With the global economy in a tailspin and investors fleeing stocks, Mara Di Giorgio, head of investor relations at Benetton Group, figured there was little point in holding road shows likely to attract relatively few attendees. Instead, she turned on the coffee pot.
Di Giorgio decided it made more sense in the current economic environment to host an open house once a week at the fashion retailer’s Milan showroom so that Italian investors — surprisingly, not a traditionally strong segment of the company’s shareholder base — could stop by and take a closer look at Benetton. Out-of-town investors in Milan on business have also been taking advantage of the opportunity to drop in.
“We recently had a first encounter with a group of American investors who just happened to be in Milan and, having heard about the open house, decided to stop by,” she says.
Since the first informal reception in mid-January, Di Giorgio says she has held at least 40 meetings with investors. “It worked so well that now we are doing an open house in London once a month.”
Roland Haefeli, head of IR at Swiss biotechnology giant Actelion, has also initiated a low-key — and original — strategy. He routinely reaches out by phone, e-mail and the company’s Web site to more than 20 recently unemployed analysts whom he expects will one day return to the industry. In the complex world of biotech, he says, it’s important to nurture a core community of savvy investors and analysts.
“Because of layoffs in the industry, we have a significant break in continuity of both buy-side and sell-side coverage,” Haefeli explains. “One of the key issues for us now is to maintain contact with investors and analysts who understand our business model.”
The financial crisis is compelling many companies to change the way they handle investor relations. Gone are the lavish banquets and high-tech media presentations of years past. In their place are informal get-togethers and frequent communication using all available means of contact. To find out which outfits are doing the best job of reaching out to investors in these troubled times, Institutional Investor asked 430 portfolio managers and investment officers at nearly 275 firms managing $3 trillion in pan-European equities and 820 sell-side analysts at more than 125 firms to identify, from among the industries they cover, the companies that excel at investor relations. Click here to view the complete rankings of Europe’s Best Investor Relations.
Actelion (Biotechnology) is one of only six companies to be judged the best in its sector by both the buy and sell sides; the others are Banco Santander (Banks), Nokia Corp. (Telecommunications Equipment), Reckitt Benckiser Group (Household & Personal Care Products), Royal KPN (Telecommunications Services) and Siemens (Electronic & Electrical Equipment).
Investors’ expectations are changing, and companies must respond accordingly, says José Antonio Álvarez, Santander’s chief financial officer and head of IR.
“As a result of the crisis, investor focus has shifted from new projects to the balance sheet,” observes Álvarez. “It’s not that we weren’t disclosing before, but now the market wants to understand liquidity.”
To aid them in that understanding, the Spanish bank disclosed in its risk report for 2007, as the subprime mortgage market in the U.S. was collapsing, that it had no exposure to subprime mortgages and only €25 million ($32.6 million) in exposure to collateralized debt obligations.
Santander was also one of the first firms to disclose that some of its clients had suffered massive losses stemming from investments in hedge funds operated by Bernard Madoff, who in March pleaded guilty to securities fraud, money laundering and a host of other felonies. On December 15, just four days after Madoff was arrested, Santander revealed that its clients had €2.33 billion invested with the New York financier.
Keeping investors informed, even when the news is bad, is vital to maintaining trust. Germany’s Bayer, the buy-siders’ choice for Best Investor Relations in Chemicals, knew that investors would be pleased with its first-quarter 2008 results, which showed year-over-year sales up 2.4 percent, to €8.5 billion. But the company also felt a word of caution was in order. The deteriorating economic climate made it “difficult to forecast” what the rest of 2008 would be like, says Alexander Rosar, head of IR.
“We’ve become more transparent in our monthly reports and for the first time begun disclosing incoming orders,” Rosar explains. The company called attention to its MaterialScience unit, which manufactures adhesives, coatings and plastics used in the automobile and construction industries, as particularly vulnerable to a global downturn.
Bayer’s warning proved prescient. MaterialScience sales plunged 24.2 percent in the fourth quarter, dragging Bayer’s total net income for the year down 63.5 percent, to €1.7 billion.
Other companies have also begun to provide more-detailed information about their operations. Dutch media group Wolters Kluwer, deemed Europe’s Best Investor Relations in the Media sector by sell-side analysts, began breaking out its revenue by product and geographic region last year, in response to investor requests for greater insight into the business.
“Investors have a real desire for more information now,” says Kevin Entricken, Wolters Kluwer’s head of IR. “People are questioning you more frequently about your balance sheet and liquidity issues.”
Case in point: In September, after the collapse of Lehman Brothers Holdings in the U.S. caused credit markets around the world to freeze, anxious investors began drilling Wolters Kluwer about its capital requirements; the company had placed a ten-year, €750 million bond issue just six months earlier.
“We could assure everyone that we were able to refinance at attractive rates, and our next bond maturity isn’t until 2014,” says Entricken.
More than anything else, investors want information. “There is a whole new set of questions being asked: whether we have access to the debt market, or about our program for the rollover of corporate debt,” says Fergus MacLeod, head of IR at global energy giant BP, which shares top honors with BG Group in providing Europe’s Best Investor Relations in the Oil & Gas sector, in the opinion of sell-side analysts.
“There is a lot of nervousness in the market,” observes Mariel von Drathen, who took the helm at IR for Siemens in February. “The conversations that we are having with investors show us how important it is to maintain regular contact.”
That’s true even when there is no news. Just ask Ulrich Brockmann, head of IR at German optical-products retailer Fielmann, which sell-side analysts say provides Europe’s Best Investor Relations in the Retailing/General sector. On the morning of March 9, Fielmann’s stock took an unexpected tumble. “There was no news out, but our stock dropped 15 percent for no clear reason,” Brockmann says. “The phone was ringing off the wall.”
He informed jittery investors that the company had made no announcements that could explain the stock’s movement and reminded them that Fielmann, as a discount retailer, stood to gain as cash-strapped consumers sought ways to save money. “New glasses are one of those purchases you can’t put off,” Brockmann adds.
Two hours after Fielmann’s shares started sliding, the trend reversed itself, and “we were back up 7 or 8 percent” by the end of the day, Brockmann says.
Such volatility has become all too common in the worst global downturn in decades.
“All of us are startled by what is going on in the world,” says Mark Becker, a London-based buy-side analyst covering chemicals for Fidelity International. “The best thing for any company right now is to be conservative in its guidance.”
Click on the names below to view their individual profiles.
Mara Di Giorgio, Head of Investor Relations, Benetton Group
Fergus Macleod, Head of Investor Relations, BP
José Antonio Álvarez, Chief Financial Officer, Banco Santander
Kevin Entricken, Head of Investor Relations, Wolters Kluwer
Mariel von Drathen, Head of Investor Relations, Siemens
