Latest articles for IR Magazine

Setting the standard in Europe

staff writers — Fri, 22 Jul 2016 00:00:00 +0100

The European IR community celebrated its highest achievers in June

For the second year in a row, Danish healthcare major Novo Nordisk topped the charts at the IR Magazine Awards – Europe, taking home three trophies: best overall investor relations in the large-cap category, best in sector and best in Northern Europe. The awards ceremony, held in London on June 22 at the Park Lane Hotel, also saw victory for Spanish utility firm Iberdrola, which moved up from third to second in this year’s IR Magazine Euro Top 100, taking home three trophies. Germany’s RWE won the mid-cap award for best overall IR, while the top prize for small caps went to Portugal’s REN – Redes Energéticas Nacionais.

New to this year’s list of accolades were three judged categories where nominations were self-submitted and winners were chosen by a jury made up of IR Magazine editorial team members and investment management professionals. Martin Kjær Hansen, senior IR manager at ISS, was distinguished as IR Magazine’s first rising star in IR. The award for best investor event was snatched up by Unilever – which ranks third in this year’s Euro Top 100 and took home three other accolades, including best sustainability practice – while Deutsche EuroShop won the prize for best use of multimedia for IR.

For all the photos from the night, see the gallery on our event mini-site.

Roche Holding, Nestlé and Deutsche Post DHL all re-enter the top 10 this year at rank 5, 8 and 10, respectively. Former serial winner BASF – whose IRO Magdalena Moll left for OMV this past year – is outside the top 10 for the first time at rank 13 but retains the best in sector award. German firms in general are the most represented nationally in this year’s Euro Top 100 with 22 companies, while the UK comes second with 11, and Spain and Switzerland come joint third, with eight each.

The Euro Top 100 and the majority of the award winners were identified by means of a survey of the European investment community. This included extra research categories, in addition to the award categories (see Euro top 10, above). The full list of research categories and further coverage of the results of this research are reported in detail in the IR Magazine Investor Perception Study – Europe 2016. For further information or to order a copy of the report, please contact Dahman Djimani at +44 20 8004 5337.

Main awards - voted for by investors and analysts

Grand prix for best overall investor relations

Large cap: Novo Nordisk
What the investment community says: ‘Novo Nordisk produces a high standard of materials, both online and in hard copy. It also holds good roundtable meetings where you can meet with senior management, as well as insightful conference calls on a variety of subjects, including research and development’ – Denmark, buy side

Mid-cap: RWE
What the investment community says: ‘There is good access at RWE and plenty of meetings. It doesn’t shy away from communicating with us even if the performance is poor’ – Netherlands, buy side

Small cap: REN – Redes Energéticas Nacionais
What the investment community says: ‘I am not voting for the quality of REN’s IR package but for the efforts of its IRO. In what remains of investor relations in Portugal, Ana Fernandes stands out as being one of the best and most helpful’ – Portugal, buy side

Best use of technology

Iberdrola
What the investment community says: ‘Iberdrola is clearly number one for its website because of the way the site is structured and the ease with which you can get what you need’ – Spain, sell side

Best sustainability practice

Unilever
What the investment community says: ‘Many companies are clear about the future but Unilever goes that bit further and inspires belief’ – Switzerland, sell side

Sector winners

• Communications: Deutsche Telekom
• Consumer discretionary: Continental
• Consumer staples: Unilever
• Energy: Galp Energia
• Financials: Allianz
• Healthcare: Novo Nordisk
• Industrials: Deutsche Post DHL
• Materials: BASF
• Technology: Amadeus
• Utilities: Iberdrola

Regional winners

• Central & Eastern Europe: ˇCEZ Group
• Germany: Continental
• Northern Europe: Novo Nordisk
• Southern Europe: Iberdrola
• UK & Ireland: Unilever
• Western Europe: Roche Holding

Judged awards

This year, IR Magazine introduced three new categories that complement our researched awards categories. Each of these new awards was presented to a publicly listed company that made an outstanding contribution to the practice of IR and the community of IR professionals. While the rest of the IR Magazine Awards are determined by a survey of the investment community, these new awards invited nominations and the winners were decided by a panel of judges made up of IR Magazine editorial team members and investment professionals.

The winners

Rising star: Martin Kjær Hansen, ISS (Denmark)
Part of the team that came third in the best IR for an IPO category in 2015, Hansen (left in this picture) works hard to further the IR profession and has built up a strong reputation among his peers. He is the youngest ever board member to join the Danish IR society and has developed new sell-side practices that have been copied by other firms.

Best investor event: Unilever (UK)
Unilever was nominated for its innovative and interactive 2015 Unilever Investor Seminar, which included hands-on experience of new technologies, interaction with management from divisional levels and beyond, and visits to consumers’ homes.

Best use of multimedia for IR: Deutsche EuroShop (Germany)
Hamburg-based Deutsche EuroShop used free video-streaming app Periscope to allow investors and analysts the chance to watch the firm’s incoming and outgoing CEOs give speeches at its AGM.

Investors optimistic over Japanese governance changes

Garnet Roach — Thu, 21 Jul 2016 00:00:00 +0100

But BNY Mellon survey finds Japanese codes have had no impact on investing approach for many investors

North American and European investors hold largely positive views of the impact of Japan’s Stewardship Code, introduced two years ago, and the country’s Corporate Governance Code, introduced in June 2015, according to research from BNY Mellon.

For the 20 investors at 19 large and small investment firms surveyed, which have aggregated equity assets under management of $679 bn – of which $49 bn is invested in Japanese equities – the most important components of the codes are the independence of board directors at 65 percent and return-focused capital policy at 60 percent.

Almost all respondents (19 out of 20) point to some improvement in issuer behavior since the introduction of the codes (adherence to which is voluntary), though many (45 percent) indicate that their approach to investing in Japan has not changed.

