Interviews with some of the winners from the first Investor Relations Magazine South Africa Awards
What a time to hold the first Investor Relations Magazine South Africa Awards. In the weeks and months leading up to the Johannesburg gala on August 20, the local IR community was put firmly and perhaps uncomfortably in the hot seat. Late July: the government's leaked mining charter, with plans to boost black ownership of new mining ventures over 51 percent, slams mining stocks. Early August: Anglo American cuts through layers of debate to take the lead in the corporate fight against HIV/Aids by providing Aids drugs to workers; the announcement provokes a government backlash. Mid-August: the JSE Securities Exchange South Africa follows King II corporate governance recommendations and demands all companies start disclosing the impact of HIV/Aids on their employees.
Then there's BoE, whose four awards were its swan song as a liquidity crisis in early 2002 resulted in a friendly takeover of the venerable financial institution by Nedcor. In the end, all the IR in the world couldn't save BoE. But according to Don Bowden, senior general manager of IR and communications, who was crowned best IRO for a FTSE/JSE Top 40 company, it helped nonetheless.
'Once we saw the predicament, we knew the only thing we could do was find a big brother,' he recalls. 'The trust we had built in the investment community allowed us to go out and give them the message. It wasn't an easy message, but they trusted us, which was why there was such a high vote in favor of the takeover.'
Like many of the winners, BoE's story is one of a radical IR turnaround. Bowden was working on the finance side at BoE when he volunteered to take over IR and communications two years ago. He had already had a lengthy career at Deloitte & Touche specializing in banking, a background that helped in his new role: 'I was able to talk not only strategy but numbers, and understand what was behind them.'
Bowden goes on to describe the formula of BoE's IR success: listening to the market and understanding its needs; segmenting the business so that it could be analyzed properly by investors; producing information as completely and honestly as possible; going proactively to the markets; and responding promptly to questions. He points out that Regulation FD and the scare over selective disclosure have made many companies afraid to talk one-on-one with investors and analysts. 'Rubbish,' he scoffs. 'You can talk to the markets as long as you have disclosed the information first.
We disclosed the maximum - warts and all - so we could talk to it afterwards.'
Finally, Bowden says the commitment from the top team is vital for a good IR program. 'I don't believe I or any IRO can achieve real success unless we have buy-in from the executive team to a proactive communications policy.'
Labor of love
Ditto for SABMiller, which won the Grand Prix for best overall IR by a FTSE/JSE Top 40 company. 'Our top executives took hold of IR and absolutely ran with it,' says Anna Miller Salzman, the company's London-based IR chief. The support was repaid in kind, with Miller Salzman viewing internal management as one of her key constituencies. Each day she sends them SMS text blasts with market conditions and SABMiller's performance.
Though Miller Salzman insists she has run a 'plain vanilla' IR program since the department was formed in August 1999, the level of commitment by this former institutional salesperson and Telewest IRO is clear. In May, at the moment SAB announced it was acquiring Miller from Philip Morris, she was giving birth after going on leave just two days before.
Miller Salzman's original brief was to make the share register reflect the business. As the company embarked on a series of acquisitions in Europe, China and India, so Miller Salzman boosted international ownership to the point that only 30 percent of the shares are now held in South Africa - down from 90 percent in 1999.
Site visits are key to SABMiller's IR program, with analysts and investors recently trooping through Africa, Poland and the Czech Republic and attending London presentations on SABMiller's Chinese and European businesses. These meetings often feature operational managers. 'They add a lot of value on top of what the senior executives do,' Miller Salzman says.
Finally, her team approach is integral to SABMiller's IR success. 'My girls,' she calls her two IR executives, who she insists get as much contact as possible with analysts and investors.
Building infrastructure
For Sappi, the paper company that won best investment community meetings, the IR turnaround came in 2001 in an effort to boost an undervalued share price. 'Not enough people understood the story,' recalls Paul Leslie-Smith, group IR manager. 'We had to get out there, see as many people as quickly as possible, and try to buy ourselves a bit of time to get more of the IR infrastructure into place.' The results can be seen clearly in Sappi's significant share price appreciation in comparison to other big South Africa companies.
Along the way, the investor relations department grew from one to two and then to three people, including one in London, and Leslie-Smith admits he would like to have one based in North America. At least one person is on the road and one in the office at any given time, working independently and attending conferences and one-on-ones. Top executives, when available, are roped in, too. 'We're starting to cross-over a lot of the executives, taking North American operations managers and bringing them to South Africa, or taking our European operations guys to North America, and vice versa. That means we have to coordinate the messaging and make sure it's consistent,' Leslie-Smith describes.
At Standard Bank, which won best corporate governance, IRO Kim Howard confirms the importance of senior management in the IR equation. Indeed, she says the award probably has less to do with box-ticking on the corporate governance checklist than it has to do with management's attitude. 'Our CEO, Jacko Maree, is known to be straight-talking and very honest,' she states, pointing to the contrast with the previous, 'very investor-unfriendly management team.'
Howard agrees corporate governance is more and more a factor in investor decision-making. She has recently noticed a huge number of questions on executive remuneration, share options, and the structure of board committees: 'There's an enormous and increasing amount of attention being focused on these issues.'
Like South Africa itself on its post-Apartheid journey, some of its companies have made tremendous progress in a short amount of time. No-one would argue, however, that even the best have reached perfection. As one of the respondents to the survey remarked, 'Most South African companies are just at the start of the long road to genuine IR representation.' Indeed the first Investor Relations Magazine South Africa Awards, which received remarkable attention from local press such as Business Report (which was in fact a major sponsor, too), are seen by some of the winning IROs as 'spurring them on to greater heights'.
Vital statistics
Investor Relations magazine commissioned Mary Maude Research to interview 72 sell-side analysts, buy-side analysts and portfolio managers. Most were based in South Africa, and interviews were conducted in May 2002.
Check out the South Africa Research Report 2002 for full details of the award winners and highly commended companies, verbatim comments from the survey respondents and a section on the general state of IR in the country. See www.IRawards.com.
Click here to see the winners