Why the winners won their plaudits in this year's UK IR Awards
BP has certainly smartened up its act since the early 1990s,' says one leading London analyst. 'It made a decision to improve the structure of its internal management and external communication. The current investor relations department is just one good reflection of those changes.'
That view seems to be echoed around London's financial community. British Petroleum scooped three of the big prizes in this year's Investor Relations Magazine UK Awards: the Grand Prix for Best Overall Investor Relations; Best Results Meetings and Analyst Briefings; and Best Annual Report. And it was a runner-up in the Best Investor Relations Officer category.
Some 600 analysts and fund managers surveyed for the awards heaped praise on BP's financial communications. Concise and clear presentation of information seems to be the general thrust of the story, backed up by an ability to deal confidently with strategy issues, not being afraid to give details of future intentions and being accessible to the investment community.
The last comment goes as much for senior management as for the IR team itself. It helps, of course, being the second largest company by market cap in the UK. That weight provides the budget to run a five-strong IR department - consisting of Kevin Abbott, manager group investor relations, and his team of Peter Hall, Richard Hubbard, Gerry Bye and Coreen Tucker - which helps ensure that someone is always available. But with the size comes a corresponding level of interest in the company and the IR team is viewed as being extremely able at dealing with most enquiries.
Abbott says that BP's strong communications ethic emanates from a 'total commitment from management'. He defines the three golden rules of successful IR as clarity, credibility and consistency, which he and his team strive to follow at all times. They are helped in that task by having a five year communications plan running in tandem with the business plan. And that goes some way to ensure that whatever is said by whomever to the financial community ties in with the overall story.
Mind you, it's not all glory for BP's team. Some analysts counter that it's sometimes difficult to get accurate, in-depth information. 'The IR function is now so slick that everything gets funnelled through the department,' complains one leading sell-side analyst. 'That's fine for fund managers who want the high level, strategy stuff. But if you're trying to dig below the surface, the IR team is often not the best place to start.'
The dominant view, however, is that BP is doing a great job at keeping the financial community informed and that its annual report confidently backs up that effort. The document is bright and breezy, yet packed with easy to access information about the company's operations. 'Verging on a corporate fact book,' is how one fund manager describes the first half of the report. Add to that the clear, comprehensive financial statements and notes to the accounts with a five year financial data summary and you've got a report which is deservedly credited as a leader.
BP is not alone in receiving recognition for upping the IR ante. Most of the fund managers and analysts in this year's survey felt there had been improvement in IR departments across all sectors. 'Information produced at the time of the results has improved,' commented one fund manager. 'Information that IR departments convey now is more planned and scripted. And we get to meet the management more often.'
Of course, if a company is starting out from a low base point then it is fairly easy to pick up marks for improvement. BTR seems to have benefited from that situation, winning the award for Most Improved Investor Relations as a result. In the past, the conglomerate was widely perceived as having made little or no effort in its communications with the financial community aside from statutory reporting. Indeed, one respondent said that the company's IR was previously 'non-existent'.
Ian Strachan, BTR's new CEO, has started to rectify that situation in the past year - but there's a long way to go before it reaches the heady heights of BP's communications. One sell-side analyst acknowledges that Strachan is a better orator than his predecessor and that finance director Kathleen O'Donovan has been doing the rounds in the City. However, he still believes that the IR function remains 'absolutely diabolical' for such a big company. The handling of recent analyst demands to cut its dividend did not inspire much confidence, either. 'They were running by a tight script and not answering the questions asked of them,' he adds. 'There are still some large questions on BTR as a company and that's being reflected in its share price.'
Other analysts hope that the appointment of Chris Milburn as BTR's corporate affairs director will help improve communication in the future. Milburn moved from Cadbury Schweppes where he was widely regarded as a leading player in the UK's investor relations community. 'They're appointing people - it's got a lot better,' notes one analyst.
Milburn himself heaps praise on the improvements that Strachan and O'Donovan have engineered in the last few months and hopes to play a major part in continuing that new-found openness in the future. He should be encouraged by Kingfisher who won the Most Improved award last year and was a close runner-up to BTR this time around.
One company which has obviously been getting a few things right on the communication front is Safeway. Formerly known as the Argyll Group, the food retailer is lauded as having an 'outstanding' IR officer who is readily accessible. Step forward, Steve Webb, investor relations director at Safeway.
Webb, it seems, can do little wrong in the eyes of the City. Safeway may have been lagging behind some of its competitors on the customer loyalty innovation front in recent months, but that has not put Webb off telling the company story with gusto. 'He's the best in the City,' says one fund manager. 'He's the most honest and straightforward, and tackles different questions.' One leading sell-side analyst adds that Webb benefits from having 'been around for quite some time' and knowing the company inside-out. 'Steve's extremely obliging and has excellent contacts in the City.'
In fact, it's difficult to find a bad word to be said about Webb's work. Maybe it's a case of the City looking after its own: Webb was an analyst before he turned his hand to IR. The only criticism available seems to be that he did not turn up to collect his award at the ceremony at the London Hilton. He claims that he did not know he was short-listed, sheepishly adding that he stayed at home to 'watch the football'.