‘Concerns were voiced that many issuers will approach implementation of the codes with a ‘box-ticking’ mentality, and fulfill only the minimum requirements at the surface level or provide vague explanations for non-compliance in the absence of truly embracing the spirit of the codes,’ write the authors of BNY Mellon’s Investor sentiment on Japanese reforms study.

‘For example, some participants point out that a majority of issuers in Japan have demonstrated progress by appointing one or two independent directors: more important, however, will be the degree of their independence, their qualifications and their influence on decision-making, which will ultimately determine how the codes’ principles are applied in practice.’

So while 65 percent of respondents see the independence of board directors as one of the most important components of the codes, when asked what key measures will serve as evidence the codes are actually working, only 30 percent of investors cite the number of independent directors. Instead, shareholder returns top the list at 65 percent, followed by return on equity at 45 percent, profitability at 40 percent and balance sheet efficiency at 35 percent.

Offering advice on how Japanese firms could better attract international investment, BNY Mellon says companies ‘should be outlining their views on optimal capital structure, setting clear return-on-equity and return-on-invested-capital targets, and delivering on these objectives and returning excess capital to shareholders,’ write the authors.

‘While some respondents acknowledge they have seen some Japanese companies showing a greater willingness to discuss balance sheet efficiency, they agree that they have not seen sweeping changes in the Japan investment landscape and, more importantly, they are waiting to see execution over a longer period.’

In terms of investor relations, ‘investors agree’ that Japanese issuers could encourage greater buy-side interest by increasing access to senior management and maintaining visibility through global conferences, company events and regular non-deal roadshows.

A quarter of investors say Japanese companies ‘generally promote themselves less than their developed market peers’. Yet ‘it is important for Japanese management and IR teams to prepare a coherent and compelling equity story that clearly outlines the company’s mid to long-term strategy, global competitive advantages, growth potential and strategy to counter current domestic macro trends.’

Some respondents even point to examples of Japanese companies with strong fundamentals that are misunderstood or under-appreciated simply because of ‘a lack of management visibility, ineffective articulation of their investment cases and insufficient information flow (especially English-language materials), all of which are challenges Japanese companies can address,’ notes BNY Mellon.

As one US fund manager with $33.4 bn in equity assets under management notes in the research: ‘We like to see that a company really has the belief to focus on the bottom line and make a presentation that it is focused on operating profit and return to shareholders. IR in Japan has actually improved quite a bit, but it is a mixed bag. If a company can sit down and discuss what it wants to be, talk about how it wants to get there, and show how it cares about shareholders, that is most of the battle.’

The Ticker Podcast – Episode 60

staff writers — Thu, 21 Jul 2016 00:00:00 +0100

Corporate culture and Twitter tactics under the spotlight

Episode 60: Jeff Cossette talks to Black Sun about new reporting guidelines around corporate culture and the role IR should play in communicating this area to investors. Plus: why ignoring criticism on Twitter could an effective tactic.

Thoughts from the European buy side

staff writers — Thu, 21 Jul 2016 00:00:00 +0100

How the buy side picked the top IR teams from across Europe

Novo Nordisk might have been named number one in the IR Magazine Euro Top 100 for the second year running but what did the buy side have to say about the Danish healthcare major? And how did the European buy side rate other IR programs from the top 10 across the continent?

1. Novo Nordisk
‘Novo Nordisk has an independent board of talented people who have been involved with the company for many years’
– Denmark, buy side

2. Iberdrola
‘Ignacio Cuenca has been at Iberdrola a long time and has extensive knowledge. He is able to talk on each segment and each geographical region without reference to anyone else’
– Switzerland, buy side

3. Unilever
‘Unilever holds a good capital markets day where it tells the story very well. I meet management people once or twice a year and the CEO is always very clear on strategy and talks easily about achievements and future plans’
– Norway, buy side

4. Continental
‘The IR at Continental is sophisticated and highly professional. It is a complex company with many businesses yet it produces detailed documentation on each segment. You can tell it invests a lot in its communications’
– UK, buy side

5. Roche Holding
‘I imagine everyone mentions Roche when it comes to thinking about sustainability as it is so interested in the future’
– Switzerland, buy side

6. EDP – Energias de Portugal
‘EDP is great because of the quality of the information provided, the timing of the presentations and the actual presentations. The senior management and IR team communicate well and send a clear message to the market’
– Portugal, buy side

7. Allianz
‘I recently put out a life insurance report and if I could have done I would have put Christian Lamprecht as the co-author for all the help he gave me. He provided details and even checked the translations for me. A great guy and extremely helpful’
– Germany, buy side

8. Nestlé
‘Nestlé is very helpful on the subject of nutrition and food additives and provides the clearest and most quantified information. I have my own criteria for assessing companies that include putting certain questions directly to the firm and I find, in terms of transparency, that Nestlé comes out the best’
– France, CSR analyst

9. RWE
‘RWE is a complex company but it makes the effort to separate equity and credit investors so its updates are always relevant to me. I meet with the firm frequently here and in London. The IR head is always available and holds regular investor days’
– Netherlands, buy side

10. Deutsche Post DHL
‘Deutsche Post keeps in good contact at all times. It holds separate meetings on special issues and is always interesting when trying to help you understand the company and its strategic plans’
– Germany, buy side

All comments taken from the Investor Perception Study – Europe 2016

How Unilever won best investor event

staff writers — Tue, 19 Jul 2016 00:00:00 +0100

Unilever picked up award for ‘innovative’ event that included a visit to a consumer’s home

At the IR Magazine Awards – Europe 2016, Unilever won the prize for best investor event for its Unilever Investor Event 2015, a three-day trip to Manila and Singapore. The winner was selected by a judging panel of institutional investors and IR Magazine journalists, with one judge commenting that the event has ‘innovative written all over it’. Below you can read an executive summary of the event provided by Unilever as part of its submission for the award.

