What are the winners of the IR Magazine UK Awards 2006, identified by an independent perception study of over 750 fund managers, analysts and retail investors, doing so well? The answer to this question is the story of what’s required for successful investor relations.
BP stole the show, winning eight of the 29 categories including grand prix for best overall IR, best IR by a CEO at a FTSE 100 company and best CSR. The oil giant’s overwhelming success is undoubtedly tied to its deep pockets – the company made a hefty $19.3 bn profit last year – and the fact that it’s in a business that demands careful attention to corporate reputation. ‘Working and managing corporate reputation is fundamental to what we do,’ says Peter Hall, director of IR at BP.
‘We are lucky to be able to specialize our communications in various ways so that we have dedicated teams working in specific areas,’ notes Hall. BP has robust PR, IR, government relations and CSR teams. Recently, members of the CSR team have joined in on investor meetings to field queries on CSR from mainstream fund managers. ‘Investors clearly want to feel comfortable with the company’s approach to these issues,’ says Hall.
Accessible chiefs
Over the last three years, one significant change BP’s IR department has instituted is better access to management. Today, seven of the company’s senior executives are meeting with its top 130 shareholders on a regular basis, Hall reports. Fittingly, Lord Browne, who retires in early 2007, was lauded for his accessibility by analysts and fund managers responding to the perception study. ‘BP’s CEO, John Browne, is as convincing as he is accessible,’ said one analyst.
‘Accessible’ describes Sportingbet CEO Nigel Payne as well. He won best IR by a CEO at a non-FTSE 100 company and says one of the main selling points for Sportingbet as an investment is its open communication style. ‘We are frank about the issues we face – good and bad – and I think investors appreciate that.’ The Aimlisted online gambling company won five awards, including best smaller company IR and best IR in the new sector category of leisure and gaming.
A sure bet
A sure sign of the investment community’s confidence in Payne is the slight dip in share price the stock took on rumors he was leaving to head up rival PartyGaming last February. ‘The sector attracts considerable interest from various hedge funds and short sellers,’ Payne comments. ‘Such people are adept at circulating false rumors to serve their own aims. This is something that I just dismiss and get on with it.’
Payne, a charismatic character who doesn’t gamble himself, is leaving his post as CEO to become Sportingbet’s executive director in October. He will be seeking to educate the US Congress on the merits of regulating gambling and has already hired two lobbying firms. Current finance director Andrew McIver, who will step into Payne’s CEO role, identifies his biggest IR challenge as keeping up with Sportingbet’s growth. ‘We are a very immature business that’s growing very quickly,’ he says. ‘Our investors all seem very happy though.’ Indeed, Sportingbet’s most recent results show an operating profit of £28.8 mn ($53.04 mn), up 43 percent from the same period last year.
Industry know-how
Sometimes IROs are a bit hard-pressed to identify the particulars of the strategies that contribute to their success. ‘There hasn’t been any fundamental change,’ notes Barclays’ James Johnson, winner of best IRO at a FTSE 100 company. ‘We are doing the same thing continuously, but just a little bit better than everybody else.’
Fund managers and analysts specified Johnson’s understanding of UK banking as setting him above his peers. The former banking analyst has spent his career in the sector either studying it academically or researching companies. As one analyst said: ‘Johnson understands the business and the market, and he knows what we want.’
Another former analyst, Peregrine Riviere of Carphone Warehouse, took home the gong for best IRO at a non-FTSE 100 company. Analysts and investors similarly commended him for his knowledge of the business. ‘The way I explain IR in a nutshell is that you have to know the answer to the question you’re going to be asked – even if you’re not going to give that answer,’ says Riviere. In other words, IR has to develop a strong and broad knowledge of a company’s business: ‘An IR team should always be judged on its ability to manage its business,’ he adds.
Riviere also believes it takes a good three or four years for an IRO to establish credibility in the UK. When a company is in transition, however, a year may be sufficient to leave an impression with fund managers and analysts.
That was the case for this year’s winner in the most improved IR category, Cookson Group’s Isabel Vilela. She took over Cookson’s IR a year ago when the materials science firm was making senior management and boardroom shuffles. Her goal was to present Cookson in light of the changes to ensure investors and analysts understood its strategy. ‘I took everyone to lunch and had frank and honest conversations – they were very forthcoming,’ she says.
A strong track record
Building a track record with investors abroad can be more complicated than in the domestic market – and UK pharmaceuticals giant GlaxoSmithKline (GSK) has risen to the challenge, according to the 240 US-based investment professionals who voted for the company as having the best UK company IR in the US market. GSK’s US IR stands out for its transparency, its understanding of domestic regulation and its ability to compare different markets, say perception study respondents.
‘The US IR team deals with North American investors and the UK team handles the rest of the world,’ says GSK’s Jen Hill. Funnily enough, she reckons the biggest challenge of operating an international investor relations team is time zones: ‘We have to make sure everyone gets the information quickly, so figuring out the best timing for things is essential.’