Granada is another award winner which continues in its role as 'darling' of the City. In this case, the credits are largely due to the high regard in which its chairman Gerry Robinson and chief executive Charles Allen are held by many a fund manager and analyst. Granada went unchallenged in scooping the Best Communication during a Takeover prize for its successful acquisition of Forte earlier in the year.
The compliments flowed free and easy from the financial community: 'They set out an extremely good plan to take over Forte and were willing to answer questions,' said one respondent. 'Robinson came over as a shrewd strategist and master of his brief,' added another.
James Tibbitts, group treasurer and legal manager at Granada, is well aware of the outstanding credentials of his chairman, but adds that the team effort and open approach during the takeover won the day. 'We tried to tell the City what we were doing,' he says. 'Not just that it was a good acquisition but what we thought we could do with the business and how we could improve it.' That meant not just doing the rounds of the major institutions but going out on the road to present to private client brokers, too.
And it's not just during a takeover situation that Granada excels. Respondents voted the company as having the best board communications, too. Tibbitts is modest in his response: 'To a degree, I'm the beneficiary here of the openness of my chairman and chief executive,' he says. 'Gerry and Charles have always been wholly clear about strategy and that's helped the investment community to understand Granada.'
The only other company to pick up more than one award was Reuters, for Best Corporate Governance and Best Financial Advertisement. Mike Cooling, manager of corporate relations, is also president of the UK's Investor Relations Society. In that capacity he found himself presenting an Award - to BTR - as well as receiving Reuters' two.
Cooling says that on the governance front Reuters has always tried to ensure that it complies with relevant codes. And that is more key than many companies would like to think. The survey reveals that governance standards have a significant bearing on the decision to invest.
'We've been anticipating the process of change,' says Cooling. 'And very often we've tended to be in advance of the set requirements.' Cooling believes that working jointly under the auspices of the regulations in both the UK and the US - the two most stringent jurisdictions as far as corporate governance best practice goes - helps the company keep ahead of the pack
That was certainly the view of the financial community. Vighnesh Padiachy, a media analyst at BZW, says Reuters is way out in front of its peers on executive remuneration issues. He points to the incentive scheme which only pays up in full if total shareholder returns perform in the top 25 relative to the top 100 companies. 'Very few companies have such a scheme,' says Padiachy. He adds that Reuters has always been an innovative company in shareholder value terms, citing it as one of the first to implement a share buy-back in the UK.
Perhaps the least surprising of this year's awards was that for Best New Issue. Orange picked up the prize, following in the footsteps of last year's winners 3i. These two have little in common in terms of what they do, but both were sizeable companies before their issues and benefited from equally sizeable budgets to market their offerings - which helps an issue stick in people's minds. Nevertheless Orange was praised for the way it put itself across and for a good roadshow.
Meanwhile, some companies at the other end of the market cap spectrum can also think big. The Newcastle-based Sage Group has obviously been making some wise moves over the last year and was rewarded for having the Best Smaller Company Investor Relations. The software supplier was lauded for presenting good reasons for its acquisitions and not speaking in jargon. 'It's an extremely good company,' said one respondent. 'Well managed, with a good business plan and it does what it says.'
Overall, most analysts and fund managers felt that IR in the UK was good - and continuing to improve. But these information hungry City types are never happy. As in previous years, there were requests for even more information and disclosure; more contact in general and face-to-face meetings - particularly with CEOs and finance directors. One brewery analyst offered the following comment on meetings with senior management: 'They are hugely influential. If I cannot speak to them I cannot recommend to invest in them.'
Unlike their peers in the US, neither the UK's financial community or companies seem to favour teleconferencing as a means of disseminating information. The number of fund managers and analysts who said that they didn't like teleconferences has decreased from last year but it still runs at a high 40 per cent. Most institutions only take part in one teleconference a year with the companies they follow.
As in previous years, environmental disclosure came way down on the checklist of fund managers and analysts. That's something of a pity because some of the companies that do pay more than lip service to their environmental responsibilities do so with some style. And it's not necessarily the oil or chemical companies, either.
National Westminster Bank and Thorn EMI were jointly voted the most forthright in their environmental reporting. One respondent said that NatWest 'make an issue of it - they're interested. And I've not noticed anyone else in the sector doing it.' Thorn EMI was highlighted for its commitment to producing a separate annual environmental report. Despite the efforts, however, the City only seems to take an interest in such reporting when environmental concerns are hitting the bottom line.
So when push comes to shove, which company has been most adept at convincing the City that things are still running smoothly? British Aerospace was awarded the Best Crisis Management prize for handling a catalogue of disasters over a number of years with openness and confidence. 'They've managed to extricate themselves from problems extremely well,' commented one respondent.' 'They spent a lot of time reassuring investors,' adds another.
So BAe, it seems, has become a competent handler of bad news. And, to be sure, knowing how to keep shareholders and analysts happy when things are going well is one thing; keeping them sweet when things turn tricky is quite another. 'British Aerospace was going bust three years ago,' comments one admiring observer. 'It's been very successful in persuading investors that the business has been refocused.'
Whatever the story, analysts and institutional investors are a lot happier as long as they are kept in the loop.