Why does the nominee deserve to win?

We had strong senior management buy-in to the event – not just from the chairman, CEO, CFO and divisional heads, but also the next layer of management whom it is rare for an investor or analyst to meet.

The event was very interactive and immersive for the attendees, for example:
• visits to consumer’s homes to understand their needs and wants
• interaction with local traders and retailers
• hands-on experience of the latest technology supporting our distributor network
• interactive sessions with brand and country managers
• presentations by CEO, CFO and other members of the senior leadership team

Key sessions were webcast live for the benefit of those not attending in person.

We received excellent feedback from our delegates, and strong attendance by both current and underweight shareholders, as well as sell-side analysts.

We demonstrated Unilever’s position in South East Asia and delivered key messages, as evidenced by the extensive delegate feedback gathered post-event.

Unattributed investor feedback:

• ‘This was one of the best trips I’ve been on – partly because of the location and home visit, but also because we had the chance to meet a lot of Unilever people and they were all a great credit to the company.’
• ‘The access to Unilever talent was impressive. I have never received such exposure at another fast-moving consumer goods business.’
• ‘I was very impressed by the enthusiasm and knowledge that all the Unilever employees demonstrated and the way the overall strategy seems to be embedded in all parts of the organization.’
• ‘I think the format used was very good and I hope it will be copied for future events.’
• ‘It was an excellent trip. The highlight was the visit to the home of a shopper in Manila. I have never done one of those before – it was interesting and also showed the local team in a very favorable light.’

Event resources

Paul Polman, CEO – Setting the scene
Rohit Jawa, head of Unilever Philippines
Graeme Pitkethly, CFO – Value creation
Keith Weed, chief marketing & communications officer – Digital marketing and e-commerce
Peter Ter Kulve – 4G growth in action
Paul Polman – Q&A
Presentation slides

Major investors gear up to oppose bill regulating proxy advisers

David Bogoslaw — Tue, 19 Jul 2016 00:00:00 +0100

Council of Institutional Investors warns HR5311 would weaken governance in US public companies to the detriment of investors

Pension funds and other major institutional investors are fighting proposed legislation that they fear may severely restrict the ability of proxy advisers to fulfill their roles in the proxy voting process. The bill, HR5311, was introduced on May 24 and began the process of being amended by the House Committee on Financial Services on June 16.

If the bill, commonly known as the Corporate Governance Reform and Transparency Act of 2016, gets passed into law, it would require proxy advisory services to submit to a strict registration process with the SEC that would entail filing an application describing its methodologies for developing proxy voting recommendations, any potential or actual conflicts of interest related to the proxy adviser’s ownership structure and whether or not it has a code of ethics, as well as adequate financial and managerial resources to be able to consistently provide proxy advice based on accurate information. The bill would grant the SEC the authority to suspend or revoke a proxy adviser’s registration if the SEC decides this information hasn’t been provided to its satisfaction.

The proposed bill is the most recent expression of allegations that members of the US Chamber of Commerce and other business advocacy groups have made about the extent of influence proxy advisory firms may have on institutional investors voting their proxies. These allegations have escalated in recent years as investors have gained an advisory vote on companies’ executive compensation plans and as shareholder activism in general has grown.

In a letter of opposition sent to the House Committee, the Council of Institutional Investors (CII) voices concern that tighter regulation of proxy advisers would hurt investors and that ‘the bill could weaken public company corporate governance in the US, lessen the fiduciary obligation of proxy advisers to investor clients, and reorient any surviving proxy advisers to serve companies rather than investors.’

Timothy Smith, director of ESG shareholder engagement at Walden Asset Management in Boston, says his firm isn’t arguing that proxy advisory services don’t need some updating or checks and balances. ‘But if you read this bill, it [is clear it’s] hugely prescriptive, micromanaging to the extreme,’ he explains. ‘It would really block the work proxy advisory services are doing.’

The Society for Corporate Governance (formerly the Society of Corporate Secretaries and Governance Professionals) publicly supports HR5311, which has raised concern among some investment firms. In addition to sending its own letter to the House Committee on Financial Services, as numerous pension funds have done, Walden sent a letter to the society, thinking it important that it hear from investors that regularly engage with corporate secretaries.

Most corporate secretaries are well-enough informed about how the proxy process works to ‘know full well that ISS or Glass Lewis don’t commandeer the votes of their clients,’ Smith says. Walden’s appeal to the society is partly to make sure its leaders are aware ‘they’re working with folks [such as the Chamber of Commerce] who have a much larger campaign in mind’, which is to counter the efforts of major investors pushing to vote proxies not only on the basis of financial performance metrics but also on projected social and environmental impacts of business decisions, Smith explains.

The Society for Corporate Governance didn’t respond to a request for comments in time for inclusion in this article.

At the heart of the long-standing tension between issuers and proxy advisers is resentment among issuers that proxy advisers too often don’t agree with their executive pay plans and side with activist investors more often than with incumbent boards and management in proxy contests.

Francis Byrd, founder and CEO of Byrd Governance Advisory, believes proxy advisers ‘have been trying to respond to issuer concerns about actual mistakes and the need for corrections in their analysis.’ He also rejects the allegations of undue influence that proxy advisers have on voting results, citing increased efforts in recent years by investors to form their own governance teams and take proxy voting more seriously.

And the largest firms, such as BlackRock, State Street and TIAA, having seen a wide range of executive compensation plans put forward over the years, now ‘have more experience and understanding to be able to refine proxy voting guidelines for the institutions they work for,’ Byrd says. There should be more effort to encourage that evolution to continue rather than focus on getting proxy advisers to be more pro-management, he adds.

