It is only a little over a year since Reuters became the first UK
company to publish its annual report on the web on the same day that it
mailed the printed version to shareholders. But in the months since
there has been a distinct shift in attitudes towards the internet as an
investor relations (IR) channel.
There is no longer any doubt that the corporate world has woken up to
the possibilities the internet offers in terms of communicating with
potential and actual equity owners.
The trail blazed by the pioneering few is now being followed by many
more. And the sentiment is that in a few years time those major plcs
that do not have an IR web strategy in place will be in the
Why this should be so is very straightforward indeed. There are
advantages all round. By putting substantial amounts of financial data
on their web sites, corporations are able to offer a better service to
institutional investors, City analysts and small shareholders.
Additionally, as the internet is a global medium it allows overseas
investors speedier access to detailed information than would otherwise
have been the case.
From the listed company’s point of view, there are cost savings to be
made by introducing an IR facet to their web sites. Large corporations
spend substantial amounts every year responding to basic requests for
investment information from small investors, prospective investors,
financial journalists, students and other interested parties.
The amount of management time devoted to dealing with such enquiries and
the cost of producing and sending out printed material can be cut
dramatically by directing people towards an internet site instead.
(Although, listed companies are still required to send out copies of
their research and accounts (R&A) to existing shareholders.)
British Airways added an IR dimension to its web site earlier this year
after a number of analysts and fund managers asked it to do so. As well
as giving these financial luminaries what they wanted, the move will
almost certainly save the airline money in the future.
’We get lots of questions from smaller shareholders and students, most
of which are fairly similar and very administrative in nature,’ says BA
investor relations analyst Mitesh Kotecha. ’They will get a better
service from us if they go straight to the site rather than making a
call, leaving a message and waiting to be called back.
’We may then be able to reduce the print runs for our annual reports and
investor magazines. And you don’t need a very high percentage cutback in
print costs to have the site pay for itself.’
Supermarket chain Tesco has also put IR information on the web. ’More
and more of our customers and the investment population out there are
linked up to the web and are increasingly computer literate,’ says Tesco
investor relations analyst Harjeet Druba.
One of the big advantages for those interested in boning up on Tesco’s
financial position, continues Druba, is that the most recent figures can
be given a historical perspective. Tesco has its R&A for the past three
years up on the site.
However, UK-listed companies still lag some way behind their US
counterparts when it comes to IR on the web. There are several reasons
for this. First, there are nowhere near the number (in absolute or
indeed percentage terms) of private investors in the UK than there are
across the Atlantic - although the growing internationalisation in
equities investment (see panel) means that UK companies should think
increasingly about reaching overseas investors, for which the internet
is a very effective channel.
Second, the UK investment community is not yet using the internet to the
same extent as its US cousins. ’In the US, the brokers and fund managers
are a few steps ahead of us with regard to technology,’ says Kingfisher
IR director Andrew Mills. ’They use the internet as part of their daily
However, there are signs that this is changing. Enterprise Oil PR
manager Patrick d’Ancona says: ’I think that analysts and journalists
are definitely beginning to use the internet more as an information
tool. People expect you to be there now.’
In an intriguing move, financial information provider Datastream ICV is
launching a new product to give internet access from its Topic 3
workstations, which it claims are to be found on the desks of 70 per
cent of institutional investors. InvestorLink launches in June. It will
feature a link button giving access to the web.
Another internet IR service is CAROL (Company Annual Reports Online) a
site containing corporate financial information run by MarchCom, a
consultancy that specialises in IR on the web.
MarchCom director Paul Reynolds believes the internet offers
corporations IR opportunities that extend far beyond distribution of
R&A. Presentations to fund managers and analysts for a start.
’Analysts and fund managers alike tell us that they attend company
briefings primarily to receive facts which will form the basis of
questions to be asked later, in private,’ says Reynolds.
’They are also under tremendous pressure to attend a multitude of
meetings called by the companies in their portfolio. Online video gives
them the chance to duck out of attending every presentation.’
Clearly, wonderful though this technology is, it will not replace
face-to-face meetings entirely. Analysts and investors like to meet
company directors in person so as to make measured judgements about
That said, as the technology evolves it will obviously be used more
One possibility is for companies to put stockbrokers’ research and
analysis on their web site, although this raises the problem of what to
do should the brokers start criticising the management or performance of
Another application being considered by a number of corporations is to
offer simultaneous webcasting of their AGMs. Railtrack is among those
thinking about such an approach for its next AGM.
Some 98 per cent of its 11,000 employees are shareholders and, all told,
it has about 350,000 small investors. In other words, there are a lot of
people who won’t go to the AGM but who will nevertheless have a strong
interest in finding out what Railtrack’s directors have to say.
The IR potential of the internet is something, says Railtrack corporate
affairs director Philip Dewhurst, that agencies have been ’slow to
His comment is amplified by Datastream ICV’s Simms: ’Some of the
investor relations companies are a little bit threatened that the data
produced for the plcs and accessible through the internet could detract
from their work for clients.’
Investor relations consultancies might argue that their role is to help
clients develop their financial communications strategies rather than
worrying about the ins and outs of web sites. But among those that fail
to grasp the very important contribution the internet is likely to make
to IR in the future, there is a very real danger that they could miss
As Focus Communications chairman Rupert Ashe puts it: ’It will become a
sine qua non for popular shares to have good IR web sites.’
CD-ROMS: INTERACTIVE INVESTOR INFORMATION
For the past four years, supermarket group Safeway has used a
CD-ROM-based multimedia presentation at the heart of its IR. It was
designed by the Presentation Company to run on a laptop computer and
incorporates both audio and video clips.
