts. They are prompt and very clear, and always available for questions. They are definitely above average compared with most French companies, which can often be hard to reach. I work mostly with Sol?ne Allain, but access to top executives is also very good.’
Charles Edouard Boissy, Oddo Pinatton Equities
‘ASF is a company that’s easily explained to investors and the IR team is very open and friendly. International investors are very interested in ASF, especially as the share price has held up nicely and there’s a bit of speculation involved due to the possible further round of privatization. The annual report is clearly presented and very comprehensive. For such a small IR team, ASF is very professional in its investor relations.’