Stricter regulation, which could result in the SEC taking issuer complaints of bias against them more seriously when weighing proxy advisers’ registration applications, could also encourage proxy advisers toward more self-censorship when making voting recommendations, Byrd warns. He further cites the potential for unintended consequences over the longer term if increased regulation drives proxy advisers out of business. More institutional investors have been staffing up to be able to better determine what sort of voting guidelines they should have, partly in response to pressure from current and prospective customers asking about how various issues are being considered, how votes are cast and whether votes are being audited properly every year, he says.

‘If there are no proxy advisers [a few years from now], then the only way to prove you’re independent of the portfolio companies will be to vote against a larger percentage of management proposals,’ says Byrd. ‘Otherwise, how do you demonstrate you’re independent? It’s not the advice you receive because that’s been taken off the board. What’s left? We vote against management.’

He says he can foresee proxy votes becoming much more by rote, with a loss of opportunity for issuers to engage with investors, whose staff will have become overburdened in the absence of research they used to get from proxy advisers.

AP4 commits $3.2 bn to low-carbon investments

Garnet Roach — Tue, 19 Jul 2016 00:00:00 +0100

Fourth Swedish National Pension Fund makes mammoth commitment to low-carbon passive funds

One of the largest pension funds in Sweden, the Fourth Swedish National Pension Fund (AP4), has allocated $3.2 bn to low-carbon investments, using the MSCI Low Carbon Indexes as its benchmarks.

The fund, which has $35 bn in assets under management and $14.7 bn in equities, has allocated just over a fifth of its equity assets to low-carbon investments as it continues its long-term strategy to ‘decarbonize’ its entire global equity portfolio by 2020.

‘We believe a lower exposure to fossil resources will benefit AP4’s long-term returns,’ says Mats Andersson, who stepped down as CEO last week after 10 years at the fund. During that time, the fund – which reported record capital of SEK312 bn ($36.4 bn) in its most recent interim report – generated an average overall return of 6.8 percent after expenses.

‘We all know the world is facing a number of major global risks and global warming is perhaps the most controversial,’ states AP4 in the interim report, released last week. ‘As investors it is natural to examine how we can contribute to a more sustainable world long term.

‘AP4 has, together with a number of the world’s largest pension funds, developed strategies aimed at significantly reducing the carbon footprint of our investments. So far we have been successful in two dimensions: the carbon footprint has decreased while returns are positive.’

This latest development comes on the heels of the landmark climate change agreement in Paris, but AP4 was an early adopter of the low-carbon approach, making its first investment in a low-carbon strategy in 2012. Two years later, AP4 allocated €1 bn ($1.12 bn) to follow the MSCI Low Carbon Leaders Index when it was launched.

‘As one of four founders of the Portfolio Decarbonization Coalition, AP4 has played a leading role in the campaign to get asset owners to reduce the carbon footprint of their investments,’ says the fund in a press release announcing its latest – and largest – allocation.

The $3.2 bn investment marks the ‘biggest single commitment to low-carbon investing by an institutional investor,’ notes the Financial Times.

Why Europeans produce the most effective corporate websites

David Bowen — Mon, 18 Jul 2016 00:00:00 +0100

The importance of good web estate governance

The corporate website is a crucial communication tool for IR professionals. Analysts and fund managers rely on them for data, viewpoints and background information, while private shareholders increasingly turn to them to check on their own companies or research new ones. The IR section is, of course, the main focus for this but there is plenty of evidence that these users will look around the whole site, and perhaps even the enterprise’s social media channels.

What IROs may not realize is that they are likely providing a different level of service depending on which side of the Atlantic they sit. The Bowen Craggs & Co Index of Online Excellence highlights just how clear this transatlantic gap is: of the 30 most effective corporate web estates (websites plus social media channels), just six are US; the other 24 are European.

What do we mean by ‘effective’? Doing all the jobs they can be doing, as well as they can be doing them. That means serving different target groups – investors, customers, jobseekers, media – with equal skill, getting across the firm’s messages and values as well as they can, and doing so in a way that people find easy to use.

Why is this, and does it matter? When corporate web estates were born in the 1990s they were allowed to grow without any significant control, and became increasingly unco-ordinated. Around the turn of the millennium some big companies in Europe decided this made little sense – they could save money by bringing these channels together to share costs, while also improving the co-ordination of messages and allowing people to move around the estates more easily.

That trend spread and is now close to universal – in Europe. But it didn’t happen in the US, and if you look around US corporate estates now, you will find huge variation, even within the ‘corporate’ bits. Look at Apple.com, Microsoft.com, GE.com – they are made up of many different bits, and co-ordination ranges from limited to non-existent.

Within particular areas, though, they may well be really good. In our ‘serving customers’ metrics, five of the top 10 companies are US; in ‘jobseekers’, four out of 10. But in ‘construction’ (that is, usability) and ‘message’, they do not feature near the top of the lists. The reason is obvious when we look for people to talk to at the companies: in Europe we can always find a small team at the center; in the US we often cannot find anyone. Co-ordination is minimal and if there is someone at the center, he or she has no power to influence what individual businesses or departments are doing.

We call this a lack of ‘governance’ – having the people and processes in place to make the web estate work together. And the reason behind it is apparently historical: 15 years ago Europeans started to go one way, and Americans did not.

Why does it matter? Well, at enterprise level it means the company is wasting resources through lack of standardization and duplication of effort. It also means the corporation’s messages are not controlled, while the poor usability and mix of looks makes it feel at best unprofessional.

And for IROs? If the only destination you care about is the investor section, it does not make much difference; your targets will find their way there via Google. But if you believe investors want to find out as much as they can about you – your products and services, your environmental credentials, your history, your leadership – it is vital they can find their way easily around the different parts of the corporate site.

That can only happen if the web estate is properly managed, and for that you need a strong team at the center. In Europe, you have one; in the US, you may well not.

