While most companies still favour audio over video for investor communications, IROs are making regular use of video teleconferencing internally, while high definition (HD) video looks set to revolutionise IR interaction.
These statistics hardly bode well for listed companies that rely heavily on audio contact with their investors and analysts. Nevertheless, despite some of the sophisticated video teleconferencing equipment available, few globally listed firms are using any form of video communication with their shareholders.
Russian telecoms group MTS is typical of many companies in using audio webcasts for its quarterly results. For other non-physical contact with its shareholders, the IR team relies purely on the phone or email: the recent announcement of the company’s new CEO was made by conference call, for example.
Despite his firm being nominated in the most improved IR category at the IR Magazine UK Awards this year, supermarket group Wm Morrison’s head of IR Niall Addison admits the group is hardly at the forefront of technology. Wm Morrison’s most recent technological development in IR was to introduce audio webcasting of its results. ‘I tested the water and my investors and the sell side seem pretty indifferent to the charms of more technology,’ Addison says.
Technical problems can pose a deterrent to video communication with investors. Melbourne-headquartered resources company BHP Billiton suffered an unexpected setback during a results briefing with investors when the video transformer at one of the three sites in South Africa overheated and caught fire. The site in question was evacuated.
Not even audio webcasts are infallible, though. Isabel Lütgendorf, recently appointed head of IR at Hochschild Mining, explains how her South American CEO coolly overcame a technical hitch when presenting interims via live audio webcast to 40 people. As he began his presentation, the ‘waiting music’ of the conference call was broadcast across the room. ‘He just smiled and said, We decided to bring you a bit of South American salsa. We all loved him for that,’ she remembers.
For internal eyes only
Although most firms favor audio over video for communication with investors, many adopt a different approach for contact within IR teams. MTS, for example, uses audio webcasting for its quarterly results, but video conferencing for its quarterly financial presentations to company directors.
MTS’ IR manager Danny Khoussainov suggests a plausible reason why firms shy away from video in results calls. ‘Video conferences can be problematic if people need to discuss among themselves how to answer the questions thrown out by investors,’ he explains. He adds that investors don’t mind not getting the visuals as long as they get answers to their questions.
An IRO at a US-based multinational, which exclusively uses audio communication with its shareholders but makes internal webcasts of earnings results, says the group recently began including a prerecording of an analyst giving a five-minute overview of the company, with a buy, sell or hold recommendation. The videos are done via the firm’s internal communications department and are not for shareholders’ eyes.
The IRO in question says there are no cost benefits for doing video externally. ‘It’s not just the quarterly results, but also a company overview and information on product launches overseas,’ she explains. ‘It’s important internally to see the CEO, but I’m not sure investors really care.’
Crystal-clear connection
Massive strides have been made in video conferencing over the last couple of years. High definition (HD) technology enables life-size, crystal-clear images of interlocutors to be projected around a table, just as if everyone were sitting in the same room.
But although HD video communication is being increasingly used for one-on-one meetings or non-deal roadshows, the technology is not at a stage where IROs can reach out to investors en masse. Larry Goldstein of HD video communication specialist AboveTel readily admits that while video calls between offices in the same firm are pretty straightforward, ‘there is a host of complexities and challenges that make inter-company calls a non-starter.’
The main challenge boils down to company security, adds Goldstein, comparing it to ‘castles built around the network’. He says the new-fangled video conferencing operates via a high-capacity bandwidth on the same IT equipment used to surf the internet.
Apart from security issues, any investor wanting to listen in to a company via HD video communication would need to possess the technology and be a paying subscriber. Goldstein agrees it is a chicken and egg situation: until enough customers are using the technology, incentive for investors or firms to commit is low. Hardly surprising, then, that listed firms tend to go via corporate access teams for any HD one-to-ones, rather than boast their own technology.
Internal IR meetings, though, are a different matter. BHP Billiton installed HD video conferencing to help its IR team – based in Melbourne, Houston and the UK – communicate on a weekly basis.
‘It’s so clear you can see a thumbprint on someone’s glasses,’ enthuses IR team head Andre Liebenberg. ‘It isn’t cheap, but it’s worth it.’ He adds that the team really noticed the difference when it had to revert to its old video conferencing system for two weeks while the new system was being recabled.
Although the multinational resources firm also makes video contact with its investors – for interims and results – Liebenberg is unsurprised that HD video conferencing is not yet available for large investor audiences. ‘Webcasting technology is phenomenal now and there are fewer people coming to live venues,’ he points out.
Technological spread
Before HD video can be a regular part of investor-IR interaction, more video systems need to be in place. Service providers agree that existing technology is most useful for one-on-ones with key investors after the quarterly earnings calls, which are generally facilitated by corporate access groups.
As more institutional investors sign up to HD video conferencing to track new companies to invest in, the concept will become more appealing to the companies themselves. In time, network and security issues should be overcome and the logistics of enabling a call from point A to point B should no longer pose a problem. ‘When technology is easier to use, more prolific and cheaper, I’d certainly be in favor of having video conference calls with shareholders to answer results questions,’ says Khoussainov.
Video conferencing cannot replace face-to-face meetings, but as more cross-border mergers take place, companies increasingly have shareholders dotted all over the world. It’s just not practical, cost-effective or environmentally friendly to meet all your investors in person on a regular basis.
Investors's Views
‘I prefer webcasting as you can see on their faces how management members accept tricky questions. They shouldn’t stop webcasting financial updates just before Q&A.’
Arvydas Noreika, Orion Securities, Lithuania
‘For video conferences, ensure the camera is close to the screen. It’s disconcerting talking to someone who appears completely disinterested or is watching the tea lady delivering refreshments. And check to see when your fire alarm test takes place.’
Chi Chan, Sourcecap, UK
‘Having slides helps immensely, but otherwise there is no great advantage to being able to see the presenter.’
Rajesh Balasubramanian, Credit Suisse, UK
‘The most important thing is the quality of the presentation; with good material, the communication technology is not so important.’
Christoph Schultes, Erste Group, Austria
‘Open lines, as opposed to moderated calls, lead to horrible sound quality and the occasional baby crying in the background. I’d like more video conferencing as you get more depth to management commentary.’
Alex Barnett, Jefferies & Co, France