The presentation was used initially to audiences of institutional
investors and was taken to the US to raise the profile of the company
among US funds. Using the technology, Safeway’s IR team was able to show
high resolution video clips from the Harry and Molly advertisement
campaign as well as the essential financial, business performance and
marketing information that prospective investors demand.
’For our particular business it’s a useful way of showing people what
the stores and advertising looks like,’ says Safeway corporate
development director Steve Webb.
The presentation was designed to be interactive so that with only a few
mouse clicks information could be called on to screen in response to
It was more dynamic and also more portable than the retailer’s previous
Safeway was so pleased with the results that the system is now used as
the basis for its main set-piece presentations to investment analysts
and is also for presentations to financial journalists.
Sophisticated presentations such as these, says Webb, can give key
audiences a better insight into the nature of a company. They also
typify a more mature attitude to IR in corporate Britain. ’IR is a much
more well-developed management discipline than it used to be,’ says
The Presentation Company has also helped Safeway put its R&A on the
internet and its director Rob Oubridge believes IR is one of the sectors
that stands to really benefit from technology. He sees a time in the not
too distant future when companies will send out CD-ROMs to analysts and
fund managers which will be able to be updated simply by accessing those
companies’ IR web sites.
OVERSEAS INVESTORS: LIVING UP TO US STANDARDS
A research paper published by the Investor Relations Society and City
University Business School in December 1997 predicts that US ownership
of UK-listed shares will increase dramatically. The paper - ’Research
into International Equity Investment Flows’ by Javier Melian Perez -
forecasts that US institutions will increase their holding of UK
equities from 12 to 20 per cent in the next few years.
At the same time, UK institutional ownership of UK equities is expected
to continue its downward trend, falling below 50 per cent by the year’s
end. According to the US National Association of Securities, worldwide
investment in foreign stocks is doubling every three years. And half of
all such investment comes from the US. This upsurge in US investment
will have ramifications for UK companies, says the IRS. If the
experience of US companies is anything to go by, there will be an
increase in investor activism.
Companies such as Exxon and Whirlpool have already been exposed to this
sort of shareholder pressure across the Atlantic. Another upshot of this
activism will be a continuing rise in demand for investor
’US companies have become used to a proactive approach in developing
relationships with their shareholders in a way which is still unevenly
replicated by UK companies,’ says IRS director Kate Hoyle.
The fact that many big US investors are prepared to buy equities
overseas presents UK companies with a significant opportunity.
Increasingly, US institutions need to be factored in to an IR
Many leading UK corporations now run short US roadshows on an annual
basis and make a point of cultivating likely US investors. According to
Ludgate head of investor relations Reg Hoare, UK companies with a market
capitalisation of pounds 1 billion or more could justify going to the US
for ’two days or so a year’ to meet members of its investment
However, it should also be pointed out that a growing number of US
institutions have established a presence in Europe as interest in
overseas equities has snowballed.
FUNDS: UNDERSTANDING THE INSTITUTIONAL INVESTOR
To City outsiders, the amount of institutional investment in UK capital
markets is almost inconceivable in its scale. The Investment Management
Regulatory Organisation (IMRO) regulates some 1,050 institutional
investors whose investments total some pounds 1,430 billion.
These pension funds, insurers, PEP companies, banks and the like have
substantial equity holdings and their attitudes can affect the share
price of a corporation. Consequently, their views about the companies
they invest in are of paramount importance.
How effective do these institutional investors think UK companies tend
to be at their IR? Where do they do well and where is there room for
’There are some chief executives who clam up when you sit in front of
them and ask probing questions,’ says Perpetual senior fund manager Neil
Woodford, who has responsibility for pounds 3 billion in investment and
unit trusts. ’But the quality of information you get when you meet face
to face is important.
The worst companies, thinks Woodford, are those that give out misleading
information and keep their shareholders in ignorance. He is sympathetic,
however to the need for executives to balance time spent with
shareholders to the demands of running a business.
’IR in the best companies is considered quite strategically,’ says JP
Morgan Investment Management European retail analyst Christian
Koefoed-Nielsen. ’I don’t mean they crudely try to massage the share
price - rather they get the investment companies to understand the
nature and dynamics of the business. They also take a little time to
understand the nature of the investment companies.’
Taking the time to differentiate between the different investment
criteria of the institutions and funds is something that is all too
By getting a clear idea of the different investment criteria of growth
and value funds, companies will gain a sharper insight into what they
are looking for.
Those funds unlikely to invest in the short term should, argues
Koefoed-Nielsen, still be kept in the picture. After all, the company’s
position could change, making them suddenly attractive to a different
type of investor - but if that investor has not been kept up to speed on
the company it will be unlikely to have the confidence to buy its shares
Koefoed-Nielsen says he frowns on those companies that only make time
for face-to-face meetings with existing institutional investors. He also
thinks it short-sighted when companies offer visits to broker’s analysts
alone and applauds those companies that offer access to the facilities
and management of key operating divisions. As a retail analyst he ranks
Dixons, Tesco, Sainsbury’s Boots and Kingfisher as the best in his
sector at IR, with Safeway and Asda not far behind.
Given the delicate relationship between corporations and their
shareholders, some institutions are reluctant to comment on the record.
But off-the-record they are more forthcoming about problems they have
’The investor relations function has clearly been created to take the
load off the CEO or financial director,’ says one head of research at a
City institution. ’The problem is when you have an IR manager who
doesn’t understand the financials or the business properly. That’s still
the case in too many companies. If you rely on PR types who tend to put
a positive spin on everything it’s cumulatively very negative.’
’Honesty is the best policy,’ adds one head of equities at the
investment management arm of a bank ’Companies should be as clear as
possible. There should be no subtlety.’