David Bowen is senior consultant at research and consultancy group Bowen Craggs & Co

IR in drive for better internal communication

staff writers — Mon, 18 Jul 2016 00:00:00 +0100

Internal communication and networks are simple yet fundamental factors in successful IR

This article was produced in association with Elite Connect. It was originally published on the Elite Connect platform.

While the IR landscape is always evolving to meet market changes, the past 12 months has been a particularly testing period. The impact of forthcoming legislation, a greater focus on ESG, the increasing importance of governance issues in general and a growth in shareholder activism have all affected IR departments worldwide.

Rather than taking each of these issues in isolation when looking to address their challenges, however, the general consensus among IR professionals at the recent annual conference of the UK’s IR Society points to a much simpler solution: IR departments should forge better communication links with their company’s various departments to ensure clarity and consistency of message.

Sandra Novakov, ‎IR director at Citigate Dewe Rogerson, agrees, adding that factors such as calls for greater dialogue and engagement between investors and corporates through regulatory initiatives such as the Stewardship Code and the Kay Review have meant the investment decision-making process has evolved to be so much more than just looking through a financial lens.

‘Non-financial factors, including sustainability and corporate governance, are becoming increasingly important and, as such, it is now imperative for an IRO to be fully versed in more than just the financial and operational details,’ she explains. ‘Fostering close internal relationships across the company are key to achieving this, which naturally enhances the IRO’s credibility with the market.’

As an example, by building closer lines of communication with their company secretary, IROs can be better prepared for dealing with challenging governance issues. ‘The role of the IR function is essentially to provide an effective two-way communication channel,’ says John Gollifer, general manager at the IR Society. ‘Like all good communicators, IROs can only be successful and have the support and trust of their executives if they know what they’re talking about.

‘It was clear from our conference that when IROs were talking about what went wrong or what could have been done better in difficult situations, greater levels of interaction with their company secretary to ensure effective and consistent communication on governance issues would often have made a big difference.’

Similarly, Gollifer says that by working more proactively with their public relations or corporate communications teams, IROs can help to ensure a variety of different stories aren’t being conveyed to external audiences, and that consistency is maintained through all channels, helping to avoid mixed messages and communications going awry.

‘If IR and corporate communications don’t talk to one another regularly to compare notes, things will be missed when preparing the investment story and the tone and messaging won’t be the same,’ he explains. ‘It doesn’t matter how good you think you are at IR, if your communications aren’t covering the same key messages and being picked up by the media and the investment community in the same way, then it’s not effective and you run the risk, for example, of activists seeing gaps or inconsistencies in your story – and acting on these.’

Taking this one step further, Novakov also believes IROs are best placed to identify and communicate internally on any investor concerns regarding company strategy, performance or governance – in effect, acting as an ‘early warning system’ for the company. ‘Given the rise in investor activism over recent years, this has become an increasingly important part of an IRO’s role,’ she says. ‘Addressing investor concerns early on, both through effective communication and by taking any necessary pre-emptive action, can help companies to remain in control and avoid any potential conflict with investors further down the line.’

Gollifer acknowledges, however, that even the best-intentioned IRO needs the support of the powers that be to succeed. If the IR function isn’t encouraged or empowered to cut across into other areas before the investment story is formulated with management, then even the most determined of IR professionals will struggle to succeed. ‘The best IROs are those given the opportunity to develop the strongest relationships internally,’ he says. ‘With this comes credibility and recognition by the board that the IR function is a vital conduit to the investment community.’

China sees growing roadshow interest

Liana Cafolla — Mon, 18 Jul 2016 00:00:00 +0100

Hong Kong and Singapore remain favorite roadshow destinations in Asia

While mainland China’s appeal as a roadshow destination is growing, Hong Kong and Singapore retain their positions as firm favorites for roadshows in Asia. That’s according to Lily Xiong, head of corporate access for Asia-Pacific at investment bank Jefferies.

‘Hong Kong is still the top choice for Asia; Singapore is number two,’ says Xiong, who has worked at Jefferies for a year and in the industry in China for more than 12 years.

The whole of Asia has become more attractive to US and European investors in the last two to three years, Xiong continues, as companies from both continents have cast their sights further afield in the search for investors. This year has seen some contraction, however, as many companies have cut their budgets for overseas travel because of the more difficult economic environment.

Even so, global interest in China as a roadshow destination is heating up and the country’s recent slowdown has not dampened investor interest due to the size of the market and the long-term potential.

‘The interest is still very high,’ Xiong says. ‘Mainland China is becoming increasingly attractive because there are more firms based in China that can invest overseas. China still has a lot of money [looking for a home]. There are still lots of opportunities there.’

With the increasing number of millionaires in the country, private wealth management is a particular growth area, she adds.

Top cities for investment roadshows in China are Beijing and Shanghai, but Hong Kong remains the main hub for both Chinese companies and investors. The city has been actively marketing itself for several years as the top destination choice for Chinese firms that want to attract international investment, and leading China funds have based their overseas investment teams in the city.

What makes Hong Kong the top choice for international companies holding a roadshow in Asia? According to Xiong, the city offers a higher number of Asian head offices and a wider variety of company types than Singapore.

Other investment hubs in Asia have also seen more interest from European and US companies. In the last three to four years, large sovereign wealth funds and national security funds have helped Tokyo, Taiwan, Kuala Lumpur and Seoul attract more interest as roadshow destinations. Retirement funds in Malaysia, meanwhile, have seen double-digit increases in size for the last three years, notes Xiong.

Over the same period, more Asia-based companies from these countries have also shown interest in investing overseas. ‘A lot of domestic companies in these countries have been trying to attract a higher proportion of overseas investment,’ Xiong says, citing as an example a Tokyo-based company that has increased its share of overseas investment from about 10 percent to around 30 percent in the past couple of years.

