Senior partner Riccardo Lodigiani explains how a small Italian IT service company deals with investors
No one wants to be called cheap. But that’s all part of the job for Riccardo Lodigiani, senior partner at Milan-listed Italian IT service company Reply and the man responsible for the company’s relations with the investment community.
Lodigiani was a member of the original team that still sits at the heart of Reply. In 1983, after a computer science degree in Turin, he became a programmer at the company where most of the nine people who later formed Reply all worked. Reply was founded in 1996, under the leadership of Mario Rizzante, who remains chairman of the firm to this day.
‘It’s been a very exciting and interesting experience,’ Lodigiani reports. ‘I think one reason for our success has been the strength of the founding management team. We’ve worked together for a long time so we really do understand each other.’
Reply is now a network of boutique IT service companies at which Lodigiani himself wears a number of hats. During the week he’s based in London – traveling home to his family in Italy for weekends – where he runs Reply’s UK operations. But he’s also responsible for acquisitions and is the member of management who deals with IR.‘
We listed Reply on the STAR segment of the Borsa Italiana on December 6, 2000,’ he recalls. This was Lodigiani’s first truck with IR for a public company and the date is etched clearly on his memory. ‘I worked with the chairman and the CFO and a small team on the listing,’ he adds.
Reply took the decision not to have a full-time IRO but to outsource day-to-day IR to Barabino & Partners, with Lodigiani as the management member who would meet investors. ‘I am not a finance guy,’ he asserts. But the company’s view was that it should have someone in the IR role who could explain the growth strategy to the market, in terms of the technology businesses it was entering. That’s the aspect of Reply that’s complicated – and why it makes sense to have Lodigiani at the IR helm.
The company’s finances, by contrast, are fairly straightforward, which – in this context – means strong consistent growth since the IPO. The revenue growth has been impressive by any standards. For an IT firm, however, the astonishing aspect is the evenness of the growth, especially during times like the dotcom crash when almost every small company in the field was suffering and in many cases going out of business.
Meeting & greeting
Lodigiani spends two or three days a month on the road for investor relations purposes. ‘And we are absolutely open and available to see investors,’ he declares. ‘We think it’s important to meet all investors that want to meet us.’
For now, most of those investors are in Italy and the UK, so meetings are generally in London or Milan but some also take place in Frankfurt. Reply participates in small and mid-cap broker conferences when invited, too.
And what is the question most often asked by those investors? Unfortunately, it’s: ‘Why are you so cheap?’ As Lodigiani reports: ‘On the last roadshow, everyone asked me that. Why are you so undervalued?’ And does he have an answer?
‘It’s a difficult question, and one we ask ourselves all the time,’ he admits. ‘We believe it’s related to the fact that we are Italian, we are a small company, we have a relatively small free float (30 percent-32 percent) and we are in the IT service sector, which is considered risky.’
Of course Reply would like a higher share price but it doesn’t set targets. ‘Our goal is to grow the business. And we are pushing, we’re working hard at IR,’ insists Lodigiani. Apart from anything else, a higher share price would help on the M&A front, because Reply often pays for acquisitions partly in shares; and since a higher share price would make the acquisitions cheaper, it would also help spur future growth.‘
In 13 years we have grown in Italy from zero to €277 mn ($350 mn) and we believe we can grow even more in the UK,’ says Lodigiani. But Reply aims to deliver more than just growth. ‘We have demonstrated an ability to execute what we promise,’ he adds. ‘We try to have this as the main character of our IR. It’s easy to put plans and forecasts on paper: the issue is to demonstrate them in practice. That’s what we’ve done in the past. In the 10 years since we listed, Reply has never surprised the market.’ Not too many 10-year-olds can claim that.