Crisis communications: IR and the cyber-attack

Angela Campbell-Noë — Tue, 12 Jul 2016 00:00:00 +0100

Recent rise in cyber-security breaches in Asia highlights role of IR during a crisis

Companies face numerous risks every day and cyber-security, in particular, has become a major issue for corporates around the world. If not handled appropriately, the fallout from a cyber-attack, beyond a short-term impact on financial performance and share price, can have dire longer-term consequences for a firm’s reputation and future. Given recent high-profile cyber-attacks on prominent organizations in Asia and across the world, this is a rising threat companies cannot afford to ignore.

The financial implications of cyber-attacks are severe: Lloyds of London, the world’s specialist insurance market, has estimated that such breaches cost businesses as much as $400 bn a year. In the US, the SEC says cyber-security is the biggest risk facing the financial system.

As such IROs need to be able to address investor concerns in this area and answer company-specific questions such as: what data do you hold? Where are you at risk? What measures have been put in place to safeguard the business and its reputation? In order to do this effectively, IROs need to make sure they are familiar with all pertinent information on their company’s cyber-security measures and that the data they store is kept up to date.

Given the impact to a share price a data breach can cause, it is important that IROs take an active role during a cyber-attack. The role will stretch from guiding the crisis team on which situations and in what circumstances an official market announcement is required to managing investor and analyst queries and educating them on the extent and likely impact of the breach.

It is important that IROs manage the information flow with great care to ensure all relevant stakeholders and the market are simultaneously updated with material developments. This is particularly challenging given that data breaches are often consumer-led crises and therefore play out in real time largely on social and digital media channels.

According to the guide to managing data breaches issued by Singapore’s Personal Data Protection Commission (PDPC) in 2015, organizations are encouraged to proactively prepare and implement a management and response plan, with a clear line of responsibility and communications, to manage data breaches; communicating with investors will form a significant part of these plans.

In the event of a breach, efforts made by an organization (such as making timely market announcements and the presence of adequate recovery procedures) will affect PDPC’s decision on whether the organization has reasonably protected the personal data in its possession. Acting in accordance with such guidelines should ensure IROs are in a position to fully demonstrate to investors their preparedness in the event of an attack.

While you cannot plan for every eventuality, you can – and must – be prepared for likely crises such as cyber-attacks. With thorough preparation, an IRO can work effectively with the rest of the crisis team to manage one of the key stakeholder groups and minimize the short-term financial impact and longer-term risk of irreparable damage. It is also important to maintain a log of all activity during a crisis so that during the post-mortem you are able to analyze your actions, learn and improve for the next potential emergency situation.

In times of crisis, senior management and IR teams need round-the-clock, instantaneous information as well as counsel on what to say to investors, when to say it ‒ and how to say it. Preparation and simulation training are imperative because when a crisis hits, you need to be ready to act decisively and with speed.

Angela Campbell-Noë is senior partner, Asia at Tulchan Communications

IR Magazine Think Tank – Euro Leaders: the people have their say

Tim Human — Tue, 12 Jul 2016 00:00:00 +0100

IROs chewed over Brexit, Mifid II and squeezed resources at the think tank for senior European IR professionals

At a glance

Brexit shadow
As senior IROs from around Europe gathered in London for this year’s Euro Leaders Think Tank, early conversation was dominated by Brexit, with the UK’s referendum scheduled for the next day.

Research update
The audience heard a briefing on the likely impact of Mifid II. Investment banks are already reducing research coverage, the audience heard, with downward pressure expected on payments.

Take your choice
In the final session, IROs could pick from six table discussions. One group learnt about new rules for alternative performance measures, while another gained insight into the quant strategies driving share prices.

Few thought the UK would vote to leave the European Union. Not the majority of politicians, not the majority of media pundits ‒ and not any of the IROs who attended the IR Magazine Think Tank – Euro Leaders 2016, held in London on the day before the vote. In a straw poll of the audience, everyone thought the Remain campaign would win.

The first session of the think tank conveniently focused on macroeconomic issues, allowing the room to tackle the referendum from the get-go. ‘Brexit in particular is highly uncertain,’ said one investor. ‘I’ve been doing this for 25 years and I’ve never felt quite as tentative as I feel right now about the next 48 hours. And that must be true for most of your businesses.’

From an IR perspective, companies should be thinking about what they can say on the variables that will be affected by the vote, such as currency exposure, regulation and access to European markets, he added. These ‘jigsaw pieces’ will help your investors put together the picture they need.

IR Magazine Think Tank – Euro Leaders 2016

One IRO had just returned from a roadshow to the US. He said stateside investors, which make up 40 percent of his shareholder base, had been selling European equities in the run-up to the referendum. ‘We are not going to stem the flow away from European equities,’ he said. ‘Our role in the US is to tell the long-term story so if they come back into equities they come back into our company rather than somewhere else.’

Catching the wind with Diageo

Diageo's Catherine James

In a change to the format of this year’s think tank, IROs heard short best practice case studies from IR professionals ranked highly by IR Magazine’s surveys of investors and analysts. In the first, Catherine James, head of IR at Diageo and an IR veteran of almost 20 years, said IR is really very simple in what we need to achieve – but it’s not easy to pull it off. James, a sailor in her spare time, said the buzz of the job comes from that feeling of the ‘wind in the sails’ when a meeting or event couldn’t have gone any better.

What makes great IR? James broke it down into seven key areas (notice that the third point accounts for when the direction of the wind shifts unexpectedly):
• Know your business
• Know your audience
• Anticipate change
• Build a service mentality
• Build strong internal links
• Build strong stakeholder relationship
• Be consistent on timing, format and data.

Such situations truly ‘test the mettle’ of IR, because you need to have a very clear understanding of your business, continued the IRO. ‘The other thing you have to be really clear about is what you don’t know. You have to get really comfortable saying, I can’t answer that question at this point in time. I’m not even going to afford you a view because [that might] fuel ambiguity on ambiguity.’

After exhausting Brexit, the conversation moved on to other macro factors. A couple of attendees noted how your business may be exposed to issues you weren’t aware of. One example: a manufacturer of medical devices might not pay too much attention to the price of oil. But a fall in oil price leads to a drop in the amount of construction work. That in turn results in fewer construction site injuries, hitting the market for trauma equipment.

Mifid II briefing

Regulation featured next on the agenda with a briefing on Mifid II. Even here Brexit got a mention, given that the UK has been the voice within Europe pushing for the most aggressive changes within the legislation.

Under Mifid II, fund managers will have to pay for research in one of two ways: out of their own costs or through a research payment account agreed in advance with the client. This will be a 'seismic' change for the buy side and one that hasn't happened anywhere else in the world.

For listed companies, the result could be a drop in research coverage. The new regime will encourage fund managers to absorb research costs themselves, which is expected to lead to deflationary pressure on payments. ‘We are already seeing some of the significant dealers reduce their coverage,’ said one attendee.

While smaller companies may fret about the loss of coverage, larger issuers are less likely to mind and could even welcome a trimming of their analyst numbers. Europe has a lot of companies that appear overbroked compared to their US counterparts, it was noted.

An unintended consequence of the legislation could be that IR teams find it harder to access research reports through news and data platforms. That’s because brokers will need to be careful how they make their research available, to ensure they are not falling foul of Mifid II rules on inducements.

Turning to corporate access, some predict Mifid II could restrict brokers' ability to provide support in this area. Others, however, are confident this will not be the case given the wording of the legislation. In any case, brokers will still be able to provide services defined as research to investors under the new Mifid II payments system.

The changes being wrought on the sell side are not just a result of new legislation but a confluence of factors, it was highlighted. Since the financial crisis, there has been a big fall in the size of the commission wallet thanks to trends like the growth of passive investment and electronic trading. This fall will continue with Mifid II as investors are forced to think more carefully about how and where they allocate their money.

Running lean

In advance of each think tank, IR Magazine polls IROs to find out what subjects to tackle. One subject that received plenty of mentions was how to make the most of scarce resources. It seems a large number of companies are currently grappling with squeezed finances and downsized teams. At some companies, IR and corporate communications departments are working more closely together or even merging, the audience heard. Partly that’s because companies want to better align their communications with various stakeholders, but it also helps the organization to cut costs.

Getting the measure of EDP

EDP's Miguel Viana (center)

In the other best practice case study, Miguel Viana, head of IR at EDP and winner of many IR Magazine Awards, spoke to the audience about how his company measures IR performance. Using a mix of KPIs, Viana incorporates qualitative and quantitative information on investor outreach, as well as feedback from management on the quality of market intelligence provided by the IR team.

The weighting of each KPI is broken down in the following way:
• 30 percent: Feedback from analysts/investors on their perception of the quality of EDP’s IR service
• 20 percent: Accuracy of consensus of key sell-side forecasts (Ebitda, EPS and net debt)
• 15 percent: Volume of interactions with investors and analysts, covering all forms of contact from emails to roadshows
• 15 percent: Management feedback on inflow of information collected in the market
• 20 percent: Other, such as the execution of the IR department budget and European IR rankings

One company further reported a drop-off in interest from brokers (perhaps as a result of Mifid II, the IRO mused). In response, the firm has started to organize more roadshow activity in-house, including a recent two-day trip to New York. It managed to fill 80 percent of the schedule itself, before asking a bank to help out with the final slots. The lesson? In large cities it’s quite possible for IR to pull this off.

Speakers offered many more tips for making the most of lean resources, including:

• Consider smaller capital markets days. They are less work for the IR team and senior management, and investors and analysts enjoy the intimate setting

• Cut activity that isn’t a priority. International site visits were all the rage a few years ago, but do you really need one? Investors have smaller budgets for travel now anyway

• See what free tools are available online. You may be able to swap expensive data services with alternatives like Yahoo Finance. In addition, use complimentary events and reports to train up team members

• Consider virtual meetings to save travel costs and extend your reach. Some investors will send one analyst to a meeting while the rest of the team joins via teleconference.

Digital disrupters and speed discussions

The afternoon included a session on the digitization of IR, where the audience heard about new tools helping IROs boost their effectiveness in areas such as corporate access, targeting and annual reports. It was then on to the day’s final session: speed-discussion topics. The set-up was six tables, each with its own topic and discussion leader. At certain times, attendees could switch tables, allowing them to pick the subjects of most interest.

One group discussed reporting trends. Companies should be thinking about how they communicate alternative performance measures (APMs), the table was told, following the introduction of new Europe-wide guidelines in July. When using APMs, issuers need to make sure they are disclosed and reported properly so investors can make adjustments as needed. The group also discussed how to report on executive pay. Some companies now include at-a-glance pages in their annual reports to help buy-siders who are not compensation experts (or just don’t want to read 10+ page remuneration reports).

At another table, IROs heard about how stock markets are being increasingly buffeted by money invested through quant strategies. One type, factor investing, which focuses on the underlying drivers of risk and return, has grown four-fold over the last decade. For IROs, it is a question of awareness. With huge sums of money invested in these strategies, they can cause big movements in individual stocks. Your recent price swing could be the result of inclusion in an exchange-traded fund you don’t even know about. That question IR professionals hear so frequently – what’s going on with the stock? – continues to grow in complexity.

Credit Suisse brings senior adviser to CEO into IR role

Candice de Monts-Petit — Tue, 12 Jul 2016 00:00:00 +0100

Former partner at Ondra succeeds IRO of three years Christian Stark

Adam Gishen, an investment banker who joined Credit Suisse in October last year to advise CEO Tidjane Thiam on ‘strategic realignment’, has been named as the global banking group’s new head of IR.

Based in Zürich, the newly appointed IRO succeeds former Cheuvreux analyst Christian Stark, who has been promoted after a three year tenure to head of group performance analytics and government.

An international studies graduate from the University of Leeds, Gishen worked at Lehman and subsequently Nomura for 10 years.

In 2009 he moved to Ondra Partners, a London-based capital markets boutique set up by former Lehman bankers, where he specialized in advising financial institutions. At Ondra he worked with clients including insurance major Prudential, where Thiam served as chief executive before Credit Suisse.

SWFs curb cross-border investments

Garnet Roach — Tue, 12 Jul 2016 00:00:00 +0100

Wealth funds and other public pension investors invested $73.2 bn in first half of 2015

Direct investments from sovereign wealth funds saw a 42 percent drop in the first half of the year compared with the same period in 2015, according to research from the Sovereign Wealth Fund Institute (SWFI).

‘For the first half of 2016, wealth funds and other public pension investors invested $73.2 bn directly,’ write the researchers. ‘This is a sharp decline from the $126.7 bn directly invested in the first half of 2015.’

That doesn’t mean there aren’t still significant sums being invested however, with the SWFI noting an interest in disruptive technology. Saudi Arabia’s Public Investment Fund (PIF), for example, invested $3.5 bn in Uber – the largest single investment ever made in a private company.

But, ‘besides the massive Uber-PIF deal, wealth funds overwhelmingly pursued smaller average deal sizes,’ write the researchers, highlighting Temasek Holdings’ participation in a series B round in Brooklyn-based Modern Meadow – a company that ‘biofabricates’ leather in laboratories – as an example.

The UK saw direct investment by public investors drop in the run up to the June referendum that resulted in a vote to leave the EU, while wealth fund investments in the US also nearly halved – from $67 bn in the first half of 2015 to $37.1 bn in the first six months of this year.

In an environment where SWFs and public pension funds have reigned in their foreign investments, Michael Maduell, president of the Las Vegas-headquartered SWFI, says it’s more important than ever for IROs to know their investor base.

‘In general, SWFs have become more selective and nimble when it relates to direct investing as higher equity volatility persists,’ he says.

‘Successful investor relations officers must fully-understand their shareholder base, though unfortunately, many do not. Worse still, some companies largely neglect the IR function.’

The investor segment covered by the SWFI, which includes SWFs, pensions, superannuation funds, central bank reserves, endowments and more, boasts aggregate assets under management of more than $30 tn, says the organization.

‘IROs that can identify current and potential SWFs and other long-term institutional investors could see a notable potential capital advantage,’ says Maduell.

IR Society: Learning your ABCs

Tim Human — Mon, 11 Jul 2016 00:00:00 +0100

The UK association’s annual conference, now in its 30th year, focused on access, boards and careers

The UK’s IR Society gathered in London for its annual conference just two days before the UK referendum on European Union membership. Had the campaign thrown up any lessons for IROs? Evan Davis, the conference moderator and BBC presenter, thought so: both sides have oversold their case, he said, eroding the trust of the people they sought to win over.

Sue Scholes, whose tenure as IR Society chair ended shortly after the conference, opened proceedings. Highlighting the event’s 30th anniversary, she discussed how much the IR industry has evolved over that time. ‘Some like me accidentally ended up in investor relations,’ she said, but today the appeal of the profession is plain for all to see.

From left to right: Mav Wynn, former head of brand communications, SuperGroup; Rupert Taylor Rea, IR director, RSA Insurance; Phil Cowdy, head of corporate affairs and strategic planning & IT, Smith & Nephew; Amanda Mellor, group secretary and head of corporate governance, M&S; Evan Davis (moderator)

Sticking with the theme of professional development, Scholes revealed that the IR Society is working on a new IR diploma, a ‘senior-level qualification’ that will complement the society’s existing IR certification. This is another important step in the growth of the profession, said Scholes, who encouraged the audience to sign up as pilots for the new course.

John Kay, the renowned economist who led a major review into the UK’s equity markets following the financial crisis, gave the opening keynote speech, in which he made a series of provocative comments on the changing nature of how businesses grow and raise capital. Kay, who leant on the findings of his 2012 review for many points, said IPOs are no longer viewed as the normal route for growth as companies need less capital today. We need to ask ourselves whether the era of public companies is coming to an end, he said.

The following session ‒ Access, board, careers: An ABC of IR ‒ tackled the main theme of the conference. The panel included IROs and former IROs who had expanded their roles or moved on to new areas. Phil Cowdy, head of corporate affairs and strategic planning & IT at Smith & Nephew, encouraged the audience to be brave when seeking a bigger remit. During your half-year assessment, put your hand up and ask for new responsibilities, he said.

Later in the day, John Dawson, head of IR at Rolls-Royce, walked the audience through an activist case study involving his own firm. The aerospace business was approached by US investor ValueAct last year, kicking off a process that led to the activist taking a board seat in February. Dawson was joined on stage by three consultants, who offered advice along the way. Don’t get into a confrontation if at all possible, said one adviser: contain the situation, learn what you can about the activist’s intentions and set out a framework for private engagement.

During the process, the number of hedge funds in the stock ‘went ballistic,’ said Dawson. Most of them wanted meetings with the company and the IR team had to do a lot of work to decide which were influential, which it needed to talk to, and which it could ignore. ‘Get advice on that,’ Dawson recommended.

Other sessions focused on leadership skills, IR as viewed from the C-suite and buy-side insight with speakers from Fidelity, Lazard and Pelham Capital. An interview with Sebastian James, CEO of FTSE 100-listed Dixons Carphone, ended the day’s talks.

At the evening reception, the IR Society unveiled the recipients of its 2016 Fellowship awards, which recognize individuals who have made a ‘significant contribution to the industry’. Fellowships this year went to former society chair Dawson and IR Magazine’s very own Janet Dignan, who founded this title in 1988.